Welcome back to Crimson Cast, GAIL and Clavio joining you. It is Saturday the 14th of June and hopefully all of you are surviving what appears to be monsoon season here in Indiana if you're living in almost any part of the state. Way too much rain so far this late spring slash early summer. Could just use some dry periods. That would be nice. Dry, warm like anything remotely summer like would be welcome at
this point. But no, it's pouring here in Bloomington today and looks like it's not going to let up for a little bit. So great, that's just what we needed. As I've promised many of you, we're going to continue on talking about the situation going on in college athletics with the house settlement and with the changes to the system that are being proposed. We're going to have some more present day items coming up here
relatively soon. We've got an interview with Ben Portnoy from Sports Business Journal coming up here tomorrow. We're also have some additional interviews. And we're going to dive into the NIL Clearinghouse now that we're starting to get a clearer sense of what the NCAA and its member schools are planning on doing with it. But I wanted to kind of take a little bit of a step back on this particular podcast and talk through how we got to where we are. This is a large topic.
Like this is a topic I could do an entire class on. I got a whole course, like a full 16 week course just on the development of college athletics from where we started in the 1800s to where we are today. We're not going to go that deep, so it's a little bit surface level, but I wanted to just give you some numbers and show you how we got to where we're at.
Talk through some of the items that I think are critical to understanding the current environment and perhaps trying to figure out where things are going. So that's what this show is about. If you're not interested in the topic, totally understand. But for those of you who are interested in the topic, I thought it would be helpful to just show you some representations of why we are where we are.
Explain some of the systems that are going on in the background, and maybe that'll help you to better understand why we're having all of these issues at this point. So we're going to dive into all that in just a second, but first, couple of housekeeping items. First of all, just a reminder that we are brought to you here at the Back Home Network by Home Field Apparel are presenting sponsor the place to go for the finest in college fashions, the softest fabrics, the coolest designs.
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All right, we're going to dive into talking about the college sports landscape by taking a step back and talking about how we got to where we are at. So I think, you know, one of the things that we really need to establish, I guess first and foremost is, is this idea of what we're doing here with
college sports. Yes, I'm going to use some PowerPoints for this, but I'm going to talk through the PowerPoints. So even if you're just listening on Apple or listening on Spotify as opposed to watching, you're not necessarily going to miss a huge amount. But I would like to show you folks some graphics and some charts to talk through what exactly we're looking at in the college sports landscape and and why things change so dramatically in the 21st century.
I do think it's important for people to understand that college sports have always been a business. And it's interesting to me because, you know, so much of the rhetoric around college sports, often pushed by colleges and universities themselves, has been around this idea that somehow college sports, there might be money involved, but it's not a business like it's education. And yet these have been run as businesses for decades.
And, you know, I think it's important that we just be real about what business everybody is in here. College athletics have a lot of reasons for being a business. I've gone into many of them on the show over the course of
time. And while there's certainly been an effort to establish and maintain an educational element, you know, the universities that engage in college sports are doing so because they get a lot of knock on benefits in terms of alumni service, in terms of drumming up donations, in terms of marketing and advertising of their institutions. And those are really important things to keep in mind.
And it's something we need to think about as we move forward is that, you know, as we see this tug of war over the house settlement over how players are going to get paid. You know, what we've seen essentially is, you know, for all of the talk and I and I think this is important to keep
in mind. You know, if you go back 10 years, maybe even less than that, you've got Jim Delaney of the Big 10, you know, talking about how paying athletes would be the effective end of college sports or some such quote. You've got coaches saying, well, if players ever got paid directly by our schools, I would I would retire. I would go down to, you know, to or just stop coaching all together or go down to the Division Three level. And I'll note that none of those things actually happened.
Everybody's still in the game. You've seen one or two people exit stage left. Tony Bennett on the basketball side, haven't really seen any football coaches. Nick Saban does not count Nick. Nick Saban was kind of at the end of his effective career life anyway, I think as a football coach. But all of these proclamations that we heard throughout the 20 tens about how athletes just couldn't be paid by by colleges and universities, and that was just completely contrary to the model.
And yet with this house settlement, we've got schools now willingly saying, OK, we're going to pay 20 and a half, $1,000,000 a year to our athletes and we're going to split it up along revenue lines. It, it, it essentially, as we said at the time, me and those of us who were were talking about college athletics paying athletes did not 'cause college athletics to disappear. In fact, college athletics from a financial perspective has never been stronger.
And that I think is really kind of a key element because while college sports has always been a business, the inputs and outputs from a revenue perspective were limited in scale. You know, so much of it was basically tied to ticket revenue and then occasionally media. And so you'd have schools who would build these huge cathedrals of college basketball or, or college football. And the ticket revenue largely dictated how much money they were making.
And, you know, schools like Michigan and Tennessee and Ohio State and a lot of schools in the South built really big football stadiums and just made more money than schools like Indiana and Northwestern, who, you know, didn't have the same level of support at the football side of things. And again, why are they doing this? You know, and this, this to me is one of those things that
carries through still to today. It's this idea that if you're a college or university, you're in competition with a bunch of other colleges and universities. Well, what are you in competition for? You're in competition for enrollment. You're you're and, and even more so now you're fighting over getting students, you're trying to get higher caliber of students or you're just trying to keep your enrollment at a high level. Well, how do you mark at a university?
