The Money Game

July 20th, 2010

One of the more memorable scenes in the movie All the President’s Men was when Deep Throat, played by Hal Holbrook, instructed Bob Woodward (Robert Redford) to follow the money during one of their secret late-night meetings.

Well, for the better part of the last 50 years, that is exactly what has been going on in college football – schools are following the money. Earlier this summer, the Big Ten, the Pac-10 and the SEC all tried to hit the jackpot by attempting to lure Texas away from the Big 12 Conference.

After sitting back and evaluating their options, the Longhorns decided to stick with the Big 12 when Fox and ESPN came to the rescue and agreed to honor their television deals with the conference despite the departures of Nebraska and Colorado. The Longhorns get about $20 million per year in net revenue from the Big 12, according to the website Fanhouse.com, and they are presently exploring the idea of creating their own television network for added revenue. Texas makes the most money ($87.5 million) and is among the biggest spenders ($22.56 million) in college football. (Ohio State is the biggest, spending a whopping $32.3 million on its football program in 2009.)

When Texas was still considering its options, the Big Ten wound up adding Nebraska to make 12 members, the Pac Ten went to 12 with the additions of Colorado and Utah, and Boise State took Utah’s spot in the Mountain West Conference. By expanding, the Big Ten and the Pac 10 now have enough teams to play a football championship game.

It was the most volatility college athletics has experienced since the early 1990s when Penn State went to the Big Ten, Arkansas and South Carolina joined the SEC, the ACC annexed Florida State and Miami took the best deal it could get by helping form the Big East football conference with Pitt, Boston College, Syracuse, West Virginia, Rutgers, Virginia Tech and Temple.

CFA Fractures

Realignment in the early 1990s was precipitated by the fracturing of the College Football Association when conferences realized they could negotiate their own television agreements for substantially larger sums of money once Notre Dame went out and struck its own deal with NBC. (More on the CFA later.)

According to Dan Wetzel of Yahoo! Sports (Wetzel has a book coming out this fall examining the financial implications of having a football championship), there are only two major revenue streams left in college sports: football television contracts and a football playoff. (His research has concluded that the NCAA men’s basketball tournament is basically maxed out financially).

During the past two years, some astonishing television deals have been negotiated. The SEC recently inked a 15-year, $2.25 billion agreement with CBS and ESPN; the ACC signed a 12-year, $1.86 billion deal with ESPN; the Big Ten is said to be printing money with its own television network (the Big Ten Network’s 2009 IRS filing showed a $72 million payment to the conference, according to Crain’s Detroit Business); and the Pac 10 anticipates landing a deal similar to the ACC’s when its present TV contract ends this year. Despite the defections of Nebraska and Colorado, it is estimated the Big 12 will earn about $160 million annually from its TV packages. Those five conferences are far and away the most lucrative in college sports.

Television has, and will continue to be, the biggest source of revenue for college athletic programs.

For decades television deals were the sole domain of Walter Byers, the NCAA’s first executive director, who served from 1951-88. Byers turned the NCAA into a powerful organization, in part, because of his skills as a TV negotiator. By the mid-1970s, however, many of college football’s top schools were unhappy with Byers’ “spread-the-wealth” approach to TV. They wanted more opportunities for exposure and more input in television negotiations.

“Walter Byers controlled all of that,” recalled Leland Byrd, West Virginia’s athletic director from 1972-78. “You only had one network that was carrying the games back then. They had four regionals and a game of the week. You had only about five choices at that particular time.”

During Byrd’s seven-year tenure at WVU, the Mountaineers had just three regular season television appearances in 1972, 1975 and 1976 (in 2008 nine of West Virginia’s 13 games were on some type of network TV).

“In the East, for example, Pitt and Penn State were the superpowers at that time and they got almost all of the television spots,” Byrd explained. “The best we could do was one game with either Pitt or Penn State. It was the same thing with Syracuse and Boston College. If they got one then that was about it. Until ESPN came along there wasn’t a whole lot you could do about it.”

