The Business of College Sports. A Question of Equity and Ethics
Don’t I have the right to do what I want with my own money? Or are you envious because I am
generous? Matthew 20:15
Abstract
The NCAA openly supports the universities in the Power Conferences of Division I college
athletics. While their approach is consistent with capitalism, it contradicts their stated objective
of equity and a level playing field. This paper investigates the impact of athletic department
operations on the student body. Within public universities, does the NCAA play a role in the
disparities between NCAA Division I athletic programs in power versus non-power conferences?
Do student-fees fund non-profitable athletic programs? Do prospering athletic programs benefit
the academic side of campus? Can and should the NCAA do anything to level the playing field
as their mission statement suggest?
Introduction:
Over the past year, the integrity of college sports has been challenged by sex scandals,
recruiting violations, academic suspensions and other actions that are unbecoming and
inappropriate for representatives of higher education. The NCAA regulated, multi-billion dollar
industry of college sports has incurred blemishes that parallel and sometimes dwarf those
reported in the for-profit, free-market that dominates corporate America. USC, Penn State, Ohio
State, Syracuse and other story book programs have been the center of controversial issues that
reach beyond the playing field or court and into the households of Americans from coast to
coast.
The NCAA, the governing body of college athletics, has proven to be as much a part of
the problem as they are the solution. The intent of the NCAA is to maintain the credibility of
college sports for the good of the student-athlete; but, given the events of this past year, it
appears they, and some of the institutions they represent, are failing at their task. The not-for-
profit NCAA agency, which is designed to protect the students, has as much to hide as the
programs they reprimand. They hold nearly $445 million in marketable securities and cash, as
part of their $570 million in total assets. Their liabilities sum to a mere $127 million.1 They
preach player and university prudence while they regularly take a portion of the incoming
proceeds to fund their operations and pad the left side of their balance sheet. They proclaim
equity while they reward the universities that generate the most revenue with the largest
paycheck. They have been accused of colluding with major conferences and television networks
to secure a lucrative revenue stream that is beyond what is necessary to meet their objectives.
Yet, they continue to operate their business as usual. This not-for-profit agency appears to be as
driven by money as their constituent Universities.
History:
When intercollegiate sports first began in the late 1800’s they were student run
organizations with no official ties to their respective universities. By 1905, college football had
become wildly popular. The sport was not what it is today. It was played with next to no rules
and was excessively violent. It was so violent that from 1890 to 1905 there were 330 student
deaths from football injuries. This staggering statistic made it clear that the sport needed to be
drastically changed if not abolished. In 1905, a rules committee (the IAAUS) was formed by the
presidents of the colleges where football was played. The committee tried to implement rules
that would make football safer for the student athletes. The new rules were ineffective at
slowing down the death toll. In the 1905 season, another 18 students died from football related
injuries. In 1906, the rules committee met again and wrote a constitution clearly outlining a set
1
http://www.ncaa.org/wps/wcm/connect/public/ncaa/finances/index.html
of rules that all schools had to sign in order to play football. In 1910 the rules committee
changed its name to the National Colligate Athletic Association (NCAA).
The early years were not easy for the NCAA. Many of the schools with successful
football programs refused to join. These schools were skeptical of an organization that would be
in charge of intercollegiate sports and feared that the NCAA would change the rules in a way
that would inhibit their success. By 1915, the remaining holdouts decided to join. Although all
schools that joined the NCAA had to sign a contract outlining rules and regulations, the schools
themselves were the ones in charge of enforcing the rules. The NCAA had no enforcement
powers. In 1925, the NCAA asked the Carnegie Foundation to conduct a study on its member
institutions to see if they were complying with the rules. The report was completed in 1929 and
the results were less than pleasing. The study revealed that 81 of 112 schools made payments to
athletes.
It was obvious that winning was important. In 1935, the SEC (Southeastern Conference)
was the first conference to allow its schools to offer athletic scholarships. The NCAA was
worried that allowing schools to offer scholarships would damage the amateur status of the
athletes; as a result, in 1948 the Sanity Code was established banning any payments to student
athletes including scholarships. In 1950, the NCAA found 7 schools in violation of the Sanity
Code and suggested that the 7 schools be banned from the NCAA. However, at the convention
in 1951 the 2/3 required vote failed to pass. The membership also voted that year to remove the
Sanity Code. Then, due to the widespread violations, in 1953 the NCAA was given the power to
enforce its rules. From that time, the NCAA could hand out a variety of punishments to rule
violators (Grant, Leadley, and Zygmont, 2008).
The NCAA has seen many changes since its beginnings in 1910. The current NCAA
handbook on rules and regulations for Division I is 434 pages long. The NCAA website claims
the following in regards to it its enforcement program:
The NCAA enforcement program strives to maintain a level playing field for the more than
400,000 student-athletes. Commitment to fair play is a bedrock principle of the NCAA. The
NCAA upholds that principle by enforcing membership-created rules that ensure equitable
competition and protect the well being of the student-athlete at all member institutions. 2
The NCAA claims that its primary goal is to create an equal playing field for all member
institutions. However, when dispersing funds among member colleges it appears that the NCAA
does not follow its stated objectives. In 2010, the NCAA redistributed $477 million to Division I
schools. The six power conferences received $228 million or 47.85% of the total revenue
disbursement.3 The six power conferences represent 73 schools which is 21% of Division 1
schools. The non-power conferences received the other $249 million or 52.15%. The nonpower conferences represent 264 schools, 79% of Division I schools.
