First things first, let’s get this out of the way — college athletics is big business.
Sure, the phrase “student athlete” sounds great, but for college basketball, and especially college football, the bottom line is as big of a factor as anything happening on the hardwood.
During the 2013 March Madness tournament – where Louisville managed its way through the field to beat Michigan in a memorable championship game – advertisers spent more than $1.0 billion on advertising, according to Kantar Media. That total topped even the super bowl, which logged-in at a mere $976.3 million.
This exchange of cash is why CBS and Turner Broadcasting shelled out more than $740 million for rights to cover the games; it’s why ESPN invested $5.64 billion over 12 years to broadcast the coming college football playoffs; and it’s why the Pac-12 Network came to a $3.0 billion deal with Fox and ESPN in 2012.
The money is there in college athletics. And, it’s why every year Ryan Brewer, an assistant professor of finance at Indiana University-Purdue University Columbus, comes out with a list every basketball and football season ranking the value of big time programs if they were bought and sold like professional franchises.
“If you want to do good, solid decision-making, thinking about a university like a business is the [right] idea,” Brewer said.
While not every basketball program is profitable, and in those cases a business decision must be made to see if it’s worth spending money there versus academics, Brewer said that schools that spend around $70 or $80 million typically hit a “magic spot” and brings in a positive cash flow.
So for universities like Louisville or Arizona, it’s not a worry about losing money. It’s about how much can they make.