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Screw the Math: UAB Can Afford Football, so Why Is It Choosing Otherwise?

UAB claims football is too expensive a program, but the report that the school is relying on to make that conclusion is full of bad math.

by Andy Schwarz
Dec 8 2014, 11:25am

Photo by Shanna Lockwood/USA TODAY Sports

When the University of Alabama at Birmingham announced last week that it will become the first FBS school to end its football program since the University of the Pacific dropped the sport in 1996, school president Ray Watts insisted that "killing football" was not his goal. Rather, the termination decision was made because the sport creates what Watts dubbed a "financial delta."

In other words, football is too expensive.

Read More: How Much Is a Degree Worth to College Athletes? Not Much

Many reports have pinned UAB football's pending demise on internal Alabama state politics—specifically, on antipathy towards the program created by the University of Alabama at Tuscaloosa, home to a far more famous (and successful) football team. Watts, however, insisted the move was wholly financial. At a somewhat contentious press conference, he cited a report from consulting firm CarrSports, which showed that keeping football would cost UAB $7.25 million in 2018-2019.

However, a closer look at the underlying numbers reveals that is almost certainly not the case. To the contrary, axing the sport is a much closer fiscal call than the CarrSports report suggests, and could actually cost the school money. Moreover, the numbers also show that no matter what happens at UAB, no one should expect a subsequent wave of FBS bankruptcies.

Here's why:

Writing Yourself a $4.4 Million Check Doesn't Cost You $4.4 Million

UAB is guilty of falling for one of the oldest tricks known to financial man: taking your own expense accounting as truth. How so? College athletic departments have two different kinds of expenses:

1.Those they pay to third parties, like when they give a coach as much as $7.9 million to go away.

2.Those they pay to other parts of the university, like when the football team is charged rent for its use of office space for its secretarial staff.

The first category is real. The second category is generally, well, fictional. Remember: no matter what price a school places on an athletic department service, if money is simply moving internally, then the university as a whole is neither richer nor poorer at the end of the transaction—no more than if you were to suddenly declare that you're a taxi service and start charging yourself $10 a mile for your morning commute.

The CarrSports report ignores this. By 2018-19, it estimates, UAB's athletic department would need to spend $4.4 million for 85 football scholarships (priced at $52,000 per year)—yet ignores that the school as a whole will lose the same $4.4 million when that check isn't written. Forget for a moment that said $52,000 is crazy high compared to the current price of $22,000-$35,000: what really matters is the actual cost to UAB, a school of 19,000 students, of having 85 scholarship football players on campus.

That cost is pretty close to zero.

Photo by Chuck Cook/USA TODAY Sports

Am I saying that a UAB athletic scholarship is worthless? No. Not at all. What I'm saying is that having 85 extra students on campus generates very little cost to the school. Remember: cost is not value. Cost is cost. Typically, the largest cost of an athletic scholarship is that giving one out takes away an enrollment slot for a regular student paying his or her own tuition—give away 85 slots to football players, and that's 85 fewer slots for paying customers.

Thing is, UAB is actively trying to grow its enrollment. When it adds 85 football players, no non-athletes are displaced, which means no revenue is lost. Now, you may be wondering: what about proposed, probably-forthcoming cost-of-living stipends for revenue sport athletes? Won't an extra $5,200 per football player cost the school something, like roughly $450,000 per year?

Yes. It will. in fact, that's my best estimate of what those 85 football scholarships will cost UAB. Only don't forget: big-time football teams always have walk-ons. Dozens of 'em. If 30 walk-ons choose UAB for the chance to play FBS football, they're paying about $15,000 each (per in-state tuition) into the school's coffers, or roughly $450,000 a year. So even with stipends, football is a break-even proposition.

Oh, and if some of those walk-ons are paying the higher out-of-state tuition rate of $20,000, UAB might even make money on the deal.

Pessimistic Pollyannas

But enough about (paltry) player costs. Let's talk projected revenues. Long story short, football makes UAB more money than the CarrSports report claims—and dropping the sport figures to cost the school more money than the same report predicts.

