October 5th, 1997

Revenues Dominate the College Sports World

By Mike McGraw, Steven Rock and Karen Dillon
Kansas City Star

Can you tell the difference between the college basketball finals and the NBA
championship?

One association usually stages its games before medium-sized crowds. A seat
goes for the price of a nice dinner. Fans watch games that differ little from
the regular season. Outside the arena the streets are surprisingly quiet.

The other group plays in arenas so huge that spectators need binoculars, and
tickets cost as much as a hotel room. Referees lengthen timeouts so television
can sell more commercials. Outside the arena, corporate sponsors set up tents
and turn the stree ts into a merchandising carnival.

Yes, for a lesson in commercialism you can’t beat the National Collegiate Athletic
Association. In fact, when it comes to making money from its athletes, the pros
have little to teach their amateur college cousin.

In the last 23 years, the NCAA’s total revenues have increased 8,000 percent.
This decade alone corporate sponsorships are on a pace to increase sevenfold,
and the NCAA’s $1.7 billion television contract is bigger than any single professional
sports le ague deal with any network.

Like professional football, basketball and baseball, the NCAA hawks its own
licensed clothing (get your Official Locker Room Cap --"The ONLY cap worn
by each of the Final Four teams"-- $19). Like the NFL and NBA, it now owns
its own traveling tent show , NCAA Hoop City. For $6, fans at the Final Four
could try the "Healthy Choice Hot Shot Challenge" or the "Hershey
Shoot Around."

It has its own Learjet. It has its own real estate subsidiary. It has its own
marketing division.

And it has something else, something the pro leagues don’t need to live up
to: an educational mission.

It’s a promise, made to President Teddy Roosevelt in 1905, that the NCAA will
keep college sports at an amateur level and secondary to getting a good education.

The NCAA was never supposed to rival its professional counterparts. It’s an
educational, nonprofit organization. It pays no state or federal taxes on its
billions in TV contracts, millions in sponsorships, millions in licenses and
Final Four tickets. I ts members are not sports teams at all, but 933 institutions
of higher learning.

That the NCAA seeks money is no secret to Kansas Citians. By 2000, the NCAA
will leave Kansas City after 45 years, uprooting 250 employees in return for
$50 million in cash and promises from Indianapolis.

But the lure of money already has taken the NCAA much farther than Indianapolis.
An 18-month investigation by The Kansas City Star reveals that money has pushed
the NCAA far from its educational goals.

Money is the reason top NCAA officials enjoy benefits that stretch the limits
of tax law and their own ethics rules. Money keeps academic standards anemic,
allowing member schools to win by playing the best athletes regardless of whether
they intend t o graduate or even belong in college.

Money is hurting—in some cases fatally—the student athletes the NCAA
was formed to protect. Money polarizes its member schools into haves and have-nots,
and money has created schisms in the new NCAA structure that went into effect
in August.

More than 1,000 interviews and a review of financial, academic and legal documents
draw a portrait of a powerful sports cartel that is addicted to making money.

"Money drives it," says Tom McMillen, formerly a college athlete,
congressman and member of the Knight Foundation Commission on Intercollegiate
Athletics, which attempted to reform college sports. "Greed drives it."

NCAA officials make no apologies for increasing revenues.

"We have been able to provide so much more in terms of student-athlete
welfare, participation opportunities, quality of education, quality of training
because of the popularity of college sports and the increased revenues that
have been a result," said Samuel Smith, chairman of the NCAA Executive
Committee and president of Washington State University.

But they deny that money drives the NCAA. "I don’t see that we are money-hungry,"
said NCAA Executive Director Cedric Dempsey.

Indeed, in a news conference before this year’s Final Four, Dempsey addressed
the merchandising of college sports.

"I really think it’s time for us to look at the commercialization, or
overcommercialization, of what we’re doing in intercollegiate athletics,"
he said.

But at the same news conference he said the NCAA would be getting more involved
with its corporate partners.

