<
>

Collegiate sports: realigned revenues

ESPN.com Illustration

When Maryland played its first Big Ten football opponent over the weekend -- an away game against Indiana -- the dust finally began to settle, for a little while anyhow, on the conference realignment shuffle that began more than four years ago.

Maryland and fellow Big Ten inductee, Rutgers, an athletic program that ended 2012-13 with a $47 million deficit, will cash in for the first time this year after joining a power conference that has a lucrative television deal.

The schools that moved to power conferences in 2011 and 2012 are still finalizing some of their financial data from 2013-14, but from prior years' financial reports and conversations with chancellors and athletic directors, it's possible to assess which teams are getting the biggest payoffs and what exactly they're planning to do with all that extra cash. (Syracuse, Louisville and others are not included in this report because only one year of financial information is available.)

A few highlights:

• Cash payouts to new conference members varied widely, from an increase of about 30 percent to a few triple-digit percentage increases. For example, Texas Christian University and Utah earned a few million annually as members of the Mountain West but since their moves, will earn $15 million with the Big 12 and $19 million with the Pac-12.

• Not unexpectedly, the biggest impact on expenses has been travel. More schools are flying sports teams to games than busing them because of schedule changes and new geographies.

• If you thought the arms race in college football has been fierce, stay tuned. Even factoring in realignment-related expenses such as travel, the schools that moved will have millions of dollars to spend. And the leaders of these programs say they expect to funnel that into facility upgrades, from bigger and better football stadiums to natatoria.

• All school officials are prepping for, and say they'll be able to cover, the expected additional expenses that will come with having to pay full cost of tuition, guaranteeing lifetime scholarships and covering more student athlete medical costs.

NEBRASKA (Big 12 to Big Ten)

Perhaps no other school has been questioned as much about whether it negotiated the best financial deal as Nebraska, which is starting its fourth year in the Big Ten.

For this past year, the school received about $16 million from the Big Ten, whereas other Big Ten schools received about $27.5 million each. Nebraska received $15.4 million the year before. At the same time, Nebraska's former conference colleagues in the Big 12 saw an average of $21 million. And it's likely that Big Ten newcomers Rutgers and Maryland -- both in major TV markets -- will get more money in their first year than Nebraska did.

The Big Ten brought Nebraska in on a graduated payment scale. Nebraska doesn't get a full share of conference distributions until 2017, when the conference renegotiates its television contracts. At that point, the projections are that all schools could see $40 million to $50 million annually.

That's one reason why Nebraska chancellor Harvey Perlman often mentions the long-term impact of the conference change, which he says he believes has always been fair to Nebraska.

"At the time we entered the Big Ten there was a realistic possibility that Nebraska would be without a conference. It isn't as though we came with a lot of leverage," he said, noting that at the time the Big 12 was on the verge of implosion. "We didn't bring a lot of TV sets or people. We brought a strong athletic tradition. We brought a strong academic tradition."

Perlman often talks about the collaboration and synergy of the Big Ten, where schools -- at least when they become full members -- share revenue equally, as being a departure from the "eat what you kill" operation of the former Big 12.

That might seem like a jab at Texas -- which bore the brunt of the blame for the whole shakeup after it was seen as making a seemingly selfish grab for more revenue through its own ESPN network -- but Perlman wants to set the record straight.

"Everyone thinks the Big 12 broke up because Texas was pursuing their own network. Well, we were pursuing our own network as well," he said, although adding that Nebraska never reached the point of negotiating with any broadcaster.

Nebraska athletics ended this past year with $93 million in earned revenue, up about 25 percent from 2008, and it's among the at least two dozen athletic departments nationwide running a surplus. Even by the most conservative estimates, the athletic department should see a substantial influx of money, especially after 2017. But Perlman said there are no big projects in the works for spending that money, aside from possibly adding more sports.

"You'd love to sit here and say there's going to be this huge influx of resources and the world will be the same as it is today, but you have to be a little cautious here," he said. His more conservative stance stems from a variety of issues that all colleges face: slowing or even declining ticket sales to sporting events nationwide, possible restructuring of the NCAA, plans to increase the financial support of student athletes through full cost of attendance and/or lifetime guarantees of scholarships, and taking on more student medical costs. Nebraska's athletic department also is required to divert 5 percent of its revenue back to the university to support academics.

The one expense that many expected to be a huge burden -- travel -- really hasn't been, Perlman said, even though costs went from $4.8 million in 2010-11 to $6.8 million two years later in the new conference. (This past year will show a drop to $5 million due to an accounting change). Perlman said spending more on travel was a combination of the new geography and a choice to provide higher-end accommodations for student athletes. And costs are likely to go up once teams start making the long haul to Rutgers and Maryland.

