Do Colleges Make Money From Athletics?

Do Colleges Make Money From Athletics?
portrait of Mark J. Drozdowski, Ed.D.
By Mark J. Drozdowski, Ed.D.

Published on November 16, 2020

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"Do colleges make money from athletics?" might seem like a ridiculous question given the millions of dollars we hear about pouring into university coffers from lucrative television contracts, ticket sales, alumni donations, and licensed apparel. But the answer is rather surprising.

Before we explore this topic in detail, let's look at how much money the top 20 earners in college athletics made in 2018-19:

  1. University of Texas: $223,879,781
  2. Texas A&M University: $212,748,002
  3. The Ohio State University: $210,548,239
  4. University of Michigan: $197,820,410
  5. University of Georgia: $174,042,482
  6. Penn State University: $164,529,326
  7. University of Alabama: $164,090,889
  8. University of Oklahoma: $163,126,695
  9. University of Florida: $159,706,937
  10. Louisiana State University: $157,787,782
  11. University of Wisconsin: $157,660,107
  12. Florida State University: $152,757,883
  13. Auburn University: $152,455,416
  14. University of Iowa: $151,976,026
  15. University of Kentucky: $150,435,842
  16. University of Tennessee: $143,765,903
  17. University of South Carolina: $140,695,659
  18. Michigan State University: $140,010,865
  19. University of Louisville: $139,955,824
  20. University of Arkansas: $137,497,788

Yet these figures tell only part of the story. Most casual observers might be shocked to learn that despite the huge sums of cash seen here, only a handful of schools actually make money through college athletics.

Football Is King but Doesn't Always Ensure Profit

What do these 20 schools have in common? Besides being public institutions, they all have football teams. (Note that private institutions are not required to release college sports revenue and expense data, which is why key players like the University of Notre Dame aren't listed.)

Since the late 1800s, football has by far been the top-earning sport on American campuses, financing not only every other sport but also often the growth and development of the universities themselves. On average, a university will realize more revenue from football than it will from the next 35 sports combined. At the University of Texas — routinely ranked No. 1 on the earnings list — 70% of its athletics revenue is derived from football.

But that still doesn't mean all these institutions are making money from athletics. According to the NCAA, among the 65 autonomy schools in Division I, only 25 recorded a positive net generated revenue in 2019.

The term "autonomy" refers to a 2014 NCAA decision that allowed the Power Five conferences — the Southeastern Conference (SEC), Atlantic Coast Conference (ACC), Big Ten, Pac-12, and Big 12 — to establish their own rules regarding student scholarships, recruitment, and staffing, among other concerns. These schools, especially those in the SEC and Big Ten, along with Clemson in the ACC, typically dominate college football each year.

Among those reporting a net positive, the median profit per school was $7.9 million. And among the 40 autonomy schools reporting a negative net revenue, the median loss was $15.9 million. In other words, the majority of universities in the nation's top athletic conferences — the schools you see on TV every weekend competing for national championships — lost money through their sports programs to the tune of approximately $16 million each.

The majority of universities in the nation’s top athletic conferences lost money through their sports programs to the tune of approximately $16 million each.

It's worse for Division I non-autonomy schools, or those outside the Power Five conferences. All 64 of these institutions lost money in 2019, with a median deficit of $23 million per school.

Also included in the NCAA's Division I classification are Football Championship Subdivision (FCS) schools, the former I-AA programs that compete in a year-end tournament to determine the national champion. The Power Five and other top conferences are classified as Football Bowl Subdivision schools, which compete at the season's end through a series of bowl games culminating in a four-team playoff to determine the champion.

Of the 125 FCS schools, all reported a negative net generated revenue in 2019, with a median loss of $14.3 million per institution.

Finally, Division I includes 97 schools without football programs. All of them had a negative net revenue in 2019, with a median loss of $14.4 million. And not one college in the NCAA's Division II or III saw their revenues exceed expenses that year.

In total, then, only 25 of the approximately 1,100 schools across 102 conferences in the NCAA made money on college sports last year. That's because the cost of running an entire athletics program, which can feature as many as 40 sports, almost always exceeds the revenue generated by the marquee attractions of football and basketball.

The Role of College Basketball in the NCAA

Basketball, particularly the annual March Madness tournament, brings in most of the NCAA's income. Of its roughly $1 billion in annual revenue, about $820 million comes from this Division I men's championship, largely through TV and marketing rights. The organization earns another $129.4 million in March Madness ticket sales.

Basketball brings in most of the NCAA’s income.

But as a nonprofit, the NCAA isn't about making money for shareholders. Instead, it allocates around $842 million annually — nearly 90% of its income — to member institutions for scholarships, travel, academic services, compliance, and drug testing. The remaining funds support the NCAA's operations.

Curiously enough, the NCAA doesn't receive revenue from college football bowl games and the championship playoffs, all of which are independently operated. For example, the Allstate Sugar Bowl — one of the bowls involved in the January 2021 championship semifinals — is run by a nonprofit organization of the same name, which earns money through ticket sales, sponsor payments, and licensing fees.

How the Pandemic Has Impacted College Athletics

Given the NCAA's financial reliance on the March Madness basketball tournament, the cancellation of the event this past spring due to the COVID-19 outbreak had a crippling effect. Not only did the NCAA lose its biggest moneymaker, but schools also suffered. According to one estimate, the NCAA was originally slated to distribute more than $600 million to member schools, but the cancellation slashed that figure to $225 million.

As a result, colleges may have to reduce the number of scholarships they offer, cut coaching positions, and even eliminate some sports. In April, Old Dominion University dropped its wrestling program, and the University of Cincinnati cut men's soccer. When making such adjustments, colleges must remain mindful of Title IX compliance, which requires equal opportunity, including scholarships, for both men's and women's athletics at the collegiate level.

Canceling the football season would have been even more catastrophic for sports programs. While some conferences, such as the Colonial Athletic Association and the Ivy League, postponed fall football in favor of a potential spring season, the Power Five conferences have soldiered on, albeit in front of empty stands or at best sparse crowds.

The Big Ten, originally reluctant to participate, began competition on October 23 under a reduced schedule. Had the Power Five conferences canceled their seasons altogether, they would have lost an estimated $4 billion in revenue.

Had the Power Five conferences canceled their seasons altogether, they would have lost an estimated $4 billion in revenue.

While it's too early to calculate the actual financial losses, limited fan engagement is taking a serious toll on greater university communities. Schools themselves are losing revenue from foregone ticket and concession sales, but local businesses that rely on game-day activity may be suffering even more.

When the Tigers host a game at Clemson in South Carolina, roughly 150,000 fans populate the downtown area, eating and drinking at restaurants, staying in hotels, and buying souvenirs and other memorabilia. The economic impact per game exceeds $2 million. In Madison, Wisconsin, that figure is closer to $16 million per game when the Badgers play, with the football season accounting for 70% of annual revenue for some local businesses.

The receding tide caused by the COVID-19 pandemic indeed sinks all boats.

By any measure, college sports are a big business — but that doesn't mean universities are getting rich off athletics. The reality is that most sports programs operate in the red. If the time comes when colleges have to pay athletes to participate, then the financial picture will change even more dramatically. But that's a story for another day.

Feature Image: Scott Taetsch / Contributor / Getty Images Sport / Getty Images North America

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