An unstated assumption re: expansion - what good is the money?

Submitted by STW P. Brabbs on November 20th, 2012 at 1:47 PM

There have been many, many posts concerning the financial wisdom, or lack thereof, in adding Maryland and Rutgers to the conference.  There have also been many posts concerning the moves from the standpoint of, you know, being a fan (spoiler: this is unequivocally bad, unless you are a big lacrosse fan.) 

But regardless of who is right or wrong in their largely ass- or thin air-derived predicitions concerning TV rights and media markets, there's one question that's not been discussed much: Why should we, as Michigan fans, care about the added revenue?  Does it really make a lot of people feel better to know that our conference's revenues are big, throbbing revenues that make other conference revenues feel insecure?  

Can someone explain to me the precise mechanism through which having some kind of edge in terms of revenue with relation to other conferences improves the fortunes of the conference as a whole?  Has the BTN largesse made a significant impact on the quality of the texisting eams in the conference? 

The Michigan athletic department doesn't need any more revenue than it already has.  We are, eventually, going to run out of new facilities to build, as Brian has pointed out.  What then, will we do with the hypothetical money that expansion is supposed to add?  

Again, why should we care, at all, about the financial implications? 

Comments

Newk

November 20th, 2012 at 1:51 PM ^

Agreed. I don't see how more $ improves the "product" for the fan, or for the student-athlete. I don't see schools like Purdue or Minn forking over more cash for better coaches, though it's possible. Michigan already has just about everything money can buy. You know they won't lover ticket prices.

I hope they get the stipend/compensation thing for the players going. That's the only legitimate place for more money to go.

UMRecruitingFannatic

November 20th, 2012 at 1:54 PM ^

We have to keep up with the other major conferences.  Michigan needs to continue to build and improve the athletic facilities to attract top talent so that our teams can continue to compete at a high level and win championships.  Do you think top-level talent is going to be attracted to Michigan if there aren't facilities, well-paid coaches, apparel sponsorships, or other things that require money, to back it up?  If Michigan slows down, the other schools are going to catch up and improve their athletic facilities and get better coaches and have better accomodations (dorms, food, travel) for their athletes than we can provide?  Then where would we be?  Michigan would have to slip to recruiting second-tier athletes (especially for "non-revenue" sports) and lose its prominence.  This would have a major impact on alumni donations, student applications, and possibly the endowment.

blueindy

November 20th, 2012 at 1:55 PM ^

More money builds better facilities. Better facilities attract better recruits. Better recruits play better. Better players win more games. More wins brings more money and better recruits.

blueindy

November 20th, 2012 at 3:48 PM ^

I think on 60 minutes they said something about a $40M indoor rowing facility? And don't worry, DB will find something, anything to renovate, or demolish and build something entirely new. Want a state of the art indoor ultimate frisbee facility to go along with that shiny new bicycle polo arena? You got it! - courtesy of the BTN and conference expansion

And if you're not building a new facility now, please believe that you will be soon. Didn't DB say something about filling in the south end of the stadium with seats to the top of the scoreboard by the end of his tenure? PSLs won't pay for that.

For better or worse (put me in the "worse" column), college sports are a zero sum game, unlike most professional sports that have salary caps and inverse draft order based on performance to help level the playing field and maintain some semblance of a competitive balance. There are a limited number of blue chip recruits and WE MUST HAZ ALL TEH REECRUUTZ!!

When looking at potential schools as a recruit, knowing you'll be spending north of 30 hours a week in the athletic facilities, would you rather those facilities be shiny, new and full of flatscreens? Or would you rather spend the majority of your time in a building that's old, dingy, probably has some asbestos, and have multi-media carts that get hauled into the filmroom because they're shared with the basketball team?

lhglrkwg

November 20th, 2012 at 1:56 PM ^

After reading Brian's interview with Spencer Hall yesterday, when he said this:

Michigan is building a 40 million dollar indoor rowing facility. At some point they are literally going to run out of things to build, and then each incremental dollar is just another one going in the pockets of the guys running the show. At that point it takes on a very dark appearance.