Financial Crunch

Athletic departments in the mid-seventies were feeling the effects of crippling inflation and an energy crisis that was consuming the country, forcing schools big and small to take a hard look at their finances. At different times through the years, athletic programs tried unsuccessfully to get a handle on its expenses.

In the 1960s, the Big Ten was the first conference to pass a rule limiting football signing classes to 30 per year. In the early 1970s, the Big Eight, the SEC and the Southwest Conference agreed to limit signing classes to 45 players per year with the provision that schools could “bank” or “borrow” additional recruits, enabling the wealthiest schools to continue to conduct business as usual.

Former West Virginia coach Jim Carlen saw firsthand college football’s inequities when he was an assistant coach at Georgia Tech in the mid-1960s. Tech’s Bobby Dodd and Alabama’s Bear Bryant were nearly inseparable and rarely disagreed, except when it came to scholarship limitations. Carlen remembers once listening to Dodd at the SEC meetings complaining to Bryant about Alabama’s humongous recruiting classes.

“Coach Dodd said, ‘Paul I want you to get your pencil out because I want you to put these numbers down. You’re signing 55 players a year and I’m signing 32 players a year on average. Then, you redshirt your eight or 10 players like we redshirt our eight or 10 players – not necessarily because they are going to play well but because our academics are so tough – and we’re never over our total of 120 and we’re on the cusp all of the time.’ We were bringing in our 32 to their 55 and this has got to stop,” said Carlen.

Of course it didn’t stop.

Georgia Tech and Tulane eventually decided they couldn’t keep up with the rest of the SEC schools and in 1966 opted to withdraw from the conference. The gap between the haves and the have-nots was widening.

College football’s national champions have historically been a closed society with only a handful of the major schools really having access to the title. Since 1950 (a span of 60 years) there have only been 24 different football champions awarded by The Associated Press. And of those 24, 14 have won multiple titles.

The party crashers were Maryland in 1953, Syracuse in 1959, Minnesota in 1960, Pitt in 1976, Clemson in 1981, BYU in 1984, Georgia Tech in 1990 and Washington in 1991. As a result college football’s alpha males have always driven the boat – that is until the smaller schools united at the so-called NCAA cost-cutting conventions of 1973 and 1975.

During those two conventions the bigger schools were forced to accept limitations in scholarships, coaching staff sizes and recruiting expenditures. In 1975, further cuts led to the reduction of 10 football scholarships from 105 to 95, the elimination of $15 per month in expense money paid to athletes and additional reductions in recruiting expenditures. Byers at the time estimated the cuts would save approximately $15 million.

Long Beach State president Dr. Stephen Horn thought the reductions didn’t go far enough and campaigned for more sweeping changes, immediately drawing the ire of the bigger schools. Horn proposed reducing scholarships to 65 over a three-year period and limiting travel rosters to 48 players. He also wanted 50 percent of television revenue to be distributed equally among all Division I schools and the other 50 percent going to Division II and Division III programs. The big schools mockingly called it “the Robin Hood plan.”

Football coaches from the major programs complained bitterly that schools such as Hofstra and Long Beach State had no business telling them what to do and how to spend their money. What Horn’s plan actually achieved was the unification of the big schools, pushing them toward the creation of the College Football Association in 1976. The CFA was formed as a means for the bigger schools to have more of a say in their own destinies. Initially, the Pac-8 and the Big Ten were receptive to the CFA but eventually chose not to attend the first regular meetings in Atlanta in 1977. Soon distrust developed between the two camps and many felt Byers promoted the Pac-8/Big Ten-CFA rift because he felt threatened by the CFA’s existence, according to author Keith Dunnavant is his interesting 2004 book The Fifty-Year Seduction: How Television Manipulated College Football, from the Birth of Modern NCAA to the Creation of the BCS.

