College sports is an extremely popular phenomena that a vast amount of Americans follow, or have, at some point, followed. College football is the second most watched sport in the entire country, second only to the NFL. It is estimated that more than 46 million fans attended an NCAA college football game in 2018 alone. With such an enormous football and other collegiate sports following, athletic departments have an extremely intricate financial system in place to manage the large revenue streams received by college football teams. Some athletic departments receive an enormous revenue from the most successful teams like the Texas A&M football team, which in 2014 alone generated over $90 million in revenue.
Furthermore, a vast amount of money is needed to fund such large athletic programs. Some of these costs include having to pay coaches and staff, having a good recruiting system in place, finance sporting events and numerous other behind the scene logistics like parking spaces, transportation etc.
This begs the question of where does the money to fund these vastly popular programs, like the giant industry of college football, come from? Who pays for these large sporting events and all the other costs associated with intercollegiate athletics? What is the NCAA's role in all of this?
Disclaimer: FBS stands for the Football Bowl subdivision, which includes 130 Division I institutions.
Q: Where does the money for athletic departments in institutions within the FBS division come from?
A: Athletic departments generate revenue from a variety of college sports teams, such as football and basketball. Athletic departments re-invest revenue generated from previous seasons back into programs and clubs, and have full control over the allocation of this money. Thus, the revenue streams cycle around the athletic departments: revenues are generated, invested and act as financing for the next season.
Athletic departments of all institutions in the country are non-for-profit entities, and thus are tax-exempt under the amateur sports or education exemptions. They then have neither an incentive to generate profit nor an obligation to pay taxes, which allows them to focus on revenue streams and re-investing these streams in the most efficient and profitable manner.
In 2019, the Department of Education reported that intercollegiate athletics brought in more than $14 billion, which is more revenue than what most professional sports bring in. This money was then put back into various college teams and clubs.
Q: What are the operating revenue streams for Athletic departments in institutions within the FBS?
A: Revenue-generating streams for institutions come from, but are not limited to, competition guarantees, institutional and government support, corporate sponsorships, NCAA and conference distributions, student fees, donor contributions, and ticket sales. All of the generated revenue is then reinvested back into programs and clubs and used as financing to maintain and further grow programs.
Of these, the largest sum of money comes from donor contributions, ticket sales, and NCAA and conference distributions from media rights and post-season football. These three combined account for more than 60% of total revenue streams in 2018.
However, there are huge disparities in how much overall generated revenue there is across different schools. Texas A&M has one of the highest paid football programs, compared to a much smaller and lower ranked football school like University of Vermont. In 2018, college sports at Texas A&M generated over $200 million in total revenue, compared to about $21 million in University of Vermont.
Furthermore, institutions with successful football and basketball programs receive significantly more funding from donor contributions (about $94 million compared to $750,000 in University of Vermont) and ticket sales ($44 million in Texas A&M compared to $1.5 million in University of Vermont). However, a school with a lower-ranked football program receives much more aid from institution and government support, (Texas A&M gets $0 from that) as well as student fees allocated to athletic departments.
Q: What sports bring in the most revenue?
A: With over 100 different types of sports teams in the FBS conference schools (the amount of sports teams per school varies a little bit), in general, athletic departments generate a lot of revenues from different various NCAA sporting events. However, there are huge disparities between the different types of sports and teams and how much money they generate for their institution.
Out of all the college sports in the 127 FBS schools and institutions, football generates the most revenue. Last year, the average football revenue was $32 million per institution. Men’s basketball is the second largest revenue maker with around $8 million per institution per year, which is more than triple the amount less than football.
Men’s hockey placed third with an average of $2.8 billion, followed by women's basketball ($1.8 million) and then baseball ($1.4 million). The lowest revenue creating team was softball, which generated just over $500,000 in revenue. This number is 64 times less than the average football revenue per school.
There is also a significant disparity between the revenue generated by different institutions. In 2018, around 54% of all revenue generated was brought in by only 3% of the schools in the FBS conference.
Q: How much revenue do ticket sales generate for athletic departments?