Literature Review:
In previous literature the NCAA has been labeled as exhibiting cartel-like behavior. The
basis for this accusation lies in rules and regulations established by the agency. Their rules range
from colleges agreeing to not pay student athletes beyond their education related expenses,
assistant coaches salaries, limiting output, side payments, and eliminating competition (Fleisher,
Goff, and Tollison, 1992; Zimbalist, 1999; Kahn, 2007, Pantuosco and Stone, 2007). Monetary
compensation for student athletes who participate in profitable sports has been forefront issue
since the NCAA’s inception (Zimbalist, 1999).
2
http://www.ncaa.org/wps/wcm/connect/public/ncaa/enforcement/index.html
The six Power Conferences are Atlantic Coast Conference, Big 12, Big East, Ben Ten, Pacific-10, and Southeastern
Conference.
3
The NCAA argues that their restrictive monetary compensation policies toward athletes
help ensure the integrity of college sports. The evidence suggests that college athletes are paid
below their market value wage. This evidence is based in part on estimates of the marginal
revenue product of college players that continue their careers at the professional rank (Brown
and Jewell, 2004; Brown, 1993, 1994). The model used to estimate a players worth consists of
using the total revenue from a sport at a particular university as the dependant variable and the
number of players who are eventually drafted into professional sports from that team as the
primary independent variable. Using data from the 1995 season this model estimates that a draftquality college football player’s marginal revenue product is $600,596 in real 2011 dollars. This
same model (using data from the 1995-1996 season) estimates that a draft-quality college
basketball player’s marginal revenue product is $1,712,445 in real 2011 dollars (Brown and
Jewell, 2004, p. 159).4
The student athletes who are fortunate enough to have a career in professional athletics
are most likely the recipients of full scholarships. The median value of a full scholarship from a
Football Bowl Subdivision (FBS) school in real 2011 dollars was $28,900, Football
Championship Subdivision (FCS) school in real 2011 dollars was $23,000, and Division I
schools without football the value in real 2011 dollars was $33,500.5 The numbers indicate that
for a professional bound athlete the value of a scholarship is well below the marginal revenue
product of the player. Because of the cartel behavior among universities and the NCAA, the
profit generated by universities with professional bound athletes will persist in long-run.
4
The GDP deflator is used to convert numbers across periods
5
http://www.usatoday.com/sports/college/mensbasketball/2011-value-of-college-scholarship.htm
Another cartel characteristic is displayed by the NCAA with limitations on coaching staff
size. The NCAA regulates the number of coaches and off campus recruiters for all sports. FBS
football teams are limited to one head coach, 9 assistant coaches and 2 graduate assistant coaches
(NCAA pg. 54). FBS football teams are allowed 7 off-campus recruiters. Men’s and women’s
basketball teams are allowed 4 coaches and 3 off-campus recruiters. All other sports are limited
between 2-3 coaches and 2 off campus recruiters (NCAA pg. 56). The NCAA flexes their cartel
muscles by imposing limitations on coaching staff size.
The NCAA has also been described as a collusive monopsony. This idea was discussed
by Blair and Romano (1997). They conclude that “the NCAA’s behavior goes unchallenged
because the NCAA hides behind a smoke screen of good intentions. But the harmful effects
should not be ignored.” While the University prospers, the players are burdened with academic
and athletic demands beyond the general student body. The authors contend that a revenue
sharing system would lead to a more equitable outcome for participating universities.
While a level playing field is their goal, their hierarchical power and legislative process is
skewed toward large football institutions. The NCAA Executive Committee carries the deciding
vote regarding policy issues. This Committee consists of 16 voting members and 4 non voting
members. Of the 16 voting members, 8 are chancellors or presidents from FBS institutions; FBS
schools are the former NCAA I-A football universities. The remainder of the Executive
Committee is a smattering of smaller Division I football programs, as well as Division II and
Division III chancellors or presidents.
The NCAA’s Leadership Council is responsible for advising the Board of Directors,
overseeing the appointment and substructure of cabinets and committees, and taking final action
on matters delegated to it by the Board of Directors. The Leadership Council is comprised of 31
members, one from each conference. However the amount of voting power is determined by
which conference the committee member represents. Representatives from the six power
conferences and Conference USA each receive three votes. The other 4 remaining FBS
conference representatives each receive 1.5 votes. The remaining 20 non-FBS conference
representatives each receive 1.2 votes. Interestingly the FBS conferences have a combined 27
votes while the non-FBS conferences have 24.
The Legislative Council has the same structure as the Leadership Council. The FBS
conferences have the majority of the votes. The Legislative Council is the primary legislative
authority. They are in charge of developing educational material regarding pending legislation.
While the objective is equity the structure of the governing NCAA committees reveals a bias
toward prominent football institutions from power conferences. This power yields the most
profitable outcome for the power conference universities.6
The Winners
The monopsony power of the NCAA (Blair and Romano, 1997; Brown, 1993; Pantuosco
and Stone, 2007) fosters a system where players are providing entertainment that is sold in the
market place by the NCAA and their member universities. The NCAA, the participating
universities, particularly those from the Power Conferences, and the coaches are sharing the
proceeds, while the student-athletes are, in some cases, living below poverty levels.7 Basketball
coaches, such as Rick Pitino of the University of Louisville, generate an annual salary of $7.5
million per year season.8 Nick Saban, University of Alabama’s football coach, and Mack
6
2011-12 NCAA Division I Manual.
