Could adding athletic programs decrease financial woes for some schools? FDU is banking on it

Karl France woke up on the first day of March, found something burgundy and blue to wear and embarked on a project that less than a handful of coaches have had since the start of the pandemic. The new men's volleyball coach at Fairleigh Dickinson University is one of just a few people who are laying the foundation of a brand-new college sports team this spring.

France was hired a month after Fairleigh Dickinson, a small private university in New Jersey, announced plans in January to start sponsoring a men's volleyball team in the 2021-22 academic year. The school also plans to add a women's lacrosse program the following year and will start a search for a lacrosse coach this spring. Only five other Division I schools have announced plans to increase the number of sports they sponsor since COVID-19 arrived.

Fairleigh Dickinson's plans to grow from 19 to 21 teams were finalized during a time when cancellations and postponements have led to millions of dollars in lost revenue for many schools. Since the NCAA called off its money-making men's basketball tournament in the early days of the pandemic last March, 35 Division I colleges have announced plans to shutter, indefinitely suspend or downgrade a total of 115 programs (22 of those teams have since been reinstated as the result of alumni fundraising and/or legal pressure). The last comparable culling of college teams came when the 2008 financial crisis led schools to hunt for ways to tighten their belts.

Fairleigh Dickinson is not immune to the current budget crunch. The Knights, however, spotted a flaw in the way that many view the balance sheet of a college athletic department and how it fits into broader, university-wide finances. By looking through a different lens, they argued that adding teams -- even those that don't garner TV contracts or fill up stadiums -- could help the school's bottom line.

Fairleigh Dickinson, like the majority of Division I athletic departments, depends on its share of the large sums of money generated by the NCAA's annual March Madness tournament to make its budget work. The school is also typically paid a few hundred thousand dollars each year from bigger schools in "guarantee games." The Knights made only roughly 20% of the money that they normally collect through guarantee games in the past year.

"We were looking at our financials, and like it was for everybody, it was bleak," Brad Hurlbut, FDU's director of athletics, said. "We needed to come up with a plan to ease those fears that the university had and we had as an athletic department."

Hurlbut took the Fairleigh Dickinson job in February 2019 after previously serving as deputy director in the Sacred Heart University athletic department that sponsors 33 sports. He hired associate athletic director Jason Young, previously of the University of Vermont, who is also a disciple of the more-is-more philosophy when it comes to sports on campus. They both had hopes of adding to the Knights' roster of teams, but grew concerned last spring that pressure from the pandemic might push them in the other direction. They decided they needed to change the conversation before cutting teams became an option on the table.

With the help of a California-based economist, Young spotted what he sees as the flaw in a lot of college sports accounting. When viewed as its own entity, an athletic department loses money on most of the sports it sponsors. It costs more to support a team, pay coaches' salaries and cover the costs of scholarships than the revenue generated by ticket sales, media rights or donations. However, Young and Hurlbut were able to convince their bosses that those teams actually made money when viewed through a wider lens that captured their impact on the whole university. The roster spots also represent tuition dollars from non-scholarship or partial-scholarship athletes who would not otherwise be attending the school.

Eliminating the cost of scholarships and accounting for additional tuition dollars frequently can bring mid-major-level schools millions of dollars closer to breaking even, according to Andy Schwarz, the California economist who first suggested that Young and Fairleigh Dickinson think differently about the financial impact of adding or subtracting sports. Schwarz has spent the past two decades studying the college sports business model and connected with Young after sharing some of his thoughts on the industry on social media.

Young calculated that having a men's volleyball team will cost the athletic department $350,000 per year, but generate an extra $470,000 in tuition payments -- a net positive of $120,000 for the school. The women's lacrosse team will cost about $500,000 per year, but ultimately provide a similar net gain of slightly more than $100,000 for the university's budget. The athletic directors' initial pitch was met with skepticism by some, but Young says he quickly found some champions for their cause in the university's administration.

"I presented back in June to the leadership group of the university," Young said. "That got some different looks, but it allowed us to peel back the curtain of the financial structure of our athletic department and really start diving in. That was the opening crack for us."

The math works at Fairleigh Dickinson because the university's enrollment and dormitories aren't at full capacity. That's not the case everywhere. Schools such as Stanford and Clemson, both of which cut sports this year, will have no problem filling the erstwhile athletes' spots in dorms and classrooms with other students who don't play sports and might be more likely to pay full price for their tuition.

Schwarz says adding sports makes sense for schools that have the space to add more students without making big investments in additional buildings or staff. Hurlbut said volleyball and lacrosse were selected as new sports because neither would require building or making major renovations to any facilities and both are popular sports in the region, which helps reduce future travel costs. The school also received a grant from First Point Volleyball Foundation to help cover its startup costs.

