$98M projected loss for Michigan if no football season
Finally saw someone post the numbers for projected losses for every team in the Big Ten if there's no CFB season. Numbers are GRIM. Story: HERE
Each school gets a $54M payout as a result of their media deals. That either goes away entirely, or is severely reduced. ABC/ESPN and FOX aren't going to pay for media rights for things that don't exist.
Ticket sales, parking, concessions are the second big hit. For Michigan, that's apparently around $44M according to the records they could find. Ohio State brought in $50 in 2018 from home games.
There will be some level of savings due to the lack of travel, but that. number would be relatively small in comparison.
Thank you for a solid link to what appears to be an informed article. Rutgers apparently has a modicum of value after all...
Meanwhile, wow, the financial impact is staggering if this analysis is anywhere close to being correct.
Rutger should hang a banner
Ok not really.
I think all schools will survive. It is interesting and certainly seems to push an agenda.
Just a reminder that it is and it isn't a 'loss'. It's a loss of our own creation because we spend all the piles of money we make as fast we get it. It will be interesting to see how Michigan and others handle it. If they lay off a lot of people and cancel some big projects, what happens when revenue comes right back next year (hopefully)? Will the AD just start spending wildly again to hide the revenue they get? Can I get a $1MM/yr job as a some type of AD analysts to help them hide all their money?
Of course it's a loss. Revenue was supposed to come in and it's not if football doesn't happen. That revenue supports the salaries of the athletic department. Fair point that those salaries are out of control for some, but that doesn't mean it's not a loss. And it doesn't mean that the many middle class people whose jobs depend on this revenue won't get crushed. Trainers. Academic support personnel. Stadium workers. Medical and mental health professionals. These are people whose jobs, salaries, and futures are at risk.
Maybe you might say they should reserve more and plan for this, but no public university can stash that much cash away.
"...no public university can stash that much cash away." Not sure I follow. UM has an endowment of more than $12 billion. That is a lot of "stashed cash"...
Exactly - just because (most) universities are non-profit, they are not precluded from saving & investment ("hoarding" to some, being "responsible" to others) of revenue.
When you spend every single penny of money you take in every year because making a profit would give it away that you're exploiting your labor, you set yourself up for a big event that ruins you.
If the department paid their players, took in less money, but set aside revenues for a rainy day and started fewer big expensive likely-to-have-overrun building projects, they wouldn't be looking at a huge loss this year and wondering how they're going to make it through. These are the costs of the current system, it's not "well shucks you can't blame anyone for this." You absolutely can, the braintrusts of college athletics have created a revenue model that makes them susceptible to this happening for one reason: to screw their athletes out of money they deserve for their labor.
So many people misunderstand what a "non-profit" organization actually is and what they are allowed to do.
Yes, I certainly agree it's a loss in that expected revenue from their main income source isn't coming in. I just have a hard time feeling too bad for athletic departments like Michigan that spend everything they make so no one questions why they have so much money. I think athletic directors across the country know it would probably be wiser to stash away $20mil a year away for whatever rather than spend it all, but they know they'll get asked a lot of questions if all of a sudden they're sitting on $100mil in the bank. Michigan certainly could stash away enough cash for a one year blip (though I don't blame anyone for not seeing COVID19 coming) but they won't because of the optics so they get stuck in a situation like this as soon as the bubble bursts
Thanks for this. I was trying to find this chart recently that shows how much Michigan's budget has grown in the last decade. The growth has been crazy, and they aren't the only ones. Read yesterday Florida State has gone from $75M/year to $150M/year in a decade. Also read that every athletic department in the Big Ten is over $100M this season for the first time. No reason at least half of those schools should be spending that much other than because they need to light it on fire to keep up the facade.
Yeah I couldn't re-find that chart for the longest time either. It's on a 247sports article about Michigan's AD budget if you ever need to find it
With all of the big dollars which get thrown around I understand it is hard to remember this, but many (most) colleges & universities are meant to be run as non-profit institutions. It's how they maintain certain tax breaks. While they can certainly have profitable aspects, a college is basically supposed to spend to it's earning every year.
That isn't accurate.
Non-profits can, in fact, earn profits every year...or they can lose money every year!