Whitlock, Jason. "College Athletes Should Not Be Paid". Sports and Athletes. James D. Torr, Ed. Opposing
Viewpoints Series. Greenhaven Press, 2005. Jason Whitlock, "College Athletes Already Paid in Full," espn.com,
September 19, 2002.
8
http://www.usatoday.com/sports/college/2004-02-18-athletic-spending-cover_x.htm
7
Brown, University of Texas’ football coach, make over $5 million per year.9 But it is not just the
coaches who profit from the talents of the college athletes. In 2010, the NCAA sold the
broadcasting rights of March Madness, Division I Men’s Basketball tournament to CBS for
$10.8 billion for 14 years, which averages $771 million per year. CBS has capitalized on their
investment by selling over $738 million worth of advertisements alone for the 2011 March
Madness tournament.10
Another winner is the participating universities in the power conferences. The NCAA, in
conjunction with the Power Conferences and the television networks, has concocted a system
where the Power Conferences are guaranteed more of the NCAA’s revenue than non-power
conferences. In 2010-11, the Big East received $39 million, followed by the Atlantic Coast
Conference at $36 million. Nearly half of the redistribution money is awarded to the top 6 power
conferences. These happen to be the 6 conferences that receive Bowl Championship Series
(BCS) automatic bids.11 The BCS controls the national championship for college football which
all but insures that a football championship will go to a university from a major conference along
with a check for over $17 million per team.12
Universities claim that revenue producing sports fund non-revenue producing sports. In
essence, football and basketball benefit tennis, golf, and soccer. They also claim that football
typically loses money.13 But a review of the football data provided by USA Today reveals that
over a seven year span (2003-07) 65 percent of the 117 NCAA Division I football programs
9
http://www.businessinsider.com/highest-paid-coaches-in-college-football-2011
http://www.thestreet.com/story/11454837/1/ncaa-tournament-drives-ticket-resale-march-madness.html
11
http://www.ncaa.org/wps/wcm/connect/public/NCAA/Finances/index.html
12
http://collegefootball.procon.org/view.resource.php?resourceID=004550
13
http://www.usatoday.com/sports/college/ncaa-finances.htm
10
earned a profit.14 The profit across the industry far outweighs the costs of supporting a football
program. Half of the schools who do not show a profit break even, leaving a small percentage of
the schools with losses.
Even when football does not generate a profit it is presumed that its existence adds to the
university in other ways, such as increases in athletic department staffing. Coastal Carolina,
located in Conway, SC began its football program in the Big South Conference in 2003. The
University posts their revenues and expenses to balance to $0.15 While the school has not
officially earned a profit, the athletic department has added 15 full time positions to service the
program. The median salary is $72,000 per coach.16 The grounds crew and equipment
departments have also been expanded. Athletic proceeds can also be applied to hire compliance
officers, multiple assistant coaches, speed and strength coaches, improve facilities, pay coaches
salaries, purchase airplanes, and expand athletic administration positions.
Athletic success can benefit the university in terms of enrollment and finances. Toma
and Cross (1998) find a notable increase in the number of admission applications after a national
championship compared to peer institutions. Although, Frank (2004) contends Cross’ finding;
he claims athletics add very little if any external benefits to universities.
The final beneficiary from a successful athletic program is the student-athletes. There are
over 380,000 students who participate in NCAA sports.17 Of those 126,000 share the over $2
billion in scholarships offered by participating institutions.18 Many of these students could not
afford a college education or would be buried with debt upon graduation if athletic funds were
14
http://matlabgeeks.com/sports-analysis/college-football/ncaa-div-i-college-football-expenses-and-revenue/
http://athleticscholarships.com/mens-football-scholarships/coastal-carolina-university/
16
http://www.thestate.com/salaries/
17
http://www.collegesportsscholarships.com/percentage-high-school-athletes-ncaa-college.htm
18
http://www.ncaa.org/wps/wcm/connect/public/NCAA/Academics/Undergraduate+Scholarships
15
unavailable. Recently, the NCAA has implemented the policy of allowing full scholarship
student athletes the opportunity to earn an additional $2,000 per semester to cover living
expenses. NCAA President Mark Emmert stated that this policy should be adopted by the six
power conferences because they have the revenue stream.19 While this statement has merit, it
puts the other conferences at yet a further disadvantage when competing for student-athletes.
With all of these beneficiaries it appears that football programs and other college athletics are
part of a successful business model for universities. But, there are problems.
Student –Athlete Perspective:
While college sports provide dividends to the NCAA, media, universities, and the
student- athletes, the emphasis on college athletics exposes at least three causes of concern: the
demands on student-athletes, the university emphasis on athletics versus academics, and the
financial costs imposed on the general student body to fund intercollegiate athletics.
