As challenges loom for college athletics because of coronavirus, question becomes: Is the party over?
The American economic boom of the last decade has gone hand-in-hand with a fundamental change in the financial reach of college athletics. Beyond the obvious growth areas like television revenue and the College Football Playoff, which helped fuel an exponential rise in coaching salaries, athletic departments became much more sophisticated at getting their fans to part with large amounts of money.
As the stock market roared and businesses thrived, schools climbed over each other to promote hotshot fundraisers into athletic director jobs, launch eight- and nine-figure facilities projects, endow coaching positions and reorient their stadiums toward amenities and premium experiences.
But the looming economic fallout from the coronavirus pandemic has raised a question that athletic departments of all sizes are scrambling to assess: Is the party over?
“One of the byproducts we’re facing is people who have lost 25 or 30% of their net value of their portfolio or their retirement funds, that’s going to have some impact on us,” said Utah State athletic director John Hartwell, who finished a $36 million project in 2016 that added 24 luxury suites and more than 700 premium seats to the Aggies’ football stadium. “You could have someone who was buying a suite and 10 club seats but may say, hey I don’t need those extra seats anymore. I think we all have to be prepared for that, but we’re trying to be as proactive as we can. We’re making sure we try to touch base with all of our donors to keep them engaged.”
Since the March 12 announcement that the NCAA men's basketball tournament had been canceled and colleges across the country were basically shutting down for the semester, the volume of questions and issues athletic directors have been dealing with is almost immeasurable.
The immediate action items like getting athletes back home and suspending off-campus recruiting took precedence. There are dozens more that remain unresolved such as how the NCAA will deal with freshman eligibility when ACT and SAT testing centers are currently shut down.
More:Giving NCAA athletes another year of eligibility for coronavirus cancellations is costly
But at the moment, the medium- and long-term thinking of many athletic directors is focused on two overlapping tracks: Is a normal, 12-game football season going to start on time, and how does the potential for a deep recession change an industry that has relied on individual donors and local and regional businesses to buy season tickets and donate money for the locker room waterfalls and sleeping pods that have fueled an arms race in college athletics?
The first part of that equation contains too many unknowns to reasonably untangle. As one administrator at a high-revenue-generating program acknowledged, internal budget modeling has started to take place about a “very different fall,” which could mean anything from a shortened season with loss of home game revenue to a delayed season to games played without fans. The administrator spoke on the condition of anonymity because they weren’t authorized to speak on behalf of the athletic department.
All kinds of models for an altered season have been drafted by athletic departments that illustrate how important it is from a revenue standpoint the football season is played in one form or another.
Another administrator mentioned potential layoffs or significant cuts if loss of football revenue reached 15% or 20% of the budget.
"We're working budgets that have us staying flat or (experiencing) a 10% reduction, a 20% reduction because we just don't know," said Arkansas athletic director Hunter Yurachek, who said ticket sales in football, basketball and baseball make between $40 million and $45 million of a $125 million budget.
But what the season eventually looks like is largely out of their hands at the athletic department level and instead will be driven by how well the COVID-19 spread is contained, how comfortable college presidents are with opening up their campuses and how conference offices and the College Football Playoff coordinate potential structural changes to the season.
Assuming football is played this fall, television revenue gives college sports something of a backstop. The power conferences this year will distribute to their members anywhere from $33 million on the low end (Pac-12) to $54 million (Big Ten) at the apex, and television demand for college football is likely to be sky high after a spring and potentially a summer without live sports.
But whether fans will be immediately comfortable crowding back into 70,000-seat stadiums – and whether their financial situations will allow them to buy tickets – is another matter altogether. Making the calculation even more complicated is that the time to collect money for those season ticket packages is typically right now, when the amount of economic uncertainty for millions of people has rarely been higher.
In recent days, schools have rolled out a variety of plans to delay or spread out payments for tickets. Just Tuesday, Baylor extended its season ticket renewal period to April 15, and Arkansas moved the deadline for Razorback Foundation pledges by a week to April 6.
Yurachek said Arkansas' renewal rate had already reached 84% of a 90% goal and that officials were hoping the extra time would help the last group trickle in after many fans spent the last two weeks worrying more about family issues or transitioning to work at home.
Several athletic directors said they expect to lose some ticket holders but, like Arkansas, the year-over-year tracking numbers haven’t collapsed yet.
“We moved our due date from April 15 to May 15 and we’ve allowed fans to extend their payoffs so they don’t have to do it all at once, and we’re trying to do some of those things now just to give folks flexibility,” Kansas State athletic director Gene Taylor said. “People are still buying season tickets. I think we sold 1,000 in renewals and new purchases last week, and this week it was more like 500. But it’s possible someone who is on the edge of being able to afford a season ticket might take a break and become a single-game buyer. We haven’t sat down and fiscally planned this out, but we could end up projecting a 5% or 10% reduction even if we’re coming back to normal.”
At the same time, though, Taylor acknowledged that fundraising for a $105 million capital campaign project announced last September, including stadium upgrades and premium seating, a new volleyball arena and an Olympic sports training center, would slow if there’s a major recession. Kansas State already had $76 million committed to the project but won’t be soliciting those gifts until the economic picture becomes more clear. Instead, Taylor said, the focus will be on maintaining individual contact with donors, asking them to “hang in there with us.”
Wren Baker, athletic director at North Texas, said he’s also directed his staff to “double down” on contacts with donors, including handwritten thank-you notes and personal phone calls from coaches.
However, Baker acknowledged that a long-planned fundraising project to expand the school’s athletic center was on hold indefinitely.
“I can get to a place where I think it’s still important to us (to fund-raise for) student-athlete scholarships, especially if we don’t have revenues coming in,” Baker said. “But making an appeal for brick-and-mortar in this environment doesn’t seem like the appropriate thing to do when you know millions of people have lost their jobs since this all started. There are more worthwhile causes than building a building. When this is over and the economy starts to come back, there’s a time and place to pick that up. But I don’t think I could even look at someone with a straight face and ask them to help us build a building today.”
In a sense, college athletics is no different other sports and entertainment businesses, all of which will face various levels of uncertainty in the post-coronavirus pandemic world. But what made college athletics different, particularly in the last several years, is how much of its growth was fueled by philanthropy and invested in luxuries that were primarily designed to appeal to recruits.
But from the very top of the sport to the bottom, the availability of those revenue streams are being challenged in ways that even administrators who went through the 2008 financial crisis are unsure how to assess.
“Even back then, you knew there was an endgame,” Hartwell said. “History told you the market is going to turn back up, stay the course. But this encompasses people’s financial health, their physical health and, in some cases, mortality. It’s a whole different ballgame. There’s just so much uncertainty still out there that we can’t quantify. We can all guess, but until the health risks have subsided we can't really come up with scenarios that have meat to them. And in the meantime we control what we can control.”