You can mark it through traditional means. You can, you know, you could have rankings in U.S. news and World Report. You could take out magazine ads or television ads as you see on, you know, during college sporting events, you know, touting your academic achievements. But realistically, it's the branding, It's the colors, it's the logos, it's the mascot.
And those are most present and most prevalent nationally during the NCAA tournament, during bowl games, during the College Football Playoff, during Saturdays, throughout the course of the fall. When you've got college football as the biggest driver of ratings, you know, other than the NFL that you'll see out there in television. These are all the things that factor into this idea of it's a business. And here's why we engage in
college athletics. And here's why we need to keep this going and why we need to continue to pour in resources and continue to consolidate revenue and generate more revenue. So you got all of that as a baseline, and I think it's important to understand as I go to this next chart, the value that advertisers find in college sports. This isn't just colleges and universities saying, oh, you know, we need to be prominent in the national landscape, so we're going to have college athletics.
This is also television networks saying, you know what? Advertisers love buying commercials and buying sponsorships during college athletics tournaments, whether that's the College Football Playoff or whether that's March Madness. Why do they love doing that? Well, it's because they get an audience that's very valuable to advertisers. Sports audiences in general are very valuable to advertisers because they're largely male. Males tend to buy more things than females do, just from a
consumer perspective. Generally, it's right in the sweet spot of the demographics. What you want in terms of age, you're talking about people aged 18 to 49. That's your prime purchasing demographic for consumer goods and for a variety of services. You think about the companies that advertise during sporting events in general, a lot of a lot of beer companies, a lot of soft drinks, a lot of snack
foods, a lot of airlines. You know, that audience is very valuable to advertisers and they tend to congregate around sports. College sports has an even greater item that goes along with that, which is that much like as we saw in NASCAR 20 years ago, people who are fans of teams when they're watching the games tend to get more highly identified with the advertisers that are advertising during the games of their favorite teams.
The effect is not as great with say the NFL or the NBA, but it is pretty sizable with March Madness and with the college football player. So you look at this chart that I've got up here and you can see like back in 2018.
So we're talking about, you know, 7-8 years ago at this point, March Madness was the second largest advertising spend on a national level for post season sports in the United States. The NFL was first, you know, buying, you know, largely buying Super Bowl commercials, but just buying inventory in general generated about $1.7 billion for
the NFL. But March Madness generated about $1.3 billion more than the NBA postseason did during that time period and significantly more than Major League Baseball. And this was right after the College Football Playoff was started. Even at that point, it had grown. That was with three games, you know, 300 and some $1,000,000. That's grown significantly since then. All of this really ties into this idea of growth in college sports in terms of overall
revenues. And there's this fascinating quote that I found when I was doing research on this, and I'm just going to read the quote that I've got up on the screen right now. Football is the main reason top tier college programs have increased the revenue over recent decades at a rate that would make blue chip companies
blush. In constant dollars, meaning adjusted for inflation, you know, So what would a dollar in, you know the in 1970, if you do the math and, and try to calculate what a dollar would be here, like maintaining that over the course of 50 some years, you know, in constant dollars. The median Division One athletic department revenue in 1970 was 6.5 million. In 2012 it was 56,000,000.
So you're talking about a really significant increase like, you know, not quite 10 times, but 9 * 9 1/2 * a revenue increase over what essentially was about a 40 year period. And that's only continued to grow as we'll see here in a little bit when we look at overall budgets and revenues in
college sports right now. So you're dealing with a college athletic system, which if you'll recall was started in the late 19th century, between 1870 and 1900, and then kind of grew into a form that we recognized as, you know, modern and present day post World War 2 and, and really in the 1970s was when it
evolved. But the revenues have kept going up. And so you've got a system that was devised around amateurism and around, you know, not compensating athletes and treating athletes as students. And at the time that that was set up, it made sense because there wasn't that much money in the mix. You didn't have coaches making that much money. A lot of your facilities were, you know, public works projects or were things that were built very cheaply with very few
amenities. But that's all changed, and the money has continued to rise. And the fundamental problem that college sports has been facing for really the last 15 years is a complete unwillingness to change the system that was created in the immediate aftermath of World War 2, when the financial structure was completely different. So looking at this chart that I I've called up here, you can't really see it too well. The grids got a little bit
smushed. But if you look at television revenue from the NCAA college basketball tournament from 1980 to 2013, you can see just this almost exponential increase, you know, almost a diagonal line that really kicks in and and gets huge advances around the late 1990s, early 2000s as revenues continue to climb, coming largely from media entities. And, and this really I think, is
the key point. Like the starting point in this chart was at a time when the NCAA Tournament was still on NBC and NBC, it would carry select games. They would broadcast it like pretty much any other of their sports properties. CBS acquires the NCAA tournament rights in 1982. And of course, famously, the first year that they had it, that was the year that Michael Jordan hits the shot to beat Georgetown to win the national
title. CBS and the NCAA partner to essentially brand this as March Madness, and they build this entire advertising and audience ecosystem around the NCAA men's basketball tournament. And it starts to generate significant revenues better than passed down not just to the teams in the tournament, but college athletics in general.
