College Athletics Enters Revenue Sharing Era

[grue2]

Revenue matters too, not just profit. Because again, schools spend every dollar they make. They are not aiming for profitability.

Should schools spend a billion dollars on renovations while the players who generate the revenue to pay for those renovations make zero?

Should coaches make millions a year, while the players make zero?

That is fair, though in theory the renovations are done to increase future profits. I do not think the revenue/profit difference changes the argument for the 95% of the FB/BB players or non-revenue sport players.

 

[lstewart53x3]

That is fair, though in theory the renovations are done to increase future profits. I do not think the revenue/profit difference changes the argument for the 95% of the FB/BB players or non-revenue sport players.

This conversation started because you said schools aren’t getting rich due to their unprofitably. I simply pointed out that they’re only unprofitable because they must spend every dollar they make. They’re getting very rich in terms of revenue, facilities, coaching hires, etc. And now the players will rightly be on the balance sheet. They don’t need to be paid from “profit”. Schools will simply adjust their expenditures to account for their athletes.

I’m not sure where and when the non-revenue sport players got added into the mix. Of course, they’ll likely be paid (a lot) less than the players who generate the bulk of the revenue.

 

[ptgrd23]

I do pretty well but am not 9 figure wealth class that can write a million $NIL check.

But if I was, I think it would be fun to get a call from Brad saying Stojakovic is the missing piece. Can you give us the money to go get him.

Imagine you had written the check for Marcus Domask or Tomas Ivicivic. It woudl feel pretty good to know you made a difference. Not to mention how good you were on evaluating talent. Next step fix the Bulls!

Of course I would be inviting my Illini Loyalty friends to join me on my private jet to Illini NCAA tournament games and bowl games.

 

[sbillini]

FWIW this argument has always applied to things like child labor and sweatshops as well, and plenty have made it in those contexts. Just because it's a "free market" doesn't mean it's actually a free market.

You kind of get at this with your #3 but there's more to it than that. The way the system was set up where the only allowable compensation was a scholarship, the fundamental problem was players could not negotiate. Imagine you are in a certain industry. It's what you were trained to do, it's the skill you have, sure you could do something else but this is the thing you have wanted to do and have studied to do. Then all the companies that hire folks like you get together and say "This is the compensation we offer to everyone. None of you can offer more. If you do, you face strict penalties." Now you don't have any power to negotiate more compensation. You're stuck taking what's on offer, which is the same everywhere and paltry in comparison to what the companies are making, or you have to go figure out a completely different plan for your life. So what do you do? You go and take a job based on which company has the best cafeteria. Is that a free market? It's not, and the actions of those companies is is fundamentally illegal. But that's basically what the system was before NIL.

1. like i said, i'm fully in favor of NIL. I think it's wrong to not allow players to take advantage of their NIL.

2. I'm also fully in favor of player unionizing if they so chose. That's a perfectly fine free market response to the supposedly non-free market scenario you outline.

Finally, these are 18 year old barely adults here. It's not like they've committed their whole careers to a given sport and they can't change their life trajectory. This isn't a sweatshop in vietnam. It's a first world country with a plethora of opportunities not available to a majority of the world's population. THey can simply stop playing football (for which they would probably not go pro for anyway) and do something else and the opportunity cost would be minimal. Heck, just go get a college education if the scholarship isn't valuable to you. Free market. But so many chose not to do that, and, for some reason, they voluntarily agreed to participate in a system when they could have easily done anything else.

 

[grue2]

This conversation started because you said schools aren’t getting rich due to their unprofitably. I simply pointed out that they’re only unprofitable because they must spend every dollar they make. They’re getting very rich in terms of revenue, facilities, coaching hires, etc. And now the players will rightly be on the balance sheet. They don’t need to be paid from “profit”. Schools will simply adjust their expenditures to account for their athletes.

I’m not sure where and when the non-revenue sport players got added into the mix. Of course, they’ll likely be paid (a lot) less than the players who generate the bulk of the revenue.

All fair. Then the question becomes what are necessary/wise expenses vs. spending because the money is there? Please list any major ones I missed.

Theory: Box seats at the stadium will make mega bucks.
Reality: What a waste.

