SALT LAKE CITY — College sports, a $13 billion industry long accused of economic bloating, could be in for a shakeup — starting at the University of Utah, which announced last week that the entire athletic department would be furloughed.
That measure would have seemed unthinkable a year ago, when the football program was celebrating a victory over in-state rival BYU and setting off on an 11-win campaign. But even football and men’s basketball coaches Kyle Whittingham and Larry Krystkowiak were sent home as the program tries to cope with budget shortfalls resulting from the coronavirus pandemic.
COVID-19 forced the indefinite delay of the Big Ten and Pac-12 football seasons — eliminating the biggest source of revenue for the Utah program — and while some hope remains that play might resume later in the fall or in the spring, hope doesn’t pay the bills.
“We had to make some tough decisions because you can’t wait for what might not happen,” Harlan said.
A global pandemic and a civil rights movement have disrupted the status quo in college sports. Attitudes and norms have changed fast. Players have organized and pushed for greater representation and, in some cases, compensation. Coaches’ salaries have come under scrutiny.
“Certainly, for the short run, (the pandemic) has absolutely turned everything on its head,” said Victor Matheson, a sports economics professor at Holy Cross and an expert in college sports revenue. “The business model for a Power Five conference school like the University of Utah is to generate as much possible in your college football season. ... Without that $60 or $70 million coming in, they’re in real trouble.”
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Upgraded arenas and luxurious locker rooms may seem opulent, but college athletic departments tend not to be profitable, even at the highest levels. Matheson describes an industry built on a circular logic, in which every gain — admission to a major conference, luring a well-regarded coach — is offset by a cost: new training facilities to keep up with league standards, competitive salaries when even strength coaches can make more than $500,000 per year.
Utah, which joined the Pac-12 in 2011, is a prime example.
“Their last year in the Mountain West, they generated about $8 million in ticket sales and another $8 million in rights and licensing money,” Matheson says, citing the USA Today’s index of collegiate spending. “Last year, they generated $20 million in ticket sales and $50 million in rights and licensing.”
But the same index shows that the major conference bump has come at a cost. “Just looking at it, you’d think, ‘They must be totally flush with cash,’” Matheson says. “The problem is that their expenses have grown every bit as fast. The amount that they pay to coaching and staff has more than tripled in less than a decade. The amount of money they spend on facilities and overhead has gone up by over a factor of six in this time. Total expenditures have more than tripled.”
Opinions differ as to why big-time programs operate on such thin margins. Adam Hoffer, a professor of economics at the University of Wisconsin-La Crosse and author of a 2015 study on college sports spending, points to the strange space that sports occupy in the higher education ecosystem, where operating at a loss is an acceptable tradeoff for building a university’s brand.
“There’s a prestige factor in being successful and winning championships that schools want — some of whom may not have the centuries built up of academic qualifications that an Ivy League might,” Hoffer says.
Others cast a skeptical eye on the industry, arguing that schools overspend to avoid the appearance of profit — and sidestep building pressure to compensate athletes.
Either way, Hoffer says, power conference college programs are not built to weather the prolonged absence of football. He predicts that Utah’s furloughs will soon be copied by other schools in similar positions.
“Any school that doesn’t play football this fall is going to have to find ways to make major expense cuts,” he says. “The most obvious area to cut expenses is on coaching staffs.”
Return to business as usual?
There are those who would rejoice at the idea of coaching pay cuts, noting a seeming disconnect between players who are unable to cover basic expenses and coaches who number among states’ highest-paid public employees. But while cutting those salaries keep departments afloat, experts don’t predict a lasting shift, if and when fans are able to return to stadiums.
“As long as colleges and universities are able to return to the old ways of generating $50 million a year in contracts like the University of Utah does, or selling tickets to fans for football and basketball, there’s no reason to think that, once that money starts coming back in, we’re not going to be back to the same arms race again,” Matheson says.
Hoffer anticipates that, in the long term, schools will support those sports that generate the most revenue. Football and basketball coaches will likely retain handsome salaries while non-revenue-generating sports suffer cuts. “If you hired a football coach on a five-year contract and you agree to pay him a salary, then that’s fixed costs,” Hoffer argues, “and you might want to get the football team back out there where you might be able to more easily cut expenses elsewhere.”
Ultimately, college athletic departments operate in a unique industry, with unique benchmarks for success. They aren’t responsible for profit margins, increased enrollment or upticks in alumni donations. Rather, they are beholden to an emotional and reputational investment from the school and its surrounding community, with returns that are difficult to quantify. Their costs, therefore, are easier to justify.
It comes down to competition, Hoffer says, which accounts for both the widespread appeal that lets college sports make money and the impulse to spend it. “People are going to want to win just as much as they did three years ago three years from now,” he says. “Because the sports are so competitive, the money is there, largely from attendance, revenues and television contracts. And as long as that money remains in place, schools are going to spend it to try to win.”