Oregon could lose $50 million of a projected athletics budget of up to $130 million for the upcoming year, athletic director Rob Mullens said.
Photo: Brandon Parry/Zuma PressWhen college sports shut down because of the coronavirus pandemic last spring, university athletic departments started trimming expenses like they were peeling an apple. Now that the Big Ten and Pac-12 conferences have postponed the fall season entirely, budgets could be slashed to the core.
Many departments in those conferences, and others that are now postponing fall sports, had already laid off staff and reduced salaries. Stanford eliminated entire teams, citing financial strain exacerbated by the coronavirus pandemic.
Without football, they’re now looking at radical changes to how they run college sports, and some are considering borrowing tens of millions of dollars to make ends meet. The pain will expand to the rest of college football’s giants if the Southeastern, Atlantic Coast and Big 12 conferences ultimately postpone football as well.
Oregon, the reigning Pac-12 football champion and philanthropic darling of alumnus and Nike co-founder Phil Knight, is looking at an unprecedented revenue drop. The Ducks could lose $50 million of a projected athletics budget of up to $130 million for the upcoming year, athletic director Rob Mullens said. That could rise to as much as $80 million if the postponed games aren’t played in the spring.
The schools collectively have a lot to lose. Pac-12 athletic departments generated a total of $1.3 billion in revenue in 2018-19, according to the U.S. Department of Education. Big Ten athletic departments generated almost $1.9 billion. Football accounts for the bulk, if not the overwhelming majority, of athletic revenue at most of those schools.
The postponement of football games won’t necessarily devastate universities’ general budgets, since few schools transfer revenues from athletics to their academic operations. Money from TV deals, priority-seating programs and ticket sales is funneled back into athletic departments to pay for sleek locker rooms, upgraded stadiums and big-name coaches like Michigan’s Jim Harbaugh.
But athletic departments could rely on their universities’ resources or take out loans to stay afloat.
Stanford announced before the loss of 2020 football games that it was cutting 11 varsity sports at the end of the coming academic year to manage an anticipated $25 million deficit on a budget of nearly $120 million—due partly to the pandemic, and partly to longer-term financial woes.
Stanford plans to discontinue 11 varsity sports—including men’s volleyball.
Photo: Nam Y. Huh/Associated PressNow the school is expecting an athletics deficit of $40 million to $50 million, said athletic department spokesman Tommy Gray, depending in part on how or if TV deals are reconfigured and whether fans are allowed into stadiums in the spring.
Stanford athletics is also cutting some staffers’ pay temporarily and could tap into reserve funds, Gray said. Scrapping more teams isn’t currently on the table.
Although Arizona is a rabid basketball school, football pays most of the bills. Without games in the upcoming academic year the Wildcats could lose up to $65 million from a projected $94 million athletics budget, athletic director Dave Heeke said.
That’s because Arizona, like many schools, makes much of its revenue from lucrative broadcast-rights agreements negotiated by their conferences—and the most valuable inventory is football games. Fox and ESPN have multiyear deals with the Big Ten and Pac-12 that together will pay the conferences $5.64 billion.
Now those TV-rights payments to conferences are in limbo. Representatives from Fox and ESPN declined to comment.
Schools benefit far beyond direct payments for broadcast deals. Football games serve as what amounts to hours-long commercials beamed into the homes of prospective students, faculty and donors. Home-game weekends also serve as natural magnets for alumni reunions and donor events. That organic marketing can’t be easily replaced.
Michigan made more than $56 million last year from sports ticket sales, primarily from football, according to athletic department spokesman Kurt Svoboda. This year, that number could drop to $0, a frightening prospect for the Big Ten powerhouse.
Michigan also earned about $28 million last year from donations that land people premium seats, mainly for football, basketball and ice hockey. Some ardent alums won’t ask for refunds.
Even before many schools lost football, athletic departments had begun tightening belts during the pandemic shutdown by cutting teams in so-called nonrevenue sports or reducing salaries. The NCAA reduced its annual payouts to schools by nearly two-thirds after the men’s basketball tournament was canceled, putting immediate pressure on schools’ budgets.
In June, Iowa cut its fiscal 2021 athletic budget by $15 million, or 11.8%, but warned there’d be more significant cuts without complete football and basketball seasons with fans in attendance.
“These are challenging times with significant uncertainty,” athletic director Gary Barta said at the time. An athletic department spokesman said Thursday that Barta wasn’t ready to comment on the financial implications of football’s postponement.
It isn’t yet clear how football’s postponement might affect the payouts to member schools, made up mainly of money from broadcast-rights deals. In the 2018-19 academic year, the Pac-12 distributed $387 million to schools, or about $32 million per university. The Big Ten distributed $55.6 million to each of the 14-school conference’s 12 longest-standing members.
Things are dire enough that the Pac-12 is exploring securing loans of as much as about $80 million per school for those who want them, according to a person familiar with the discussions. Conference leaders believe they could secure 10-year loans from banks at about a 3.75% interest rate, that person said. Mullens at Oregon said the school is considering a loan among a range of options.
So is Colorado, which had already cut its athletic budget to $72 million from more than $90 million earlier this summer. “Everything is on the table,” said spokesman David Plati.
With athletics’ largest revenue stream halted for 2020, universities could shoulder a greater burden in repaying tens of millions in debt that many athletic departments have taken out in recent years to pay for facilities upgrades.
Michigan made more than $56 million last year from sports ticket sales, primarily from football, according to an athletic department spokesman.
Photo: Gregory Shamus/Getty ImagesUC Berkeley, for instance, owes about $439 million, mainly for a massive football stadium construction project completed in 2012. The central university pays more than half of the current annual $18 million debt service for the stadium, but is in the process of reducing its annual direct support to the athletic department.
Moody’s Investors Service said in a note Thursday that some athletic departments likely won’t be able to cover debt-service payments on their own right now, but that it expects parent universities to step in with internal loans to avoid default.
Moody’s Vice President Dennis Gephardt warns, though, that other revenue streams are running dry as well—money from housing and dining, for example, are down as students continue taking classes online.
Some remain optimistic that this is a short-term revenue hit and not an existential crisis for college sports.
“What you’ve got to bank on is that we’re going to get back to playing, eventually,” said Rutgers football coach Greg Schiano on Friday. He noted that the school is set to come into a larger share of the Big Ten’s valuable TV rights in the near future.
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—Benjamin Mullin contributed to this article.
Write to Melissa Korn at melissa.korn@wsj.com and Rachel Bachman at rachel.bachman@wsj.com
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