How the Southeastern Conference got rich
Birmingham News February 24, 2008
When it comes to money, revenue or profits, conference second to none
By
Jon Solomon and Mike Perrin
Birmingham News staff writers
Roy Kramer remembers when taking home $200,000 from the Southeastern Conference in the late 1970s was a boon for his school.
"Man, I thought that was great," said Kramer, then Vanderbilt's athletics director. "Today, schools would think it's pocket change."
SEC schools received on average $10.2 million from the conference office in 2007. And that's nothing compared to the revenue schools produce for themselves, mainly through ticket sales and booster donations.
Per athlete, no conference spends more money, accumulates more revenue or has a higher net profit than the SEC, according to an analysis by The Birmingham News of institutional data filed to the U.S. Department of Education for 2006-07. The numbers reflect that in this, the 75th anniversary of the SEC, the conference is not only about championships and tradition. It is also about money -- lots of it.
While intercollegiate athletics is thought of as an enhancement to student life, it is also a big business, and there the SEC shines. In the past decade, it has doubled its payouts to member schools, reaching a record $122 million in 2007.
The result is more money spent on teams to win, but a higher price tag for fans to pay through tickets, donation requests and apparel.
It is no accident the increasing wealth of the SEC coincides with football's growth in popularity. Football revenue at schools in the SEC and the Big Ten, the two most lucrative conferences, accounts for 57 percent and 49 percent of their income, respectively.
In 2006-07, five of the top nine football-revenue schools came from the SEC: Georgia ($59.5 million), Florida ($58.9 million), Auburn ($56.8 million), Alabama ($53.2 million) and LSU ($48.1 million).
Through television contracts, marketing and bowl games, the SEC has become a financial giant along with the Big Ten, whose schools averaged $70.4 million in revenue in 2006-07, slightly more than the SEC's $66.8 million.
David Ridpath, who defends academic integrity as executive director of The Drake Group, said major conferences are simply fulfilling their calling to make money for their members.
"Conferences don't exist for academic reasons," said Ridpath, a former Mississippi State faculty member. "They exist for monetary reasons and TV exposure."
Kramer said the SEC had contracts with four bowl games prior to the BCS. Today, the conference has eight guaranteed bowl spots and, because of a lucrative at-large spot with the BCS, often has a chance for nine.
Bowl games accounted for $23 million of revenue for the SEC office in 2005-06, trailing only football TV and postseason basketball games as the highest sources of revenue.
Cedric Dempsey, the executive director of the NCAA from 1994 to 2002, said he supports TV contracts for individual conferences and schools, but is "disturbed" by how they changed the bowl system.
"I think the bowl system needs tremendous overhauling," Dempsey said. "We've moved away from what the initial purpose of the bowl system was - a celebration of success. Going 6-6, to me, is not really highly successful."
Dempsey said that at least half of the 32 bowls are not moneymakers and believes a playoff is possible if the six conferences with automatic BCS bids were not so reluctant about sharing funds with other leagues whose teams make the playoff.
Kramer said he does not envision the bowl landscape changing any time soon.
"Those are the conferences that have the dominant stadiums," Kramer said of the BCS-affiliated conferences. "When you get down to it, that's where the (fan) interest is. That's where the market is for television."
Marketing
The SEC was not always a financial juggernaut. Former SEC Commissioner Harvey Schiller said there were no conference sponsorships before he took over in 1986.
"Some of the schools, like Tennessee, were not making any money on their radio broadcasts," Schiller said. By the time Schiller left, the SEC was on the verge of expanding to 12 schools by adding Arkansas and South Carolina. The league added a football championship game - it produced $13.2 million in revenue in 2006 - and new geographic areas joined the SEC.
"Arkansas got the SEC some of the Texas market, which was really significant," Schiller said.
Bill Battle, a former Alabama football player under Bear Bryant and chairman of The Collegiate Licensing Company, said universities were slow to realize the amount of money they could make from athletic licensing.
In the mid-1980s, Battle said, universities were ecstatic when they generated $100,000 a year from athletic licensing. Back then, a Georgia fan who wanted a Bulldogs T-shirt had to drive to the bookstore in Athens.
Today, it's easy to go to a local Wal-Mart and find college apparel. CLC, which represents all SEC schools except Mississippi State, estimates the SEC was responsible for $600 million in retail sales of officially licensed products in fiscal year 2007. That ranks No. 1 among CLC's leagues.
Although professional sports now compete with colleges in the South, Battle said the SEC years ago wisely targeted a core group of fans that support universities.
"The college market has an advantage," Battle said. "Once every four years, if not every year, there is a turnover as college graduates move into the marketplace. Every year a new crop of (high school) seniors enters college and that's a totally new market."
As the financial landscape has changed, so too has the job description of SEC athletics directors. Businessmen are a priority over ex-head football coaches, who once were automatically anointed as athletics directors. A new breed of athletics directors is exemplified at Georgia, where 37-year-old Damon Evans says his business background is important to manage a $78 million athletic budget and cut deals.
"I do believe the face of the athletics director and type of person is evolving and changing," said Evans, who once considered working on Wall Street.
"That's not to say individuals from a different era -- what I call the veterans -- don't have a recipe for success."
'Poorly run business'
In an analysis by The News, the SEC last fiscal year averaged $135,846 in expenses per athlete and $148,352 in revenue per athlete, for a net profit per athlete of $12,506. The SEC's net was 40 percent higher than the Big Ten, the next-closest conference.
Seven SEC schools were among the top 10 nationally in revenue per athlete, six were in the top 10 in expenses per athlete, and four were in the top 10 in net per athlete. Only Texas generated more revenue per athlete than Tennessee, Florida, LSU, Auburn, Alabama and Arkansas.
This comes at a time when the NCAA is focused on keeping the growth rate of athletic spending from exceeding the rate of higher education spending in general. Studies show athletic expenses are growing at a faster rate than athletic revenues and many athletics departments are being subsidized by universities.
For the 2006 fiscal year, 19 institutions in Division I-A football reported a profit from athletics, with an average of $4.3 million, according to Dan Fulks, an accounting professor at Transylvania University who analyzes athletic finances for the NCAA. Those 19 included many SEC schools, he said. The 99 other schools lost an average of $8.9 million.
In Division I, much of the increased expenditures are the result of large investments in facilities.
"The schools that are making money now are making more money, and the schools losing money are losing more money," Fulks said. "The gaps between the financial haves and have-nots are getting wider. It's only natural that sooner or later, you're going to hit a ceiling with revenues. You can only get so much money out of ticket sales before fans will rebel."
Lately, the haves are coming from the same circle of schools. Of the top 15 revenue-producing athletics departments in 2006-07, six are in the Big Ten, six are in the SEC, and the three others are Texas, Notre Dame and Southern California. That pool produced nine of the past 12 participants in football's national championship game.
Ridpath, the executive director of The Drake Group and an assistant professor of sport administration at Ohio University, said college athletics has become a "poorly run business.
"They don't manage the business. It's all build, build, build, more, more, more," Ridpath said. "It's not going to hurt anybody like Alabama or Auburn, but it does hurt a place like Ohio University. In theory, they are at the same level, but we're playing a game we can't win."
Three decades after he collected checks at Vanderbilt, Kramer admits he couldn't have foreseen the SEC's wallet looking quite like this.
"You have to be a little amazed at it all," he said.
jsolomon@bhamnews.com
