Schools lose out at BCS

Reports show schools lose over $130,000 on average at BCS
By Mac Cerullo

UConn’s trip to the 2011 Fiesta Bowl was a milestone for the football program. It marked the first time the school had earned the Big East’s automatic bid to the Bowl Championship Series, and meant the school would play Oklahoma, one of the nation’s most prestigious teams, in a nationally televised game on New Years Day.

But the experience came at a great cost. The team had to travel over 2,200 miles to the site of the game in Glendale,Ariz., and once there, the school was contractually obligated to spend eight days at a hotel of the Fiesta Bowl’s choosing and sell 17,500 tickets to the game. The school could not negotiate its hotel rates, and it was unable to sell most of the tickets it was required to sell, forcing the school to eat $2.9 million of unsold tickets.

In the end, UConn lost nearly $1.8 million at the game.

“It was a high number, there’s no question,” said Mike Enright, UConn’s associate director of athletics for communications. “I think it would have been interesting from a BCS standpoint [if] Stanford went to the Fiesta Bowl and we went to the Orange Bowl, would both schools have benefited from them making the switch?”

It’s impossible to know whether UConn would have done better in another situation, but while the amount UConn lost at the Fiesta Bowl was eye-popping, the fact that the school lost money is not unusual.

A review of bowl documents from each school that has appeared in the BCS over the past three years revealed that most schools who participated in the postseason lost money. The Daily Campus obtained records from 26 of the 30 total teams during that timeframe. The teams not accounted for were Stanford and Texas Christian University, both private schools that are not required to disclose financial information. Both Stanford and TCU appeared in the BCStwice over the past three years.

The biggest costs of playing in the BCS were transportation, meals, lodging and unsold ticket expenses, most of which are directly related to the terms of playing in the bowl games. Many schools received some help from their conferences with unsold tickets however, and in many cases this help meant the difference between posting a profit or a loss.

Specifically, the investigation revealed the following information.

• Schools that participated in the BCS between 2010 and 2012 lost close to $130,000 on average. If you factor in the cost of unsold tickets that conferences bought up, that number jumps to over $400,000.
• On average, schools spent $2.3 million at BCS bowl games, including $576,009 on transportation, $764,948 on meals and lodging, $420,778 on unsold tickets and $559,971 on other expenses, such as awards, entertainment, promotion and equipment.
• The last three national champions all lost money. In 2010, Alabama lost $1.86 million at the BCS National Championship game. In 2011, Auburn lost $614,106, and this past year, Alabama lost $1.9 million.
• More than half of all teams whose data was available (16 of 26) incurred greater expenses than revenue at their game. Five of those teams ended up posting small profits after their conferences helped buy up tickets, and the remaining 11 posted losses.

One school that received help from its conference but lost money anyway was Virginia Tech. Between the 2011 Orange Bowl and the 2012 Sugar Bowl, Virginia Tech lost $954,214 despite the Atlantic Coast Conference absorbing 17,123 unsold tickets worth over $2.1 million.

In both years, Virginia Tech received roughly $1.7 million from the ACC to cover its expenses, but that wasn’t enough in either case. Once transportation, meals, lodging and other miscellaneous costs were factored in, the school’s expenses added up to about $2.2 million in each year, resulting in losses close to $500,000 each time.

Those numbers were actually a major improvement for Virginia Tech too, considering that the school took a historic $2.2 million loss at the 2009 Orange Bowl, according to Virginia Tech bowl documents.

“There’s not financial gain to be made,” Virginia Tech athletic director Jim Weaver told The Virginian-Pilot in a 2010 article about the losses. “The benefit is the exposure of your program. The system is what it is.”

That fact might come as a surprise to many, given that bowl games always advertise massive payouts for their participating teams. According to a Huffington Post report, some of the payouts this year were as high as $22.3 million.

“Participating in a bowl game does not always equate to a financial windfall,” said Amy Perko, executive director of the Knight Commission on Intercollegiate Athletics, an independent panel of experts that serves as a watchdog over college sports. “That’s been a public misperception because the public sees the hundreds of millions of dollars associated with bowl games and there’s just a basic assumption that ‘Oh if our team participates in a bowl game that’s going to result in a financial windfall,’ and that’s just not the case.”

The bowl games do issue big payouts, but that money does not go directly to the participating schools. Instead, it goes to the school’s conference, along with the bowl money generated by all the other schools in the conference that go to bowl games. The conference then distributes a certain amount of money to the schools that reached bowl games to help cover expenses, usually between $1.7 million and $2.5 million.

Some conferences, like the ACC and the Big 12, also reimburse a certain amount of unsold tickets before dividing up the bowl money. For many schools, this help made a big difference. Oklahoma, UConn’s opponent in the 2011 Fiesta Bowl, turned a profit of $9,350 after the Big 12 absorbed $1.8 million in unsold tickets for them.