The problem begins with the physical, mental, and time consuming demands placed on
the student athletes. One former women’s Division I college soccer player was quoted as saying
“playing college soccer is like having an awful job, working for a terrible boss, and not getting
paid.”20 This comment summarizes the feelings of a lot of college athletes. The time demands on
the student athletes are capped by the NCAA; but students-athletes are as much employees of the
university as they are students (McCormick, 2006). The NCAA limits the number of hours a
student athlete can participate in intercollegiate athletics to 20 hours per week during the season,
with one day off required. The off-season time limit is 8 hours per week.21 The off-season lasts
19
http://espn.go.com/college-sports/story/_/id/7143961/ncaa-weighing-2000-payments-student-athletes
An anonymous Clemson Women’s Soccer player.
21
http://ncaacompliance.nd.edu/countable_hours.shtml
20
about 6 weeks per 32 week academic year, depending on the sport. Some sport seasons flow into
the break period or into the summer months. College basketball players continue their training
throughout the winter break. A successful college baseball team’s season can extend into late
June. In 2010, South Carolina won the College World Series on June 29th, two months after their
last class. 22
The typical student athletes must engage in 6:00 am running sessions at least two days a
week throughout the academic year. One of the running sessions is typically held on a Friday
morning to deter students from engaging in potentially damaging extra-curricular activities on
Thursday night. Then, a regiment of weight lifting is added to the program, regardless of the
sport. It is not unusual for a woman soccer player to spend 4 hours a week in the weight room
even though there is no evidence to suggest that weight lifting improves a person’s soccer skills.
Clearly, weight lifting can provide strength on the ball, but the best player in the world, Lionel
Messi, is 5’5” and 145 pounds, hardly a product of the iron-gym.
It appears that students-athletes are required to participate in this regimented life style so
that coaches can justify their enormous staffs. There are 10 people on the University of
Kentucky Basketball athletic staff. The team can only travel with 12 players. The greater the
staff the more demands placed on the players.
Following the training regiment, the student athlete fills his/her schedule with daily
meetings with tutors, advisors, coaches, and/or mentors. Whatever time is left is consumed by
classes and studying. In short, between the travel, practices, training and meetings, college
athletics is a full-time job without financial compensation.
22
http://www.fitsnews.com/2010/06/30/gamecocks-win-college-world-series/
Athletics versus/with Academics
The mission statement for universities and colleges nationwide formalize their
commitment to education. But, recently that focus has been questioned. Schools are dedicating
more resources toward athletics, and in some cases placing the success of their sports teams over
their scholastic integrity. The Penn State University scandal provides evidence of the overemphasis of sports on college campuses.23 While the case is still under investigation, the
President of Penn State University was fired for his alleged cover-up of an inappropriate incident
between a football coach and student on University grounds. The legendary football coach of
Penn State was fired for his role in the scandal. Universities with profitable athletic programs
appear to utilize the proceeds solely for athletic department purposes. Coaches and trainers are
added to the university payroll while full-time faculty positions remain constant.
Table 1 provides athletic department spending information for a cross section of public
universities within each of the 29 NCAA Division I conferences where public universities reside.
The data is compiled for the 2009-2010 academic year. The first six conferences listed are the
“Power Conferences.” It is clear from the data that Power Conferences dedicate a much higher
amount of financial resources to athletics. The operating expenses for athletics in power
conferences average over $150,000 per male participant. The overall average budget per school
in Power Conferences ranges between $54 million and $82 million per year. The second column
posts the student teacher ratios by conference. The third column provides a list of the average
class sizes by conference. A casual glance of the conference averages does not indicate any
obvious differences between Power Conferences and other conferences in the student teacher
23
http://espn.go.com/college-football/story/_/id/7214380/joe-paterno-president-graham-spanier-penn-state
ratio (STR) or the average class size. There may even be a slight bias toward larger class sizes in
Power Conference universities.24
Table 2 displays additional spending information on men’s recruiting expenses and
coaching salaries incurred by public universities in NCAA Division I conferences.25 The
universities within the Power Conferences dedicate greater financial resources toward recruiting
men’s head coaching and assistant coaching salaries than the other 23 conferences listed. Table 3
provides the same information for women’s sports. Once again, the Power Conferences
outspend the other conferences in recruiting and coaches salaries.
Student Fees:
A third issue is the financial burden placed on the student body to support their athletic
programs. Students at the College of Charleston, a relatively small school in the Southern
Conference, located in South Carolina pay 72 percent of the athletic expenses through fees.
Meanwhile, students at large revenue producing universities, such as the University of Alabama
do not pay any fees for athletic programs. In 2009-10, the 73 public universities in Power
Conferences had student fees funding an average of 3.72% of their athletic departments, while
the other 150 public universities from Non-Power Conferences collected 31.24% of their revenue
to cover athletics from student fees.26
The first column of Table 4 posts the percentage of athletic department expenses covered
by student fees in NCAA Division I public institutions. The student fees to support athletic
departments tend to be lower in Power Conferences with a few exceptions, one being, the
24
All public schools in the survey are weighted the same within their conference.
The focus on men is to compare schools with football programs.
26
Data from the Department of Education
25
Northeast Conference. This outlier is a result of low fees at Central Connecticut State the only
public school in the Northeast Conference. Table 4 also shows the average profit/loss of the
athletic departments of each school within the conference. The most profitable conference is the
SEC with the average athletic department earning just below $7.3 million per year. Overall, the
six Power Conferences generate more profit than the other conferences combined and six of the
top seven most profitable conferences are Power Conferences. These conferences are also the
beneficiaries of the NCAA Revenue Distribution. The NCAA’s Revenue distribution is based on
a variety of factors including performance in the NCAA basketball tournament.