COLORADO (Big 12 to Pac-12)

Colorado's move from the Big 12 to the Pac-12 saddled the athletic department with significant debt, including about $16 million the university loaned the department to pay bills during the transition.

"I looked at this as a long-term investment," Colorado chancellor Philip DiStefano said. "It was certainly difficult that first year, and things are certainly getting better with TV revenue."

Colorado received only $3.4 million from the Pac-12 in 2011-12, but that jumped substantially after the conference signed its 12-year, $3 billion media rights deal with Fox and ESPN. This past year, the school received about $20.4 million from the Pac-12, according to preliminary figures released by the athletic department. That figure is slated to increase 5.1 percent each year. And DiStefano said if the Pac-12 can ever get a deal done with DirecTV, each school should receive an extra $3 million to $4 million a year.

The current Pac-12 disbursement is a substantial increase from the $8.3 million the school received in 2009-10 from the Big 12 but about the same as the average payout existing Big 12 schools have received in recent years.

The athletic department is paying the university back in installments for the lump sum it needed during the transition, but the school will have to continue, at least in the near term, to give money annually to the athletic department to make ends meet -- support estimated to have been about $6.4 million last year. And the department also relies on about $1.5 million in student fees, which DiStefano said he would like to look at eliminating but doesn't see happening for at least three to five years. With the university and student fee support, last year the athletic department broke even -- at about $62 million in revenues and expenses.

But DiStefano said he sees a revenue impact of the conference change in other ways, especially in private donations, which came in at about $22 million last year after averaging closer to $10 million over the past several years.

"I think it's the footprint. When you look at Colorado, the footprint [of alumni] in the Pac-12 is about two-and-a-half to three times larger than in the Big 12," he said. Colorado's move to a more West Coast-oriented conference put it better in line with where its alumni live. DiStefano referenced the 1,500 people who showed up in Palo Alto, Calif., the first year Colorado played Stanford there.

"It was by far the largest pregame we've ever had for an away game," he said. "In the Big 12, the average for the pregame was 300 to 400 individuals."

Colorado isn't alone in projecting higher attendance and interest for away games, even as ticket sales for home games lag, but the question for it -- and other schools featuring a new slate of conference competitors -- that is not yet answered is whether fans will keep coming when the newness wears off.

UTAH (Mountain West to Pac-12)

For schools such as Utah, where the conference realignment meant a move into a Power 5 conference, there is no question whether moving was a good financial decision.

Last year's operating revenue for the Utah athletic department was $55 million, which is exactly double what it was six years ago. Even ticket sales have risen by two-thirds as fans have been drawn to games with more prominent Pac-12 opponents.

Utah came into the Pac-12 on a graduated payment scale. Last year, it received $18 million, the year before that $10.2 million, and the year before that, $4.1 million. This year it's expected to receive $23 million.

Had it stayed in the Mountain West Conference, athletic director Chris Hill said it would be getting closer to $4 million annually.

"The way that college athletics have shifted, I don't know if there's a school in the country that has benefitted as much as we have," he said.

Yet the Utah athletic department hasn't yet joined the ranks of the about two-dozen schools that are self-sustaining -- at least on paper. Utah relies on about $10 million from student fees and university support to break even, and that's something Hill doesn't see changing in the near future.

It borrowed an additional $7 million from the university and issued bonds to borrow $16 million to help support its transition to the Pac-12.

"It's like we jumped the Grand Canyon in terms of economic influx of revenue into our program and also the level of competition in all our sports. In many of the sports, you want to make sure that you can pay a competitive rate in everything, and that raises the bar in the Pac-12," Hill said.

That means to be in a power conference you have to look and act like you belong, and can compete, in a power conference. At Utah, that meant increasing the investment in facilities, academic advisers, strength trainers and other trappings of a big-time athletic program. It meant turning a planned $16 million football facility into a $32 million football stadium and relying on donations and loans to build a $25 million basketball arena.

"We were confident about the revenues coming in, and we invested a little bit on the front end," Hill said.

Although Utah's opponent-geography really didn't change, the move to the Pac-12 caused its travel expenses to double to $5.3 million. Hill said that comes from traveling to more expensive cities, such as Seattle, and needing to travel more in the middle of the week because of TV scheduling, which means providing students faster or more direct transportation home so they miss as few classes as possible.

As the spoils of the Pac-12 come in, Hill said the department is targeting paying off debt, including infrastructure bills, and tapping into a strategic reserve for future expenses, including the estimated $2 million to provide student athletes with the full cost of attendance.

During the department's annual fundraising campaign, Hill said there was a misperception about how the move to the Pac-12 affected the budget.