Schwarz likens this approach to a cruise ship offering last-minute discounts to fill its empty cabins. A team built on partial scholarships is the equivalent of a coupon, he says. If you have a product with a limited shelf life -- like an empty berth on a ship about to leave port or any empty seat in a classroom -- it makes sense to take a discounted payment instead of leaving that spot empty. Most athletic directors don't think like economists, and in the often-siloed world of higher education, most universities don't see the full accounting value of adding sports.

Schwarz said he's not sure how many of the schools that have cut sports are under capacity, but he has found multiple examples of an athletic department cutting a team in the past year and doing more harm than good to the school's overall profits.

"Unless someone advocates for it, the schools probably aren't thinking of athletic scholarships as coupons, which is the best way to think about it," Schwarz said. "They don't think about it as marketing on the input side."

College sports have long been viewed as university marketing tools, "the front porch" of the universities they represent. Usually that marketing value is thought to be the media exposure and brand recognition that comes from good performances on the field or court. However, Young says the more sustainable and impactful type of marketing that sports provide to midsized or small schools is more akin to an amenity -- students who choose to go there for the chance to play a sport.

And as with cruise lines, the pandemic has left many more schools with empty slots to fill. Roughly 60% of American colleges that responded to a recent survey conducted by the Chronicle of Higher Education did not meet their fall enrollment goals last year. The same survey found that two-thirds of those schools didn't hit their revenue goals.

At Division I schools without football, athletes make up more than 5% of the student body on average. At lower divisions that number jumps even higher -- 18% at Division II schools with football teams and 27% at Division III schools with football.

"It's harder and harder to be at capacity. For the smaller schools, the cost savings [of cutting a sport] are sometimes negligible or even go in the other direction," said Tom McMillen, who runs LEAD1, a professional organization for FBS-level athletic directors.

McMillen said that while more schools in lower divisions are showing interest in adding more sports, that approach has yet to gain traction among the FBS-level athletic directors in LEAD1. Some of those schools -- especially Group of 5 conference schools with a more regional footprint -- are facing the same under-enrollment issues and could benefit from adding rather than cutting their sports programs.

The nationwide drop in enrollment numbers is having a bigger impact on small schools than the big-brand universities that have no problem attracting an overabundance of applicants. At a school like Stanford, which announced this summer it was cutting 11 of its 36 sports, adding or retaining sports isn't likely to have the same positive impact on the university's budget as it did at Fairleigh Dickinson.

Stanford's decision to cleave nearly a third of its department -- which has been met by dismay and protest from its talented alumni -- is more a reflection of priorities that determine how the athletic department wants to distribute its income to provide the financial support it sees as necessary for each of its teams. The school's president, provost and athletic director said the "financial model supporting 36 varsity sports is not sustainable" on a budget of roughly $140 million per year. In the 2018-19 school year -- the most recent available data -- the Cardinal spent $56 million on costs not allocated to a specific sport, $44 million on their football and basketball teams, and $40 million on their 33 other teams combined.

Among the cuts at Stanford was its prestigious men's volleyball program. That decision sent a disconcerted shock wave through the sport's community, including coaches like Karl France who were hoping to run their own programs one day. If Stanford can't survive this budget crunch, the logic went, then how could the smaller schools attempting to sponsor the sport make it through?

France, who was last year's AVCA Division III men's assistant coach of the year at New York University, said he remained optimistic that his chances of eventually becoming a head coach were good. But pandemic-related cuts left him uncertain when that opportunity might come.

"The sport felt like it was moving two steps forward and three steps back," France said. "Everyone was scared. We've all got to be weary of this."

Then in January, Fairleigh Dickinson announced its plan to start a new program from scratch. France said he went from pleasantly surprised to euphoric when he received the call from Hurlbut in early February to tell him that he was selected as the man to build the new team.

"I was over the moon. ... This is going to create great opportunities for a lot of young men," France said. "I think there are some forward-thinking people here that believe in their vision of leadership through sports. FDU is well-positioned to do this."

Hurlbut and Young both say they have wondered why more schools haven't considered adopting the same approach they've taken at Fairleigh Dickinson. They believe one major reason for the missed opportunities is a lack of good communication between the athletic department and those who run the university budget. They're hoping that their decision to add more sports might get other schools thinking about the benefits of adding to their athletic departments.

"We want others to think this way," Hurlbut said. "It's great for the growth of all these sports. It just shows the value of Division I athletics at mid-major schools. Hopefully it can turn the tide of cutting sports, to get people to think differently about it."

Hurlbut said since making their announcement in January he has fielded some calls from other schools who are weighing their ability to add programs. So far, however, the Knights remain a rarity in college sports this year.