Many college athletic programs are facing tough times financially as we move through the uncharted waters of the coronavirus caused shutdowns. These shutdowns and possible impact on revenue generation has created the need for many schools to find new revenue sources and reduce expenses. Several athletic programs have been living paycheck to paycheck, relying on a variety of revenue sources to fund ever-increasing cost to operate their athletic programs.
The main sources of revenue for most NCAA college athletic programs come from the following areas: donor contribution and endowment, guaranteed revenues, institution and government support, media rights, royalties, licensing, advertising, student fees and ticket sales. The lower the division that a college or university competes in the larger the need to rely on institutional and governmental support.
Schools spend funds in the following areas: administration compensation, athletic student aid, coach compensation, facility expenses, game and travel expense, guarantees, medical expenses, recruiting expenses and others misc. expenses. Reducing expenses often manifests itself by program and staff reductions.
College athletics was struggling financially before Covid19 according to an NCAA 2018 database on expenses and revenues for all divisions. The pandemic is bringing to light the major financial issues universities face. In 2018 according to the NCAA, college athletic programs spent $18 billion on athletics. The total revenue generated by athletic programs in over 1100 NCAA universities was $10.3 billion, leaving a deficit of nearly $8 billion dollars, that had to be subsidized by the university.
Universities are facing financial realities of larger deficits and dwindling income. Some have already chosen to furlough staff, drop programs and in some cases replace full-time staff with part-time head coaches. It seems like every day we read about another athletic program that is facing a major financial crisis. No university at any level is immune to these issues.
In the 2018 NCAA data not one Division II or III athletic program produced more revenue than expenses. Those Division I programs participating in non-power five leagues had no schools that produced a positive revenue report. In FBS football playing schools, only 29 universities showed a revenue surplus for 2018.
College athletic programs face some major challenges moving forward! They cannot operate with ever-increasing deficits and as a result will need to right size their operations. Contact the experts at Executive Management Partners to get the help you need in determining what that right size should be.