NCAA Hoop City is another new venture for next year, snatched up for $1 million
by the NCAA after an impressive run under the name Fan Jam by its former owners
—the National Association of Basketball Coaches.

Either way, any blow against materialism hasn’t inconvenienced NCAA executives.

Case in point: The manual for cities holding Final Fours requires a series
of gifts to be delivered every night to the hotel rooms of NCAA officials. These
mementos cost Indianapolis an estimated $25,000, said John Parry, athletic director
at Butler Un iversity there.

At a minimum, gifts for each official included a Samsonite suit bag, a Final
Four ticket embedded in Lucite, a Limoges porcelain basketball and Steuben glass.

High-stakes games

To see just how money manipulates the NCAA, you need to look at the organization
in two ways.

It has a head, the offices of the National Collegiate Athletic Association,
based for now on College Boulevard. Out of that office, a staff of 250 investigates
rule violations, runs the basketball tournament and collects a central pot of
money from TV contracts, licensing deals and so on—$270 million projected
in this school year.

And it has a body, 933 member campuses that write those rules, and continually
write new ones, and then vote on them. They sell their own tickets and have
their own licensing agreements, shoe deals and TV contracts. They also divide
most of the money th e NCAA takes in. Division I schools alone expect to split
about $146 million this year, leaving the College Boulevard staff more than
$32 million for salaries and expenses. The NCAA will spend an additional $92
million on championships, programs and other expenses.

Remember that the schools—the NCAA’s body—write the rules. Thus universities
themselves are the first line of defense in preserving the NCAA’s mission: looking
out for the welfare of student athletes and making sure they are really students
first .

But then look at the numbers. Sports generate almost $2 billion in annual revenue
for just Division I schools—the top 305—according to a Star computer analysis
of financial data.

That’s twice the money that the Department of Defense pays colleges for research
and five times the annual gross revenues of all Kansas City casinos.

And in Division I-A—the 100-plus power schools that control the NCAA—
the average college makes more than $4 million annually on football and men’s
basketball, or enough to pay four years’ tuition for more than 600 in-state
KU students.

Huge sums can swing on a single play. Nebraska and the Big 12 lost almost $900,000
in ticket sales when Texas completed a surprise fourth-quarter pass in December
to win the conference championship. The Cornhuskers and their fans had expected
to go to the Sugar Bowl. But the loss consigned Nebraska to the Orange Bowl,
and thousands of fans stayed home. (The drop in ticket sales was made more palatable
by the $21.4 million that Nebraska and the other Big 12 schools split just for
playing in bowl games l ast year.)

With such fortunes at stake, winning or losing is hardly an academic question
for colleges today. In a perversion of the old saying, it does matter whether
you win or lose, not just how you play the game.

In case after case, scholarship takes a backseat to fielding a winning team.
In an investigation that ended last year, three Baylor University coaches were
convicted of wire fraud for filling out tests for star basketball players to
improve their grade s. At least 40 other universities have been implicated in
the same scheme. Said U.S. District Judge Walter S. Smith:

"The evidence in this case makes it clear that Baylor, like probably the
majority of NCAA colleges and universities, is in the business of athletics
—at least so far as basketball and football are concerned—to make money."

When does amateur no longer mean amateur? At least three college football teams
—Michigan, Florida and Notre Dame—are each worth more than the Detroit
Lions, according to recent research by Notre Dame economist Richard G. Sheehan.
The Star’s own analysis showed each of those three teams had an average gross
revenue of $18.2 million last year—and more than $14 million in profits.

Colleges act like pro teams as well. The University of Texas plans to expand
its football stadium to about 82,000 seats at a cost of $55 million. Sixty-six
new luxury suites will boost revenue by $3 million a year. The school will spend
an additional $ 10 million for a new soccer and track stadium—the old track
will be torn up for the football expansion.

"We will have the most and the best," said Athletic Director DeLoss
Dodds.

Staffs are becoming more specialized. Kansas State pays a football equipment
manager more than $40,000. The laboratory staff that produces game videos at
Texas A&M made $152,456 last school year.

