Sportsgeekonomics

Musings on Sports Economics

Myth 5: We can’t pay them or else we’ll have to cancel other sports.

(Previous Myth)

This may only be a half myth, in the sense that in a market system, as the costs of putting on football and basketball rise, such that the profits from those programs decline from astronomical to merely sky-high, it may be the case that some schools, in their budgeting priority, choose to drop some (most likely men’s) non-revenue sports.  It is true that currently, those football and basketball profits are being spent, in part, on subsidizing all of the other sports on campus.  And so if those programs are of so little value to the campus community as a whole, that with the reduction of the subsidy from football and basketball, no one values them enough to pay for them if the subsidy is reduced, they will probably go away.

 

When the cost of one essential input (e.g., football players) increases without a change in the total money available, the college has less money to spend on other things.  It has less money to spend on coaches’ and administrators’ salaries[1] and on weight rooms and practice facilities,[2] but it also has less money to spend on the drama club, on professors and graduate students, on parking enforcement, trash collection, painting campus buildings, and on all of the other things it takes to run a university.  When it’s time to cut the budget to adjust to lower football profits, schools will have to prioritize spending from most important to least, and then cut from the bottom up. 

If men’s lacrosse is the absolutely lowest priority, that’s what we should cut.  But if it is the case that men’s lacrosse is already the least-wanted activity on campus, then giving money to those least-wanted lacrosse athletes is a horrible justification for diverting money from the athletes whom we do want on campus, whom people are eager to see.  If lacrosse and other sports are valuable, let’s fund them ourselves without using it as a justification to deny the football and basketball players a chance to earn what they are worth.  If lacrosse and other sports are not valued enough to be funded without a massive subsidy, let’s not ask the football players to give up a market wage to finance these apparently unwanted activities.  Better still, if the campus doesn’t value the lacrosse team enough to pay for it, we could ask the lacrosse players and parents to pay their own tuition costs, rather than forcing the students who play football and basketball to pay it via collusion.  And we could ask the lacrosse fans and interested alums to pay the expenses of lacrosse coaches and travel, rather than colluding to force the students who play football and basketball to cover those costs as well. 

 

Of course, I think the campus as a whole does want lacrosse.  Schools want it enough that if we didn’t have football revenues to subsidize it, we’d still keep it, much like schools that have lacrosse in Division III,[3] where there are no football profits to spread around.[4]  If profits were needed to have men’s sports, the entirety of Division III would have vanished long ago.

 

Instead in Division I, what we have now is a subsidy by young African-American men (who comprise a disproportionate number of scholarship athletes in FBS football and the majority of scholarship athletes in basketball throughout Division I[5]) going to support the country-club sports of middle-class whites, all the more shameful if it’s done to support activities that are at the absolute bottom of our list of priorities.  The current system imposes an involuntary subsidy on students coming from the poorest elements of our society to pay for the activities of the broad middle and upper-classes.  NCAA President Mark Emmert calls this “a terrible argument” as if somehow his derision can erase these economic facts.[6]  But as Nobel-prize winning economist, Gary Becker put it:

 

“A large fraction of the Division I players in basketball and football, the two big money sports, are recruited from poor families; many of them are African-Americans from inner cities and rural areas.  Every restriction on the size of scholarships that can be given to athletes in these sports usually takes money away from poor athletes and their families, and in effect transfers these resources to richer students in the form of lower tuition and cheaper tickets for games.”[7]

 

So we really might, in a few cases, decide some of the non-revenue sports we have on campus really are unwanted given all of the other priorities on campus, and as a result, some schools might cancel some programs.  But again, recognize that if we did allow football and basketball players to earn a market-level of compensation, other inputs would probably become less expensive.  This is a very important concept that people often ignore.  When economic competition is restricted on a given dimension, it flows into other, less-efficient avenues.  By allowing the NCAA cartel to dictate the maximum amount each school can pay for talent while allowing that talent to generate excessive profits, we create incentives for schools to find other (expensive) ways to attract that talent. 

 

For example, the University of Oregon build the Jaqua Academic Center for Student Athletes, which is a glass palace, combining a Duck Hall of Fame with an exclusive tutoring facility for student athletes and a fancy eatery, all aimed at attracting the best players to Oregon.  Millions are spent on lavish facilities like this because the efficient method to attract talent, simply offering a higher compensation package, is not allowed.[8]  The so-called “arms-race” in college sports to build bigger and better facilities would be dampened by allowing schools to compete by directly paying those whom the race is trying to influence.  If the money is going to be spent anyway, let’s direct it to the people generating the revenue, not large construction firms.  If schools could sweeten their offers with cash, they might also be able to spend a little less on the female escorts they currently use as enticements.[9]

The ban on paying players also creates a tremendous windfall for coaches and athletic directors.  Recruiting is the life blood of a college sports program.  If money were an available recruiting tool, it would go to the players.  Instead, the money flows to those who are most responsible for getting star players to enroll and play at that school.  As discussed above, Mack Brown earned over $6 million in 2009 (after bonuses) because Texas knows he can bring in talent better than other coaches.[10]  In the market-compensation world, Texas would not need to pay as much for Brown’s ability to charm athletes and their parents; they could show interest in athletes by offering a large annual grant in excess of the cost of attendance.  Mack Brown would still be worth millions in this new world, just not six of them per year.