Theory: A better coach increases revenue (and thus profitability) more than their salary.
Reality: Bielema is gold.
There were 40k empty seats in the stadium a few years back. Filling those at an average of $30 each (cheap) is ~10M/year extra revenue. I think I saw we were already up 20-25k seats in attendance since Bielema took over.

Theory: Assembly hall rework will ... I never really got why the massive project was needed vs. something much more basic.
Reality: Dunno.

As far as I know the other things such as the new practice facility were all donation funded. Are those donating buildings also required to create funds to maintain those buildings like they are on the Engineering campus, or does that maintenance money come out of the budget?

I guess my bottom line is I'm not seeing a lot of "spend it because we have it". I am seeing "spend it because we think it will make more." I may well be missing things.

 

[the juiceman cometh]

I guess my bottom line is I'm not seeing a lot of "spend it because we have it". I am seeing "spend it because we think it will make more." I may well be missing ththings.

Our football facility has a bowling alley and mini golf.

 

[grue2]

Our football facility has a bowling alley and mini golf.

TL;DR The bowling alley is a huge waste. Did the rest impact budget significantly?

The bowling alley seems like a really poor decision. Even 2 lanes, are a major cost to maintain. The pin racking machines are also a major injury hazard to the untrained. There should always be a trained person available to unjam pins etc.

The rest of the luxury items seem to mostly be space and acquisition costs vs maintenance costs. If the donors bought them they probably did not impact the budget. The mini-golf course, while looking pathetic, is on otherwise unused rooftop space.

Seeing these amenities, it looks like the goal is to keep the athletes with the athletes vs. on campus with the other students. My initial reaction is that I do not like the isolation. If they are students, they should interact with non-athlete students. If we are going to paid athletes who really don't qualify as students anyhow, the separation is probably a good idea.

 

[the juiceman cometh]

TL;DR The bowling alley is a huge waste. Did the rest impact budget significantly?

The bowling alley seems like a really poor decision. Even 2 lanes, are a major cost to maintain. The pin racking machines are also a major injury hazard to the untrained. There should always be a trained person available to unjam pins etc.

The rest of the luxury items seem to mostly be space and acquisition costs vs maintenance costs. If the donors bought them they probably did not impact the budget. The mini-golf course, while looking pathetic, is on otherwise unused rooftop space.

Seeing these amenities, it looks like the goal is to keep the athletes with the athletes vs. on campus with the other students. My initial reaction is that I do not like the isolation. If they are students, they should interact with non-athlete students. If we are going to paid athletes who really don't qualify as students anyhow, the separation is probably a good idea.

The point is that athletic departments bring in a ton of money and have to spend it, and a lot of those expenditures are not to "make more" as you suggested. They spend it because they have it. It they were trying to run in the black they'd never spend on this kind of stuff, and if they spent more money on player compensation they'd just spend less on things like this. Maybe coaches' salaries would stop increasing at the rate they have been. They'd make choices that accommodated that additional expenditure.

And yes, an $80 million facility impacts the budget plenty. It's not just the bowling alley and mini golf. Most buildings on campus don't look this nice. There was a ton of money spent on this facility and if the budget was as unhealthy as you make it out they absolutely could have done without it.

 

[grue2]

The point is that athletic departments bring in a ton of money and have to spend it, and a lot of those expenditures are not to "make more" as you suggested. They spend it because they have it. It they were trying to run in the black they'd never spend on this kind of stuff, and if they spent more money on player compensation they'd just spend less on things like this. Maybe coaches' salaries would stop increasing at the rate they have been. They'd make choices that accommodated that additional expenditure.

And yes, an $80 million facility impacts the budget plenty. It's not just the bowling alley and mini golf. Most buildings on campus don't look this nice. There was a ton of money spent on this facility and if the budget was as unhealthy as you make it out they absolutely could have done without it.

I believe that the buildings and amenities in the new buildings are all separate specific donation campaigns and not part of the sports revenue earned. I do not believe they fit in the "make more, spend more" aspect. I was hoping to see what else out there was in the main budget and discretionary and looked unnecessary.

 

[lstewart53x3]

TL;DR The bowling alley is a huge waste. Did the rest impact budget significantly?