Teams travel in style. Nebraska, disappointed to be going to the Orange Bowl,
still paid $1.7 million to send 730 coaches, athletic administrators, the board
of regents, spouses, children, the marching band and 160 players—97 of whom
didn’t play—to Florida. More than 300 Huskers stayed for at least 10 days.

The KU team spends the night before each home football game at a local hotel.
Total cost for five games in 1996, when it stayed in Overland Park: An estimated
$47,000.

"It keeps them focused on what they are doing," said Athletic Director
Bob Frederick. KU, however, won only one of those games.

Total revenues Haves and have-nots

Given the media attention paid to multimillion-dollar coaching contracts and
sold-out stadiums, it’s not surprising that half of Americans think all or most
colleges make money on athletics, according to a Gallup Poll conducted last
year for the College F ootball Association.

But that is not true. Athletic costs have skyrocketed 90 percent in the last
five years as campuses gear up to bask in the prestige of big-time sports, and
most schools lose money on college athletics.

"There are always going to be haves and have-nots," as Nebraska Athletic
Director Bill Byrne says.

Nebraska should know. With a perennially top-ranked football team, the Huskers
earned $2 million from licensing alone last year. The University of Missouri,
with a far more average team, earned $253,000 from licensing. The Huskers sold
$11.3 million in football tickets; Missouri $2.1 million.

Even so, Missouri’s athletic department still made a profit of $280,000 last
year after paying for all its other sports. But most NCAA colleges—even two-thirds
of the large Division I schools—did not. Taken as a whole, Division I schools
had athl etic deficits totaling $245 million in 1995-96, according to The Star’s
analysis.

And more than ever it’s the students themselves—both off and on the field
—who must make up the difference.

Just ask students at Southern Illinois University at Carbondale. They will
see their student fees increase by $80 over four years to pay athletic salaries
and also ensure the Salukis can remain in Division I. Or students at Missouri,
where officials ha ve discussed raising fees as much as $75 a semester to cover
their proposed basketball arena, which would replace the 25-year-old Hearnes
Center.

In Texas, a recent study by the state found student fees on the rise there,
too, to pay for athletic department deficits. One Texas school diverted profits
from campus bookstores and vending machines.

"We are a rather poverty-stricken university at this point," says
University of Houston sociology professor Janet Chafetz. "Faculty members
have argued for years for them to drop athletics because the cost siphons money
away from academics."

Closer to home, the University of Missouri-Kansas City once hoped it could
erase its athletic deficit by building a big-name Division I basketball team
using only donations and ticket sales, not academic funds.

It didn’t happen. While a basketball deficit was running at almost $400,000
last season, the math department lacked additional faculty for high-demand courses.
But the school still pursued its dream of a packed arena, paying $5,672 to bring
the L.A. La kers Girls to one game.

Eleanor Schwartz, UMKC chancellor, said basketball provides more benefits than
the bottom line because it enhances the school’s image and elicits support.
"You have to ask, `What does it do for us as a university?’ " she
said.

In search of a big payday, some smaller schools have volunteered for a type
of competitive hara-kiri.

Take, for example, the University of Akron Zips, which had been negotiating
to play Ohio State this season for $350,000. Instead, they scheduled Nebraska,
which paid them $450,000.

The Zips’ side of the bargain was getting shellacked 59-14 by the Cornhuskers
a month ago.

"Obviously, the money was something we needed to consider," Zips
Coach Lee Owens said. "We have struggled, as do most have-nots in the Mid-American
Conference."

Willing losers abound.

Bowling Green State University filled in for the Zips against Ohio State, earning
$350,000 (and losing 44-13), then last weekend got $175,000 for playing Kansas
State (and losing 58-0).

And Washburn University, a Division II school, took $25,000 in December for
playing a basketball game against top-ranked Kansas. The score: 90-65.

"We played the best we could under the circumstances," said Ichabods
sports information director Robert Rodgers. "More importantly, nobody got
hurt."

