The Big Business of College Football

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By Dave Smith, Senior Contributor, USDR.

“There’s no more money. Everybody is working as hard as they can to generate as much revenue as humanly possible and all, but a handful of schools operate in the red.” – Steve Patterson, former University of Texas Athletics Director

In 2011, the University of Texas signed a $295 million deal with ESPN to create The Longhorn Network. The 20-year agreement was considered a landmark at the time – while there were conference network deals such as those establishing the SEC and Big Ten Networks, this was the first large-scale single-school network dealing solely with sports.

The network roiled the Big 12 Conference, with Missouri and Texas A&M bolting for the SEC, and other Big 12 schools grumbling; the Big 12 is now the only conference without a conference-wide network. As predicted by pundits like Outkick the Coverage’s Clay Travis, the economics were not viable for a standalone network, and the business model was outdated. The result: multi-million dollar losses for the Longhorn Network.

The overall result for the University of Texas athletic program was that Texas fell from the number 1 position in terms of revenue and profit… to number 2. In the latest Forbes study, Texas finished with annual athletic revenue of $133 million and a profit of $87 million – a margin of 65%. The losses of the Longhorn Network belong to the broadcast partner, ESPN, not to the school’s athletic department.

Dave Smith Said That

The new #1? Cross-state rival Texas A&M, whose payouts from the SEC Network combined with vastly increased donor contributions provided $148 million in revenue and $107 million in profit (72% margin) according to Forbes. The surging contributions – fueled by the move to the Southeastern Conference and the Heisman-winning exploits of “Johnny Football” Manziel, the Aggies have parlayed their newfound popularity into a $485 million stadium expansion and the top of the financial leader board.

Nine of the top 16 highest-revenue teams in the Forbes survey hail from the SEC, five of which have won at least one national championship in the past 20 years; yet of the top three schools – A&M, Texas, and Michigan – none has participated in the College Football Playoffs that were implemented in 2015.

As the profits soar, however, college football has faced issues. A recent Wells Fargo report documents declining attendance, even at the “Power 5” conferences (SEC, Big 10, Big 12, PAC-12, ACC), as the TV market is saturated with multiple games televised throughout the week and all day on Saturday. TV ratings for college football have not seen the same ratings erosion that the NFL has experienced, despite most NFL games appearing on broadcast TV and college games being sprinkled across various broadcast and cable outlets: four games during opening weekend topped 5 million viewers, and ESPN’s perennial stalwart College Gameday still draws close to 2 million viewers. While the NFL network partners came in $500 million in advertising revenue under targets, college football benefits not only from television contracts, and gameday revenue from ticket sales, concessions, and parking, but also from donors – the aforementioned Texas A&M collected $260 million in contributions over a 3 year period.

College football has several advantages over the professional game that have insulated it from the ratings declines seen in professional football and in other programming in general. Many of the top programs are located where there is no competition from a professional franchise, sometimes in any sport, e.g., Alabama, Nebraska, and South Carolina. College football has not drawn the ire of fans over National Anthem protesting. And, unlike the NFL, nearly every college game is available on TV, regardless of where in the country you live; the NFL allows regional showing of games, and so anyone wanting to see a different game has to go to a sports bar or else purchase a costly “NFL Sunday Ticket” package.

It is yet to be seen what impact head trauma will have on football participation overall – the NFL and the NCAA have faced lawsuits over head injuries and CTE (chronic traumatic encephalopathy) – but for now, college football is indeed Big Business. There is, indeed, “more money”.

Born in the same county as Davy Crockett in East Tennessee, Dave found his way to Texas where he works in the petrochemical industry. He’s written and spoken about politics on various media outlets including Fox, ABC, and Townhall. He is a graduate of Tennessee Tech with a degree in chemical engineering. Follow Dave on Twitter: @semperlibertas.

All opinions expressed on USDR are those of the author and not necessarily those of US Daily Review.
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