New look, old problems

 

It was Nov. 28, 2012.

Earlier that week, the Big East Conference admitted Tulane and East Carolina as members to counter the departures of Louisville and Rutgers, which are headed to the Atlantic Coast Conference and Big Ten Conference, respectively.

In an interview on WPHT during halftime of the men’s basketball game that night, Athletic Director Bill Bradshaw tried explaining why Temple was still in a good place, despite the fact that most of the prestigious athletic programs in the Big East had announced their intention to leave.

Ignoring concerns from fans about a drop in Big East competitiveness, Bradshaw said to think of the money instead.

“If anyone’s confused and frustrated, just know one thing – it’s the color green,” Bradshaw said. “Think of the color green, and that answers all of your questions.”

Bradshaw has gone on to say Temple’s move to the Big East – since renamed the American Athletic Conference – is a step up because Temple will have most of its sports competing in a conference with schools that are on an even playing field.

“The level of competition that we’re playing in a league with like institutions, with similar enrollments and commitment to athletics, missions of the university, all of those things in the league we’re in now are similar,” Bradshaw told The Temple News in January.

However, through a comprehensive analysis of athletic budgets, it’s clear Temple doesn’t have a similar financial investment in athletics with almost all of the universities set to compete in The American in the next couple of years. Even though Bradshaw cited revenue as a gain, the amount of money the university will receive from the new conference in the future will not approach what the Big East used to bring in, nor is it clear that revenue will increase steadily as schools continue to come and go.

According to records, Temple’s operating expenses per sport were less than every university set to join The American by 2015 – except Tulsa and Tulane – during the 2011-12 reporting year. Per sport, Temple spent more than $100,000 less than East Carolina and less than half of what Connecticut and Rutgers spent.

Out of 13 schools, Temple spent the eighth-highest amount on football, men’s basketball and women’s basketball combined. When only considering non-revenue athletics, Temple ranks last by about $12,000 per sport.

According to USA Today’s college athletics finances report on its website, only seven athletic departments out of 121 Division I schools turned a profit last year. Like the large majority of universities in the country, Temple was forced to subsidize its athletic program in 2012.

While it’s certain that Temple’s conference move has made for a step up in revenue, it’s less clear whether or not that increase in revenue will remain stable in the unstable world of collegiate sports, and just how well the athletic department, with its slim budget, can stem the tide of rising costs.

A HISTORY OF FAILURE

To understand the prospects of Temple’s revenue-driven future, it’s important to first understand its money-losing past.

From 1991-2004, Temple competed in the Big East for football only and had a historically unsuccessful program. The Owls finished last in the conference in seven out of 14 seasons and never won more than three conference games in a year.

Temple’s budget, facilities and attendance numbers became so unacceptable to the Big East that in 2001, the Owls’ failures led to a conference formally voting out one of its members for the only time on record in the history of intercollegiate athletics.

Temple negotiated a three-year stay before officially leaving in 2004. At the time, the university strongly considered dropping the football program altogether. One of the main reasons it stayed in operation was the prospect of a football-only agreement with the Mid-American Conference, which could have brought in the type of revenue the athletic department could greatly benefit from.

But Temple’s decision to begin competing in the MAC in 2007 was a lifeboat deal, and it came with a costly price.

For the entire time that the Owls competed in the MAC, Temple paid the conference a membership fee. University officials wouldn’t specify the amount, but said it was significant enough that Temple didn’t gain any profit from bowl revenue shared among the member schools.

University officials also wouldn’t discuss the terms of the MAC’s media rights negotiation while the Owls were members but said the revenue was inconsequential.

Revenue was so low in the MAC that in the two years that the Owls competed in MAC bowl games, the university lost several hundred thousand dollars just in the expenses that were needed to cover participating in those events.

“We lost money playing football in the Mid-American Conference,” Harry Metzinger, an assistant athletic director and the chief financial officer of the athletics department, said.

In basketball, the Owls have a tradition of winning in the Atlantic 10 Conference but not necessarily of making money. For the past 20 years, whatever success the men’s basketball team has had in generating revenue has been offset by the failures of the football team.

