Business Journal: With U of M's college football season uncertain, stage is set for athletic department showdowns

Donate To GopherHole
BleedGopher

BleedGopher

Well-known member
Joined
Nov 11, 2008
Messages
62,122
Reaction score
18,590
Points
113
per the Business Journal:


The University of Minnesota's Athletics Department isn't immune to the financial havoc created by the coronavirus pandemic — especially if the college football season doesn't happen or is severely altered.

The U lost roughly $10 million from the cancelation of spring sports, and athletic department executives and coaches have already taken pay cuts, according to the Star Tribune.

The Gopher football team brings in roughly $63 million in revenue, which is about half of the $122.7 million of all the revenue athletics bring in, according to Business Journal research. The U isn't alone in this problem. Other Minnesota colleges rely on football for a large chunk of sports revenue as do many other Division I schools nationwide. Budget cuts have already been made and more seem likely if football isn't played in front of thousands of paying fans.

Experts in the field of business and sports say the financial squeeze — and pressure to make significant budget cuts — gets uglier by the day as the pandemic's uncertainties persist.

"It's sheer panic," said Rodney Fort, an economist and professor of sports management at the University of Michigan.

President Joan Gabel wrote in a letter to students, faculty and staff that she is recommending the Board of Regents allow in-person classes to resume this coming semester, which means fall sports could resume in some fashion.

Most big colleges in trouble
A Business Journals analysis identified approximately $5.8 billion in revenue generated by 894 college football programs in fiscal 2018, the latest reporting year available through the U.S. Department of Education. For the vast majority of schools — nine out of every 10 analyzed — football-related revenue was less than $10 million for the year.


Go Gophers!!
 

in trouble

They'll be fine... it's the small schools who are in trouble.
 

A_Slab_of_Bacon said:
in trouble

They'll be fine... it's the small schools who are in trouble.
Click to expand...
If the 10 million is true for the U that means we are short at least 9 million. That is a big prpblem for a ton of schools. Most are planning on losing a lot of tuition revenue as well.
 

Having that $50M+/year lifeline from the Big Ten, really helps us. Athletics accounting is so make believe and hand waivey, it's tough to know what exactly is rolled up in that $63M figure quoted in the OP.

And most of that is from TV revenues. So far, only March Madness really got cancelled and that would've been a bite out of the 2019-20FY payment anyway. So long as full football season on TV happen, and basketball too, we should still be in-line for full payments in 2020-21FY and going forward.
 

Athletic budgets are just the tip of the iceberg. Look for lots of lawsuits also coming towards colleges and universities - big endowments make them a big target for class action suits. The claim is students paid for services that were not adequately provided. Tulane went through this when Katrina hit, and came out of it in great shape, but that's because so many other colleges and universities helped them out by accepting Tulane students for a semester. Tulane gave those other colleges the tuition payment, so Tulane's revenue went to zero for the semester, but that's how they survived the court challenges. With COVID, this is a different ballgame. If they kept students on campus they get sued for endangering them; if they go to remote-learning they get sued for not providing the services paid for by students (e.g., you can't have a lab class at home). The answer is refund the student's tuition, which if that happens, is a huge hit to those endowment funds.
 


Livingat45north said:
Athletic budgets are just the tip of the iceberg. Look for lots of lawsuits also coming towards colleges and universities - big endowments make them a big target for class action suits. The claim is students paid for services that were not adequately provided. Tulane went through this when Katrina hit, and came out of it in great shape, but that's because so many other colleges and universities helped them out by accepting Tulane students for a semester. Tulane gave those other colleges the tuition payment, so Tulane's revenue went to zero for the semester, but that's how they survived the court challenges. With COVID, this is a different ballgame. If they kept students on campus they get sued for endangering them; if they go to remote-learning they get sued for not providing the services paid for by students (e.g., you can't have a lab class at home). The answer is refund the student's tuition, which if that happens, is a huge hit to those endowment funds.
Click to expand...

I'm not following. What's your association between tuition and the endowment?
 

How does the U lose 10 million from spring sports? Few go to the events, and all lose money. If anything, it should be a reduction in losses.
 

FatNTired said:
I'm not following. What's your association between tuition and the endowment?
Click to expand...
Schools need funds to pay their bills. If they take a hit on tuition, the way those bills will get paid is through the endowment. Even with public schools like the U of M, I just don't see state gov'ts coming to the rescue with a big bailout program. I'm using Tulane and Katrina as an example because it's the only university that I can think of that was in position to get sued for not providing services (e.g., classes) to their students for a semester. The fact that they didn't have a campus wasn't part of the legal discussions, students paid tuition for classes and lawyers raced towards that situation to file class action suits. Tulane worked with other colleges to place all their students for a semester (of which 97% returned to Tulane after that semester), but at the expense of also giving those colleges the tuition money the students had paid to Tulane. To by their bills (which were huge, rebuilding the entire campus, faculty salaries, etc. ), Tulane nearly wiped out it's endowment. They recovered nicely, actually pretty amazing how Cowen managed the situation, but it's just an example of what may be coming. In the COVID case, it certainly wasn't a 100% shutdown like Tulane and Katina, but watch for lawyers to line up going after colleges.
 