What happens during this time period is that colleges, universities in the NCAA are looking at all this money coming in and they're saying, you know, wow, we now we have the capacity to do a bunch of things we haven't done before, but it requires us to maintain control of those revenues. So, you know, rather than look at this and say, wow, we're generating a lot of money, we should make sure that athletes
are taken care of equitably. You have decisions being made in the 1980s saying, no, we need to keep those, you know, that money for ourselves. The amateur system suddenly becomes the most important thing for pretty cynical reasons. Not oh, this is the best thing for athletes.
It's really there because it's the best thing for schools because it allows them to essentially reap all the benefits of this new money coming in from television partners as the television partners are gradually learning how valuable the property college sports can be.
You know, this had happened in other areas like the NFL to some degree already gone through this process a few years earlier as that became a a place where, you know, television companies looked at it and said, gosh, people really love the NFL. They really love these broadcasts. We can charge more for these. And so that's really where the cult of, you know, how much Super Bowl ads cost companies to advertise on. That's where that comes from it.
It's not always been this way. And and this is something I think we need to keep in mind just with sports in general. Sports has not always been that popular on television. Sports was often times relegated to the sidelines, no pun intended, when it came to the way that television networks tried to go about their business. You know, because you would look at sports fans and they were kind of this odd group of people. It's just like combination of die hard fans and gamblers.
It wasn't necessarily a group of people that you looked at and said that's the the primary audience we're looking at.
I mean, famously there were NBA Finals games that were on tape delay in the early 1980s because, you know, CBS would get better ratings and therefore better advertising dollars off of showing Dallas or I forget if Dynasty or Knox Landing was the other show on Cbsi think it was Knox Landing, but that was a better option for the networks in the early 80s because they hadn't really figured out that if you.
Took sports seriously and put it in prime time and, and took care of it on the weekends and, and put it in good spots. You could get not just great, you know, ratings numbers, but you could get a demographic that you weren't getting showing night time television dramas. And, and so this starts to happen at the college sports level almost at the same time that it happens at the professional sports level.
The difference being that at the professional sports level, there are unions, there are players unions, labor unions who are looking at this, looking at these revenues increasing and saying, hey, wait a minute, we deserve some of that money. There's nobody to speak out for college athletes during this
time period. In fact, not only are college administrators refusing to speak out in favor of athletes because they have a vested interest in keeping the money in house, but media end up being very complicit in painting a picture of athletes needing to be protected from money. You know, this was the narrative that happens all throughout the 1980s about, you know, agents being the real evil and, you know, players being talked into leaving school early and going
pro. If this was the real evil and things. I mean, the whole plot of Blue Chips is essentially college athletics used to be pure and then money came in and destroyed it. That's, that's the the subtext of the whole movie essentially.
And it's just a fundamentally different type of mentality than what you get at the professional level where there's an acknowledgement in some sports, a very begrudging acknowledgement that, yes, we're going to have to probably share these revenues in one form or another anyway as we move
forward. If you look at TV revenues in the Big 10 just over a period from 2013 to 2018, as you can see up here on the screen again, it is almost a direct diagonal line, like almost an exponential growth of of television revenues just coming into the Big 10 conference. Same thing was happening with the SEC. So what does all that lead to, You know, in this world where you've got college administrators and coaches saying no players shouldn't be paid.
That would destroy the system that we have. Who is getting paid? Well, it's college coaches because you got to put the money somewhere. Because one of the things that I think is fundamentally misunderstood about college athletics is that college athletics departments, as I've said on the show before, are not businesses. They're not profit centers, at least not yet. They're some of them may become,
that's very soon. So as a result, if you make 50 million extra dollars over the course of a 10 year period of time, you got to find a way to spend that money because you're not going to be able to keep it in reserve. That's not the way that the budget is set up. So a lot of that money goes into coach's salaries.
You can see this quote. According to research by Charles Klopfelter and The Economist at Duke, the average compensation for head coaches at public universities, head football coaches, which at the time was more than $2,000,000, has grown 750%, adjusted for inflation, since 1984. That's more than 20 times the cumulative 32% raise for college professors. So over the same time period, college coaches salaries went up 750%.
And the average college professor who's theoretically in the same business, if you take the schools at their word during this time period that they're engaged in education, the college professor salaries went up 32%. That's an illustration of something amiss in the numbers and something amiss in the, the economic evaluation of what's going on. And really what it is, is we've got all of this money, we have to keep it within, you know, the, the, the non student ranks of college athletics.