A: Money earned from ticket sales from NCAA sponsored sports go to the home institution where the event takes place, which is also known as the host institution. In 2018, about $1.5 billion tickets were sold within the FBS institutions, which accounts for about 17% of total revenue streams for athletic departments.
However, it is important to note that ticket sales revenues vary differently across different sports. Of the $1.5 billion, about $1 billion of those tickets were sold for football games, which accounts for about 67% of total ticket sales revenue.
There are large disparities in the amount of money institutions get from ticket sales based on their teams. A team with a successful football program, like the University of Michigan, receives around $36 million from ticket sales, whereas the University of Vermont receives about $1.5 million.
Apart from revenue generated from the ticket sales, which strictly accounts for revenue generated from home games, it is also important to acknowledge money from Competition Guarantees. Competition Guarantees is the revenue received from away games (which are games you play outside your own institution). Athletic Departments receive a significantly smaller sum from this (about $140 million). However, institutions with smaller and less profitable football teams rely more heavily on this.
Q: How much money do institutions and athletic departments receive from the NCAA?
A: In 2018, institutions received about $2.5 billion total from all NCAA affiliation, which includes not only championships, but also conferences, media rights and post-season sports and football games etc. Therefore, the NCAA provided about 29% of total revenue to athletic departments in 2018.This number includes revenue distributed from NCAA to institutions from March Madness, wherein the NCAA alone brings in $1.2 billion in just media revenue.
The amount of money received from the NCAA is about $1 billion greater than it was in 2005, adjusted for inflation, and it has been constantly growing throughout the past decade.
Q: Are student fees and tuition money allocated towards college sports? If so, how much?
A: The allocation of student fees towards intercollegiate sport is a widely debated issue and is coming to the forefront of the discussion surrounding college financing. The exact allocation of student tuition going specifically to athletic departments is often concealed and not obvious on tuition bills.
In 2014, Texas A&M charged each student a mandatory fee of just under $100 to go directly towards its athletic department, which led a huge student body pushback through protests. A similar student response and pushback was seen at a number of other colleges throughout the nation like Clemson and University of Kansas.
University of Alabama Birmingham recently decided to halt the football program as the expenses were getting too high, and they didn’t want to put more financial burden on their students to fund their football program.
Officially, it is reported that the total amount of fees that go strictly to the Athletic department for intercollegiate sports varies by institution, but in 2018 was about $590 million in the FBS schools.
Unlike other revenue streams, mandatory student fees that are used as financing for college sports teams is completely unrelated to the actual success of the teams. Thus, each institution has very different numbers of revenues generated front his based on institutional politics and student response.
Q: Who gets money from sales of Athletic gear and apparel?
A: Despite being tax-exempt institutions, colleges are still allowed to make apparel contracts with different for-profit brands like under-armour, nike and adidas. A lot of deals and contracts are not required to be officially reported with numbers and sums, especially in private schools, therefore it is hard to estimate the exact sum.
Unlike student fees, the amount of money received from athletic gear and apparel is highly correlated with the success of sports teams. Big companies like Under Armour and Nike only want to work with schools who have a successful sports program with a good reputation. The largest paid school for apparel is UCLA with over $12 million in average value a year.
The Athletic departments do get a large sum of money from sales of apparel, most of which is allocated to the specific sports club program from which the sales came from. However, not all of this money goes directly to the athletics departments, as a significant portion of sales revenue goes back to the home institution.
Q: What are other major sources of money for intercollegiate sports?
A: The other major revenue streams are donor contributions, which account for about 20% of total revenue for Athletic Departments (about $1.7 billion in 2018). This is money from any organization, individual, or corporation that contributes to the funds available for intercollegiate sports and teams. The amount of donor contributions received depends very highly on the success of the team. Texas A&M has a very highly ranked football program and receives just under $100 million in donations compared to $750,000 at University of Vermont.
Furthermore, a portion of revenue comes from other miscellaneous items like parking and concession sales, sports camps, investment income etc., which accounted for about 7% of total revenue in 2018.
By Dariya Zhumashova
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