The Big East does not reimburse its schools for unsold tickets, meaning when UConn struggled to sell tickets to the Fiesta Bowl, it had no insurance policy.

Once the revenue has been distributed to each of the bowl teams, whatever is left over gets divided equally among each school in the conference as part of the conference’s annual revenue distribution, including schools that didn’t qualify for bowl games.

That means last year UConn received the same share of revenue from the Big East as Rutgers, who finished last in the Big East. Rutgers also didn’t go to a bowl, meaning it didn’t incur any bowl-related expenses like UConn did.

By that thinking, the argument could be made that it is better for schools to avoid playing in bowl games, although school officials don’t see it that way.

“You can’t put a price tag on the exposure we got to go to the Fiesta Bowl,” Enright said. “You certainly wouldn’t say we never want to go to a bowl game again because it will save us money, because that’s not true.”

The line of thinking is that over the long run, things will even out because schools that lose money at a bowl one year will still get conference revenue in later years when they don’t go to a bowl game.

“That is the nature of conference membership,” Bill Hancock, the executive director of the BCS, told The Arizona Republic in a Sept. 2011 report. “If you have a downtime and you are in a conference, you have an insurance policy. You can reap the benefits of having an uptime. It all goes in a cycle.”

Enright also pointed out that programs that consistently do poorly and miss bowl games end up suffering on the bottom line anyway for more conventional reasons.

“You have to look at it more widespread because of interest in the program, more TV revenue, selling more season tickets,” Enright said. “You can’t look at it so narrowly.”

Regardless, critics of the system argue that schools shouldn’t be losing money in postseason football events.

“The end result doesn’t sound like a system that’s designed to reward the teams that have success,” Perko said.“UConn’s situation is not an anomaly, there have been other universities that have their better financial years in the years that they don’t qualify for a bowl game because they don’t have to take that financial loss.”

Perko also said that the bowl system needs a reevaluation, and that it should be structured in a way that benefits the participating universities without creating more costs than necessary.

One potential change could be to reduce the ticket burden on the schools.

There are a number of factors that contribute to poor ticket sales for schools at bowl games. One is the distance from the game. Many schools are selected to play in bowl games that are very far from campus, making travel costs for fans steep. Another is competition from secondary markets. Websites like StubHub offer bowl tickets at much cheaper prices, providing little incentive to buy through the school.

“I think the secondary ticket market can’t be overestimated,” Enright said.

Out of all the teams who played in the BCS over the past three years, no team sold out its allotment of tickets. Even at the 2012 BCS National Championship game in New Orleans, neither Louisiana State University nor Alabama sold out their tickets, despite the fact that the game was played a short drive from each school’s campus.

While both schools did sell over 15,000 tickets each, high expenses in other areas helped contribute to big losses for both teams. LSU lost $1 million after spending $754,118 on meals and lodging, $526,924 on unsold tickets, $194,443 on administrative expenses and $1,344,154 on compensation and fringe benefits that kicked in for the game, among other costs.

Alabama, who shut out LSU to claim the national championship 21-0 this past January, lost $1.9 million after spending $846,704 on meals and lodging, $770,152 on unsold tickets, $1,593,101 on bonuses, $186,584 on administrative expenses and $207,553 on awards. The year before, Auburn lost $614,106 after incurring travel expenses over $1 million, meal and lodging expenses of $886,718, and $781,825 in unsold tickets, among other costs.

“When Alabama and Auburn play in the national championship game and they got to absorb ticket money? It’s amazing!” Enright said. “I would guess for Alabama and Auburn, if there was some sort of requirement that they buy the tickets through the school they would have sold out their allotment.”

The key to coming out with a profit, the data showed, was to minimize expenses and sell as many tickets as possible. While many schools struggled to keep costs down, there were some examples of schools that went to BCS bowls and came out in the black.

The most profitable trip to the BCS over the past three years came in 2010, when Boise State played TCU in the Fiesta Bowl. Not only did the Broncos win 17-10, but they brought home $1.6 million in profits. Boise State sold nearly all of their tickets, and had the second lowest total expenses of all schools over the past three years.

The team with the lowest expenses was Cincinnati, the 2010 Big East champion who represented the conference in the Sugar Bowl. Cincinnati was blown out by a Tim Tebow led Florida squad 51-24, but the school came out with over $1 million in profits thanks to strong ticket sales and very low transportation costs.

No other schools approached $1 million in profits, however, and the fact that so many schools are struggling with the costs associated with BCS bowl games will likely be addressed during the upcoming BCS negotiations this spring.

“This is not a situation that is going to go on unnoticed by administrators,” Enright said, also saying that the fact that bowls are managed by private organizations, and not the NCAA, is also something that will likely be addressed.

“The system is currently undergoing a reevaluation, and that’s been needed,” Perko said. “Hopefully whatever results come out of these decisions that are going to be made over the next couple months will better serve the universities from a financial standpoint.”