What you end up with is coaches getting paid, facilities getting paid for, assistant coaches getting paid for. And that's the bubble, essentially that's occurred within coach contracts over the course of the last 25 years. That's where it comes from. All of this money is generally coming from what we would, you know, essentially call media revenues. And as I mentioned earlier, college football's the second biggest audience draw in television right now. In all of television, the NFL is
first. And the NFL ends up, you know, comprising like 75 or 80 of the 100 most watched television programs in the entirety of the United States in any given year. But college football often times occupies the next 10 spots. And then, you know, sometimes they'll be higher ranked.
You know, college football in general is a tremendous audience draw and what you get out of that if you're a television company is you get higher levels of brand search and activation, which is what I was talking about earlier. So not only are your advertisers getting a better demographic, they're getting a more active demographic.
You've also got some different approaches that have been taken by different conferences about what the best way is to go about dealing with all of this money and, and how to handle the television, you know, circumstances that are generating the revenue in the 1st place.
So one of the things that I think it's important for people to know about the Big 10 is that back in the mid 2000s, right of 2005, 2006, ESPN goes through this process where they're trying to get the Big 10 to sign on to essentially become the house conference, so to speak, for their new channel, for ESP NS, new channel ESPNU. And they want to use the Big 10 essentially as cover for trying to get a bunch of cable companies to add ESPNU to their packages.
And the idea is, oh, we'll put all of your games on the ESPNU. People will be forced to subscribe because they're going to want to get your games. Big 10 was like, well, that doesn't seem like a great deal. That almost puts us at a disadvantage in the marketplace. So the Big 10 ends up going and partnering with Fox and they craft the Big 10 network. And the Big 10 network very uniquely is actually part owned by the schools in the conference.
So, you know, when you see numbers coming out about how much money the Big 10 is making in media revenue, it's a little bit of a different calculation because the Big 10 has actually created something in partnership with Fox where the Big 10 is part owner of the network rather than just being cut a check. The SEC went the other direction. The SEC partners with ESPN and Hearst.
Those are the partners for the parties that own the SEC Network. And then ESPN cuts them checks based upon the amount of money that ESPN has made. And it's a guaranteed number every year. But what we're starting to see now is that the Big 10s model, where you combine the Big 10 Network with all of these national broadcasting groups, Fox, CBSNBC, they're able to generate more money now on a yearly basis than the SEC is.
This is actually one of the reasons why if you've been following along with the College Football Playoff debate about who is supposed to get into the College Football Playoff, whether there's going to be auto bids. There's been a lot of arguments back and forth about the SEC wanting a 5 + 11 model and the Big 10 wanting automatic
qualifiers. A lot of it comes down to the idea that the SEC only plays 8 conference games, whereas the Big 10 plays 9, the Big 12 plays 9, the ACC plays nine, and the Big 10 saying we are not going to agree to a fully at large focused or largely at large focused College Football Playoff set up unless the SEC moves to 9 conference games.
But the reason the SEC doesn't move to 9 conference games is because they want ESPN to pay them more money for that extra conference game and ESP NS. Like, no, we really don't want to do that. And technically, according to the contract, we don't have to. So there will likely be a
negotiation on that front. Or I think we're going to see some problems in the College Football Playoff because I think rightfully so, the Big 10 looks at this situation and says we're not going to put ourselves in a position where we're supposedly comparing apples to apples on playoff resumes when the SEC is playing one weaker competition a year or at least one out of conference competition a year more than the Big 10 is.
So, but all that really goes back to the financial models that are set up and the way that these things are working. Like the Big 10, when they added a 9th conference game, they looked at it and said this is actually good for us because as part owners of the Big 10 Network, where the bulk of that inventory would go, we're actually going to make more
money off of that. Whereas the SEC to add a ninth game would have to go back to ESPN and essentially renegotiate the deal, something that ESPN is not really that excited about doing. But one of the things that we're also seeing in this mix is, as you know, realignment has occurred. And I, I really should do a whole podcast where I just talked through the entire history of realignment because there's some surprising stuff in
there. But obviously we've been paying attention to what's going on with the ACC. You know, Florida State sues the ACC to try to get out of the agreement that was signed between the ACC and ESPN.
Clemson does the same thing. There are arguments through that whole process where essentially we can't financially compete at the level that we feel we're at nationally because we are handcuffed by this deal with ESPN that pays an artificially low level of money because it was signed with a 20 year term back in 2016. We feel like, you know, we, we're going to have to sue to get out of this.
Now, what ended up happening was Florida State and Clemson both dropped their lawsuits in exchange for differential payouts, where they're going to get significantly more money than other schools in the ACC. That'll keep them there in the short term. Chances are they're still going to find a way to get out of the ACC around 2030 or 2031 because that's when the next negotiation of television rights comes in
for the Big 10 in the SEC. And again, a lot of this really does come down to an idea of these schools are not just right now fighting for money, they're also fighting for prominence. And there's a couple of different ways that that is weighing into this equation when it comes to player compensation and nil and all of those items. Because you've got schools who are, on the one hand, trying to control costs and trying to regulate a market that really doesn't have a legal precedent
for being regulated. And I'm going to talk about that in a little bit. But then you've also got schools trying desperately to not get left out in the cold and willing to take lesser deals in order in some cases to stay at least somewhat in the limelight. And so, you know, there was a lot of talk about, oh, we're going to just end up with a super conference and a bunch of schools are going to get kicked
out. And, you know, we heard a bunch about like, oh, Indiana's going to get kicked out in favor of, you know, having a, a smaller conference that's just the Super teams that's less likely to happen. You know, and actually, I think Indiana's in much better shape financially than most people give it credit for. So they would not be first on the chopping block like Purdue, Rutgers, Northwestern, they're in much bigger trouble with
these things. But the, the other aspect of this that I think is worth noting is that there are going to be some moments as we go through these next sets of negotiations where the larger brands, as we're, as we've seen in the ACC, as we saw in the Big 12 with Texas and Oklahoma, where they're going to say we deserve more money than the teams in the conference that are not generating the, the revenue, the ratings, the things like that.
