With the advent of revenue sharing this fall, annual athletic expenses at Power conference schools are going to sharply increase. Topping the list is a $ 20.5 million revenue sharing commitment that virtually all P4 schools will be paying. In addition, the lifting of athletic scholarship restrictions for all NCAA I sports could add around $ 5 million or so in additional costs at most schools. On top of this you can add additional staff to administer revenue sharing and NIL payments to athletes, including a pricey General manager at many schools. All told, some power conference schools could be looking at additional costs of close to $ 30 million per year beginning this fall.
School athletic departments will be looking at boosters to step in and ultimately fund the majority of these new costs. Why Boosters? Other major sources of athletic revenues are for the most part already baked into the budget. Media contracts are set for many years, while bowl and conference revenues are not within the control of individual schools. You can increase ticket prices, but only within reason without alienating your fan base. And athletic departments are very much aware given the proposed massive federal funding cuts to many universities, requesting additional school funds to pay teenage athletes millions of dollars would not be a good look to put it mildly. So, this leaves booster contributions as the go to resource for school athletic departments to tap.
But will the call to boosters fall short of what schools hope for? There are several developing factors that could result in a severe case of Booster Fatigue. Booster support is going to be tested beginning this fall for a number of reasons:
Parity: Revenue sharing is going to significantly level the playing field between historically dominant programs and their conference competitors. However, football boosters used to seeing 10 and 11 win seasons may become disgruntled if 7 and 8 win seasons become the new norm. Donors may begin to feel their contributions are being wasted if they are being used to pay teenagers millions of dollars to achieve so-so results on the football field or basketball court. And for boosters at powerhouse schools the disillusionment will likely run deeper … we won national championships without paying athletes, and now we’re being asked to pony up millions to pay for middle of the pack teams? While parity in general may be good for intercollegiate sports, boosters at (historically) powerhouse schools will almost certainly not welcome this development.
The transfer portal: Most boosters and their families are school alumni. They spent 4 or 5 years at the college, likely still remember their student ID number, and are the most loyal contributors. However, this loyalty will be tested if these supporters feel their contributions are going into the pockets of athletes who have little or no allegiance to the school … athletes only there for the money and who are quickly off to the transfer portal if another school is willing to pay more. While players have been switching schools via the transfer portal for several years, what’s different with revenue sharing is that boosters may now perceive it’s their contributions athletes are running off with.
Conference realignment: While switching conferences can result in increased booster support, in many situations it’s a disaster. Prior to the Pac-12 refugees coming aboard, Nebraska, Maryland and Rutgers were the newest Big Ten members, and booster contributions for these three schools were dead last in the conference. Boosters at Nebraska and Maryland appear to have especially soured over leaving conferences where they had fierce regional rivalries and had won national championships, to a conference where they are at best, middle of the pack. Booster support at new Big Ten members UCLA, USC and Washington could quickly begin to deteriorate for similar reasons.
Federal Funding cuts to Research Universities: The Trump administration has proposed billions of dollars in federal funding cuts to research projects at US Universities. The vast majority of the universities affected by these cuts are NCAA I schools … these schools even highlight these important research endeavors during college football broadcasts. Unless these cuts are rescinded, the Universities of Washington and Virginia will lose around $ 60 million each in federal funding, Penn State $ 20 million, South Carolina $ 17 million, and Maryland $ 12 million to name a few. The loss of this funding will result in significant layoffs at Universities across the US.
Given the massive proposed cuts in federal funding, will it be reasonable for universities to pay young athletes millions of dollars to play football or basketball, while simultaneously laying off highly skilled scientists performing critical research into cures for cancer and ALS among other projects? Even the most ardent school athletic boosters would probably agree this is a fair question. While some boosters might instead direct contributions to the school research funds rather than the athletic department, others might simply withhold contributions entirely. The arrival of this perfect storm may prod many universities to carefully examine their priorities and being true to the school’s mission.
Runaway Athletic Department Spending: Ohio State’s annual athletic department budget is approaching $ 300 million per year, and a number of Power 4 conference schools spend well north of $ 200 million annually. Head coaches at many power conference schools are receiving compensation packages of $ 10 million or more per year. When is it all too much? Even prior to revenue sharing, some Power conference schools were badly losing the intercollegiate arms race to the detriment of the school’s finances.
Despite receiving massive Big Ten media contract payments, the athletic department at Rutgers is over $ 250 million in debt and is running up operating deficits of over $ 70 million annually. And this is before revenue sharing and related expenses could add another $ 30 million in annual costs. Not surprisingly, supporters are dismayed and Rutgers has the lowest athletic booster support of any Big Ten member. Rightly or wrongly, the school has become the poster child for athletic department mismanagement. But whether it’s Rutgers or any other school, many boosters will simply stop contributing if they believe there isn’t a control on costs and that their donations are simply being wasted.