I wondered if there might be some middle-ground where all of a sudden B1G teams start adding sports like crazy before gradually easing in to paying all of their AD's $10 million a year. Maybe it might lead to full-on B1G lacrosse and hockey conferences. Probably not, but I could hope.

French West Indian

November 20th, 2012 at 2:10 PM ^

"At that point it takes on a very dark appearance."

Instead enriching the guys running the show, maybe it could be fed back to the University and tuition levels could be reduced.  I know it's unlikely but if there is any upside to the relentless money grab of big time sports then it should be the chance to make a difference for the university and it's students.

justingoblue

November 20th, 2012 at 2:20 PM ^

Even if M could donate $10m (something like 40% of the current conference payout) into a fund to lower tuition, that ends up being $234.10 for each student at Michigan right now. I won't argue that students would appreciate the extra grant (or however you distribute it), but a little less than a thousand dollars over four years isn't going to make much difference for the vast majority of the student body.

saveferris

November 20th, 2012 at 1:56 PM ^

The rich exploit the poor, that's the way it's always been.  Right now, we're trying to make sure we don't fal into the latter category...realistic concern or not.

xcrunner1617

November 20th, 2012 at 1:57 PM ^

My issue with expansion is that more teams don't necesarily equate to more money for each school.  I believe the Big10 currently divides the total money made by the number of teams in the league.  So if the Big10 earned 120 million last year, each team pockets 10 million dollars.  So to justify the addition of Maryland and Rutgers, these two teams need to each bring over 10 million apiece to make this more profitable for the Big10.  As of now, does anyone know if this is actually the case?  Furthermore, one would hope that these two schools bring much more than that to the table to actually justify their addition to the conference because otherwise no one is actually getting richer from it. 

UMGoRoss

November 20th, 2012 at 2:16 PM ^

I've read a number of places the amount they can generate per year is up to $200M. That would mean full saturation of the TV markets from NYC, NJ, Maryland and DC. Other, more realistic numbers have it at around $100M per year, which would mean everyone would benefit given what schools recieved from TV contracts this past year.

joeyb

November 20th, 2012 at 2:26 PM ^

Washington DC and Baltimore account for ~3.4m homes. 3.4m * $3.99 per subscription = $13-14m.

NYC has 7.4m homes. Providence has ~600k. While that only equates to around $2.5m right now, if they can renegotiate it so that providers in NYC have to carry BTN, you are looking at a $20-30m boost. I don't think that Rutgers is the key to getting that to happen, but if it is, then Rutgers is one of the best financial decisions they have made since starting the network.

This also doesn't account for increases to advertising revenue due to additional markets.

polometer

November 20th, 2012 at 2:10 PM ^

sports fans associated with Michigan that would love to see more money being put towards the non-revenue sports.  Michigan could start a varsity women's lacrosse team, men's water polo team, men's crew, men's volleyball, etc.  The money could be put towards improving the coaching, equipment, and facilities of varsity sports that already exist but don't generate revenue.The money could be put into promoting the non revenue sports to drive up their followings, get games put on tv (or BTN), and get involved with the community.  

I also agree that as other programs around the country continue to grow Michigan needs to continue to keep pace.  Even if atheletic facilities, gear, and coaches are top notch--there are still many good places for the money to go: tutors for atheletes, imrpoved study centers and resources, post-playing resources, job training, alumni support for former athletes, community outreach, etc. etc.

Hell, if the athletic department is really swimming in useless cash they could turn it over to the University; give it to a scholarship program, specific related departments (like kineseology or the medical school) or even improve atheltic facilities for the student body.

I don't think that decisions about "how to make a better product" should boil down to "how to make as much money as possible"...but even if this money is used for athletic related reasons--there is a glut of other places it could go and do a lot of good.

 

STW P. Brabbs

November 20th, 2012 at 2:28 PM ^

Maybe I'm a snob, but to me there's only so much money that should go into fringe sports like  water polo and crew.  There's already a thriving/massive athletic department at the school, and I don't see why it's better for it to grow further.  Also, money is not necessarily going to drive interest in the non-revenue sports - there's a limit to how much increased TV exposure, etc. is going to create a following in, say, field hockey or volleyball.