They if you're not bringing in money, you shouldn't be getting as much money in return. And that could be the biggest destabilizing force that we see in college athletics in general, because they're going to be schools who are going to be willing to take that deal because the alternative will be getting, you know, removed from your conference.
But there's going to be schools that are kind of in the middle of things who don't want to be a a second class citizen financially in their own conference. And I'm curious to see, you know, how that process goes. You at this point really can't afford from a marketing perspective and from a reputational perspective, if you're a college or university, to be left out of a major
college athletics conference. That's why Stanford and Cal moved heaven and earth behind the scenes to get admitted to the ACC. It's why SMU was willing to forgo media payouts for nine years or whatever the term was
to get into the ACC. You know, it was like, we have to get on this boat because if we don't, we're going to end up like what happened with Oregon State and Washington State, who really did get out of left standing in the game of musical chairs and now find themselves in a position where they don't really have a great way of marketing themselves nationally.
Because I mean, realistically, if you, if you lived in Indiana, if you lived in Tennessee, if you lived in Virginia, like what occasion would you have other than occasionally throwing on like a a basketball game or a baseball game to have heard of or think about Washington State or Oregon State just doesn't happen that that much. Like there's not a really good
reason for that to resonate. And yet most of these colleges are competing at least at a regional level, if not a national level for students, you know, for for all kinds of different things that they they have to have that that prominence in order to maintain a position in the national conversation. Sports is the easiest way to do that and the probably the most effective.
So anyway, that's going to be something worth keeping an eye on. And that is how far the industry of college sports has evolved and changed since just 2000, let alone 1946 when, you know, we kind of restructured college athletics into what we currently see now on the player payment front. I've talked about this before on
the podcast. But I think what we're seeing right now with essentially major college athletics capitulating to the courts about paying athletes, you know, this was something that we talked about for years prior to the NIL situation unfolding in 2021. And it was this idea that his revenues continue to rise. Eventually there was going to be a break point where, you know, athletes and lawyers and lawmakers, we're going to look at it and say this is not right.
Like this does not pass the the smell test in terms of how you are claiming the money is going and what is needed for versus what's actually occurring. Anytime you get this huge growth in revenue, you start to get people who want the revenue besides just the people who claim that it's theirs and they should be able to keep it. And So what I look at within this context is very similar to what happened with Major League Baseball in World War, post World War Two.
You have this big expansion of interest in the game. You get, you know, new markets being opened up. You get the West Coast suddenly hosting Major League Baseball teams. You, you've got a real interesting development just in terms of like the growth of the game and the growth of interest in the game, not just in person but also increasingly via television. Baseball during this time period. And it and again, baseball by that point had been around professionally for about 8090 years.
Had this thing called the reserve clause. And the reserve clause essentially said that if you got cut by a team, you could go and sign somewhere, but a team had the right to essentially sign you to one year contracts in perpetuity, whether you agree to it or not. They also could trade you without any input. Like you. There were no no trade clauses. Like none of that actually ever. None of that existed during this
time period in baseball. And players started to agitate against that because they're looking at the increasing amount of revenue that their teams are making. And they're like, why are we not being paid at a higher level? And it's because they had no leverage. So you start to see lawsuits around this idea of players should have their own, more of their own determination about where they go and what they do. Curt Flood's lawsuit happens
during this time period. And so this period from like 1968 to 1976, you've got this back and forth. You've got the court's ruling in favor of Major League Baseball. And then you've got the courts going back on it and saying, no, actually what we're seeing here is a violation of, of Labor law and a violation of, of, you know, what works from a
contractual perspective. And you end up with a situation where baseball very arrogantly refused to ever sit down at the negotiating table with players in any meaningful way. And then the courts essentially forced baseball into unrestricted free agency. And that caused them to have to completely redo the rules on the fly.
And that ends up in a situation where by the 1980s, you've got illegal activities, literally illegal activities happening with Major League Baseball. You've got collusion. You know, there was this one summer in the 1980s where Major League Baseball owners essentially all got together and said, don't offer money to free agents.
