Each chapter takes apart a common misconception, showing how the assumptions behind it fail to add up. Fort and Winfree reveal how these myths perpetuate themselves and, ultimately, how they serve a handful of powerful partiessuch as franchise owners, reporters, and playersat the expense of the larger community of sports fans. From the idea that team owners and managers are inept to the notion that revenue-generating college sports pay for athletics that don't attract fans (and their cash), 15 Sports Myths and Why They're Wrong strips down pervasive accounts of how our favorite games function, allowing us to look at them in a new, more informed way.
Fort and Winfree argue that substituting the intuitive appeal of emotionally charged myths with rigorous, informed explanations weakens the power of these tall tales and their tight hold on the sports we love. Readers will emerge with a clearer picture of the forces at work within the sports world and a better understanding of why these myths matterand are worthy of a takedown.
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About the Author
Jason Winfree is Assistant Professor of Agricultural Economics at the University of Idaho. He is co-author of Sports Finance and Management.
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15 SPORTS MYTHS AND WHY THEY'RE WRONG
By RODNEY FORT, JASON WINFREE
Stanford University PressCopyright © 2013 Board of Trustees of the Leland Stanford Junior University
All rights reserved.
REVENUE SPORTS PAY FOR NONREVENUE SPORTS
It is an old adage that without the top men's revenue programs—football and basketball—there would be no athletic department. The idea is that the athletic director (AD) spends any excess of revenues over costs in these sports on all of the other programs. Ipso facto, as football and men's basketball revenue goes, so goes the economic fate of the athletic department. In some cases, the courts have determined that the original implementation of Title IX (enacted in 1972) acted to exclude football from the equation on just these grounds (e.g., Blair v. Washington State University, Washington State Supreme Court, 1987). Indeed, as far back as 1974, Texas senator John Tower proposed an amendment that would exempt "revenue generating" sports from Title IX; nobody was fooled that "revenue generating" meant anything besides football and men's basketball. In 1995 the College Football Association (the major conferences minus the Big Ten and Pac 10) argued for the exclusion of football from Title IX in part because it funded other sports. The myth is being used at this writing to bolster the argument against the death penalty for Penn State football—it funds all of the other sports (Scranton Times-Tribune.com, 2012).
In this chapter we first document the number of athletic departments in which revenues from football and men's basketball exceed the costs of running just those two sports. Then, for those departments for which the rest of the sports have operating deficits (indeed, many do not!), we show the number of athletic departments that can cover that deficit with their football and men's basketball operating surplus. Finally, we examine the extent to which any surpluses also cover the remaining costs of running the athletic department.
We need to be clear immediately on an important element in our calculations. The data available on college sports revenues and expenses (we cover the source in detail in a subsequent section) are not submitted according to any rigorously monitored accounting protocols. This does not mean that the data in any way misrepresent revenues and expenses, but they do pose interpretative problems. One of the issues is that the revenue reports are divided into two categories. "Generated" revenues can be attributed to the usual sources—attendance and attendance related revenue for each of the sports, TV contracts by sport, and contributions that are earmarked by sport. "Nonallocated" revenues are not tied directly to any particular sport—direct institutional support, student fees, and general giving. The problem clearly is that some ADs take a portion of nonallocated revenues and allocate them in the data reports while others do not.
And therein lies the interpretative problem. Suppose those ADs that allocated some of their nonallocated revenues to football and men's basketball in their reports had not done so. Then we would identify fewer programs in our first step that would have any surplus from these two sports to cover the rest of the sports, let alone any of the other athletic department spending. We take some comfort in our results, since this means that we are overstating the ability of football and men's basketball to provide spillover value to the rest of the department. At the same time, however, we wish there were a consistent accounting protocol, consistently audited, that did not have this problem in the first place.
Here is what is true in the most recent data available (2010–11). About 85 percent of Football Bowl Subdivision (FBS, previously I-A) athletic departments were able to cover any excess of spending over revenue in the rest of men's sports and women's sports with football and men's basketball net operating revenues. The result drops precipitately to about 34 percent for the Football Championship Subdivision (FCS, previously I-AA). Since the myth is that they all do so, myth dispelled. But stopping here lets the myth off the hook too easily because these results are about only allocated revenue and cost by sport. There are other expenses that are not allocated to any one sport, including salaries, recruiting, event management, and annual facilities costs. All are required to make play happen at its current level for any program. Adding these in, the myth is busted squarely and truly. Only 6 of 118 reporting FBS programs earned enough from football and men's basketball to cover their entire athletic department budget. In order of smallest to largest surplus, they are Syracuse, Michigan State, Notre Dame, Alabama, Penn State, and Georgia. Only one FCS program out of 124 reporting earned this same bragging right—Southern University and A&M. The fact that all reporting FBS and FCS departments at least break even means that they must rely on revenues that are not allocated by sport in order to do so. (And remember that this lack of ability for football and men's basketball to cover other sports and athletic department spending is actually overstated as a result of the data reporting issue noted above.)