"A lot of people said, 'You've got all this money. Why do you need me?' " he said. "Everybody on campus thought we were rolling in it and we said, no, we still need to pay our scholarship bill."

TCU (Mountain West to Big East to Big 12)

Texas Christian University and West Virginia fled commitments to the crumbling Big East to join the Big 12 in 2012. Those moves saved the Big 12 -- which was losing Texas A&M and Missouri to the SEC -- from crumbling itself.

TCU athletic director Chris Del Conte tells a well-known story of how, after it was clear the Big East was in jeopardy, he drove to Austin and sat for hours to meet with Texas athletic director DeLoss Dodds to press his case for bringing the Horned Frogs into the Big 12.

If there was one hiccup in TCU's move, it was having to pay the Big East $5 million for saying thanks-but-no-thanks to its invitation.

So far in annual conference disbursements, TCU's rise is among the largest, going from just $2 million in the Mountain West to $9.8 million its first year in the Big 12. TCU, which was also brought in on a graduated scale of payouts, got about $15 million last year and should receive $18 million this year, Del Conte said. Next year, it will be entitled to the full disbursement, projected to increase due to the Big 12's media rights deal with ESPN and Fox.

"It has been not only financially beneficial from our participation in the Big 12, but also from season-ticket sales, donations, merchandise sales. Everything has been through the roof," he said.

As a private school, TCU isn't required to disclose all of its finances, but Del Conte shared some details.

The last year in the Mountain West, TCU sold 13,000 season tickets. Today, Del Conte said, sales are at 32,000. Combined ticket sales and licensing revenue went from $10 million in 2011-12 to $19 million this past school year, he said.

And he said the new revenue won't be used to pay for facilities: Donations paid for the school's new $164 million football stadium and for $70 million in ongoing renovations to the basketball facility. Instead, he said, the department will use much of the revenue to offset the money the university has spent for years supporting the athletic department so the university can spend that money elsewhere.

He said the department should get close to being self-sustaining within the next couple of years.

"We've actually covered the last two years of our entire scholarship bill. That's huge for us," he said.

WEST VIRGINIA (Big East to Big 12)

West Virginia's move to the Big 12 probably caused the most raised eyebrows in the conference realignment as fans wondered what a school leaving the Big East and nestled in Appalachia could have in common with the mostly cornfields and cattle ranches of the Big 12.

Clearly it was a case of a school needing a home and a conference needing to plug some holes, but athletic director Oliver Luck said fans have been finding more commonalities than they expected.

"We're a big land grant flagship school for a rural state," he said, pointing out that the stadium attendance is larger than the population of the state capital of Charleston on game day. "Schools like Oklahoma State, Kansas, Kansas State and Texas Tech are similar to us."

Although Luck said the move positioned the Mountaineers well for the future to be in one of the five power conferences, it hasn't yet shown a huge bump in the bottom line -- although school officials did not have all of their financial figures yet for this past year.

The athletic department's earned revenue -- meaning everything except money received from student fees and the university itself -- dropped about $2.3 million from 2011-12, the last year in the Big East, to 2012-13, the first year in the Big 12, when it was $73 million. The context of that, though, is important: The Mountaineers left the Big East with a bang, ending the 2011 football season with an Orange Bowl win over Clemson. And that year, the department's earned revenue was up almost $20 million from the year before.

In 2011-12, ticket sales were about $21.6 million, which was up from an average of about $17 million over the previous four years. In the school's first year in the Big 12, ticket sales dropped to $21.4 million.

The school didn't have ticket sales figures for 2013-14 yet.

"I think we're doing fine," Luck said. "I firmly believe that the quality of the Big 12 programs that will be in Morgantown is ultimately much more attractive to our fan base than the Big East teams. The only team in the old days that elicited a lot of passion was Pitt."

Luck said, at the end of the day, the school is still getting more money now than it would have if it had gone into the American Athletic Conference. The payoff from the Big 12 is on a graduated scale, just like it is for TCU. It was about $14 million last year, up from $9 million the year before.

In comparison, the former Big East gave West Virginia about $10 million during its last year in the conference (although it ended up withholding $9 million of that for exit fees).

The new alignment has also meant about $2 million more in travel expenses, but Luck said that's an amount that is "dwarfed by the increased conference payoff that the Big 12 offers us."

Luck said the payoff is going to allow the school to invest in improvements to its athletic facilities, which include a basketball arena, football stadium and swimming facility built in the 1970s that have been "tinkered with" but not really remodeled. The department just announced $125 million in improvements, of which the $75 million will be financed through bonds made possible by the money coming in from having moved to the Big 12, Luck said.

