Auburn University has announced plans to cut athletic spending by 10% across the department. The decision to slash program budgets comes on the heels of a fiscal year (2017-2018) in which AU athletics posted record revenues ($147.6 million), but watched its overall profit margin fall. With spending (+ $6.9 million YoY) far outpacing revenue growth (+ $109,000 YoY), athletic director Allen Greene made the call to “reshuffle the department’s financial priorities” – eliminating spending on luxuries with minimal return (think: hotel stays, meals), in favor of investments in “elite-level coaching staffs and current and future facility upgrades”; expenditures perceived to directly assist in the mission of winning championships.
Auburn isn’t the only SEC institution looking to reduce their cash output. The chief revenue officer at another southeastern conference school told JohnWallStreet that its athletic programs were now traveling commercial (or by bus) as opposed to on chartered planes (excludes football/basketball) and that the school had begun to cut back on costly dinners at high-end restaurants. Like the Tigers, “we’re just trying to be better stewards of the money we have recognizing that expenses have gone up.”
Howie Long-Short: Cutbacks in spending are unusual by college athletics standards – and almost unheard of within the SEC – so Greene’s announcement reverberated throughout athletic departments nationwide. The mindset within college sports has been “costs don’t matter – if it’s needed to compete or to attract recruits, we’ll figure out how to pay for it later – but those days are coming to an end.” With the money being spent on facilities and coaches spiraling out of control, most schools now have little choice but to cut corners elsewhere.
Stadium infrastructure aside, people are an athletic department’s biggest expense. The CRO we spoke to said that in addition to the highly-paid coaches (Auburn spent $26.2 million in ’18), his school carries upwards of 200 administrative staff members to support teams in 18 sports (Auburn spent $26.7 million on support staff in ’18). It seems that athletic departments could save hundreds of thousands of dollars by cutting back on the salaries of coaches for non-revenue generating sports, but “the money to build state of the art facilities has to come from somewhere. It’s not going to come from ticket sales or television – it’s going to come from donors; and it only comes from donors if they’re buying into the belief that the program is doing its best to compete for a national championship in the sport they’re supporting.” Hiring the best coach available is part of making them believe.
For that same reason, schools will play in post-season bowl games or invitational tournaments even if they’re going to be a loss financially. “It always come back to our donors not wanting to be left out of the national conversation.”
It’s unclear how long Auburn’s run of fiscal responsibility will last. While YoY revenues are currently flat (see: SEC Network maxed out market penetration), the conference’s broadcast deal with CBS expires after the ’23 season. With media executives projecting the value that deal to increase 5x (currently worth $55 million/year), the conference’s 14 schools should have an extra $15 million/year to spend. It’s highly unlikely that they’ll decide to simply bank that capital.
Fan Marino: Adding $15 million/year to the more than $40 million/year SEC schools bring in now will only further the gap between college athletics’ haves and have nots. The SEC CRO we chatted with believes that “there’s going to be tiers – even amongst the power 5 conferences. There will be a conference or two – perhaps the SEC and Big Ten – that keep the value of their television contracts rising and the other three conferences won’t be able to keep up with their spending levels.You’ll see some schools dramatically outspending others.” Perhaps, but as noted in Early Entrants Vol. XI, the formation of a Pac-12 and Big-12 alliance has been deemed very likely and there’s strength – and more importantly revenue – in numbers. Don’t count those schools out just yet.
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