The Economic Impact of College Football
Meera BluePrint 08.07.2020
Discussion
CNBC: “What a lost college football season would mean to the college sports economy”
“I could sense we were going to die of a thousand cuts if we didn’t do something really quick,” – Iowa State Athletic Director Jamie Pollard
COVID-19 has wreaked havoc on the college sports landscape threatening to change the economics of college sports forever. Over the last 3 years, only 57 NCAA programs had been dropped. That is before Stanford University announced they were eliminating 11 sports, predicting a $70 million shortfall over the next three years.
University of Wisconsin Athletic Director Barry Alvarez announced projected revenue losses between $60-70 million after the Big Ten conference announced that they would be playing a conference only schedule. If there is no season the losses are expected to be closer to $100 million. As opposed to last year, when the program generated $157 million in revenue which accounted for 58% of the University’s athletic budget.
Athletic directors and conference officials around the country have had to make tough decisions about the upcoming seasons, many canceling them altogether. Large Power-5 schools are pursuing drastic measures to keep everyone safe. Purdue University budgeted $50 million for safety measures including; face masks, hand sanitizer, PPE, and 5 miles of plexiglass.
A $50 million COVID expense would represent 50% of Purdue University’s $100 million athletic department revenue generated over the 2017-18 school year. Sacrifices like these seem almost like a necessity as schools fight for their piece of the multibillion-dollar college football industry. Critics argue that schools have gotten too dependent on athletics revenue as department expenses have soared, including spending on facilities and salaries.
Unfortunately lost athletic revenue is not the only challenge higher-ed institutions are facing. Many are also bracing for decreased enrollments and state funding also due to the COVID-19 pandemic. Many of the cut programs will never come back, which is extremely unfortunate considering the broad-ranging impacts. Scott Galloway hinted at some externalities of non-revenue program cuts including Olympic dominance and global perception.
As negative as the impending circumstances will be on college sports and their stakeholders, there is an opportunity for change. Universities and the NCAA should take this time to seriously consider the role of athletics at institutions and how capital is allocated across those programs. There is plenty of room for improvement.
Learn Something
Knight Commission on Intercollegiate Athletics: College Athletics Financial Information (CAFI) Database
WSJ: College Football Value Rankings
USA Today: NCAA Finances
Zion Market Research: U.S. Education Market Will Reach USD 2,040 billion by 2026