There is no law or recommendation that required U of M or any other athletic department to increase their expenses by >$50 million/year over the last decade in order to match revenue. That was a choice; they could have easily built a reserve and been fine with the IRS (whether other people, like politicians or students would have been OK with athletics sitting on, say, a $100 million reserve is another matter).
"The term "nonprofit" is a bit of a misnomer. Nonprofits can make a profit (and should try to have some level of positive revenue to build a reserve fund to ensure sustainability.) The key difference between nonprofits and for-profits is that a nonprofit organization cannot distribute its profits to any private individual (although nonprofits may pay reasonable compensation to those providing services). This prohibition against “private benefit” is because tax-exempt charitable nonprofits are formed to benefit the public, not private interests"
https://www.councilofnonprofits.org/myths-about-nonprofits
As you are concerned about accuracy, and I pointed out the ability for colleges & universities to have profitable aspects, please read some of the original charters for both state and private institutions of higher ed. You will find many mentions of the goal being to provide an education while operating in a manner not to be driven by gaining profit. This was done to help insure the focus stayed on educating students and not simply making money. Many churches operate under this same mission focus.
I'm not going to debate with you mission statements of colleges (let alone what churches can do).
You said, "While they can certainly have profitable aspects, a college is basically supposed to spend to it's earning every year."
That is not accurate.
The key fact is all these athletic department could have, 100% legally, built a reserve of $100 million (or more!) to prepare for any downturn, instead of spending it all on ever bigger buildings and ever higher admin/coaches salaries. They chose not to build the reserve, and here we are.
I’m not going to debate with you the basis and justification for your position, but it is not accurate.
Will the AD just start spending wildly again to hide the revenue they get?
yes, although i hesitate to use the word "hide." very, very few ADs can just sit on money to save for a rainy day. there's always a new project out there.
Hide their money? It’s all public and they spend a ton of money on athletics, salaries played and facilities
I wasn't trying to say 'hide' like it's all going into off-shore accounts or something nefarious. I'm saying they've made or allowed their expenses to be far higher than they need to be so that the +/- every year looks small so they're keeping their profit low and out of the public eye. I'm sure costs have gone up, but I'm suspicious that it's almost twice as much as it was a decade ago and it tracks really well with revenue. If Michigan was keeping a higher profit every year, it would certainly make it into the national media that Michigan is absolutely swimming in money and would thus support paying players and I'm certain the AD is trying to avoid both of those things
Mr Ross, can you spare another 100mill. Thanks, Go Blue!
LOL-Hail Yes! Also ask Mr Glick for $100 mil.
Not that I feel sorry for Ross (he'll be completely fine), but commercial real estate is doing awful.
Not sure he'll want to pony up another $100 million when about 30-50% of his commercial tenants are skipping rent and/or not renewing leases b/c they've gone bankrupt or decided they are going to keep their employees working from home.
Indeed, it will be interesting to see what happens to commercial real estate in the short and long term. With so many business realizing they can substantially cut costs by having more people work remotely with as much effectiveness as being in an office, in my mind commercial real estate is in for a world of hurt.
I wonder if, with Title IX, this means sports like mens wrestling and soccer, traditional non-revenue varsity sports, goes club. How can they not?
Yeah if you have to cut sports, you have to cut equally due to Title IX
Exactly - we have waaaay too many varsity sports. When the dust settles:
Men's Sports Women's Sports
Football Soccer, Volleyball, Gymnastics, Track, Rowing
Basketball Basketball
Baseball Softball
Hockey Field Hockey
Well, Michigan can certainly take some solace in the fact that everyone is going to hurt badly this season. They will be far from alone in taking massive financial hits.
On a separate note, does Northwestern not have to post their projected loss totals because they're private?
They don't have to make it public, but they still have to report it to certain parties.
Amateur sports.
Does Rutgers lose more money than this when they DO have football?
Preparing for and coaching games has to be a primary job responsibility for college coaches. Off hand I'm thinking UM's football's coaching staff makes around $15 combined, and that doesn't include support staff. At some point those numbers have to go down for the year if there are no games in 2020, more than just a 10% cut to JH's salary. If all the things that go into paying for their salaries (TV deals, ticket sales, concessions, etc.) go away, a good chunk of their salaries should probably go away as well. I'd hate to see a bunch of non-sports jobs get cut just to keep football coach salaries, which are already astronomically high.