LesBolstad said:
How does the U lose 10 million from spring sports? Few go to the events, and all lose money. If anything, it should be a reduction in losses.
Click to expand...
If you pull up the budgets I suspect even though the teams aren't playing you still have the bulk of expenses (scholarship costs, coaching staff salaries, building and facility mgmt, etc.) but have no revenue. Some costs are eliminated (travel, game day expenses), but the bulk are still in place. In addition to ticket sales, there's also probably lost revenue from broadcast rights.
 




Livingat45north said:
Schools need funds to pay their bills. If they take a hit on tuition, the way those bills will get paid is through the endowment. Even with public schools like the U of M, I just don't see state gov'ts coming to the rescue with a big bailout program. I'm using Tulane and Katrina as an example because it's the only university that I can think of that was in position to get sued for not providing services (e.g., classes) to their students for a semester. The fact that they didn't have a campus wasn't part of the legal discussions, students paid tuition for classes and lawyers raced towards that situation to file class action suits. Tulane worked with other colleges to place all their students for a semester (of which 97% returned to Tulane after that semester), but at the expense of also giving those colleges the tuition money the students had paid to Tulane. To by their bills (which were huge, rebuilding the entire campus, faculty salaries, etc. ), Tulane nearly wiped out it's endowment. They recovered nicely, actually pretty amazing how Cowen managed the situation, but it's just an example of what may be coming. In the COVID case, it certainly wasn't a 100% shutdown like Tulane and Katina, but watch for lawyers to line up going after colleges.
Click to expand...

That would take a big, big draw on the endowment for it to work. My institution advertises 5% as the draw but has more recently been at 8%. I will ask my closest donor, a retired emeritus professor at Tulane, for his memories next we talk. I just can't fathom the ability to run down your endowment that far when the majority of funds are restricted.
 

LesBolstad said:
How does the U lose 10 million from spring sports? Few go to the events, and all lose money. If anything, it should be a reduction in losses.
Click to expand...
$10 million revenue, not profit.

They might also be including things like facility rentals into the spring number that aren't directly tied to spring sports.
 




MplsGopher said:
Having that $50M+/year lifeline from the Big Ten, really helps us. Athletics accounting is so make believe and hand waivey, it's tough to know what exactly is rolled up in that $63M figure quoted in the OP.

And most of that is from TV revenues. So far, only March Madness really got cancelled and that would've been a bite out of the 2019-20FY payment anyway. So long as full football season on TV happen, and basketball too, we should still be in-line for full payments in 2020-21FY and going forward.
Click to expand...
That 50 million is in the revenue. And it was not 50 last year. 43 is the total. Revenue 8th in the conference and way behind the big boys. The budget is public domain and it can be read in full detail.
 
Last edited:

FatNTired said:
That would take a big, big draw on the endowment for it to work. My institution advertises 5% as the draw but has more recently been at 8%. I will ask my closest donor, a retired emeritus professor at Tulane, for his memories next we talk. I just can't fathom the ability to run down your endowment that far when the majority of funds are restricted.
Click to expand...
IMO, what Tulane did was pretty amazing. They had something like a $150M hit in revenue, but came out of it better than when they went in. They used Katrina to restructure the school, major restructuring of programs, degrees, staff and construction of new buildings and facilities, and ended up with a larger endowment than they had before Katrina hit. My point in all of this is that on this board we're just looking at the athletic departments (which of course makes sense, that's why we're all here), but there is a very real probability that colleges and universities are going to see a much larger impact than that. Just my guess.
 


Livingat45north said:
IMO, what Tulane did was pretty amazing. They had something like a $150M hit in revenue, but came out of it better than when they went in. They used Katrina to restructure the school, major restructuring of programs, degrees, staff and construction of new buildings and facilities, and ended up with a larger endowment than they had before Katrina hit. My point in all of this is that on this board we're just looking at the athletic departments (which of course makes sense, that's why we're all here), but there is a very real probability that colleges and universities are going to see a much larger impact than that. Just my guess.
Click to expand...
MplsGopher said:
$54M last year FY2018-19
https://www.usatoday.com/story/spor...it-nearly-759-million-fiscal-2018/3686089002/
Click to expand...
Reading the 2019 report from the University of Minnesota themselves. In the conference we rank 8th in revenue and are almost dead even after expenses. No room for error.
 

How many employees at the department? The number of programs have been relatively static but what are the HR costs and how has that evolved over the past 15 years?
 

builtbadgers said:
Reading the 2019 report from the University of Minnesota themselves. In the conference we rank 8th in revenue and are almost dead even after expenses. No room for error.
Click to expand...
That’s just hand waiving. Athletics accounting always is.
 

Relative to the main operating budget, athletics is a rounding error.
 

You must log in or register to reply here.



Top Bottom