The bowling alley seems like a really poor decision. Even 2 lanes, are a major cost to maintain. The pin racking machines are also a major injury hazard to the untrained. There should always be a trained person available to unjam pins etc.

The rest of the luxury items seem to mostly be space and acquisition costs vs maintenance costs. If the donors bought them they probably did not impact the budget. The mini-golf course, while looking pathetic, is on otherwise unused rooftop space.

Seeing these amenities, it looks like the goal is to keep the athletes with the athletes vs. on campus with the other students. My initial reaction is that I do not like the isolation. If they are students, they should interact with non-athlete students. If we are going to paid athletes who really don't qualify as students anyhow, the separation is probably a good idea.

Robert has the best explanation of this that I have seen. I’ll paste in a snippet from a paid article and I recommend getting a subscription because every article is Illini gold:

I'm going to generalize here, but that's the thing that always gets missed in this debate. Everyone has always talked about how these schools are "getting rich" off college athletics, but that's not exactly the case. There's no money going into a bank account somewhere. There's not a check written from Alabama football to the university endowment or anything. There are no profits year to year. What comes in must be spent.

You'll see some SEC offensive coordinator making $1.8 million and think that it's ridiculous but it's just a way to spend all the money that's coming in. Your goal has to be zeroing everything out, and you're swimming in cash, so you have meetings where you say "well, we could start paying football assistants crazy amounts like $700,000 to be the inside linebackers coach and then we could build a new women's tennis facility that's wholly separate from the men's tennis facility - would that get rid of all the money?" And when you're told there was still more money, you'd say "what if we added a deputy athletic director for every single sport?" And at some point, you'd spend all the money and you could report that money coming in was $219 million and money going out was $219 million.

(Obviously there are reserves from year to year and it isn't exactly zeroed out each year. That happens across multiple years. But you understand what I'm saying. There's no "hey everyone, we had a great year so here's $1.7 million end-of-the-year bonus checks for all of our employees" system in place here where the athletes earn money and then the administrators split up the proceeds. They get healthy raises, don't get me wrong, but... you know what I'm saying.)

This settlement says "stop adding AD positions and stop upgrading facilities - give 22% of it to the student athletes themselves." The adjustments that the Ohio States and Alabamas have to make are basically "I guess we can't have 45 associate athletic directors anymore." The adjustment that Wake Forest has to make is "how are we supposed to afford $22 million going to our athletes?" And the adjustment that Ball State has to make – all Group Of Five schools have the option to opt-in to this kind of revenue sharing if they so desire – is "you're telling me that these other schools have TWENTY TWO MILLION DOLLARS laying around?"

Again, this is just a small snippet from a much longer article with more context, but because it’s paid, I don’t want to paste in the full thing.

Here’s the link though if you’d like to check it out:

One Question Mailbag: The House vs. NCAA Settlement

A "One Question Mailbag" post is really just "I started to respond to someone on Twitter and then I realized it was way too long for a social media response so I just decided to write an article on the topic." It can even be a rhetorical question (like this

www.illiniboard.com

 

[grue2]

Robert has the best explanation of this that I have seen. I’ll paste in a snippet from a paid article and I recommend getting a subscription because every article is Illini gold:



Again, this is just a small snippet from a much longer article with more context, but because it’s paid, I don’t want to paste in the full thing.

Here’s the link though if you’d like to check it out:

One Question Mailbag: The House vs. NCAA Settlement

A "One Question Mailbag" post is really just "I started to respond to someone on Twitter and then I realized it was way too long for a social media response so I just decided to write an article on the topic." It can even be a rhetorical question (like this

www.illiniboard.com

I appreciate the effort. I'll admit I'm not going to sign up. (I've never signed up for any sports service. I'm unlikely to ever do so.)

When I looked at the UIUC financial reports from '23(?) I spent 45-60m reading them. I didn't catch any spending to spend. It looked pretty grim overall. I did not see significant facility upgrade costs. I thought that was all donor based. The stadium retrofit etc was there as a major interest expense. The forms did not contain a full employee roster, so maybe there is a lot of chaff there. I don't think it could be 10M+; I don't remember the total non-coaching staff salary numbers being very high. The assistant coach salaries did seem pretty high.**

I don't think the average school, even in the BIG is looking to spend to zero out. I suspect UIUC is closer to Wake Forest than Alabama/OSU financially, and that is a large part of my argument. Most schools don't have the money. There are a few outliers with big surpluses -- Texas in particular. They are the outliers.