Metzinger described the past five years as a situation where Temple lost money every year in football as a result of membership fees and low bowl revenue. With revenue earned from A-10 tournament units, things evened out, but no significant revenue was gained.

PROMISES AND COSTS

All of the athletic department’s problems seemed to be solved with the March 2012 announcement that Temple would be making an all-sports move back into the Big East. Equipped with a premier media rights deal, an automatic qualifying bid to a BCS bowl game and the country’s best men’s basketball league, the Big East would finally provide for Temple the revenue it needed to bolster its fledgling budget.

But since that announcement, the conference has renegotiated its deal with ESPN, lost its spot as an automatic qualifier and almost all of the basketball schools have left. On April 3, it was announced that the conference would be renamed the American Athletic Conference after the Catholic 7 schools – DePaul, Georgetown, Marquette, Providence, Seton Hall, St. John’s and Villanova – left to make their own conference and took the Big East name with them.

In February, The American agreed to terms with ESPN on a seven-year media rights deal reportedly worth $126 million. Starting in 2014, The American members would reportedly share $20 million annually for rights to their football and basketball games. That would break down evenly into $1.82 million per school annually.

The deal was substantially less than the $1.17 billion proposal that was reportedly offered to the Big East in 2011. That deal could have distributed $13 million to each of the 10 members of The American this year. However, as a show of where the conference was two years ago versus where it is now, the Big East presidents voted down the billion-dollar deal.

It’s unclear how much revenue the football team will draw from Big East media rights this year before the new deal goes into effect in 2014. The current Big East deal reportedly splits $13 million annually between the conference’s eight football members. That would leave Temple with a $1.63 million share if distributed evenly, but Metzinger said the number will be significantly higher.

In an interview last week, Bradshaw said The American presidents are still working out how to redistribute money from exit fees, bowl game revenue and NCAA tournament units from departing schools to new members.

“There’s going to be a combination of these revenues that’s going to lead to the share that we get, which no one could tell you,” Bradshaw said. “Or everybody could. We can have some estimates and plan ahead, but we’re going to be in the best place we’ve ever been in terms of conference affiliation and our net and our revenues.”

However, in 2014, the outlook for revenue is more bleak.

The new media rights deal will kick in, which is reportedly less valuable for football and will have to be shared among more teams. The same year, the new bowl postseason format will be put into place, in which The American will not have a spot as an automatic qualifier for one of the six BCS bowls.

Also, the departure of Louisville to the ACC before the 2014 football season cannot be overlooked. This year, the Cardinals won the Orange Bowl and the NCAA men’s basketball championship, and their women’s basketball program was the national runner up.

Bradshaw dismissed the notion that The American would be losing its most significant moneymaking program when Louisville leaves.

“That’s a heck of a year, but this is just all talk over a beer,” Bradshaw said. “Maybe Larry Brown’s basketball team with the fifth-best recruiting class will win the national championship. This is all conjecture.”

The good news for Temple is that the NCAA tournament units – which distribute money based on the number of games a conference has in the NCAA tournament – are shared out during a six-year rolling period. That means Temple will get a share of the units from the national championship runs of UConn in 2011 and Louisville in 2013 in addition to the other Big East units from the past six years.

In the 2013 NCAA tournament, eight Big East teams combined to earn 19 units at a rate of $245,500 per unit, which will be shared with Temple during the next six years. However, seven of those teams will have left the conference by 2014.

THE NEW CONFERENCE

Tulane has beach volleyball and Division I bowling, but it doesn’t have a men’s or women’s soccer program.

Southern Methodist University doesn’t compete in baseball or softball, but spends almost $70,000 per year to operate its equestrian team. Tulsa – with an enrollment of less than 3,000 – spends four times the amount Temple does on its tennis programs.

Temple’s athletic department has taken the stance that the move to the American Athletic Conference is a positive one because it unifies most of Temple’s sports in a conference of universities with similar scope and commitment to athletics. However, records show that Temple is actually unlike most of the schools set to join The American by 2015 in terms of enrollments, the size of the schools’ athletic budgets and the number and types of sports sponsored.