The revenue from the Bowl Championship Series (BCS) is included in the profit/loss
summaries of the institutions but it is not part of the revenue distribution column. The BCS,
designed for football, is a separate entity from the NCAA formed by the six Power Conferences
in 1998 to obtain more bargaining power with television stations. The BCS negotiates with the
television stations on behalf of the conferences. They then distribute the media revenue to the
conferences, who then allocate the funds between the schools. This adds to the profitability of
the school but it is not under the auspices of the NCAA.
Model:
The policy questions are, within public universities, does the NCAA play a role in the
disparities between NCAA Division I athletic programs in power versus non-power conferences?
Do student-fees fund flailing athletic programs? Do prospering athletic programs benefit the
academic side of campus? Using a sample of public institutions, I analyze how profitable power
conference universities allocate the revenue they generate from athletics. Are their excess funds
redistributed to the students, athletics, or academics? Then an alternative method of revenue
distribution is discussed that would address the objective of a level playing field.
The data was compiled from the Department of Education and USA Today. The schools
in the survey consists of all NCAA Division I public institutions. Data was not available across
variables for the private institutions. Furthermore, private institutions may have different budget
and accounting procedures than public institutions. Regressions were performed at the
university level as opposed to the conference level; pooling data would hide variation within
conferences. Two hundred and twenty two schools are included in the sample. A few schools,
such as Army and Navy were omitted for data consistency purposes.
The sample period for this paper is the academic year 2009-2010. This academic year
follows on the heels of a severe recession where states across the country were forced to incur
budget cuts. Higher education was a casualty of the war on spending. Since 2008, 43 states have
reduced funding for public universities (Johnson, Oliff, and Williams, 2011, p. 6). The severity
of the cuts varied by state and by school. This has resulted in higher tuition and fees, as well as
faculty pay cuts and firings. Using 2009-2010 might skew the results since schools with
profitable athletic programs may be able to adapt to funding cuts better than less profitable
athletic programs. Non-profitable athletic departments rely on student fees to stabilize spending.
(EQ. 1)
Student Fees i = o + 1STR i +  ACS i + 3 PowerConf i + 4 Profit i +
5 Coach/Part i + 6 Other + e1
(EQ. 2)
5 Other + e1
STR i = o + 1Profit i +  PowerConf i + 3 i Coach/Part + 4 Students Fees +
Expenses i = o + 1Profit i +  PowerConf i + 3 i Coach/Part + 4 Students Fees
(EQ. 3)
+ 5 Other + e1
Equation 1 estimates the impact of a vector of variables on the percentage of athletic
department expenses funded by student fees. The STR variable is the student teacher ratio of the
university. ACS is average class size.27 There is no distinction between the quality of teachers
within the public Division I institutions. STR and ACS are instruments for estimating the
correlation between student fees and academics. Given the collinearity between the two variables
they are implemented separately in the equation. A negative coefficient, 1 implies that holding
everything else constant, a reduction in the student teacher ratio or size of the class will increase
the student fee percentage of the athletic budget. PowerConf is a dummy variable used to
designate whether or not a school belongs to a power conference. A value of 1 is assigned for
Power Conference schools, zero otherwise. The variable Profit represents the profit margin of
the athletic department. Using the profit margin adjust for university size.28 A negative
coefficient for either of these variable would imply that affiliation with a Power Conference
reduces student fee percentage of the athletic budget. Or, the schools that have higher profit
margins tend to draw their revenue from athletics as opposed to students fees. Coach/Part is the
ratio of coaches per participant. A positive correlation would indicate that the more coaches
hired the higher the student fees percentage dedicated toward athletic programs. Other variable
were implemented into the equation to determine how the schools allocated the student fees.
Equation 2 estimates the impact of school specific athletic department variables on the
student teacher ratio. The intent is to estimate the impact of athletic department financial success
27
28
Data was acquired from various University websites.
The correlation is .86.
or conference affiliation on academic focus. A coefficient that is not significantly different from
zero, imply a disconnect between athletic success (Profit), athletic conference affiliation
(PowerConf), commitment to athletics (Part/Coach) and student funding percent of athletic
budgets (Student Fees).
Equation 3 estimates the factors that contribute to athletic department expenses. The
question proposed is what inspires athletic spending. The variables are the same as Equation 2. It
is suspected that PowerConf will have more exorbitant athletic expenditures and athletic
department profits will be channeled back into the athletic department. The empirical evidence
suggests that Student Fees are necessary to fund non-profitable athletic department. The nonprofitable athletic department tends to be housed in smaller universities. Therefore, the expected
correlation between Student Fees and relative Athletic Spending is negative. After controlling for
profits and power conferences, this relationship should be offset since Student Fees add to
athletic budgets. The emphasis on coaches hired is captured with the Part/Coach variable.