 

And then some of those millions would be there if we decide we still want a lacrosse team.  Or we could spend it on more science courses, or however the university wants to allocate its money, but now we would not be imposing an involuntary subsidy on the eighty-five football and thirteen men’s basketball players, asking them to support the rest of the Athletic Department on their backs.

(Next Myth)

[1] Of the fifty-eight head football coaches in the six major conferences for which salary information was available (eight private schools did not provide data), fifty-two Head Coaches earned more than $1 million dollars per year in 2010. Football Bowl Subdivision Coaches Salaries for 2010, USATODAY.com, December 9, 2010, http://www.usatoday.com/sports/college/football/2010-coaches-contracts-table.htm.  Among the six head coaches that didn’t reach the threshold, Washington State’s Paul Wulff was employed for a full year and did not have the potential to exceed $1million after considering bonuses, Baylor’s Art  Briles earned $878,315 (with no bonus information reported), and the rest had the potential to earn over $1 million after bonuses. Id.  Seven non-AQ schools also paid their coach over $1 million.  Id.  Even assistant coaches have broken beyond six figure salaries; for example, Will Muschamp was recently offered $1 million a year to be Mack Brown’s defensive coordinator at Texas.  Seth Wickersham, Is Gordon Gee Serious?, ESPN.go.com, available at http://espn.go.com/college-football/story/_/id/6843627/college-football-ohio-state-president-gordon-gee-recent-football-scandal-espn-magazine.  Four of the six BCS AQ conference commissioners earned over $1 million in 2009, and a fifth, Larry Scott of the Pac-10 earned over $700,000 in his first six months on the job.  Four BCS Conference Commissioners Earned $1M, SI.COM, June 20, 2011 http://sportsillustrated.cnn.com/2011/football/ncaa/06/20/commissioner-pay.ap/index.html.  Interestingly, athletic directors, who are neither responsible for attracting talent like head coaches or negotiating television contracts like conference commissioners, earned much less.  A 2009 study of 51 BCS AQ schools found that no athletic director earned more than $1 million (Florda’s Jeremy Foley was tops at $965,000) and only ten earned $500,000 or more. See Curtis Eichelberger, Florida Enters BCS Title Game with Top-Paid Athletic Director, Bloomberg.com, January 6, 2009 http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aYYY_mDwYMkY.

[2] With Oklahoma State’s announcement of construction of a $16-million project, now all teams in the Big XII have built indoor football practice facilities. See Oklahoma St. to Start Work on $16M Practice Site, SI.com, June 21, 2011 http://sportsillustrated.cnn.com/2011/football/ncaa/06/21/okla.st.complex.ap/index.html.

[3] There are more Division III lacrosse schools than Division I and II combined. Men’s Division III Conference Standings, Inside Lacrosse (last visited August 4, 2011) http://games.insidelacrosse.com/standings/league/3/DIII.

[4]According to an annual survey by the N.C.A.A., every program in Division III loses money. And because of their low profiles, teams in the division have limited cachet among some donors and alumni.Jim Naughston, In Division III, College Sports Thrive with Few Fans and Even Fewer Scandals, Netfiles.UIUC.edu, November 21, 1997  https://netfiles.uiuc.edu/hschein/www/readings/athletics/athletics-div_iii.html.  Of course, this analysis likely suffers from many of the problems of Division I NCAA accounting, but compared to Division I, Division III has fewer revenues to misallocate and no athletic scholarship costs to overstate.

[5] As of 2009, 46% of all FBS football players were African American.  In the same year, 60% of all Division I men’s basketball players were African-American. Floyd A. Keith, BCA Executive Director Statement to C. Keith Harrison, Protecting Their Turf: The Head Football Coach Hiring Process, and the Practices of FBS & FCS Colleges and Universities 11, 11-12 (2009), available at http://grfx.cstv.com/photos/schools/bca/genrel/auto_pdf/09-football-hrc.pdf.  The stars of these sports are even more likely to be African American; the NBA is over 80% African American, NBA Gets High Marks for Diversity in New Study, NBA.com, June 10, 2009 http://www.nba.com/2009/news/06/10/NBA.diversity.ap/index.html, and the NFL is approximately two-third African American., Travis Reed, Study: NFL has Slightly More Latino, Asian Players, USAToday.com August 27, 2008 http://www.usatoday.com/sports/football/2008-08-27-1555250552_x.htm.

[6] Outside the Lines: Selling the NCAA, (ESPN television broadcast March 13, 2011) available at http://sports.espn.go.com/espn/otl/news/story?id=6209609.

[7] Gary Becker, The NCAA as a Powerful Cartel, The Becker-Posner Blog, April 3, 2011 http://www.becker-posner-blog.com/2011/04/the-ncaa-as-a-powerful-cartel-becker.html.

[8] Oregon is not alone.  Another classic example is The University of Michigan.  See Stephen M. Ross Academic Center, MGoBlue.com (last visited August 3, 2011) http://www.mgoblue.com/facilities/ross-academic-center.html.

[9] See e.g.Brooks, Auburn Payroll: Tens of Thousands to Hostesses, Sports by Brooks, June 20, 2001 http://www.sportsbybrooks.com/auburn-payroll-tens-of-thousands-to-hostesses-29756.

[10] It’s not just because he is a good recruiter.  Great coaches like Brown also need to do a great job with the talent once they have it, in order to earn their millions.  However, excellence in recruiting is a sine qua non.

Posted by
Andy Schwarz

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