So, by and large, the observed facts reveal that revenue sports nearly never cover the costs of making the rest of the sports happen. This myth feeds on the intuition of the misinformed. It is quite easy to believe that football and basketball generate giant revenues and that other sports do not. Thus, if there are to be these "other" sports, the money must come from somewhere. Where else than from football and basketball? And it is especially mythical if the idea is extended to an all-encompassing policy such as Title IX.
We feel almost sheepish busting this particular myth, but we feel compelled for two reasons. First, even though others have pointed the way, they have been nearly completely ignored. Second, nobody (including the earlier pathfinders on the subject) puts substance behind the myth busting by asking a simple question. Why in the wide world of sports would anyone ever expect it to be true in the first place? The breadth and scope of the elements of the athletic department are chosen much like the individual elements of a firm's product line. Successful products are never expected to cover unsuccessful ones; the idea is that all products are expected to be successful. And so it is with sports offerings in athletic departments, but the yardstick is not net revenue. What is missed in the confusion of this myth is that different sports have different purposes for university administrators. Some men's and women's sports will generate operating revenues greater than expenses (just as the medical school might). Some will not (the majority of departments on campus, we dare say), but these sports serve other purposes than generating positive net operating revenues. Some generate other types of values for university administrators—most notably, Title IX compliance for some women's sports. We will get into more detail on the relationship between university administrators and their athletic departments in subsequent chapters. Here, it is sufficient to bring the evidence together and demonstrate the power of just a little data when it comes to busting myths.
This myth is destructive in a number of ways. First, it grants football especially, and men's basketball secondarily, special status that they deserve at literally a handful of the very top programs in the FBS, and at only one program in the FCS. Feeding on the uninformed (and misinformed by those foisting the myth), the myth deflects proper attention to be paid to all aspects of the athletic department when it comes to the implementation of public policy. Surely Title IX or the impacts of the National Collegiate Athletic Association (NCAA) death penalty, generally, cannot be judged by the size of football revenues at a school like Penn State, when nearly no other programs in all of big-time college sports look like that. Second, it confuses people interested in discovering just where it is that university support actually gets spent. Under the myth, it doesn't go to men's major revenue sports because they are generating a positive spillover to the rest of the department. Truth be known, in nearly all FCS and in a large number of FBS departments, university support also goes to football and men's basketball. If policy is to be effectively implemented, and if proper accounting of spending in the athletic department is to occur, this myth must be discarded.
This myth begins to show the pervasive way that the operation of athletic departments is done with purpose—namely, the purpose of university administrators and athletic directors. This type of myth distracts the scrutiny of critics from full attention to the actual allocation of revenue sources. Since athletic directors thrive with full control of that spending, this distraction is clearly in their interest.
A QUICK LITERATURE REVIEW
As we have said, we feel almost sheepish writing this chapter, since others have made the same point. However, by drawing all of the past works together and augmenting with our own, perhaps we will cause the myth to wither under unified scrutiny. The earliest "general consumption" notice we found came from the Women's Sport Foundation's executive director, Donna Lopiano, in a 2002 "Q&A" (Women's Sports Foundation, 2002). Under item 10, Does Title IX Enforcement Hurt Football Programs?, we find the following:
Among NCAA football programs in all competitive divisions, 81% spend more than they bring in and contribute nothing to other sport budgets. Even among Division I-A football programs, more than a third are running deficits in excess of $1 million per year.
We do not buy the "deficits" characterization, addressed explicitly in Chapter 3, but the point is clear—leftover revenue from football and men's basketball is the exception rather than the rule.
Turning to academic treatments, University of Notre Dame business professor Richard Sheehan (2000) found that a $1 "profit" increase raises spending in other men's sports by $0.10 and in women's sports by $0.20. At Penn State, with net revenues of $15.5 million, that's $3 million for women's sports. At Tulane, losing $3.3 million, that's a decrease in women's spending of $600,000.
While their aim was to study college football and Title IX, Temple University economists Michael Leeds, Yelena Suris, and Jennifer Durkin (2004) found out along the way that only a few of the most profitable football programs provide any actual subsidy at all to women's sports. Almost all other athletic departments, including some with highly profitable football programs, actually drain money from women's sports. They conclude the following:
Schools with unprofitable football programs have no surplus to provide and reduce the funds available for women's sports. A profitable football program, however, is no guarantee that women's sports will receive adequate funding. Only a few of the most profitable football programs provide a positive net subsidy to women's athletics. Almost all other schools, some of them with highly profitable football programs, actually drain funding from women's athletic programs. Indeed, some of the nation's most prestigious and successful football programs have the most harmful impact drain on women's athletics.