Results:
Table 5 contains the regression results for Equation 1 and some variations. The
dependant variable is the percentage of athletic department expenses funded by student fees. In
the first column, the PowerConf coefficient is negative and significant. The value of the
coefficient was .25. Therefore, holding other factors constant student fees are 25 percent less in
power conference schools than non-power conference schools. There is also a negative
correlation between the number of coaches per participant and student fees. Even after
controlling for power conference affiliation, schools with lower coaches per participant have
higher student fees percentages. This result is consistent with the empirical data and our a priori
hypothesis. The student teacher ratio has no impact on the percentage of athletic department
expenses funded by student fees, nor does the profit margin of the university. The second column
displays the results using ACS instead of STR. The results were basically the same. In the third
column, the coefficients are listed for a similar equation that substitutes “profit” in nominal
dollars for profit margin and power conference affiliation. The notable result is nominal profit
leads to lower student fees. Universities with profitable athletic department are able to reward
their student body with lower fees. The fourth column uses profit margin as opposed to profit.
Using the profit margin adjusts for school size. In this equation, the coefficient is negative but
only significant at the 10 percent level.
Table 6 provides the results for equation 2; this equation estimates the impact of school
specific athletic department variables on the student teacher ratio. The coefficients are not
significantly different from zero. These estimates imply a disconnect between athletic success
(Profit), athletic conference affiliation (PowerConf), commitment to athletics (Part/Coach) and
student funding percent of athletic budgets (Student Fees). The equation reveals a mutually
independent relationship between academic success and STR. The second column displays the
same result using ACS as the dependant variable.
Table 7 presents the results for Equation 3. The dependant variable is nominal athletic
department expenses. The coefficient value of the PowerConf variable is near 51 million. Power
Conferences budgets are $51 million greater than non-power conference universities, holding
other factors constant. As expected profit margins positively impact spending. Once again the
student fees variable is negative even after controlling for profit margin and Power Conference.
This may be explained by the outliers among athletic programs. Some of the Power Conference
universities profits are extremely high while some on the largest losses are Power Conference
universities. These results suggest that profitable athletic departments spend their proceeds on
the athletic department expenses. However, students benefit when athletic departments profits
subsidize student activity fees.
Proposal:
In NCAA Division I public universities, the students bare a larger burden of the athletic
department expenses in the non-power conferences than power conferences. Yet, the NCAA
legislative committees and revenue distribution plan favors the power conferences. To some
extent the NCAA revenue distribution creates the profit of the Power Conference schools since
some of their profit can be attributed to the NCAA payout. That being said, the power conference
schools have a greater ability to earn profit without the assistance of the NCAA.
The NCAA appears disingenuous in their objective of providing a “level playing field” or
“ensuring equitable competition.” A more equitable approach would replicate the revenue
sharing system of the for-profit Major League Baseball (MLB) or the National Football League
(NFL), where owners agree that parity leads to profit. In MLB large market teams are levied a
luxury tax that is distributed to the small market teams. This Robin Hood type policy promotes
more parity, assuming the receiving team uses this money to invest in quality players. Franchises
that have kept the proceeds for profit have been mired in mediocrity. The NFL model is more
cooperative and perhaps a better fit for the NCAAs. The television contracts revenue,
merchandising revenue, and forty percent of the gate receipts are pooled and equally distributed
among the teams. This cooperation leads to parity and additional profit for all members.
The NCAA has compiled $445 million in marketable securities and cash. This money
could be used to support smaller school’s athletics or provide seed money for start-up football
programs. The evidence suggests that smaller schools are fighting to compete and they are using
student fees to fund their operations. If the NCAA’s goal is equity then the current system of
side payments to large conferences contradicts their objective. While cooperation is not the
foundation for American capitalism, it works well in professional sports as a means of
maximizing league profit. A more equitable and comprehensive system of revenue distribution
should be a goal of the NCAA, otherwise students fees will rise or students-athletes will not have
the opportunity to compete in inter-collegiate athletics.
Conclusion:
Even though the objective of the NCAA is to create a level playing field and equity
among member institutions, the NCAA revenue distribution and legislative structure support the
dominance of profitable Power Conference universities. Universities in the Power Conferences
receive close to 50 percent of the revenue from basketball proceeds and are guaranteed
placement in the lucrative BCS football games. Coaches and athletic staffs spend in excess of
$50 million more than their non-power conference counterparts. Meanwhile, the student-athletes
provide free services in the monopsonistic labor market. And, school representatives avert
unethical practices to insure economic rents.
Profitable athletic programs provide some positive externalities for the student body and
the athletic department at profitable institutions. The athletic department profit leads to lower
student fees necessary to support athletics, particularly in the Power Conferences. The
percentage of athletic department spending that is funded by student fees is twenty five percent
lower in Power Conference public universities. The profit does not appear to seep into the
academic side of campus. Assuming comparable faculty quality among public universities, there
is no significant difference between student teacher ratios and average class sizes in Power
Conference institutions versus non-power conference institutions. The negative spillover effect
of profit driven college athletics has never been more apparent than in present times. A more
equitable plan for sharing revenue should be developed to insure the objective of a level playing
field and equitable competition.