Start with this: in 2011-2012, UAB football brought in $4.3 million of outside money from ticket sales, athletic department donations flagged for football, television money from Conference USA, and the like. By 2018-19, the CarrSports report claims that the football program's take will rise to just $4.7 million, a tepid increase of just $400,000 over seven years.

This is silly. For one, FBS revenues as a whole have grown at a rate of 7 to 9 percent per year, rain or shine, for the last five decades. If UAB football grew from 2011-12 to 2018-19 at just four percent annually—half as fast as the historical trend—its annual revenue would reach $5.7 million, or $1 million more than the CarrSports report predicts.

More concretely, Conference USA is set to receive a minimum $15 million annual payout from the new College Football Playoff television contract, of which UAB is slated to receive at least $800,000 per season. That amount, all by itself, is double the seven-year bump predicted by CarrSports. Are UAB's consultants aware of the new playoffs? Do they not get ESPN?

Photo by Shanna Lockwood/USA TODAY Sports

Speaking of conference payouts, UAB received roughly $2.6 million from Conference USA in 2011-12. Football accounted for $1.2 million of that total. The CarrSports report correctly assumes that the school will lose that $1.2 million after dropping football—but fails to note C-USA's pesky rules requiring schools to have a football squad in order to participate in any conference revenue-sharing.

So the most likely scenario is that UAB has to leave C-USA and ends up losing out on that entire $2.6 million. To offset this, the school could join a non-football conference such as the Missouri Valley Conference, which gave its members around $650,000 per school in 2011-12. Or maybe C-USA will make an exception and let UAB stay, though it's doubtful the school would be handed an equal slice of non-football revenues if they became a junior member. Either way, that's another financial hit.

Similarly, UAB received $1.65 million in sports-related charitable donations in 2011-12, all of that given specifically for football or without being explicitly assigned to any other sport. The CarrSports report assumes that only $400,000 of that will disappear without a football team—a pretty optimistic view of how and why football boosters donate money.

Last but not least, the same report ignores the tangible benefits from football that are accounted for on the books of UAB departments other than athletics. Case in point? All of the stuff the school sells with the cool UAB Blazers dragon on it: hats, T-shirts, sweatshirts. As far as I can tell, the school doesn't track merchandise and apparel sales through its athletic department budget. That's not unusual—it's common to credit the university bookstore with those revenues. Still, that won't make the drop in football-driven, dragon-branded goodie sales any less real if and when it happens.

An Inconvenient Profit

Add the above up, and you get the following:

  • UAB football scholarship costs: overestimated by $4.4 million.
  • UAB football revenue growth: underestimated by at least $800,000.
  • Money UAB stands to lose without football via conference revenue-sharing and donations: $1.6 million to over $3 million.

Do the math and UAB appears to be overestimating the supposed $7.25 million cost of having a football team in 2018-19. In fact, it looks like UAB football is a break-even and/or slightly profitable proposition, without even considering merchandise sales or other, hidden sources of revenue. (For instance, one recent FBS entrant has a $2 million-a-year concession deal with Pepsi, yet credits those revenues to university food services.)

But wait: didn't UAB also claim that in order to continue with football, it would need to spend about $22 million on upgraded facilities in order to compete for recruits? And wouldn't that take the school from modest profits to swimming in red ink and wet concrete?

Well, yes. But only if you consider UAB's athletic department to be an independent business, and not a part of the larger school, like the math and English and history departments. As an institution, UAB brings in a little more than $1 billion annually. As such, a $22 million, one-time upgrade to its football facilities is little more than a rounding error. If UAB paid for the construction by securing a 10-year bond at three percent interest, the roughly $2.5 million annual payment would equal one-quarter of one percent of the school's annual revenues.

The point is that UAB can afford football. Any mid-major school can. The question isn't having the money or not having the money; it's making smart investments versus dumb ones. Is football a good investment? Go back to that $2.5 million. The resulting practice facility will help to recruit football players. Do those players—and a football team in general—help to recruit regular students? Remember, UAB wants to grow. Growth takes marketing. Football teams, especially winning ones, are highly-effective university marketing tools.