Big Schools Fight Back

Immediately, the big schools began to fight back against the cuts enacted in 1975 and soon an open arms race was once again under way. Alabama unsuccessfully sued the NCAA in an attempt to overturn travel squad limitations; Warner Cable Corp. in 1978 filed a lawsuit in an attempt to air Ohio State football games on a pay-per-view basis over its QUBE pay TV system in direct violation of the NCAA’s TV contract with ABC (a good portion of the revenue was to go to Ohio State). Also in 1978, the NCAA split into I-A and I-AA classifications, further reducing the number of elite football programs.

In 1981, Oklahoma and Georgia filed an antitrust lawsuit over the NCAA’s control of television and in 1984 the Supreme Court ruled against the NCAA in a 7-2 decision, voiding the football TV deals with ABC, CBS and WTBS. This created a whole host of television opportunities and soon the market became oversaturated with games. Despite a pair of mediocre seasons in 1985-86, West Virginia was on television six times those two years, or twice as many times as the previous decade from 1970-80.

“I thought the CFA was very beneficial to West Virginia University,” said recently retired athletic director Ed Pastilong, who served as the CFA rep for Eastern football independents before WVU joined the Big East Conference. “It was a practical organization serving the common goals of similar institutions.”

Initially, the open market kept television rights fees down but soon that changed when Notre Dame stepped outside the CFA to negotiate its own deal when the school became unhappy with ABC’s regionalization concept for TV coverage. The Irish were able to sign a five-year deal with NBC for $38 million covering the 1991, 1992, 1993, 1994 and 1995 seasons and that effectively ended the CFA. This is when individual conferences started negotiating their own TV deals with the networks.

In the meantime, SEC commissioner Harvey Schiller discovered an obscure NCAA rule that permitted conferences with 12 members to hold a championship game. Knowing an SEC championship game could generate millions, Schiller first gauged Texas’ interest before the SEC ultimately added Arkansas and South Carolina in order to have a made-for-TV championship game, according to Dunnavant.

College football was also moving closer toward a true national championship when the Fiesta Bowl in 1987 was free to pit independents Miami and Penn State in a one-versus-two matchup. Two years later in 1989, top-ranked Notre Dame and No. 3 West Virginia also determined college football’s national champion on the field in Tempe, Ariz.

In 1990, the seeds for the BCS were planted when the Sugar Bowl jumped the gun and invited 7-0 Virginia in anticipation of hosting the nation’s top-ranked team. But the Cavaliers stumbled down the stretch, losing all four games, and wound up being unranked when they faced Tennessee in New Orleans. Finally all of the major bowls got together to put an end to the madness, first developing the Bowl Coalition, then the Bowl Alliance, before settling on the present BCS system that has been in place since 1998.

At about the same time the SEC was considering expansion, Raycom tried to put together a 16-team megaconference of football independents headlined by Miami and Florida State that would have encompassed 35 percent of the nation’s television markets. New Big East commissioner Mike Tranghese saw the eminent danger to his basketball league and he pushed the basketball schools to get into the football business by adding Miami. To entice the Hurricanes, the Big East promised them a much larger revenue share than the rest of their potential suitors.

In 1994, the Big Eight cherry picked the best Southwest Conference schools to form the Big 12 Conference, and the Big East was able to benefit when Fox Network outbid CBS for the NFL’s NFC package.

When CBS lost the NFL it was anxious to remain in football, so in addition to signing a long-term deal with the SEC, it also negotiated a five-year $56 million TV agreement with the Big East that enabled West Virginia and Rutgers to join the conference as full-fledged members. To appease the basketball schools, Notre Dame was also added in all sports except football. Five years later, Virginia Tech joined the Big East as an all-sports member and Temple was kicked out of the football conference.

Winners and Losers

No school benefited more from conference expansion in the early 1990s than Virginia Tech. The Hokies’ football tradition consisted of a pair of Liberty Bowl appearances under Jerry Claiborne in the 1960s and three bowl trips under Bill Dooley in 1980, 1984 and 1986, including the school’s first-ever postseason victory in ‘86 against NC State in the Peach Bowl.