We're going to keep free agent levels low because, you know, when a player decides they're going to become a free agent, we don't want them to have anywhere else to sign with and they'll have to go back and sign with their original team at a deep discount from what their market value might have been. This was discovered, went before a federal arbitrator, and the arbitrator ruled that, yes, Major League Baseball was
colluding to keep salaries down. That process lasted about 15 years and ended up with the system we have now eventually where, you know, baseball players are pretty well compensated their their guaranteed contracts. They get a certain percentage of overall revenues. And teams are actually incentivized now to spend a significant amount of money with, you know, a luxury tax
essentially on top of that. But if you're willing to pay the luxury tax, these are the things that that happened organically over time. But all of it goes back to Major League Baseball being in a position where they would refuse to deal with athletes, and they've ended up losing in court
and have had to scramble. And I think you can make an argument that, you know, for the longest time, the Major League Baseball players union was probably the most powerful union in professional sports because they were able to force the issue time and time again. And Major League Baseball owners
really weren't on the same page. That's kind of what you could potentially see with college athletics, with the notable exception that you're dealing with a much younger group of athletes here at the collegiate level. But a lot of the legal issues aren't that terribly different from what we saw during this time period. So I think this is a helpful example for most people to
understand. There's value, I think, in coming to the the bargaining table, working out a reasonable agreement versus having the courts force an agreement on
you. Because if you're the business organization, in this case the NCAA or the OR the conferences, or in the case of Major League Baseball, MLB itself, when something's imposed upon you, the terms of the deal are almost never as good as when you are able to sit down with the parties that you're supposed to be dealing with and come up with something worthwhile. A lot of this then goes down to college athletics budgets and where they're at right now.
So I wanted to show you a couple of slides here. The growth of revenue within college athletics has been pretty intense over the course of just the last five or six years. So if you go back to 2019. And you look at the amount of money in college athletics budgets, Ohio State at the time had the biggest athletic budget in the country, 220.6 million. Texas was second at 204. Those are the only two schools that it eclipsed the $200
million mark in revenues. Michigan was third at 190.9, Alabama with $185 million budget, and then Texas Tech at 169 in 2023. Just four years later, Ohio State goes up by over 25,000,000. They're at 251.6. Texas is at 239.2 million, Alabama's at 2.214, point 3, Michigan's at 210.6, Georgia's at 203. Since then, we've seen even
greater growth. I mean, there was a story that I was reading the other day that Tennessee who back in 2023, if you go back and look at the numbers, Tennessee was 18th in the country with athletics revenues of 154,000,000. Tennessee just reported that for fiscal year 2024, Tennessee athletics had $234 million in total operating revenue and that was a $32 million increase over what they had reported the
previous fiscal year. So this is, you've seen just an immense amount of growth and most of it is coming through media deals. And you're starting to see a lot of these athletic departments just kind of fully professionalized what they're doing and how they're doing it. And also going to their institutions and saying we need to get some additional money to do what you need us to do to market the university, to service alumni, to generate
donations, so on and so forth. So all of this is happening simultaneously with now the requirement in the house settlement that you need to come up with essentially 20 and a half, $1,000,000 to pay athletes if you're going to compete at the revenue share level. So in addition to needing more money for coaches, needing more money for facilities, you now need money to pay athletes. And that's where a lot of these advances in revenue are going directly to.
And even with that $20 million extra is a lot of money. I mean, that's 10% in some cases of just the top budgets. And when you get down to even even like, you know, if you go back to the 2023 numbers, I'm actually going to stop sharing this and, and share these revenues and expenditures. Let's see if I can get this up here. There we go. So if you look at this was this, this report was from 2024, but it's actually the 2023 budget
numbers. You know, if you look at the numbers that you're dealing with right now, if you get down to say the 20th ranked teams, you're talking about, like Wisconsin's a great example, $150 million athletics revenues.
If you have to suddenly pay 20 and a half million dollars, I mean, that's, that is what 15% of that revenue structure you have to come up with again, or you have to cut a bunch of things underneath the surface that like, I don't think people understand the math involved here. But you don't just generate 20 million extra dollars out of thin air. It's got to come from somewhere.
And a lot of it is coming from a gradual pullback in certain areas that college athletics has kind of prided itself on up to this point. If you look at where the money's going right now, if you go back to 2005, the a, a plurality, a very small plurality of the money was going to athletic scholarships. So about $736 million of college sports money was going to scholarships, followed by coach's compensation, which was about at the same number.
And then administration and support staff compensation was in 3rd. By the time we get to fiscal year 2018, coach compensation had shot up to $1.9 billion per year. Athletic scholarships have dropped below administration and support staff. So you're dealing with the situation where yes, you're still spending a lot of money on athletic scholarships, but you're spending a significant amount of money more on coaches and the administrative structure that you need to run this multi
billion dollar business. I'm going to stop here for a second and and a couple other things I wanted to note before I dive into the last part of this. It's important to understand that college athletics has always rested on this idea that there are rules, But most of the schools that are competing at the highest levels are not paying attention to the rules, knowing that there's not going to be a huge penalty delved out
to them in most cases. And that ultimately, if you know what you're doing, it's very hard to police violators of the rules. And this is where, you know, I think it's easy to, you know, and I've done this myself on the show before, get very frustrated with coaches and, you know, reporters who are acting as the the mouthpieces of coaches complaining about all the rule breaking and all the tampering and all this and that. And then no names are actually named. And, and it's, it's a very
frustrating system for fans. It's a very frustrating system for outside observers because it's clear that people want to complain and make excuses for when they're not winning because other teams are cheating. But there's never any real effort by the system or by the schools to do anything about the cheating or to codify a system where the cheating would be faced with like real, actual penalties.