Say UAB wants to attract about 1,000 new students per year. If that's the case, the annualized cost of said practice facility is equivalent to about 100 new out-of-state students per year, just 10 percent of the school's overall growth target. I've heard that football is somewhat popular in the South. If UAB dumps football and emphasizes cross-country, will 100 kids from neighboring states find UAB more attractive than, say, FBS member Louisiana-Monroe?

UAB claims they can't afford football. As someone in sales might say, maybe UAB can't afford to not have football.

As UAB Goes, So Goes America?

Believe it or not, the rising tide of media-driven revenue in college sports really is lifting all boats. Yes, the University of Alabama in Tuscaloosa is bringing in far more football money than its sister school in Birmingham; still, revenues across the FBS spectrum have grown substantially. Since 2000, in fact, revenues for schools in the lower, non-power conference half of the FBS have increased by 180 to 330 percent.

Why does this matter? Because it puts to lie the ludicrous notion that if the Alabamas of the college football world keep making more and more money—and potentially spend more and more of it on elite players—UAB and its ilk will have to drop the sport. Nonsense.

We wouldn't expect a mom-and-pop store that has grown from $1.4 million to $6.5 million in annual revenues (which is what the typical school in the bottom quartile of the FBS has experienced) to go belly up just because a big box store across town grew from $24 million to $58 million (what the typical upper quartile FBS school has experienced) in the same time frame, nor would we expect the mom-and-pop to keep pace with what the big box spends on marketing and employee bonuses. Why would UAB, or any other mid-major football school, be different? The Blazers don't compete against the Crimson Tide or the rest of the SEC for the very best high school recruits; they compete against the rest of C-USA, against schools that choose to spend about as much on football as they do.

You don't need to outrun a hungry bear. You just need to outrun the guy sprinting next to you. (Moreover, in UAB's case, it should do just fine against its C-USA competition just by positioning itself as a great place to transfer in the event that Nick Saban decides you're good enough to break second-string on Alabama's depth chart.)

So Why Do Colleges Hide the Money?

While digging through the CarrSports report, I noticed something odd: although dropping football is being pitched as a cost-cutting move, UAB doesn't forecast any reduction in student fees for sports, nor any of the other in-house transfer payments that the school says "subsidize" sports.

If neither is happening, then why cancel football in the first place?

Here's a guess. If Watts had told the world that football was being canned because it was only earning $300,000 after expenses—or that UAB had determined that diverting resources from football to cross-country would be a better way to market the school against its regional peers—he would have been laughed out of his press conference. People might wonder if cancelling football was a messy, vendetta-driven political move, and not simply the sad, necessary handiwork of responsible public stewards.

Honesty is hard; waving a consultant's report that says "football loses lots of money" is easy.

On a larger scale, this same sort of hide-the-profits accounting is—in my experienceall too common in college sports. It's the kind of financial trickery that allows a swimming-in-the-black industry enjoying billions more in revenues than expenses to claim that more than 80 percent of FBS schools lose money on sports, the better to seek exemptions (via the federal courts or Congress) from the laws (antitrust or labor) that require all other entertainment industries to pay their talent free-market wages. It can create a feeling that this is a new wave of fiscal prudency or an apocalyptic trend when even the New York Times couldn't find a second example of a school planning to follow suit. Whether the school is trying to fool outsiders with its funny numbers or just managed to fool itself is hard to say, but one thing is certain: bad accounting drives bad decisions.

Case in point? Western Kentucky. Like UAB, it plays football in C-USA; also like UAB, the school once faced a question of whether or not sports were draining its coffers. The bookkeeping said yes—Western Kentucky supposedly was losing $1.5 million per year across all sports in the early 1990s. Only then the school did a pretty remarkable thing: it gave its own economics professors (Melvin Borland, Brian Goff, and Robert Pulsinelli) full access to its books. When the trio finished its own analysis, they found that the school was actually making a modest profit on sports.

Armed with this analysis, Western Kentucky chose to emphasize football and moved up to FBS, eventually reaching C-USA. Given the school's success, I suspect that administrators are glad they didn't cancel football outright— just as I suspect that UAB may wonder in a few years why their promised savings from canceling football never materialized, and where all their expected new students went.