So strong is the NCAA’s prestige that schools are standing in line to join
up, even though it will cost many of them hundreds of thousands of dollars to
build their sports up to NCAA standards. Since 1991, 108 colleges have jumped
to the NCAA from the National Association of Intercollegiate Athletics. That
leaves the NAIA with only 352 colleges—and 80 of them are applying for dual
or full membership in the NCAA.

Humvees and free juice

With so many colleges in the red from overambitious sports programs, it’s up
to administrators at NCAA headquarters in Overland Park to keep the amateur
programs in check. But that’s a losing battle.

"Money begets money, but in college athletics there never seems to be
enough of it," Walter Byers, the NCAA’s first and longest-sitting executive
director, wrote last year. Byers and others point out that much of the increase
in revenues goes for perks and higher salaries for coaches and athletic directors.

Dempsey, the current executive director, acknowledged schools are pushing to
raise revenues, which sometimes detract from their educational mission. But
the NCAA is working to counter those forces, he said.

"We have attempted to reassert what the mission is," Dempsey said.

To some critics, though, the NCAA’s actions tell a different story. According
to a Star survey of college presidents, more than half who responded said the
NCAA did too little to control costs.

It’s easy to become confused by what the NCAA says—and then does.

Take a look at the Final Four, by far the NCAA’s most publicized and most profitable
event.

Entrusted with keeping amateur athletics pure, the NCAA asked the city of Indianapolis
to ban commercialization downtown during the Final Four. The week before the
games, a federal judge issued a temporary restraining order just in case any
greedy and unlicensed souvenir hawkers popped up. To cover all possible scofflaws,
the order named "John Does 1-100 and XYZ Companies 1-100."

"We didn’t want something like what happened at the Olympics last year
in Atlanta," said Bill Hancock, the NCAA official in charge of the Final
Four. "Their downtown became an advertising vehicle and a carnival."

But in Indianapolis, the NCAA wanted to control the carnival. The restraining
order was only for hawkers who didn’t have NCAA approval. Surrounding the RCA
Dome were the NCAA’s corporate partners—companies that paid money to advertise
their official connections with college sports.

A black Humvee circled the dome, sometimes parking on sidewalks. The back was
filled with ice and Mountain Dew, a corporate sponsor, made by Pepsi Cola, another
corporate sponsor. Across the street, on Pan Am Plaza, a music tent bore a large
advertisem ent for Ocean Spray, another corporate sponsor. Plastic wagons filled
with free cans of juice were pulled through the plaza.

"What we were trying to accomplish was an environment clean of commercial
entities that were not related to the NCAA," said Al White, who runs the
NCAA’s corporate partner program.

That explains why across from Pan Am Plaza, in the basement of normally empty
Union Station, temporary souvenir shops peddled officially licensed NCAA goods
with 7.5 percent of sales going into NCAA coffers.

And that’s why when you copied the bracket of the teams heading to the Final
Four for your office pool, you unwittingly violated a trademark—the NCAA
has even registered that. When The Indianapolis Star used the bracket and the
Final Four nam e in an advertisement touting its basketball coverage, an NCAA
official called to tell the paper to stop running the ad. It did.

The NCAA has been getting into the advertising business itself. TV commercials
this fall showing a fan with "NCAA" scrawled on his bare and ample
belly kicked off a sophisticated marketing blitz with a very serious goal: more
money for NCAA members.

The promotion is called "NCAA Football," which is also the logo that
has begun appearing on helmets worn by college players. They will become walking,
and running, advertisements in a strategy to pump more money to NCAA colleges.

"As we can build value into that NCAA Football logo, then obviously we
can sell more products," says Bill Battle, CEO of the Collegiate Licensing
Company in Atlanta.

Other parts of the campaign include a traveling NCAA Football Fan Festival
and an NCAA Football TV show.

Changing the game

The NCAA not only has auctioned off its image to corporate sponsors, it sometimes
even changes the flow of its games to make more money.

During the Final Four, for example, timeouts can stretch much longer than during
the regular basketball season, when they often are limited to 90 seconds or
less.