And So what that ends up doing is creating, you know, historically in college sports, an underground marketplace where there's money being paid out to athletes and everybody knows it. If, I mean, anybody that's around college athletics knows that that's taking place. You know, and one of the things that's been brought up here recently, for all the talk about how a playoff would destroy competitive balance, again,
false. But that was the argument for many years that you can't have a College Football Playoff because that will that'll hurt competitive balance. And, and this and that you can't pay athletes because that'll hurt competitive balance. When the shackles came off of the NIL payment structure and teams could suddenly start paying players their market value, suddenly you started seeing a lot of teams competing at high levels that were not competing at those levels before.
You know, and in football, I think it's been a very interesting thing to watch because the hegemony that the SEC has had for years in college football, you know, the, the marketing was like, oh, it just means more, which is crap. That's that's, that's a ridiculous cover story for the reality that, you know, schools in the SEC are generally willing to pay a lot of money to get the best players to play for them. And it wasn't just the SEC. Ohio State's thrived on this
very thing. Michigan's thrived on this very thing. There, there was a essentially a hegemony of schools that had figured out the system, knew I was going to go and those schools jealously guard that particular set up because they don't want anybody else threatening their access to talent. It's why when you see like Ole Miss going in and signing players immediately, you're starting to see stories about, oh, this guy got paid this amount of money by this school
or this booster. There's a it's, it's almost like an allergen gets into the system if the money is threatened by an outsider trying to come in. It's why to some degree there was such a backlash against Indiana football. Indiana football finally starts paying, you know, being able to pay players, being able to, you know, to, to devote resources to coaching and whatnot. And no one in the old guard wants to see Indiana football in the mix.
That's the kind of thing that's going to be interesting to watch as we move forward with all of this because it's not just about finding money to pay athletes, but it's also about a power struggle in college athletics where you've got this built in hegemony of of schools that does not want to let other schools have access to the competitive aspects of things.
And it's really one of the primary differences between professional sports and college sports where at the professional level, you know, you have varying levels of this. You have small market teams and big market teams. But the, the, the sports that are thriving the most right now, the NBA, the NFL, like they have a system where it can be
equitable enough. And you see this in the NBA Finals this year where you have two small market teams who used different methodologies to take advantage of the current rule set, were very smart with their money and are in the NBA Finals in the NFL. You know, it's how smart can you
be with the salary cap? Yes, you've got some big market teams that are playing, but you've also got smaller market teams that have won Super Bowls or gone to Super Bowls because everybody's essentially in the same business there. And there's an acknowledgement that they're growing overall revenues and that the competition aspects are more about how good am I at doing XY and Z under the rules of collective bargaining in the salary cap.
That's not really how colleges and universities think about it. You know, everybody wants to market their schools. Everybody wants to put themselves in a position where they are, you know, getting thought of as a place for, you know, a high schooler to go and attend college. Everybody wants to get their alumni satisfied. But there are also schools for whom winning at college sports is very important from a cultural perspective, from a
pride perspective. And in many cases, it covers up a lack of other accomplishments that that institution might have. You know, a lot of what we see in the SEC like there is a civic pride, but there's also the the idea that a lot of the SEC schools are not great academic institutions just by rankings. So how do you attract students otherwise? Well, you attract them by saying, hey, we win at football. We win increasingly now at
basketball. And whether or not you want to acknowledge that those things should or shouldn't matter in college choice, the reality is they do, you know, students want to go someplace where it's fun. And college sports is about the most fun thing that you can think of for a large number of people that are going to college. Not everybody, but a large number of people. So that is the kind of thing that you have to factor into all
of this. And I think it's important to keep in mind that the amount of money that you're generating and the amount of money that you bring in is increasingly A proxy for how important or not you are within the college sports landscape. I want to go back to those revenue numbers again because I think it's really interesting looking at, let me get this up here. There we go. Sorry, we need to let me remove this for a second. There we go.
If you go back a couple of years ago and you look at the revenue processes, you know what's interesting is you go down the list of who's generating the most revenue, the top ten schools in 2023, Ohio State, Texas, Alabama, Michigan, Georgia, no surprises there, right? LSU, Texas A&M, Florida, Penn State, Oklahoma, no surprises there. You get down into that next 10 and it's a little surprising, at least to my eye. You got Auburn, not a surprise. Michigan State and Indiana,
surprise. It is a bit of a surprise that both of those schools are there, but that's a byproduct of A, being in the Big 10 and B, in Indiana's case, having a, a nationwide network of people who are very interested in watching IU athletics. You know, the Virginia, a bit of a surprise, but some of that with Virginia and Florida State is a little bit misleading because there's a lot of university appropriations coming in to help with their budgets and their overall revenue streams.
