In the first installment of this series, we learned that football is the economic engine that drives OSU’s athletic program, and currently supplies 51% of all department revenues. This article profiles the financial health of the football program and trends in the program over time. Future articles will present similar profiles for other OSU sports programs.
The graphic below shows the competition-related revenues and expenses for OSU’s football program from FY 2001 to FY 2013. The revenues charted below include ticket sales, media revenue, etc., but not donations as they are a part of non-competition revenues. Expenses shown below include game costs, travel, staff salaries, etc., but not facility construction or construction debt costs. As a reminder, OSU’s fiscal year begins on July 1st and ends on June 30th, thus FY 2001 started on July 1st 2000 and ended on June 30th 2001. Consequently, the football seasons associated with the fiscal years on the graphic begin in 2000 season (Fiesta Bowl) and ends with the 2012 season (Alamo Bowl). The other important years to note for reference purposes is FY 2006 (2005 season) as that year saw the opening of the new east side of Reser and FY 2008 (2007), the opening of the new south endzone and expansion of Reser to its current capacity.
Revenues exceed expenses in every year and the sport generates a “profit” that is used to subsidize non-revenue and money-losing programs at OSU. Football is one of only two programs at OSU (men’s basketball is the other) where revenues regularly exceed expenses. Football revenues grew with the increasing competiveness of the program and with the increased capacity of the stadium. However, that growth stalled slightly with the national economic downturn in FY 2009.
A major turning point in the revenue production capacity of the program was evident in FY 2010. There was certainly a lingering effect of the economic downturn but other factors also played a role in the huge loss in annual revenues compared to the $30 plus million that the department had become accustomed to. Some fans had become disenchanted with the program and its direction, and that sentiment carried over to subsequent seasons with non-renewals of season tickets. It was at this time that the athletic director initiated programs to re-engage existing fans and to expand the donor base (12,000 in 2012, etc.). The 5-win season in FY 2011 and 3-win season in FY 2012 added to the revenue production woes, and together with FY 2010, these three seasons were the root cause of a $30 million revenue deficit that was covered by borrowing from OSU’s E and G (Education and General) funds. In FY 2013, football revenues returned to the level needed to balance the department’s budget without massive subsidies from E and G funds. This increase in football revenue was attributed to the receipt of the first Pac-12 media contract revenues and the 9-win season in 2012, but the hole that was blown into OSU’s main engine of revenue production can be clearly seen in the graphic. That shortfall and resulting debt will take years to pay off.
OSU’s football expenses have not risen as fast as football revenues and lag far behind our Pac-12 conference peers in both the rate of increase and the amount expended on the football program. In fact, football expenses have dropped in some years or have remained unchanged for periods of time since the Fiesta Bowl season. For example, OSU spent $ 11.9 million (9th place) on football in FY 2010 while our Pac-10 peers spent an average $16.2 million. Four years later in FY 2013, OSU had increased spending to $13.8 million (11th place) but our conference peers averaged $19.4 million. OSU is not gaining ground on its conference competitors in terms of spending on the program.
Both Pac-12 conference newcomers Utah and Colorado are outspending OSU on football despite having lower football revenues than OSU. Even WSU, the perennial last place in football spending in the conference, allocates more of its smaller overall budget to football (25%) than does OSU (23%). Administrative costs and expenses for other sports programs at OSU have increased at a greater rate than for football. Football expenses at OSU have increased by 46% over the last decade while administrative expenses and men’s basketball expenses have increased by 120% and 106%, respectively.
If football is the economic engine that drives the athletic department’s finances, then strategic investment in this critical program is warranted to ensure its continued viability and by extension, the financial health of the entire athletic department.
The sources for this and upcoming articles include:
http://ope.ed.gov/athletics/index.aspx
http://oregonstate.edu/budget/
