March money madness

Posted: 3 April 2012 in Uncategorized
Tags: , , , , ,

This morning, after the ‘Cats were crowned the 2012 Division 1 men’s basketball champions and before the women’s championship game is played, it’s amazing how quickly the discussion has turned to money.

Just one example: according to Jeré Longman, basketball experts can’t believe that Baylor star Brittney Griner plans to return for her senior season instead of jumping to the pros—a decision that flies in the face of Kentucky coach John Calipari’s “one-and-done” strategy of recruiting players to win a national championship and then ushering them (perhaps six this year) on to the National Basketball Association.*

The economy of NCAA basketball, which has an “unmistakable whiff of the plantation,” is all about big money. Lots and lots of it.

Consider Forbes’s list of college basketball’s most valuable teams. At the top of the list is the University of Louisville, a university that is currently imposing a 3 percent budget cut on the academic side but whose basketball program is worth $36.1 million, which generates $23.2 million in basketball profit. Here’s how it works:

Louisville’s value is helped by ticket sales of $1.4 million and an additional $1 million from the sales of concessions, parking and programs. But the major driver behind Louisville’s financial success is contributions to the basketball team, which hit $20 million last year. Only five other teams were able to generate $20 million in total revenue, let alone from a single source. A significant portion of those contributions are tied to luxury seating. College teams don’t sell seat licenses like professional teams, but rather require that fans make a minimum contribution before they can purchase season tickets or luxury seating options.

The financial windfall that seating-related contributions generate for college basketball teams is just one way that the sport is progressively emulating its professional counterpart. This is the first year that our valuations have captured the effects of Louisville’s KFC Yum! Center, which opened in October 2010. The state-of-the-art waterfront arena rivals many NBA venues, and it has certainly played a major role in Louisville’s 39% growth in value over the last two years.

The KFC Yum! Center helped the Cardinals join Kentucky and Syracuse as the three teams that averaged more than 20,000 fans per home game last season. Only four NBA teams managed the same feat last season. The similarity between college and professional basketball is also apparent in ticket prices. Louisville charges $35 per ticket for most home games. It might not sound like a lot, but seven NBA teams had a lower average ticket price last season.

College basketball’s head coaches are also often paid as much as, if not more than, many NBA coaches. Louisville’s own Rick Pitino is a great example. Thanks to a loyalty bonus in his contract, Pitino received over $6 million from Louisville last year. Pitino’s contract is also laden with performance bonuses, and the head coach stands to make an additional $175,000 each time the Cardinals make the Final Four. If they win it all [which they did not, at least this year], he will receive $325,000. And Pitino isn’t even the sport’s highest earner. Consider that Kentucky’s John Calipari rakes in nearly $4 million annually before bonuses, and he can earn another $750,000 from the team’s on-court success.

One of the conditions of existence of the enormous profits generated by college basketball is the fact that the workers, i.e., the “student-athletes,” are not paid a dime. According to a recent study by the National Collegiate Players Association and the Drexel University Department of Sport Management, “The Price of Poverty in Big Time College Sport,”

The room and board provisions in a full scholarship leave 85% of players living on campus and 86% of players living off campus living below the federal poverty line.

The fair market value of the average FBS football and basketball player was $121,048 and $265,027, respectively.

Duke basketball players were valued at $1,025,656 while living just $732 above the poverty line and a scholarship shortfall of $1,995.

Here’s something else I learned from the report: in 1973, the NCAA changed the four-year athletic scholarship award to a one-year renewable scholarship, “an arrangement that effectively renders athletes silent or substantially voiceless when it comes to their own welfare by exerting pressure on them to remain compliant if they wish to achieve their goals of either remaining in college or developing their athletic talent in pursuit of professional careers.”

There’s a lot of other money swirling around and generated by March Madness and other big-time college sports programs, both positive (for a handful of schools) and negative (for many others, which then need to tap into student fees).

No wonder that Griner’s decision to return to Baylor for her senior year seems shocking to so many “experts.”

* And then, of course, there’s the fact that, while women’s basketball coaches Pat Summitt and Geno Auriemma receive salaries of around $2 million year, most women’s team coaches make far less than their male counterparts.

  1. […] March Money Madness This morning, after the ‘Cats were crowned the 2012 Division 1 men’s basketball champions and before the women’s championship game is played, it’s amazing how quickly the discussion has turned to money. […]

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