The Upstart Factor: Similar to the plot of “Moneyball”, there will be an upstart team that makes a run to the coveted College Football Playoffs with a budget the fraction of most Power Conference schools. How will boosters react when they see a school with a $ 60 million athletic budget make it to the playoffs while their school, despite its pricey coaches and $ 200 million annual budget, has a football team either heading to a low profile Bowl game or are not even playing in December? Some boosters may decide their contributions are not being spent wisely, and simply throwing additional money at the athletic department isn’t the solution
NIL Collective poaching: NIL collectives arose because they performed a function that schools were prohibited from doing … paying athletes directly. With the advent of revenue sharing, this prohibition will be removed and the purpose for outside NIL collectives will dimmish. Many if not most NIL Collectives will likely disappear. However, many in the collective community dispute this premise, and intend to carry on. The sticky issue here is that Schools and Collectives are asking the same donors to fund the same cause – paying student athletes. Money received by ongoing collectives typically represents funds that would otherwise have gone directly to the schools … money that could have been used to help fund revenue sharing commitments.
It’s not really college sports anymore: The Little League World series generates fabulous television ratings, and it’s not because players are blasting 400’ home runs. Some of the kids are not even 5’ tall, many weigh around 100 pounds, and virtually all of them act like well, the way you’d expect 12-year-olds to act. But it’s compelling because it’s authentic and takes many viewers back to when they were that age.
College sports became wildly popular for similar reasons. Watching your team play in person or on TV keeps you in connection with the school you likely spent several memorable years at. You take pride in watching your college’s athletes compete, you wear your school’s colors. While the athletes often receive scholarships, they were not there for the money. They displayed loyalty to your school by staying for four years, and more often than not, graduating.
But as college sports moves closer to professional sports it may lose its authenticity to many supporters and become viewed as just another commercial enterprise. While University of Pittsburgh boosters will make contributions to support the school’s athletics, few if any of these same donors would seriously consider making a donation to support the Pittsburgh Steelers. Collegiate television viewership and the value of media contracts could also decline. College football must avoid being becoming viewed as say the XFL or UFL football leagues and their dismal TV ratings. College basketball must avoid becoming viewed similar to the NBA G League which also has miniscule TV viewership. College sports became widely popular because they are college sports. If they become something else in the minds of boosters and viewers, schools will likely begin to lose support via contributions.
Do I actually want my donations to be used for revenue sharing?: Never before have schools asked boosters for support to assist in compensating individual athletes, with some players likely to receive over $ 1 million annually. Historically, booster support went to fund things like field & facility improvements, equipment and scholarships. With over 90% of revenue sharing payments going to football and men’s basketball players, there will also be a much starker monetary gap between these two sports and women’s and all other sports. This could result in some boosters to consider whether this is how they want their support to be applied.
Booster Support is Variable: Booster Support is critical to the athletic budget at most schools, but It’s also the most variable factor of school revenue. TV contracts are set and are guaranteed for many years. Ticket sales also tend to be fairly consistent, even if fans grumble about the football team or its coach, they still typically show up every Saturday. But booster contributions can vary greatly, and disgruntled boosters can have a very detrimental impact on athletic departments finances. If boosters get disillusioned they simply contribute less money, which is a big problem for school athletic department finances when costs are also increasing by $ 30 million per year.
Athletic Boosters are also School Contributors: The most important reason to keep athletic boosters happy is that they are also often the biggest donors to school general funds. Phil Knight (co-founder of Nike) has donated millions to the University of Oregon’s athletic department, but he also donated $ 1 billion to fund a new Science Campus at the University. T. Boone Pickens donated millions to Oklahoma State athletics, but his total gifts of $ 650 million to the school included contributions to both the athletic department and general funds. With the proposed federal funding cuts to research universities, continued contributor support will be even more essential for schools to accomplish their stated mission.
College sports are an extremely effective tool in promoting schools and keeping alumni engaged. Attending games in person, or seeing your school’s teams play on television is highly effective marketing. College presidents often refer to athletics as the school’s “front porch” … not the most important room in the house, but the most visible. The risk schools face this fall is that the changes to major college athletics may diminish the attractiveness of their front porches, with a resulting loss in booster enthusiasm and support. Schools will be entering a new and risky landscape with the advent of revenue sharing this fall.
Questions on our data? Contact us at: NIL-NCAA.com
Statistics compiled & edited by Patrick O’Rourke, CPA Washington, DC 