SEC Revenue: Where's The Money Come From?

SEC Revenue: Where’s The Money Come From?

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Auburn fans may be understandably bitter over the Bowl Championship Series’ recent decision to strip USC of its 2004–2005 national title. After all, had USC been declared ineligible before the end of the 2004 regular season, then 12-0 SEC champion Auburn would have moved up from #3 in the BCS standings to #2 and faced Oklahoma in the Orange Bowl for the national title. While NCAA-revised history may now reflect Auburn was the only legitimate undefeated team from that season, it doesn’t compensate the Tigers — or the SEC — for the lost opportunity to claim another title on the field.

On the other hand, even revised history would have paid the same. Some critics noted that neither USC nor the Pac 10 Conference was required to return any of the money earned for the Trojans’ now-vacated title game appearance. The reason is pretty straightforward: The BCS divides money among conferences rather than individual schools. Even if the 2004 Trojans had been declared ineligible for a BCS bowl beforehand, another Pac-10 school (likely California) would have taken its place, albeit not in the championship game, and the overall conference payouts would remain unchanged.

Each of the six BCS “automatic qualifier” conferences is guaranteed one team in a BCS bowl, and thus one share of the overall BCS revenues. The only way to earn an additional share is by qualifying a second team (no conference can have more than two teams). In 2004–2005, the SEC would not have qualified a second team regardless of USC’s ineligibility. As explained above, USC’s slot would have gone to the next-ranked Pac 10 school. The only two non-automatic qualifying positions were already assigned to Utah — the undefeated Mountain West Conference champion — and Texas, which secured a second Big 12 share by virtue of its #4 ranking.

In terms of dollars and cents, the SEC received a BCS payout of $16,247,847 for Auburn’s participation in the 2005 Sugar Bowl. The Pac 10 received an identical payout. The Big 12, the only conference to qualify two schools, received the largest payout, $20,795,460.

Today, six years later, the overall payouts are higher but the apportionment scheme remains the same — this despite the 2007 addition of a separate BCS Championship game to the four traditional bowls. In 2011, the SEC, Big 10, and Pac 10 each qualified two BCS teams and received a $28,515,095 payout, more than a 75% increase from 2005. This is due to the rapid increase in television rights fees and title sponsorships for the BCS, from $78 million in 2004–2005 to $120 million in 2010–2011.

The SEC’s Financial Relationship with the NCAA

The $28 million-plus BCS payment is just a drop in the bucket compared to the SEC’s overall revenues, which topped $224.4 million in 2009–2010, according to papers filed with the Internal Revenue Service. More than 68% of SEC receipts came from the conference’s own television and broadcasting deals.

Most SEC revenues are simply redistributed to the 12 member institutions. In 2009–2010, the conference reported $219.3 million in such distributions, about $18.3 million per school. This reflects each member’s share of “television rights, fees and ticket sales for regular and post-season football, basketball, and baseball games.”

Basketball, incidentally, largely reflects the NCAA’s contribution to the SEC’s bottom line. While the BCS and its $181.9 million (in 2010–2011) in revenues is substantial, it pales next to the $750 million pot of money under the NCAA’s control. Even more than the SEC, the NCAA depends on television contracts for its very existence. In 2009–2010, the NCAA reported $642.7 million of its budget — nearly 86% — came from its “television and marketing rights fees,” which is almost entirely related to the men’s Division I basketball tournament.

The NCAA employs a variety of channels to distribute funds to member conferences. The largest pot is the “Basketball Fund,” which rewards conferences based on their overall performances in March Madness over a rolling six-year period. In other words, each SEC school earns one share of the Basketball Fund’s payout for every NCAA tournament game it wins over the previous six years. In 2010, this came out to over $15.1 million, fifth best among all conferences (the Big East was first with a payout of over $23.1 million).

The next largest category of NCAA distributions is the “Grants in Aid Fund,” which is supposed to subsidize the cost of providing athletic scholarships. Unlike the Basketball Fund, the Grants in Aid Fund is unrelated to performance. Instead, it is based on the number of varsity sports sponsored by the conference (and member schools) and the number of scholarships awarded accordingly, the latter having greater weight. In 2010 the SEC received $8,276,070 from the Grants in Aid Fund, third among all conferences (the Big 10 received the most, just over $11 million).

Similar to the Grants in Aid Fund is the “Sports-Sponsorship Fund,” which the NCAA awards to encourage “institutions that support non-revenue sports,” which for the SEC is likely every sport that isn’t football, men’s basketball, or baseball. The SEC only received the ninth-largest distribution from this fund in 2010, just over $2.3 million (the Ivy League received the largest payout, over $4.3 million).

Next the NCAA sets aside about $40 million for a “Student-Athlete Opportunity Fund,” which the conferences are allowed to distribute directly to athletes, or their families, “in meeting financial needs that arise” outside of what scholarships provide. The SEC’s 2010 share of this fund was about $2.5 million, fourth best among conferences (the Big 10 was first).

Another $22 million in NCAA funds goes toward “academic enhancement,” which is not specifically defined, except that the funds may not be used for fifth-year scholarships for students who exhausted their athletic eligibility, tuition for summer school, or the purchase of course books. The SEC received $771,756 from this fund in 2010, tied for fourth best (the Big East was number one at just over $1 million).

Finally, every conference receives a grant of approximately $250,000 annually to improve services in six specific areas, including officiating, compliance with NCAA regulations, drug awareness, career opportunities for women and minorities, and anti-gambling programs.

Altogether, the SEC received over $31.1 million in NCAA funds in 2009–2010. It’s nothing to sneeze at, but to put the numbers in perspective, the SEC’s current television deals with CBS and ESPN guarantee an average of $205 million per year for the next 15 years. The SEC and its football-first (spring football-second and baseball-third) member institutions are hardly dependent on the NCAA and its basketball-generated subsidies.

Conclusion

Given that the SEC’s most recent BCS payout ($28.5 million) nearly equaled the conference’s total NCAA grants ($31.1 million), one could ask whether it might someday be in the SEC’s interests to cut ties with the NCAA — at least in football — and seek a potentially more lucrative alliance with the other major conferences. One reason there has been little movement towards a Division I-A playoff is that the more profitable conferences, particularly the SEC, are understandably reluctant to follow the example of men’s basketball, where hundreds of millions of dollars get thrown into a giant pool that subsidize hundreds of institutions and sports that contribute little, if anything, towards generating that revenue. Eliminating this “dead weight” could be the first step towards truly reforming college football.

 





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