Monday, June 14, 2010

Looking At Basketball Revenues

All this talk of conference expansion as of late has been focused on one thing: money. In college athletics, much of the revenue universities take in comes from television contracts which are largely constructed around football. Basketball really doesn't mean much in this discussion, though money is certainly important when it comes to success on the court. Programs with large football revenues can funnel funds into other athletics, one of the reasons why the pigskin is such a prominent feature at schools above The Red Line. Schools below that famous line, those without booming football departments, have a proven disadvantage that transfers from ledgers to hardwood when playing those above.

But what about within their own conferences? Do larger budgets make for stronger programs, even when apparently on the same level? The answers to these questions can be partially answered thanks to a recent article from CNN which breaks down revenues and expenses from every Division I men's basketball program. Specifically, we'll take a look at programs in Oakland's conference, The Summit League. Before looking at the numbers, it's important to note one fault with them:
The comparison between basketball revenues and profits is interesting, but not precise. That's because schools have latitude in their filings with the Department of Education in whether they attribute some expenses and revenues to a specific sport or a more general classification for their entire athletic department.

Many schools use that latitude to have revenue and expenses for one sport equal one another rather than show a profit or a loss, a trick of accounting that wouldn't pass muster with the Securities and Exchange Commission.
Despite the lack of a universal accounting method, the numbers are still revealing. Even ignoring the profit margins, one can obtain a general idea about the amount of money each school makes and spends on men's basketball (data sometimes hard to obtain across the board considering private institutions do not have to make public their financial information). Here is a look at the financial factors for the 10 Summit League programs:

What strikes me immediately about the information above is that Oakland University was the only school reporting a profit from men's basketball in the reporting year. While it is impossible to draw many conclusions from that considering how different departments handle their accounting, it is interesting nonetheless. It confirms the thought that OU's basketball program has done rather well for itself in recent years, especially when compared to some other programs (IUPUI, UMKC, SUU) reporting significant losses.

The data also gives us a general idea of how much money each team is bringing through revenues. Since actual budgets are difficult to obtain, this revenue data can give us a decent starting point for comparing program successes based on budgets (since budgets are estimated based off revenues). With that, here is a look at the amount of revenue each school took in compared to number of conference wins:

It would be challenging to make any definitive statements based on this graph. Generally, the schools generating close to or over $1 million had the most success in this year. UMKC is the one exception. Other thoughts, in bullet form.
  • UMKC is the most captivating case in this study. Not only did they generate more revenue than all schools but Oral Roberts, they also spent the second most (over $2 million) on men's basketball. There could be some odd reporting on the university's part, but what remains is an unpleasant picture: a program generating and spending close to $2 million and winning only 3 conference games as a result. UMKC has largely been a bottom-feeder in the Summit League the past few seasons, but it spends a significant amount on the sport which serves as an outlier to the common thought that more money wins more games.
  • NDSU operates at an incredibly efficient level. The books were balanced in this year, and they took home a conference championship. While the 2009-2010 numbers probably look a bit different, there is no doubt that NDSU brings to the conference a very solid model.
  • It is my hunch that ORU and Oakland will be near the top of the conference in dollars generated and spent every year. It's no coincidence, then, that they are also in a race for a conference championship every year. While money is not the only reason why they've been successful, their continued success has allowed them to expand their budgets which gives them an advantage over many peer institutions.
  • The group of teams in the middle seems about right, given their competition level in men's basketball over the years. IUPUI is worth noting as a school that lost a whole lot of money on the sport in 2008-2009. They don't make much on it, either, ranking dead last in revenues. Future data would be needed to see if this was a one-year abnormality or if the program truly lacks the financial support of others. If the latter is so, the university deserves props for fielding a competitive club year-in and year-out.
The Summit League is far from a financial powerhouse when it comes to basketball conferences, but there are many programs which have discovered the means to operate efficiently while staying competitive. Hopefully OU will continue to be a leader in the conference when it comes to embracing this model.

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