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Table 1
Operating Expenses
STR
Class Size
per Participant AVG
AVG by
AVG by
Athletic Exp
CONFERENCE:
by Conf Men
Conf
Conf
AVG By Conf
ATLANTIC COAST
$143,633
17.5
30.13 $54,021,023
BIG 12
$135,696
18.5
26.91 $70,679,683
BIG EAST
$154,989
18.2
24.33 $53,835,841
BIG TEN
$176,545
17.0
25.00 $81,960,118
PACIFIC-10
$149,146
18.9
23.38 $59,532,344
SOUTHEASTERN
$159,645
18.7
28.45 $81,640,520
AMERICA EAST
$38,778
18.4
23.29 $16,885,211
ATLANTIC 10
$69,868
17.5
25.67 $20,430,055
ATLANTIC SUN
$29,569
19.8
30.60
$8,592,995
BIG SKY
$27,275
20.1
27.22 $12,045,051
BIG SOUTH
$31,142
15.5
23.33
$9,986,115
BIG WEST
$38,638
20.0
26.75 $14,873,539
COLONIAL ATHLETIC
$52,406
16.9
29.00 $22,370,316
CONFERENCE USA
$75,844
20.0
24.25 $25,806,680
HORIZON LEAGUE
$32,017
19.7
26.33 $10,410,551
MID-AMERICAN
$45,496
18.7
24.25 $21,540,926
MID EASTERN ATHLETIC
$27,358
17.0
20.13
$8,663,324
MISSOURI VALLEY
$42,029
18.7
28.00 $16,297,563
MOUNTAIN WEST
$73,918
17.0
28.67 $33,731,721
NORTHEAST
$23,870
16.0
25.00 $11,764,819
OHIO VALLEY
$27,942
18.4
22.64
$9,637,043
SOUTHERN
$34,372
17.6
25.14 $11,830,859
SOUTHLAND
$32,505
20.9
25.09 $10,557,149
SOUTHWESTERN
$23,301
17.5
20.90
$7,016,739
SUN BELT
$42,945
20.8
21.92 $14,983,122
THE SUMMIT LEAGUE
$38,986
18.3
27.75
$9,902,917
WEST COAST
$28,968
26.0
31.00
$8,645,474
WESTERN ATHLETIC
$67,835
20.1
26.78 $25,764,743
Note: IVY Group, Metro Atlantic Athletic, Patriot League, and Independents were excluded due to the
fact that all members were private institutions
The 2009-2010 data used for this paper was obtained from the Department of Education.
http://ope.ed.gov/athletics/
The NCAA’s website provided the data on revenue distribution for 2010-2011.
http://www.ncaa.org/wps/wcm/connect/public/ncaa/pdfs/2012/2010+2011+revenue+distribution+chart
Table 2
CONFERENCE:
ATLANTIC COAST
BIG 12
BIG EAST
BIG TEN
PACIFIC-10
SOUTHEASTERN
AMERICA EAST
ATLANTIC 10
ATLANTIC SUN
BIG SKY
BIG SOUTH
BIG WEST
COLONIAL ATHLETIC
CONFERENCE USA
HORIZON LEAGUE
MID-AMERICAN
MID EASTERN ATHLETIC
MISSOURI VALLEY
MOUNTAIN WEST
NORTHEAST
OHIO VALLEY
SOUTHERN
SOUTHLAND
SOUTHWESTERN
SUN BELT
THE SUMMIT LEAGUE
WEST COAST
WESTERN ATHLETIC
Recruiting Expenses
Men (Average by
Conference)
$654,783
$723,778
$507,878
$700,815
$614,456
$927,041
$158,343
$230,010
$66,747
$139,805
$79,304
$112,895
$202,669
$343,924
$94,126
$261,556
$61,812
$161,008
$403,191
$88,213
$111,169
$147,963
$114,412
$57,231
$180,615
$90,982
$64,382
$228,234
Head Coach Men
FTE Salary
$486,161
$814,210
$498,594
$502,554
$557,781
$853,409
$115,817
$165,746
$76,927
$106,979
$84,671
$113,927
$126,467
$298,266
$128,520
$165,830
$98,826
$182,763
$314,051
$158,687
$91,506
$102,229
$96,212
$70,903
$139,799
$82,813
$74,842
$239,760
Assistant Head
Coach Men FTE
Salary
$140,559
$174,565
$131,058
$129,538
$148,708
$206,857
$45,723
$54,123
$39,604
$49,404
$45,096
$55,617
$50,817
$102,957
$57,628
$74,347
$48,182
$55,037
$93,054
$86,469
$40,885
$47,534
$45,915
$46,616
$71,503
$41,417
$29,486
$81,809
Note: IVY Group, Metro Atlantic Athletic, Patriot League, and Independents were excluded due to the
fact that all members were private institutions
Table 3
CONFERENCE:
ATLANTIC COAST
BIG 12
BIG EAST
BIG TEN
PACIFIC-10
SOUTHEASTERN
AMERICA EAST
ATLANTIC 10
ATLANTIC SUN
BIG SKY
BIG SOUTH
BIG WEST
COLONIAL ATHLETIC
CONFERENCE USA
HORIZON LEAGUE
MID-AMERICAN
MID EASTERN ATHLETIC
MISSOURI VALLEY
MOUNTAIN WEST
NORTHEAST
OHIO VALLEY
SOUTHERN
SOUTHLAND
SOUTHWESTERN
SUN BELT
THE SUMMIT LEAGUE
WEST COAST
WESTERN ATHLETIC
Recruiting Expenses
Women (Average by
Conference)
$311,129
$304,364
$244,087
$341,066
