Talk about lucrative scheduling. The Idaho Vandals will have some tough games in the years ahead, but they will be handsomely compensated for the bruises that they will incur. Idaho will play an SEC school in each of the next four seasons and are being paid between $850,000 and $1 million per game according to the Idaho Statesman:

  • 2012: LSU – $925,000
  • 2013: Ole Miss – $850,000
  • 2014: Florida – $975,000
  • 2015: Auburn – $1,000,000

While this might seem silly on a surface level, this arrangement between schools like Idaho and power schools like we have in the SEC is an extremely important part of college football. Let’s look at why it’s so important and then at how this will change in the years ahead.

In order to sufficiently look at this integral part of college football, we will walk through the following questions:

  1. Why do schools like Idaho travel to SEC schools to get destroyed on the field?
  2. Why do SEC schools pay huge money for cupcake home games?
  3. Do small schools rely on this revenue stream?
  4. Is this revenue source at risk for the small schools considering the pending changes in college football?

Before we get into the specifics, it’s important to note that this is a mutually acceptable arrangement. Both parties have their own reasons for these types of games and financial payouts. It is a natural, market-based response to the varying levels of demand when it comes to college football.

Why do schools like Idaho travel to SEC schools to get humiliated?

This is a fairly easy question to answer. They get paid a lot of money. As we already noted, Idaho is making nearly $1 million for each game in the coming four years against SEC schools.

Additionally, playing LSU is obviously a way to get some more attention around the country versus the typical WAC opponent. Games against powerhouse programs are a form of marketing even if it involves a 63-7 loss. Lots of kids aspire to play college football and don’t get recruited by the SEC programs; Idaho and other schools hope to recruit some of these kids.

What about the SEC  side of the equation?

Why do SEC schools pay huge money for cupcake home games?

This question boils down to the fact that big football programs want extra home games. Yes, schools want a few cupcakes for scheduling reasons so that they can guarantee a couple wins in conjunction with a tough SEC in-conference schedule. Also, a few cupcake victories may be the difference between going to a bowl game or staying home for the holidays.

But, it’s more about the financial benefits of extra home games.

Home games are big business for the big boys of college football. For major programs, home games can generate in the range of $4-5 million per game in ticket sales, concessions, etc. According to ESPN’s Kristi Dosh, Texas A&M generated $4.2 million per home game in 2010.

Paying $1 million to generate $5 million? Seems like a simple equation.

Moreover, Forbes has discussed on multiple articles (here and here) about the economic impact of local businesses that results from a college football game. For instance, the Forbes writer states that University of Texas home games generate nearly $10 million in local spending for each home game. Consider the restaurants, bars, hotels and countless other small businesses that benefit from such spending.

Let’s sum it up. Major football programs have much higher demand for football than schools like Idaho. They can meet this demand by paying a small school to come to town. It is in the interest of the major programs to have more home games.

Idaho Vandals SEC Games

Idaho's Stadium vs Alabama's Stadium

Do schools like Idaho rely on this revenue stream?

These cupcake games are crucial for the financial health of small athletic departments.

The Idaho Vandals’ football budget for 2012-2013 forecasted $5.1 million in revenue from football. Therefore, a single game that pays $1 million in revenue is nearly 20% of all football revenue. In the same budget, Idaho projected revenue of $440,000 in ticket sales – a major program like Florida pays the Idaho athletic department double their annual ticket sales for a single game.

Is this revenue source at risk for the small schools considering the pending changes in college football?

We’ll start with the answer: yes.

Let’s briefly go back and acknowledge that this current system of cupcake home games is a natural market-based reaction to some real differences across the college football landscape. University of Alabama has more demand for football than does Idaho. Idaho helps fill this demand by agreeing to travel to a place like Tuscaloosa in return for a nice chunk of revenue. It’s a win/win.

There’s no need for a legislative body to require schools to play X cupcakes and pay Y dollars for each one. The market sorts it out. Idaho and schools like it will agree to such a game if the payout is right. Big programs will pay as much as they think a home game is worth. The system works well.

Interestingly, the same media that is always championing the cause of the small football programs constantly criticizes the SEC for cupcake home games. The SEC always plays weak non-conference games is the consistent mantra of SEC-haters – which is ridiculous of course (look at the teams that Alabama, LSU, Georgia have played out of conference recently).

As we’ve discussed, if the SEC cuts off the cupcake games, it hurts the small “cupcake” schools like Idaho much more than the SEC programs. Of course, I don’t expect Joe Sportswriter to get into any degree of economics when penning his usual columns.

The structural changes of college football will impact this cupcake arrangement even more. Over the weekend, I talked about five consequences of the coming college football playoff. Consider this #6.

The basic gist of this article is that there is a widening spread between small schools and major football programs. The cupcake payouts actually help keep this spread from widening. These home game payouts are a form of trickle-down economics, if you will, on a college football level. The major programs have huge demand; thus, they get massive revenues from television contracts and home games. Some of this money is distributed to small schools via cupcake home games. Removing cupcakes may remove some incremental revenue from a home game for a major SEC program; but cutting off roughly 20% of the revenue of a small school like Idaho is much more detrimental. And the gap widens further.

SEC Scheduling

It’s only a matter of time before the SEC goes to a 9-game conference schedule. The college football landscape is encouraging such a move by placing more emphasis on strength of schedule with regards to the coming selection committee.

Additionally, Nick Saban has been vocal that an extra conference game makes sense in the wake of expanding the number of teams in the conference. An extra game, Saban argues, would help determine the best teams in the conference each year.

Lastly, and probably most importantly, a ninth SEC conference game is huge for television contracts. The additional conference game is the ace in Mike Slive’s hand. He will use it when it is advantageous to use it. He will use it to land a massive new television contract. He may even use it to launch an SEC Network – more inventory of SEC matchups could be important to filling programming on a new network.

An extra SEC game means a decrease in cupcake home games. An extra SEC game means more money for the SEC and less money for the little guys.

Extra: Comparing to the NFL

If the economics of college football is of interest, keep reading…

It’s interesting to take a step back and look at the model of scheduling in college football. It’s much more of a market-based approach versus the NFL. There are multiple parties acting in their own self interest in college football, where in the NFL, you essentially have one league controlled by a single group of people.

The ramifications of this are huge when it comes to scheduling. Because of this setup, the scheduling of college football games is able to response to actual supply and demand. Nobody denies the difference in demand for various sports across different cities and regions – compare the Florida Marlins to the New York Yankees, the Sacramento Kings to the Los Angeles Lakers, the Alabama Crimson Tide to the Idaho Vandals.

College football has the ability to schedule games according to these differences in demand in a way that is impossible in the NFL.

If the NFL scheduled games according to demand, then the Jacksonville Jaguars would have four home games instead of eight. If you took this further, it would allow teams with enormous demand like the Dallas Cowboys to pay for additional home games just like large programs in college do. Of course, this is not permitted since the NFL executives want a level “competitive” playing field, but there are ramifications of such a policy- namely, terrible attendance levels in multiple stadiums every Sunday.