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Are Colleges Spending Too Much Money on Athletics?

A general view of Notre Dame Stadium
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I can hear the outcry already. A study was released that shows that colleges spend up to 12 times more on student-athletes than the do students. Academics are probably already putting together their protest signs.

However, before you start typing that email to your college president that exudes righteous indignation, let’s think about this first.

Now, before you write me off as your standard sports junky from a big name college that bleeds his college colors, guess again. I attended three colleges over my academic career and none of them had anything resembling athletic prowess.

I attended George Mason University in Fairfax, VA. They have a decent Division I basketball team that did make a run to the Final Four one year, but that was LONG after I had left. I also attended Longwood College (now University) in Farmville, VA and no, you have not heard of it. When I was there they had a Division III basketball team and their claim to fame was Jerome Kersey, who went on to play for the Portland Trailblazers. They have sinced moved up to Division I, but now get roundly destroyed by the likes of North Carolina and Duke. Finally I attended Emerson College in Boston, MA and they have NO sports teams.

So, no I am not a live and die by college sports kind of guy.

When I first read the story my initial reaction was like most people: that’s ridiculous. According to the report:

The median athletic spending for institutions competing in the top tier – the Football Bowl Subdivision (FBS) – was $92,000 per athlete in 2010 while median academic spending per full-time student was less than $14,000. Overall, median academic spending per full time student in the other Division I subdivisions was about $11,800 in 2010, while athletic spending per athlete ranged from $37,000 to $39,000.

Apparently it is worse in the so-called power conferences such as the SEC, Big 12, Pac 10, ACC, Big Ten and Big East (though how can you possibly call the Big East a power conference anymore). According to the report, in those conferences “the median athletic spending per athlete topped $100,000 in 2010, and each conference spent at least six times more on athletics than academics.”

Ouch!

Then I thought, ‘wait a minute.’ I have been following the constant conference realignments (better than soap operas if you ask me) and they all talk about how much money the schools will make if they move to this conference or that and how much this school or that is making from the new TV contracts.

So, I went to the independent website findthedata.org, which uses public databases to create an economic review of various categories, including sports.

I checked out how much profit the college football teams of several ‘power conference’ schools generated. The results were surprising: the University of Alabama’s football team showed a PROFIT of $45.2 million. Florida raked in just a bit more at $46.5 million. And the University of Texas Longhorns brought in a whopping $71.2 million in profit.

So, I thought, what’s the problem with the schools spending more on athletics if those athletics generate so much profit that, ostensibly, would be used to improve the school as a whole (including academics).

I am sure that a lot of sports people will point to that information and pull a Kevin Bacon from Animal House (“Remain calm. All is well, all is well!”).

But here’s the rub. According to another study by the NCAA itself, only 57% of football programs reported being profitable. The number was the same for college men’s basketball programs (the other sport colleges spend money on).

The study also shows that most athletic departments receive subsidies from their colleges and universities because they do not generate enough revenue to cover all of their costs. Three out of four of the athletic departments of the 97 public institutions in the FBS analysis generated less money than they spent in any year between 2005 and 2010, according to the report. Athletic subsidies to offset revenue shortfalls are typically funded by student fees, and state and institutional funds.

Not only are schools spending MORE on athletics, they are using regular student-fees to do it and they are not seeing a return on their investment.

Are colleges spending to much money on college football and basketball, especially in a time when more and more states are cutting back on education funding?

In order to answer that question you have to accept that college athletics are not athletics anymore; they are a big time business. Once you do that, once you look at it from a purely business standpoint you have a different answer than if you looked at it from a sports-fan or academic standpoint.

If you are a college sports fan, then there is no amount of money that shouldn’t be spent to build up a successful football or basketball team.

If you are an academic, then spending any money on anything that doesn’t promote educaiton is a waste of funds.

In you are in business, you have to look at college sports one of two ways. In 57% of the cases, college football and basketball are generating profit for the university. That profit can then be re-invested into the business – or the educational institution – in the form of better facilities, scholarships, hiring additional professors, etc.

In 43% of the cases, the business looks at college sports as what is called a loss-leader. A loss-leader is something you do that you know won’t generate profit directly, but will lead to other benefits.

For example, you go into a pet store and buy a kitten for $25. Trust me, the pet store has spent a lot more than $25 on that kitten in the form of vaccines, food, etc. So, the are not making any profit on the kitten. However, when you buy that kitten, you also have to buy food, toys, food dishes, probably a cute bed, a nice color, etc. So, the pet story makes its profit on other items.

And that is how some schools see college sports. They are going to lose money on it, but it also provides valuable promotion and marketing for that school. It serves as a marketing vehicle for perspective students, donors, investors, and maybe even professors.

So, there will always be studies that point to this, that and the other thing. When you read those reports, don’t think of college sports as a part of an academic institution. Think of college sports as what they really are: a business.

Study Highlights Spending Gaps in NCAA

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