That was the extent of Tech’s football history.

In 1983, a 9-2 record couldn’t even get Tech a bowl invitation. But just five years into its affiliation with the Big East, Virginia Tech was playing in back-to-back major bowls and is now a perennial Top 25 program in the ACC.

On the flip side was Houston, no school suffering more from expansion in the early 1990s than the Cougars. Houston won four Southwest titles during a 15-year period and played Boston College in the 1985 Cotton Bowl. When the SWC broke up in the mid-1990s Houston football fell on hard times under Kim Helton, and since joining Conference USA in 1996, the Cougars have been to just five minor bowls.

West Virginia’s new athletic director Oliver Luck is very familiar with Houston’s football tradition having lived in the city for several years, and he understands fully the importance of maintaining the appropriate associations when the next round of expansion takes place, likely sooner rather than later.

“I think that there will be further activity and I’m not sure if when the dust settles there will be a permanent solution,” Luck said the day he was hired last month. “Realignment has a major impact on a lot of institutions, and WVU is no exception.

“We have to make sure we protect WVU as best we possibly can and make sure our affiliations are the best that we can have to further the growth of our university.”

Mountaineer football has performed remarkably well through the years both on the field and on the balance sheet. Since 2005, the Mountaineers have won two BCS bowl games and have finished ranked in the Top 25 five consecutive years. West Virginia’s 59-17 record over the last six years is ninth among BCS programs.

Mountaineer football is also by far the strongest revenue generating program in the Big East, WVU ranking 28th overall nationally in 2009 after producing $13.05 million in net profit, based on Fanhouse.com’s recent study of college football finances. That is nearly twice as much as Louisville’s net take of $7.43 million, and considerably more than Pitt football’s profit of $5.57 million. In addition, during the past five years WVU has done more for less by posting a nation’s-best 14-3 record against programs with larger football budgets.

“The Mountaineers’ success rate against schools with a greater financial commitment is unprecedented,” wrote Fanhouse.com’s Brett McMurphy.

Today, West Virginia’s athletic budget has grown from roughly $19 million when Pastilong took over as athletic director in 1989 to approximately $55 million during his final year in the big chair in 2010. That’s roughly on par with growth in the past. When Red Brown retired in 1972, West Virginia’s athletic budget was approximately $1 million ($5 million in 2009 dollars) and by the time Leland Byrd departed to run the Eastern 8 Conference in 1978, the budget had tripled to $3 million ($9.7 million in 2009 dollars). The budget will likely continue to grow.

West Virginia’s preference is to remain in a strong Big East Conference and is hopeful the league can protect its flank from future expansion. The defections of Miami, Virginia Tech and Boston College in 2003 left the Big East in a difficult position when it renegotiated its TV deal in 2006.

Still, the conference was able to ink a six-year $80 million package with ESPN that expires in 2012 (impressive considering the circumstances), along with a combined six-year, $192 million basketball package with ESPN and CBS. However, that is less than what the other five BCS conferences are presently earning with their TV deals. Former NFL commissioner Paul Tagliabue was brought in as a consultant to get the Big East prepared for its next round of television negotiations, which will be vitally important considering three of the five BCS football programs that failed to make money in 2009 came from the Big East.

The Southeastern Conference announced earlier this spring that it distributed roughly $17.4 million to each school – a 57 percent increase from the previous year. Including bowl money and NCAA tournament appearance fees, West Virginia will receive between $8-10 million from the Big East Conference this year.

Of all the financial statistics currently in circulation this one is the most sobering: Ten schools will have athletic budgets exceeding $250 million by 2020, according to a recent Knight Commission study.

Consequently, for the Big East to continue to remain a viable football conference, it is going to have to follow the money.

By John Antonik
For MSNsportsNET.com

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