College Bowl Economics

Many people are frustrated with the BCS system in college football for a number of very good reasons.  However, I am doubtful the system will change in an expansive way because the economics suggest there is little incentive for it to change.

A growing inequality exists between the smaller bowl games that will begin on Saturday and the games that will be played in January.  Here are a few examples:

• Potato Bowl (formerly the Humanitarian Bowl) - Generates revenue of less than $2 Million.  Team payouts for game participation are $500,000 combined.  Broadcast revenue is less than $200,000.
• New Orleans Bowl - Generates revenue of approximately $2 Million.  Team payouts for game participation are $650,000 combined, and broadcast revenue is a little over $100,000.
• Holiday Bowl and Poinsettia Bowl - The same association puts on both bowl games which generated a combined $10.7 Million of revenue last year.  Team Payouts were a combined $4.2 Million, or more than the combined revenue of the bowl games in Boise and New Orleans.  Broadcast revenue in San Diego was $1.8 Million last year.  Finally, this association currently hold approximately $4.7 Million of cash!
• The non-profit committees that put on the Orange Bowl and the Sugar Bowl hold approximately $20 Million and $21 Million respectively of publicly traded investments!
• "The Granddaddy of Them All" (aka The Rose Bowl) generated revenue last year of $54 Million.  The participation payouts amounted to just under $18 Million per team.  I know, they have a parade and do other things as well.  Ok, so they only attributed $46 Million of their revenue to the Rose Bowl.  However, the BCS National Championship Game was worth $54 Million of revenue (on top of the $43.7 Million generated by the Rose Bowl the same year) for the organization.  That year, payouts to the four schools (Rose Bowl and BCS Championship) topped $70 Million! 

So, a basic bowl game generates somewhere between $2 Million and $5 Million of revenue.  If the bowl committee is lucky and does a nice job over time they may be able to generate 10% of the revenue received by the Rose Bowl or the BCS National Championship Game.

Please correct me where I am wrong, but I just don't see how college football can maximize revenue through a playoff system.

A Peek Inside The Budget of BYU's Athletic Department

BYU doesn't typically disclose anything about their finances.  In fact, about the only thing they disclose about their athletic department budget is a pie chart showing the percentage of operating revenue that comes from various sources.  It shows the following revenue sources:

• Football Ticket Sales - 23%
• Tuition Allocation - 21%
• Donations & Endowments - 16%
• Corporate Sponsors - 9%
• Sports Camps - 8%
• Conference/NCAA - 7%
• Basketball Ticket Sales - 6%
• Other - 5%
• TV & Radio - 4%
• Ticket Sales (Other) - 1%

It is the 7% that comes from the conference and NCAA that is especially interesting because those numbers are public (if you do a little digging).  It turns out that the BYU athletic department received $1,485,373 from the Mountain West Conference and the NCAA during this period.  With a little math, it's easy to calculate that BYU's athletic budget is between $20 Million and $22.8 Million (accounting for potential rounding around the 7% figure).  Let's say BYU's athletic budget is approximately $22 Million.

How does this compare with other schools?  A few points of contrast:

• During the same year, the athletic department at the University of Florida had revenue of $107 Million; including donations of over $39 Million.  
• After turning $6.5 Million over to the University, Florida's athletic department still held over $27 Million of publicly traded securities at the end of the year.
• The Big Ten conference distributed over $20 Million to each school during the same year
• The Rose Bowl distributed over just under $18 Million to each school/conference that participated in the Rose Bowl this year

One question that arises is how does BYU compete against schools with an athletic budget that is 4-5 times as large each and every year?  I know BYU has additional concerns besides generating additional revenue.  They like things like "exposure."  However, at it's core, that's a financial issue as well because BYU relies on the same donor base to support the athletic department as well as things like BYU Broadcasting.  That's a sobering thought to this Cougar Club member.