Gotta figure that anything they do coaching wise has to be voluntary due to their contracts. I don't think you can furlough or layoff someone on contract to get out of paying them. They are still owed that money unless there is some sort of language in the contract that allots for the season just not happening.
I read that Wimbledon had an insurance policy to cover losses if the tournament were canceled due to various reasons, including a pandemic. Surely UM/B1G has similar policy? Bueller?
You have to pay (big) money to have insurance that covers that possibility, and most do not have it.
That would have been a very smart place to spend some of those billions that the B1G (and other big conferences) was raking in, but my strong guess is that if they had this insurance, we would have seen stories noting it (e.g., "While Michigan is forecasting a $98M loss this year, approximately 75% of that would be covered by insurance.")
Yeah the only reason we know about the Wimbledon one is because it was a holy shit kind of fact that was reported. Like you can get that covered, and they actually paid to have it covered? And it paid off??? If any other sport or event at all had a similar policy we would have heard about it by now.
University of Illinois made an insurance bet that paid off.....
https://finance.yahoo.com/news/university-of-illinois-insurance-bet-224016209.html
The British Open too. It"s one of the reasons why they cancelled it rather then try to reschedule like the other majors.
Let me make sure I understand the implication here:
Each school gets a $54M payout as a result of their media deals.
So if Rutgers is on track to lose only $48.8M, they typically operate at a loss yr/yr outside of TV money? Granted, I’m sure they’d change their cost structure if TV disappeared, but that’s still wild.
That is why joining the B1G was such a huge win for Rutgers. That football TV money allowed them to fund football plus all sports programs and projects without a loss.
Michigan funds all sports plus the intramural programs from the football revenue. Also, in a typical athletic year the program generates a $10-15MM surplus that is used to fund athletic department infrastructure projects and/or service the debt related to such projects. This will be a huge setback for UM's athletic department as the future surplus will have to be used to cover this ~$100MM Covid-19 loss ... which could take like 7-10 years unless wealthy donors pay those bills.
Rutgers doesn’t get a full share of the media revenue. They are still on probationary status/not a full B1G member when it comes to splitting Tv contracts. They really are the red headed step child in every possible way.
From what I understand (after just looking it up), along with Maryland, Rutgers is still paying their way towards equity in the Big Ten Network and doesn't get a full share of conference earnings yet. But on top of that their finances were SO BAD that they had to borrow against future earnings to help pay bills, and that loan is deducted every year from their cut of the Big Ten pie. They aren't projected to get an actual full share until after the 2026-2027 season now. Maryland (I think) is slated to get a full share in 2020-2021 -- this season...if it happens.
I mean...just look at this mess. Gotdamn Rutgers...
If there is no season do the schools still get Big Ten Network money? I realize money is made just from the subscription however, they will lose a ton of money on lost ad revenue.
This is lost football revenue that funds football expenses plus basically all other sports except maybe basketball. Stanford is clearly planning for no football this year when they eliminated 11 sports as a cost cutting measure to fund the deficit over time.
Funding these losses will be a big setback for college athletics - reduced teams, delayed infrastructure projects, pay cuts, job eliminations, etc.
Goddammit, Ohio State beating us at ANOTHER thing
Now you know why they are going to play and it doesn't have anything to do with confidence the kids will be safe
That's rough for Rutgers, right after they shoot the money cannon on getting Schiano back and upgrading facilities and paying out for assistants, this happens, and that's a big loss for them.
Schools like OSU, UM, MSU, and PSU can take hits like that. I don't know if Rutgers can.
next up on the pet peeve list - warde manuel announcing huge hikes in ticket prices, to (checks future notes) "make up for the huge shortfall the department experienced in the 2020-21 school year," despite the incontrovertible fact that the money faucet will turn right back on as soon as covid is under control.
i swear, if i hear a word about poverty from this athletic department, i'll probably...oh, hell, let's be honest here, i'll grumble for about five seconds before i continue to give them my money. sigh.
That's only 14 Harbaughs!