From The Journalist’s Resource – College sports: How winning impacts institutional revenues

Photo courtesy of University of Alabama

On September 30, 2015, the U.S. Federal Court of Appeals overruled a lower court’s decision that colleges and universities could pay student athletes up to $5,000 in deferred compensation, which would be held in a trust until the athletes leave college.

This decision was a win for the National Collegiate Athletics Association (NCAA), which claims that the amateur nature of college sports should keep it exempt from antitrust laws, or laws put in place to ensure fair and free competition in an open marketplace.

The original class action lawsuit, O’Bannon v. NCAA, involved a lead plaintiff, former UCLA basketball player, Ed O’Bannon, who claimed that athletes should be allowed earnings from the marketing and commercialization of their images and likenesses after they leave college.

The 2014 ruling in that case was made by Judge Claudia Wilken, who maintained that the NCAA was in violation of the Sherman Antitrust Laws.

The decision to reverse that ruling by the U.S. Federal Court of Appeals in 2015 comes on the heels of another case involving college athletes and whether or not they are entitled to compensation.

In April 2015, Northwestern University’s football team voted to unionize claiming they were employees of Northwestern, and thus deserved the right to collectively bargain.

In August of 2015, the National Labor Relations Board made the decision that it did not have jurisdiction in the case, effectively blocking the unionization of the athletes.

Many saw this as a win for NCAA leaders, who have long argued that paying athletes will result in an unfair marketplace where richer schools are able to scoop up all the best high school athletes by paying a premium.

Despite the ongoing debate about whether college athletes should be paid, little research has been done to examine the connection between college athletics programs and the money they make for their academic institutions.

Many of these programs bring in millions of dollars annually as highlighted in an August 2015 study forthcoming in Management Science.

“How Much Is a Win Worth? An Application to Intercollegiate Athletics” looks at how each game win during the Division 1 men’s football and basketball seasons translates into dollars for a given sports program.

Doug J. Chung, an assistant professor at the Harvard Business School, surveyed data from 117 schools between 2003 and 2013. Chung separated these Division 1 programs into more and less established athletic programs.

Power Five Conference teams made up the more established category, while lesser known programs were schools that have a shorter record of athletic success and do not participate in the prestigious conferences, such as the Big 10 and Big 12 conferences.

This study’s findings include:Some top schools make up to $200 million from their football and basketball programs annually.Wins equal cash for many collegiate football teams.

In fact, a single win during the football season could mean as much as a $3 million increase for some top schools. Less established football teams saw a monetary increase as a result of invitations to postseason bowls.In general, among the 117 schools surveyed, football programs were far more lucrative than basketball programs.

However, basketball programs also brought in significant revenues for schools ranging from $44 million to $123 million annually.College sports is a multibillion dollar industry with several schools reporting revenue around $100 million annually and some top schools bringing in $200 million annually.

Chung mentions in his study that one area for further research is to examine how the revenue for each team and school breaks down in terms of sales categories, such as tickets and team merchandise. Chung, who is an avid college sports fan himself, says he hopes his work will inform the debate on whether and how college athletes are compensated by the schools they represent.

 

Related Research: A 2007 study,

“The College Sports Reform Movement: Reframing the ‘Edutainment’ Industry,” looks at efforts to reform college sports, relative to

“(1) commercialization; (2) university involvement in the entertainment industry; (3) damage to the integrity of higher education; (4) exploitation of athletes; and (5) harm to nonathletes” using the proposals of The Drake Group and the Coalition on Intercollegiate Athletics.

Writer: Tina Pamintuan | November 30, 2015

Citation: Chung, Doug J.

“How Much Is a Win Worth? An Application to Intercollegiate Athletics.” Management Science (forthcoming).

Source: College sports: How winning impacts revenue – Journalist’s Resource Journalist’s Resource

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s