That’s so CBS can recoup its $1.7 billion investment. During the first half
of this year’s championship game, viewers had already waited through more than
eight minutes of commercials to watch 20 minutes of playing time.

"I don’t think that’s something that drastically changes the flow of the
game," said NCAA spokesman Wally Renfro.

Others disagree. Coaches run out of advice to give players as timeout breaks
drag past 21/2 minutes. Teams like Kentucky and Kansas, noted for benches deep
enough to wear down exhausted opponents, lose that advantage.

"The delays are detrimental to the game," said Dale Kelley, coordinator
of men’s basketball officials for the Big 12, Conference USA and Sun Belt conferences.
"Obviously, money and television dictate."

Not so with the NBA, which doesn’t tamper with timeout lengths.

"If you do that, it ends up damaging the product," said Ed Markey,
vice president of sports information for NBC, which televises the championship.

Even the Masters Tournament limits television commercials to four minutes per
hour so as not to sully the game for golf fans. Yet at the NCAA, money drives
the fans into the backseat—literally.

That’s where Natalie Chambers was sitting. Her ticket to the NCAA championship
cost $115 but placed her five rows from the back wall. "We weren’t even
this far away at the Olympics," Chambers said.

The RCA Dome was so cavernous that on one day alone, more than 300 fans paid
$10 to rent binoculars. But the 47,000 tickets brought in $4.1 million in revenue.
That’s why the Final Four will be held exclusively in domes or stadiums through
at least the year 2002, including a return in 2000 to the RCA Dome.

The NBA, on the other hand, frowns on playing games in hangars as big as the
RCA Dome. The Indianapolis Pacers considered playing there but quickly decided
to ask the city for a new basketball arena with an estimated 19,000 seats.

"I think everyone here quickly acknowledged that domes are just awful
for basketball," said David Kahn, vice president and assistant general
manager.

The league put its All-Star Game this year in Cleveland’s Gund Arena with 20,562
seats. Next year: Madison Square Garden, 19,763 seats.

Even though there were 47,000 seats, a Final Four ticket was tough to come
by for Joe Fan. Face value of tickets—from $55 to $100—wasn’t close to
opening bid for scalpers, who were so bold that many set up shop in the lobby
of the coaches’ hotel.

But NCAA officials had it easier. That’s because the NCAA office gets 10 percent
of the tickets to distribute to employees, corporate sponsors and politicians.
The NCAA staff itself gets 300 to 500 free tickets.

That doesn’t count prime seats the NCAA appropriated in a quiet coup.

For years, corporations purchased luxury boxes for every event in the RCA Dome.
But after the 1991 Final Four there, NCAA officials told local organizers that
if they wanted the NCAA back in 1997 they’d have to throw in some of the best
luxury boxes, c onvention officials said.

So a new clause in skybox agreements gave local officials the right to commandeer
the boxes for the Final Four. Boxholders got seats in the stands as compensation.

"The suite-holders were basically told, `You do not have your suite, and
here are your lousy seats,’ " said John Parry, co-chairman of the local
organizing committee.

"That’s the kind of power that the NCAA can wield."

But the NCAA’s marketing power wasn’t applied to the women’s Final Four, playing
down the interstate in Cincinnati’s Riverfront Coliseum (capacity: 16,500).
No Humvees circled the arena. No wagons full of free juice. Even NCAA officials
stayed at the men’s tournament most of the week.

For the women’s championship game, Dempsey and three companions flew about
100 miles to Cincinnati in the NCAA’s Learjet, returning afterward. Estimated
round trip cost: $1,400.

The cost to go by limousine the same distance: $468, including tip.

Until Dempsey’s flight, NCAA top officials were almost a no-show in Cincinnati
despite the popularity of the women’s tournament—TV ratings were the highest
ever. But the two top NCAA boards met in Indianapolis.

"We have suggested meeting at the women’s Final Four," said Patty
Viverito, head of an NCAA committee on women’s issues. "Nobody has taken
us up on that suggestion."

Moneymakers Database editor Gregory S. Reeves contributed to this article.

 

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