POUNDING THE (LAST?) NAILS IN THE COFFIN
While examples can't prove anything, if they are chosen carefully they can be enlightening. A quotation from the Book of John is well known: "Then you will know the truth, and the truth will set you free." From the secular standpoint, it helps to know where the truth comes from—data sources matter, since they are important for knowing data limitations. For college sports revenues and expenses, there is only one original source. Member institutions respond to an NCAA survey of revenues and expenses. While some surveys were collected prior, the data have been collected under the requirements of the Equity in Athletics Disclosure Act (1996, henceforth EADA) pretty much on an annual basis. In turn, the data are publicly available in four versions.
The NCAA produces and freely distributes its own revenues and expenses report from this survey, most recently from Transylvania State University accounting professor Daniel Fulks (2011). While useful, the NCAA reports provide data at a very aggregate level (representative programs such as the median and largest). Another less condensed (but condensed nonetheless) version of the same survey results goes to the U.S. Department of Education, Office of Post-Secondary Education (OPE) as one of the assessments for Title IX compliance. The OPE data, available freely at their webpage (Office of Post-Secondary Education, 2012), are available by athletic department, for all sports offered, by men's and women's sports, and also at the aggregate individual program level.
The two other versions of the NCAA survey were obtained under the Freedom of Information Act (FOIA) and compiled at two news sources. The IndyStar.com (2012) version contains all of the data that went through the NCAA but only for the 2004–05 school year. This is by far the most detailed report, including all of the important elements of revenues and expenses for football, men's basketball, women's basketball, "other" sports, and a non–program specific category for all reporting individual athletic departments. The USAToday.com (2012) version covers a longer period, the 2005–06 through 2010–11 school years, but only for individual program totals without any breakout by sport. Both of these versions are valuable despite their limitations, because (1) the reporters went to great lengths through FOIA to make any data of this detail available, and (2) they offer insights that neither the NCAA reports nor the data available at OPE can provide.
To begin our examples, we chose the two major universities in the state of Washington, where we both grew up and spent part of our academic careers. For the purpose of untangling revenue and expense data by sport, and by men's and women's spending, for the most recent period possible (2010–11 school year), only the OPE version will do (we did verify some of our calculations with the USAToday.com version). At Washington State University, the smaller program in the eastern part of the state, athletic department spending totaled $40.6 million. Football operating revenue exceeded operating costs by $3.5 million, and the figure was $1.3 million for men's basketball. Operating costs exceeded operating revenue by $1.8 million on all other men's sports. The WSU athletic department spent $4.0 million more on women's sports in total than those sports were able to generate in operating revenue. Thus the top earning men's sports, football and basketball, fell short of covering the net operating losses on the rest of the men's sports and the women's sports by about $1 million. While this result clearly violates the myth, the final assessment cannot stop here. No sports would occur on just the spending on operations. What of the rest of the spending in the WSU athletic department required to make sports happen?
In addition to sports operations, another $16.8 million, or 41.1 percent of the $40.6 million budget, was spent on the rest of the athletic department (salaries, recruiting, event management, and facilities). When we add this "other spending" to the picture, and surely we must, since the athletic department cannot function without it, football and men's basketball at WSU fall even further behind in terms of funding all of the "other programs"! The amount to be covered is the $1 million net shortfall in sports operations plus the $16.8 million spent on the rest of the department, or $17.8 million. So, while football and men's basketball helped defray part of the cost of sports operations, they did not cover all of it and they surely, then, could not cover any of the rest of athletic department expenses. For the year, the WSU AD reported to the NCAA (subsequently, to OPE) that the Cougars broke even with other revenues that were not allocated by sport. The IndyStar.com version for 2010–11 shows that the rest of the revenue needed to cover all spending came from student fees, institutional support, and contributions.
Excerpted from 15 SPORTS MYTHS AND WHY THEY'RE WRONG by RODNEY FORT, JASON WINFREE. Copyright © 2013 Board of Trustees of the Leland Stanford Junior University. Excerpted by permission of Stanford University Press.
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Table of Contents
1 Revenue Sports Pay for Nonrevenue Sports.................... 7
2 An Arms Race Drives College Sports Spending.................... 22
3 Athletic Departments Are a Drag on the University Budget................. 41
4 Conference Revenue Sharing Levels the Football Field and Basketball
5 Pay-for-play Will Bankrupt College Athletic Departments.................. 80
6 Title IX Compliance Must Come at the Cost of Men's Participation......... 95
7 The FBS Playoff Will Be Better than the BCS.................... 110
8 Owners and General Managers Are Inept.................... 133
9 Owners Lose Money on Their Sports Teams.................... 154
10 Player Salary Demands Increase Ticket Prices.................... 170
11 Failure to Act on the Issue of Competitive Balance Is Hurting Some
Sports Leagues.................... 188
12 Player Drafts and Revenue Sharing Will Improve Competitive Balance...... 211
13 Owners Should Be More Vigilant in Policing Performance-Enhancing Drugs.. 226
14 Everybody Loses When Labor-Management Relations Go South................ 239
15 Major League Baseball Should Emulate the National Football League....... 253
References and Further Reading.................... 275