Pollard, former CFO of the University of Wisconsin athletic department, concedes that the spending race is “staggering” and “never ending.” But he doesn’t blame big schools for spending what they do. “To each his own,” he says. “It’s a competitive business.” Pollard’s view is that the race will continue as long as fans are willing to support it: “Until consumers stop investing in it, the market drives it.”
Indeed, fans seem to have an insatiable appetite for college-sports tickets, television broadcasts, and apparel. The biggest schools seemingly can grow revenues at will — and in recent years have been less shy about doing so, pushing further into the realm of blatant commercialization.
Rather than rebuke colleges for any excesses, the NCAA — in more of an admission of reality than a change in policy — gave college athletics its blessing for running up the score on revenues. “Let us end the ambivalence and do the best job we can developing revenue for our athletics departments,” NCAA president Myles Brand told athletic directors at a convention in January. “Athletics, like the university as a whole, seeks to maximize revenues. In this respect, it has an obligation to conduct its revenue-generating activities in a productive, sound, and businesslike manner.” It was a sharp departure from Brand’s earlier warnings for athletic departments to tone down the commercialization.
“There’s no doubt that the brakes are off on efforts to increase revenues,” says Stephen A. Greyser, a marketing professor at Harvard Business School who studies the business of sports.
While Henderson says Ohio State keeps tight controls on costs, the school is focused on developing additional sources of revenue. That goal is shared by universities around the country, and it’s not just premium stadium seating they are pursuing. A common trend among athletic departments is to outsource the sales of broadcasting rights and sponsorships to professional sports-marketing companies. Last year, for example, Boston College handed over sponsorship sales to Fenway Sports Group, the marketing arm of the Boston Red Sox. T.J. Nelligan, who runs Nelligan Sports Marketing, says such agreements can increase broadcasting and sponsorship revenue exponentially. The University of Louisville, for example, credits its outsourcing deal with Nelligan for increasing its broadcasting and sponsorship revenue from $700,000 in 1996 to $7 million last year.
Borrowing another page from the professional-sports playbook, universities are also beginning to sell naming rights on their stadiums. Louisville is reportedly seeking $40 million for the naming rights to a new arena it is building on campus. (Such a deal would dwarf the $5 million Louisville received to name its football stadium, which opened in 1998, after a pizza chain: Papa John’s Cardinal Stadium.) The University of Minnesota already sold the naming rights to its new football stadium, expected to be completed in 2009, to TCF Bank for $35 million. Elizabeth Eull, associate athletic director for administration and finance and CFO of the athletic department, says some on campus squawked over the deal, which will help fund the $248 million project. “There was some discontent, but it’s a situations where you say, ‘This isn’t going to get done without [selling the naming rights],’” she says.