We'll see if any of that money ends up in community outreach (not sure what that would be, exactly - more money isn't going to give student-athletes more time to visit hospitals or run sports camps), or post-career resources for student-athletes.  But will those things really require millions and millions of dollars?  

I would absolutely love it if the surplus cash from the athletic department went into the university for things like scholarships or even improved student athletic facilities (it's not still the same CCRB and IM building is it???)  But I am very, very skeptical that such a thing would happen.  

Finally, the always-prevalent 'arms race' explanation:  we're already at the head of the pack in football, and are moving toward that position in basketball... with the revenues we already had.  How much more can the football program, for example, build to be more attractive to recruits? A floating practice facility?

Sambojangles

November 20th, 2012 at 2:12 PM ^

Better facilities, better coaches, better recruits, more sports, etc. Maybe even cheaper tickets. 

To say the athletic department "has enough money" is asinine. There is always an opportunity to improve the athletics, and the university in general, in some way.

snarling wolverine

November 20th, 2012 at 2:14 PM ^

As Brandon noted in the 60 Minutes piece, the financial system underpinning college athletes is broken.  Most schools - including some in our conference - lose money on athletics.  There seems to be no means of cost-containment (especially with tuition continuing to skyrocket), so the only real solution is to rake in cash wherever you can.

 

snarling wolverine

November 20th, 2012 at 2:38 PM ^

Well, they aren't great programs (although Rutgers is now becoming a regular bowl participant) but they do open up some fertile recruiting territory to the rest of the conference.  PSU has recruited the mid-Atlantic region with great success for a long time, but other schools (even Michigan, really), haven't landed that many guys from there.  Our recruiting in Pennsylvania stepped up bigtime when PSU joined, and gave us exposure there.  I think that can happen again in Maryland/NJ.

Hannibal.

November 20th, 2012 at 2:30 PM ^

I believe that a lot of the arguments that fans are making in favor of the financial aspects of expansion are people who are lying to themselves about how much they don't hate this (i.e. dissonance reduction behavior).  I have never met somebody who got excited hearing that his athletic deparment operated in the black.  I have never waited in eager anticipation all week long to hear a revenue announcement. 

Since each Big Ten team gets about $25 Millon per year from the B1G right now, that's how much money Maryland and Rutgers each have to generate in order to be a breakeven proposition for the conference.  A total of $50 Million.  They have to generate that number without adding a championship game, a hockey program, or a basketball tournament, and they have to do it with but a fraction of the fan base and alumni support. 

Let's say that Rutgers and Maryland wildly exceed expectations and contribute $64 million instead of $50 Million.  That extra $14 Million gets divided 14 ways, which is about $1 Million for each program.  That's less than 1% of Michigan's athletic department budget.

Even if expansion is as financially lucrative as has been sold to us (I guarantee you, it's not going to be), the windfall barely moves the needle when compared to ticket revenues, seat licenses, and alumni donations. 

People need to stop lying to themselves and forcing themselves to feel good about this because it supposedly makes a ton of money.  Not only are the economics highly questionable, but once you divide all of this money 14 ways, we're not left with much of it.

NYC Blue

November 20th, 2012 at 7:05 PM ^

Well, I don't think that Maryland and Rutgers are "exciting" additions, but I think that if you make business decisions based on what is exciting or sexy, that you are a pretty bad at your job.

The economics are highly questionable?  Based on your made up numbers?  Please, just stop.  We do not know what the actual data is, so this is a silly argument to have.  I am pretty sure that the folks in the B1G hired a whole truck load of accountants and business consultants to consider all the various economic impacts of this expansion far better than we can here on the board.  There are all sorts of direct and indirect benefits, both near and long term which need to be considered.  Now, you can assert that they are all a bunch of idiots when it comes to business, but I would argue that history tends to disprove that with the success that they have had with prior expansion and the BTN thus far.  So I am going to give them the benefit of the doubt on this (at least as far as the economics go)

So the real debate is whether the potential economic benefit of expansion outweighs the dilution of tradition.  I think that is the big issue that we are having.  Teams all go through good and bad spells, but what is bothersome is bringing in schools without rich sports traditions.

For me, I am not thrilled with it, but I can see the need.  I hope it does not become the start of a trend.