"A couple weeks later, [Oklahoma athletic director] Joe Castiglione announces they're going to put $325 million into their football stadium -- alone," Luck said, laughing. "It put it all into perspective that we're swimming in the deep end of the pool."

TEXAS A&M (Big 12 to SEC)

Texas A&M considered its entry into the SEC so successful, it created a special website -- called Year One -- celebrating the school's successes across all sports: Hiring a new athletic director and head football coach, winning several conference championships and a national championship in track and field, and, of course, quarterback Johnny Manziel winning the Heisman Trophy.

"I think there are three things that are a perfect storm -- Johnny, [head coach Kevin] Sumlin, and the SEC," said athletic director Eric Hyman. "It was a pretty successful project with that recipe."

The school also announced $450 million in renovations to Kyle Field, which would make it the largest stadium in the SEC. About 78 percent of those renovations are projected to be paid for with a combination of seat licenses and donations, which Hyman said are bolstered by the team's move to the new conference.

"Because of what's transpired in the SEC and our transition, it's just ignited the entire fan base, our 12th Man [Foundation]," he said.

He said the support also has helped with the school's efforts to build a softball stadium, an outdoor track, new weight rooms, and nutritional center -- for which they've also hired an executive chef.

Ticket sales revenue -- about $37 million for all sports combined -- had been steadily increasing since 2008, and average sales for the first two years in the SEC were 6 percent higher than the last two years in the Big 12.

The bump in conference revenue was more substantial: Last year, the SEC gave Texas A&M about $21 million, which is an increase of about 72 percent from the $12.2 million Texas A&M received from the Big 12 in 2010-11. (The Big 12's tax returns show it gave the school just $3.8 million in its last year in the conference. It withheld $12 million, prompting the university to give the athletic department a loan, which is being paid back $1.5 million each year.)

Getting $21 million from the SEC might not seem like a big coup, considering the Big 12's payouts now average $21 million, and it isn't right now. But that doesn't factor in the future revenue potential of the just-launched SEC Network by ESPN. Much like the other schools that moved from one major conference to another, the big payoff is to come. Some estimates show that in only the third year of the SEC Network, schools could see payouts of $40 million.

The SEC made Texas A&M and Missouri equal partners upon joining -- and that means millions of extra dollars up front.

The school's biggest expense related to the change is a nearly $9 million travel bill, which is up 42 percent the first two years in the SEC compared with the last two years in the Big 12.

Hyman also expects to spend more money on student athletes related to health insurance and the full cost of attendance. "This past year we had 55 of our student athletes finish their eligibility, and we made sure 53 of them finished their education because we continued to pay for it. We were able to do that because we had a little financial latitude, but I want to make sure we can do that in the future."

MISSOURI (Big 12 to SEC)

Although Missouri didn't have quite the same level of success or Johnny Football hype as Texas A&M entering the SEC, it has still seen a financial payoff and can anticipate a similar future. This past year, the school reports having received $21.8 million from the SEC.

Athletic director Mike Alden says he appreciates the equal revenue sharing model of the SEC. The disparity in payouts in the Big 12 was a major contributing factor to why the conference almost fell apart completely, although it has recently moved to a more-equal revenue sharing model.

Missouri suffered the same fate as Texas A&M in 2011-12, its last year of the Big 12, when the conference withheld $12.4 million and gave the school only $1.4 million, according to tax returns. The school also took a hit to its operating revenue that year, down to about $50 million when it had averaged around $60 million for the four years prior. Alden wrote in an email interview that the athletic department will start paying back $14.5 million to the university for help it gave toward paying the exit fees during the conference transition, starting with $2 million in the next school year.

It doesn't look as if Missouri will have trouble absorbing that payback. Preliminary figures for this past year show revenue at $82 million, with expenses closely matching. Ticket sales are up 11 percent for the first two years in the SEC ($21.2 million last year alone for regular season play) compared with the previous two years in the Big 12. And Alden wrote that he expects to see increases in licensing revenues, annual giving and concession sales as well. Just like Texas A&M and the other SEC schools, Missouri is anticipating much higher revenues from the SEC Network in future years.

Missouri also saw a bump in its travel costs going into the SEC, up by about 20 percent from the last year in the Big 12 to this past year, totaling $5.3 million. Recruiting costs, with some tied to travel, jumped 25 percent in the first year of the SEC to $1.3 million.

"The SEC has broadened our recruiting base, in particular with our Olympic sports, and we want to capitalize on these opportunities," Alden wrote. "The competitive challenge in this league is significant. Top to bottom in every sport, it is the toughest league in college sports."

And although Alden didn't outline any specific building projects, he said it's likely some of the money will go toward bricks and mortar: "In this area, if you're not addressing and moving forward, you're falling behind."