Temple ranks below the average of schools that will compete in The American before 2015 in terms of total expenses, revenue and operating expenses. Per sport, only Tulane and Tulsa spend less in operating expenses out of 13 schools.

Temple spent the eighth-highest amount in operating expenses – which don’t include coaches’ compensation – on football, men’s basketball and women’s basketball combined during the 2011-12 reporting year. When only considering non-revenue sports, per sport, Temple ranks last by about $12,000.

The schools that spent less than Temple on athletics overall, like Central Florida and Houston, do not sponsor as high a number of sports as Temple does. However, both of those schools spent more per sport than Temple.

While operating expenses aren’t everything, Temple’s relatively small athletic budget raises questions about whether or not the university’s athletic programs can be competitive in a new conference where other schools are able to be more generous in financial support for their sports teams.

Temple ranks below the average of The American schools in operating expenses in all of the university’s sports except football. In most cases, it’s well below the average. In baseball, men’s soccer, women’s soccer, tennis and volleyball, Temple ranks last.

Temple spent $62,510 combined on its men’s and women’s tennis programs during the 2011-12 year, which ranks last by far among The American schools with a men’s and women’s team. Most schools spent more on just one of their tennis teams than Temple did on both of its combined.

The makeup of the universities in The American that have the ability to spend more on athletics than Temple varies from public schools with huge enrollments, like Central Florida, to private schools with huge budgets, like SMU.

Temple’s undergraduate enrollment of 24,428 ranks third highest in The American. The private schools – Tulsa, Tulane and SMU – all have enrollments of less than 6,000. The average school in The American would have an enrollment of 17,295 and an athletics budget of $43.7 million.

In terms of scope, the school in The American that can best be compared to Temple is Rutgers. Like Temple, Rutgers has 20 Division I sports – with track & field and cross-country combined – and a similar enrollment. However, the Scarlet Knights had more than $57 million in total expenses in the 2011-12 reporting year, about $20 million more than Temple.

Despite spending relatively little on operating its sports teams, Temple still required a substantial subsidy from the university to balance its books for the 2012 fiscal year. The university spent $5.5 million in operating expenses, but also had to pay coaches $4.7 million and an additional $9.4 million in student aid.

Coaching salaries in particular have become an increasingly costly expense for athletic departments. At Temple, the most recent data on the school’s website is from the fiscal year 2010-11, but shows that Al Golden was the highest-paid employee at the university when he was the head football coach. University officials declined to discuss the specifics of coach Matt Rhule’s contract.

Harry Metzinger, an assistant athletic director and the chief financial officer of the athletics department, said coaching salaries are market driven, and that is unlikely to change anytime soon.

As costs continue to rise, so must Temple’s ability to generate revenue to alleviate the university’s responsibility to subsidize its athletic department. Metzinger admitted that things need to get better.

“We certainly need to improve,” Metzinger said. “Even just looking at this year versus last year, we improved the amount of revenue versus our subsidy, and a lot of that is our conference affiliation.”

In the university’s budget for 2013, Temple anticipates an increase of athletic revenue close to $4 million and a decrease in the subsidy of $650,000. Metzinger said the expected changes are based mostly on conference distribution.

However, true to college sports, Temple also expects $3 million of new expenses this year.

With the vast majority of programs losing money – including some of the most prestigious athletic institutions in the country, like Florida, Alabama and Wisconsin – and the cost of athletics continuing to rise, it begs the question: Why do universities continue throwing a life line to a department that can’t sustain itself?

“It’s about the value to the university,” Bradshaw said. “There’s a value to it and that’s why they do it.”

Joey Cranney can be reached at joseph.cranney@temple.edu or on Twitter @joey_cranney.

 

CORRECTION: In a version of this article that appeared in print on Tuesday, April 30, Temple’s ratio of subsidy to total revenue – its percent subsidy – was incorrectly calculated. Temple’s percent subsidy is based on total revenue, not the revenue reported on the university’s budget. Temple’s 2012 year-end financials aren’t made public.