What’s the Value of a Win in College Athletics?

 
 
As debate continues over whether student-athletes should be paid, professor Doug Chung’s research on the massive money being earned by collegiate football and basketball programs could help guide the answer.
 
 
by Roberta Holland

As the debate continues over whether college student-athletes should be paid for their on-field performances, a new study from Harvard Business School reveals just how much intercollegiate football and basketball programs contribute to a school’s bottom line.

The quantitative link between game day and payday is courtesy of Assistant Professor Doug J. Chung, who reviewed 117 schools with Division I football and basketball teams, matching athletic performance with revenue flow covering an 11-year period. The findings were jaw-dropping—winning just one more football game in a season, for example, could bump revenues by as much as $3 million for a high-powered program like Alabama or Michigan.

“As a scholar and an enthusiastic fan, I’m providing content that policymakers would need to proceed in talking about this issue”

Chung details the correlation between wins on the field and wins for a school’s piggy bank in his paper, How Much Is a Win Worth? An Application to Intercollegiate Athletics, forthcoming in Management Science.

“Some of the top schools make enormous amounts of money—just extraordinary, close to $200 million,” says Chung. “That’s a very big amount of money, and we’re talking about academic institutions of higher education.”

Even though the National Collegiate Athletic Association (NCAA) stresses the amateur nature of intercollegiate sports, college programs have grown into a multibillion-dollar industry. Chung focused on the two most dominant sports, football and basketball, culling a US Department of Education database for individual schools’ reported revenue by sport, which provided, through econometric modeling, a causal link between athletic success and revenue.

A Multimillion-Dollar Industry

In the 2013-2014 academic year alone, each of the top 19 schools raked in more than $100 million in revenue from their athletics programs. A total of 67 schools made more than $50 million.

Hundreds of free-spending University of Alabama
fans head toward the Georgia Dome. ©iStock/Picsfive/Blulz60

The University of Texas at Austin topped the list, with $161 million, which Chung points out rivals some professional teams. In fact, the National Basketball Association’s Portland Trail Blazers had $153 million in revenue in 2015 according to a Forbes ranking of NBA teams.

One limitation in the available data was how those totals broke down into revenue streams such as ticket sales, merchandise, and booster donations. Did a win increase the merchandise take or ticket sales for the next game? The answers will depend on more research. Still, says Chung, “It’s a big business.”

Chung also divided the schools into two groups—more established and less established. Auburn, Michigan, Ohio State, and other schools from the Power Five conferences were deemed more established. Less established schools hailed from less prestigious conferences with a shorter track record in intercollegiate athletics.

Victories gave both groups a revenue bump. For the more established schools, an 8 percentage point increase in regular season football winning percentage translated into a 3 percent revenue increase. That means typically one more win per season is worth an average of $1 million, which for the top schools could mean a spike of as much as $3 million. The less established schools saw the spike not from wins during the regular season but from prestigious postseason bowl invitations. Schools getting the national spotlight by playing in BCS (Bowl Championship Series) bowl games scored a 27 percent jump in revenue, for an average of $2 million.

Football revenue dwarfs basketball revenue, but money triggered by Division I basketball teams is hardly chump change, ranging from $123,000 to $44 million a year, Chung found. The boost from winning was very linear for both types of schools. A 3 point increase in winning percentage—basically one game—resulted in a 4 percent revenue boost for more established schools and a 3 percent bump for less established ones.

Chung also found that spikes from victories were less significant for larger schools and for schools considered to have a higher quality of education. Both groups and both sports benefited from a carryover effect with one year’s success spilling into the next year.

Growing up in Manhattan, Kansas, Chung became hooked on college football—and Kansas State in particular. The first game he watched was serendipitously one of the most talked about games in history, the 1984 matchup between Boston College and the University of Miami that culminated with a last-minute Hail Mary pass by BC quarterback Doug Flutie.

“I was totally blown away. I’ve been a fan ever since,” Chung says, adding that he and his family continued to watch college football after they returned to South Korea, staying up until midnight to catch the games. (In an earlier paper, The Dynamic Advertising Effect of Collegiate Athletics, Chung looked at the bump in applicants that colleges often see after a major sporting event, dubbed the “Flutie Effect.”)

Should Student-Athletes be Paid?

Chung’s research is valuable in light of the ongoing debate over whether college athletes should be paid, given the large amounts of money they bring in. Two pending court cases would give college athletes the right to be paid—a move staunchly opposed by the NCAA. Meanwhile, in August the National Labor Relations Board refused to consider whether football players at Northwestern University could unionize.

Proponents of paying college athletes say that since they are what people buy tickets to see, they should take a piece of the pie. Supporters also argue that if these players are treated as de facto employees of the school, they would be eligible for workers’ compensation if they suffered a career-ending injury.

Opponents stress that the players are student-athletes, not athlete-students, and are primarily in college for an education supported at least in part by athletic scholarships. Changing the dynamic would end the tradition of amateur college sports in this country.

“As a scholar and an enthusiastic fan, I’m providing content that policymakers would need to proceed in talking about this issue,” says Chung.

If college administrators know what success is worth, that knowledge can guide their decisions on how much to invest in a sport, Chung says, especially in light of multimillion-dollar salaries paid to head coaches like Alabama’s Nick Saban, who earns $7 million a year. If the courts allow college athletes to be paid, the information could help both sides figure out appropriate contracts.

“I did this research because collegiate athletics is a passion of mine—it’s a hobby of mine. But I also think it would be of benefit to greater society, especially in the United States, to have a very fruitful discussion about whether we should pay or not pay college athletes.”

About the Author

Roberta Holland is a writer based in Boston.

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