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 #30 – League of Fans’ Sports Forum podcast: The State of College Athletics with Dr. David Ridpath: Problems and Potential Solutions – Ridpath is a sports administration professor at Ohio University and a long-time member of The Drake Group, a college sports reform think tank.
Follow on Facebook: @SportsForumPodcast
Episode #29 – League of Fans’ Sports Forum podcast: The Honorable Tom McMillen Visits League of Fans’ Sports Forum – McMillen is a former All-American basketball player, Olympian, Rhodes Scholar and U.S. Congressman. We discuss the state of college athletics today.
Episode #28 – League of Fans’ Sports Forum podcast: A Chat With Mano Watsa, a Leading Basketball and Life Educator – Watsa is President of PGC Basketball, the largest education basketball camp in the world. We discuss problems in youth sports today.
Episode #27 – League of Fans’ Sports Forum podcast: Kids’ Sports: How We Can Take Back the Game and Restore Quality Family Time In the Process – Linda Flanagan is author of “Take Back the Game: How Money and Mania Are Ruining Kids’ Sports and Why It Matters.” We discuss how commercialized and professionalized youth sports are hurting kids and their families.
Episode #26 – League of Fans’ Sports Forum podcast: How Can We Fix Youth Sports? – John O’Sullivan is Founder and CEO of Changing the Game Project and author of “Changing the Game: The Parents Guide to Raising Happy, High Performing Athletes and Giving Youth Sports Back to Our Kids.”
Episode #25 – League of Fans’ Sports Forum podcast: Physical Education Should Be a Critical Component of K-12 School Design – Michael Horn is co-founder of the Clayton Christensen Institute for Disruptive Innovation.
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.
- Reed Appears on Ralph Nader Radio Hour League of Fans’ sports policy director, Ken Reed, Ralph Nader and the New York Times’ Tyler Kepner discussed a variety of sports issues on Nader’s radio show as well as Reed’s updated book, How We Can Save Sports: A Game Plan. Reed's book was released in paperback in February, and has a new introduction and several updated sections.
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.
Vanderbilt Sport & Society - On The Ball with Andrew Maraniss with guest Ken Reed, Sports Policy Director for League of Fans and author of How We Can Save Sports: A Game Plan
Sports & Torts – Ken Reed, Sports Policy Director, League of Fans – at the American Museum of Tort Law
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