$278,533
$397,638
$106,189
$140,240
$57,166
$71,856
$54,149
$70,240
$110,672
$158,262
$71,293
$125,939
$39,972
$94,439
$156,901
$55,045
$56,407
$64,567
$57,769
$28,377
$85,714
$71,904
$100,887
$115,365
Head Coach
Women FTE Salary
$149,679
$201,457
$158,235
$143,527
$167,121
$186,819
$73,538
$79,078
$60,703
$68,751
$55,227
$83,389
$75,411
$79,941
$73,080
$85,095
$59,283
$73,893
$106,092
$109,676
$58,762
$59,999
$66,135
$42,354
$69,734
$60,052
$66,018
$74,770
Assistant Head
Coach Women
FTE Salary
$62,577
$74,685
$56,948
$61,622
$63,918
$71,442
$40,885
$38,938
$32,951
$38,098
$30,407
$47,200
$39,368
$41,269
$38,811
$44,525
$31,858
$39,423
$50,924
$64,449
$33,506
$33,036
$36,824
$30,060
$43,328
$34,641
$28,222
$40,613
Note: IVY Group, Metro Atlantic Athletic, Patriot League, and Independents were excluded due to the
fact that all members were private institutions
Table 4
Percentage of
Athletics
Program
Covered by
Student Fees
8.46%
1.42%
11.80%
0.45%
2.17%
2.58%
31.31%
28.89%
55.73%
16.61%
51.70%
32.44%
61.92%
21.42%
31.12%
38.47%
46.28%
27.74%
10.96%
0.00%
19.56%
47.23%
36.20%
20.13%
33.15%
18.02%
24.14%
10.09%
Profit/Loss
Averages by
Conference
$1,456,260
$6,419,675
$887,210
$7,021,941
$6,372,645
$7,293,353
$112,543
$1,330,936
$335,286
$72,229
$145,835
$257,917
$563,286
$51,518
($272,749)
$1,345,901
$199,651
$386,443
($295,572)
$510,906
$108,133
$40,083
$68,664
$241,527
($754,013)
($28,044)
($797,440)
($147,643)
Percentage
of Total
NCAA Div I
Funding
8.10%
7.52%
9.22%
8.93%
7.03%
7.04%
1.92%
3.22%
0.95%
1.47%
1.40%
1.66%
2.77%
4.28%
1.95%
3.31%
1.52%
2.30%
3.49%
1.82%
1.63%
1.89%
1.57%
1.50%
2.70%
1.42%
1.61%
2.47%
Total NCAA
Distribution
CONFERENCE:
(2010-2011)
ATLANTIC COAST
$38,724,762
BIG 12
$35,949,380
BIG EAST
$44,074,162
BIG TEN
$42,691,368
PACIFIC-10
$33,586,746
SOUTHEASTERN
$33,671,053
AMERICA EAST
$9,168,424
ATLANTIC 10
$15,379,568
ATLANTIC SUN
$4,553,605
BIG SKY
$7,023,406
BIG SOUTH
$6,692,743
BIG WEST
$7,915,097
COLONIAL ATHLETIC
$13,243,676
CONFERENCE USA
$20,445,493
HORIZON LEAGUE
$9,320,618
MID-AMERICAN
$15,839,969
MID EASTERN ATHLETIC
$7,279,652
MISSOURI VALLEY
$10,993,414
MOUNTAIN WEST
$16,702,798
NORTHEAST
$8,681,492
OHIO VALLEY
$7,786,660
SOUTHERN
$9,031,883
SOUTHLAND
$7,521,882
SOUTHWESTERN
$7,153,527
SUN BELT
$12,925,836
THE SUMMIT LEAGUE
$6,782,046
WEST COAST
$7,712,528
WESTERN ATHLETIC
$11,798,464
TOTAL
$477,955,000
Note: IVY Group, Metro Atlantic Athletic, Patriot League, and Independents were excluded due to the
fact that all members were private institutions
Table 5
Student Activities Fees
I
II
III
Variable
Coefficients
Coefficients
Coefficients
Intercept
0.505*
0.541*
0.58*
Student Teacher Ratio
-0.00074
-0.002
-0.001
ACS
Power Conference
-0.255*
Profit Margin
0.047
-0.26*
0.058
0.000001*
Profits
Part/Coach
-0.018*
R-squared
.51
-0.018
-0.028*
.51
.32
where ***indicates significance at the 10% level;**indicates 5% level;*indicates 1% level
Table 6
Student Teacher Ratio and ACS
I STR
II ACS
Variable
Coefficients
Coefficients
Intercept
19.2*
29.2*
Student Fees
-0.172
-1.492
Power Conference
-0.098
-0.927
Profit Margin
0.795
5.931
Coaches Per Participant
-0.042
-0.109
R-squared
.04
.11
where ***indicates significance at the 10% level;**indicates 5% level;*indicates 1% level
Table 7
Athletic Department’s Expenses
I
II
Variable
Coefficients
Coefficients
Intercept
18,705,327*
Profit Margin
18,059,887*
19,520,296***
0.938*
Profits
Power Conference
50,894,653*
Coaches Per Participant
-148,052
Student Fees
-7826761***
R-squared
.88
47,261,863
-95711
-7159826***
where ***indicates significance at the 10% level;**indicates 5% level;*indicates 1% level
.89