** I remember researching/writing a note in this forum on typical BB coach and assistant coach salaries a few years ago.

 

[sbillini]

Robert has the best explanation of this that I have seen. I’ll paste in a snippet from a paid article and I recommend getting a subscription because every article is Illini gold:



Again, this is just a small snippet from a much longer article with more context, but because it’s paid, I don’t want to paste in the full thing.

Here’s the link though if you’d like to check it out:

One Question Mailbag: The House vs. NCAA Settlement

A "One Question Mailbag" post is really just "I started to respond to someone on Twitter and then I realized it was way too long for a social media response so I just decided to write an article on the topic." It can even be a rhetorical question (like this

www.illiniboard.com

in my experience, robert is exactly right. in the high dollar, non-profit world, showing a "profit" (outside of some cushion money) is the last thing you want to do. I analyze businesses for a living and some of them are non-profit. An example is a blue cross blue shield insurer (i know, everyone hates health insurers, but that's not the point here). most of them are non-profit. But when you look at their executive compensation and spending, they're very much acting like for-profits. One of them (i won't say which one, but it's a relatively smaller one), owns 4 private jets...for a regional insurer that only covers part of a state. Point being, when there's a ton of money sloshing around, you don't want to show a "profit" because somebody (regulators, governments, or, in college sports' case, the university, is going to come after it).

So that then has a follow-on effect - what do you do with that money. Well, some of that is just keeping up competitively. UIUC's football center may have bowling alleys or mini golf. But the ROI to that isn't measured in "is this a good or bad use of money". It's measured in "well, ohio state, michigan, LSU, Alabama, Kentucky etc etc are upping their sports facility game (beacuse they have the money to do it since they don't want to show a "profit") we need to do it as well to keep up with recruiting. It's as simple as that. Now with 20% going to the athletes, that might change, but I find it interesting that they even have a 20% cap. Who came up with that cap? why is it the right cap? why have a cap at all? I'm sure there were some back room machinations that came up with that number, so the AD's and coaches don't have to sacrifice.

with all that rambling done, going back to my original point, i'm more in support of a certain percentage going to the university, since the university affiliation is where most of the value lies. Top tier MBA grad school programs usually feed money into the endowment, not sure why sports is different.

 

[the juiceman cometh]

I believe that the buildings and amenities in the new buildings are all separate specific donation campaigns and not part of the sports revenue earned. I do not believe they fit in the "make more, spend more" aspect. I was hoping to see what else out there was in the main budget and discretionary and looked unnecessary.

When it comes to how athletic departments take in and spend money, you can't really separate donations from revenue in any meaningful way. Athletic departments are going to work to get as much in donations as they can regardless of whether they need it for new facilities, player acquisition, or coaching salary. And are we really to believe that same donors that are like "Yes, take my money for a state of the art $80 million facility!" would have in an alternate scenario been like "What, $5 million to renovate existing facilities and a $20 million player salary budget to field a competitive football team? Are you crazy, I would never donate to that!" Of course not. Donors want the teams to succeed, if their donations go towards player salary, and the football facilities were just "very good" instead of "top notch" I'm sure they'd be fine with that.

 

[grue2]

When it comes to how athletic departments take in and spend money, you can't really separate donations from revenue in any meaningful way. Athletic departments are going to work to get as much in donations as they can regardless of whether they need it for new facilities, player acquisition, or coaching salary. And are we really to believe that same donors that are like "Yes, take my money for a state of the art $80 million facility!" would have in an alternate scenario been like "What, $5 million to renovate existing facilities and a $20 million player salary budget to field a competitive football team? Are you crazy, I would never donate to that!" Of course not. Donors want the teams to succeed, if their donations go towards player salary, and the football facilities were just "very good" instead of "top notch" I'm sure they'd be fine with that.

I thought donors had tired of the "just give us more", and so UIUC was say "give us money for <new X center>." If so, then it may be possible to mostly separate things out.