By Ken Reed
For years, major college athletic departments have cried poor. Most of them say they’re actually losing money on their football and men’s basketball programs. Supposedly, according to NCAA execs, athletic directors and their apologists, only about 20 NCAA FBS Division athletic departments make money. Most people, including sports columnists and writers take these NCAA mouthpieces at their word.
But how can this possibly be? The NCAA’s college football and basketball TV contracts are going through the roof. (For example, ESPN recently paid $5.64 billion for the new College Football Playoff.) College football stadiums are jammed with 80,000+ plus fans paying huge ticket prices, plus seat ticket license fees, in a lot of cases. Suites and club seats are full.
Folks, college sports revenue is up, way up, even in a sluggish economy. From 2008 to 2013, the average revenue of a big-time Division I program increased by 32 percent. Meanwhile, during the same timeframe, median household income in America went down by 1.3 percent.
As sports economist Andy Schwartz points out, the key factor behind the “woe is me” persona of power five conference athletic directors is a unique brand of non-profit accounting.
“College sports have an honesty problem,” says Schwartz. “… most big-time football and men’s basketball programs aren’t losing money. It only looks that way.”
The reason it looks that way is a non-profit accounting system that produces a less-than-honest look at college sports finances. It’s “athletic department transfer-pricing chicanery,” as Schwartz labels it.
Transfer-price accounting (aka funny money accounting) allows colleges to call their college football and men’s basketball programs non-profits (wink, wink), put fake prices on things like an athletic scholarship, and move money around the campus to make it look like highly profitable ventures (like football and men’s basketball programs) are actually not making any money at all.
“[F]or those few university departments–like athletics–that generate revenue from outside the university, transfer prices don’t just help manage costs,” according to Schwartz.
“[Transfer prices] also can be used to shift profits away from the money-making department and towards the central administration by charging the department more than things actually cost. In other words, phony football expenses can hold football spending in check while also making sure the resulting profits end up benefiting more than just the football team.”
For more on the accounting games that college athletic departments play, and a look at a more honest alternative that would restore the economic rights of college athletes, among other benefits, read Schwartz’ excellent piece at Vice Sports called “College Sports Programs are Playing Poor, Here’s How to Fix It.”
— Ken Reed, Sports Policy Director, League of Fans
Sports Forum Podcast
Episode #10 – League of Fans’ Sports Forum podcast: An Issues Discussion With Paul Dolan – Dolan is the Cleveland Indians Owner and CEO. He discusses the use of Native American names and logos by sports teams and the decisions to drop the Chief Wahoo logo and the upcoming change to the team name. Other baseball topics include health and safety, possible MLB rule changes and youth participation in the sport.
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Episode #9 – League of Fans’ Sports Forum podcast: Talking Sports Issues With Ralph Nader – Nader is a consumer advocate and was named one of the “100 Most Influential Americans of the 20th Century” by Time magazine. He is the founder of League of Fans.
Episode #8 – League of Fans’ Sports Forum podcast: How Can We Save College Sports From Overcommercialization and Professionalization? – The guest is Dr. David Ridpath, a sports business professor and past president of the Drake Group
Episode #7 – League of Fans’ Sports Forum podcast: Brain Trauma and CTE Risk in Sports With Dr. Ann McKee – Dr. McKee works in the field of neuropathology and has demonstrated that “mild” repetitive head trauma can provoke chronic traumatic encephalopathy (CTE), a devastating neurodegenerative disease.
Episode #6 – League of Fans’ Sports Forum podcast: The Need for Quality Physical Education in Our Schools is Greater Than Ever – The guest is Clayton Ellis, one of our nation’s leading advocates for getting our young people to be more physically active.
Episode #5 – League of Fans’ Sports Forum podcast: Youth Sports with Positive Coaching Alliance Founder Jim Thompson – Thompson started Positive Coaching Alliance (PCA) in 1998 to help create a movement to transform the culture of youth sports from “win-at-all-costs” to a positive, character-building experience.
Media"How We Can Save Sports" author Ken Reed appears on Fox & Friends to explain how there's "too much adult in youth sports."
Ken Reed appears on Mornings with Gail from KFKA Radio in Colorado to discuss bad parenting in youth athletics.
“Should College Athletes Be Paid?” Ken Reed on The Morning Show from Wisconsin Public Radio
Ken Reed appears on KGNU Community Radio in Colorado (at 02:30) to discuss equality in sports and Title IX.
Ken Reed appears on the Ralph Nader Radio Hour (at 38:35) to discuss his book The Sports Reformers: Working to Make the World of Sports a Better Place, and to talk about some current sports issues.
Sports & Torts – Ken Reed, Sports Policy Director, League of Fans – at the American Museum of Tort Law
League of Fans is a sports reform project founded by Ralph Nader to fight for the higher principles of justice, fair play, equal opportunity and civil rights in sports; and to encourage safety and civic responsibility in sports industry and culture.
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