Kentucky, Clemson, Tennessee, Oregon, Arkansas, and then Iowa in 21st. You know, so what's interesting is like a Nebraska or a Washington who you would expect to maybe be a bit higher. They're a bit further down the list. And as you continue to go down the list, like North Carolina, a school that really feels like it should be very prominent is actually in the 30s.
So the the reason I bring all of that up is if you're an Indiana fan looking at the landscape, I think to some degree Indiana's lack of success in football have made it look like a weak school from a revenue perspective and a school that doesn't have a lot of pull nationally. And yet the actual revenue numbers paint a different picture all together.
Indiana's got a ton of money, Indiana's got a ton of of, of resources available to it. It is just kind of now for the first time maybe ever, truly taking football seriously. And a lot of the things that you're seeing at IU are a restructuring of the culture of the business of IU athletics around that reality. And you see the dividends. I mean, we know we as much as that first year with Kurt Zignetti and the staff were was amazing.
You're seeing recruiting payouts above and beyond what we're very, you know, what we're used to seeing with IU athletics in football. And a lot of that is just simply the shift in mentality that they went through first with, you know, the the way that they handled the Tom Allen contracts after they went to the Gator Bowl and after the 2020 year.
But continuing that on, not just shrinking into the background once the Allen experiment failed, you know, in 2023 like that, that's a really big difference. And and it's important that Indiana's doing this at this time. I think you could make an argument that Indiana elevating itself into the upper echelons revenue wise of college sports came like at just the right moment. Because you can look at other schools and you know, like Purdue's a great example.
In 2023, Purdue's revenues in athletics were $115 million, Indiana's were $166 million. And if you go to what the report was for 2024, Indiana's revenue in 2024 was 173.5 million in athletics revenues. You know, and that included a $3,000,000 increase in meteorites, a $4 million increase in donor contributions. There was direct institutional support. Certainly that was pretty sizable. But that's kind of the norm, as we're seeing now in a lot of college athletics.
So there's an acknowledgement here, even if you aren't reading about it much or aren't noticing it. IU has looked at this landscape and said like, this is essentially A proxy war around revenue. We can't afford to not be engaging in that war because we're going to end up on the outside looking in and and that's not something that anybody's looking for. If you look at what Indiana's, you know, overall setup looks
like. Let me, I'm going to, I wanted to just kind of show you how much this has changed over time. Let me let me remove that and share something else because I think this is again important for people to get a, a sense of, you know, how exactly this is gone. All right, let me present here. Let me go to this. So if you look at Indiana's revenues and and how they've changed over time and their expenses, if you go all the way back to 2004, IU Athletics was bringing in $37 million, thirty,
almost $38 million. And you know, that was 8.3 million, 8.4 million in ticket sales, about 8.1 million in contributions and then about 18 million in media rights and other rights and licensing. And then at that time there was still a student fee that IU Athletics was making.
If you look at where Indiana's gone since then, you know, they had a gradual climb and then a big jump between 2016 and 2017 where they got up into the 120, two $123 million range in revenue all the way up to the present day where it's now at the 173,000,000 range. What is Indiana spending money on? You know, total expenses have been relatively, you know, around 132 million.
And this is not a complete accounting of everything, obviously, because there's a large category here that says other, but coaching staff salaries. Now Indiana's paying about 4647 million in that, paying about 17.4 million in scholarships and then paying about $28 million in
facilities and overhead. I, I just find all of this fascinating because if you, you know, you look at a school like Michigan and what you find is a similar pattern where, you know, back in 2004, Michigan was at about $78,000,000 in revenue. So about double what Indiana was. Michigan's now at 210 million. That's a flattening of the curve. Instead of Michigan making double the revenue that Indiana is making, Michigan's only
making about what, 3540%? I'm doing math off the top of my head here, but it's not an overwhelming difference between Indiana and the top of the Big 10, whereas it certainly was 20 years ago. So these are all things I think that are important to remember and keep in mind as we go
through all of this. So anyway, the last thing I wanted to talk about was basketball revenues and and again, people get the wrong idea sometimes about basketball here in Indiana because it's such a popular sport. Indiana does make a significant amount of revenue compared to other schools for basketball, but realistically speaking, the amount of money being made off of basketball is just nowhere close to the amount being made on college football on a week by
week basis. And if you look at the NCAA basketball tournaments in 2019, the men's tournament made $917 million in revenue. The women's tournament made $15 million in revenue. Flash forward five years, you've had about a $40 million increase in the men's tournament in revenue. You've had a significant increase, about a little over almost a four fold increase in the women's tournament. So you're starting to see some growth in terms of women's sports and, and how they
resonate on the national level. I think that revenue number is going to go up to close to $100 million next year for the women's tournament. This is where the men's tournament is trying to add inventory so that they can continue to generate more revenue there.
But the reality is, you know, over the course of a full season, college football between ticket sales and the revenue that you're generating off of television is just a much bigger financial driver and it's a much bigger audience driver. And then again, you got to go back to that basic idea of here, like this is ultimately the goal. You want to get things that attract the most number of people get it on television because you're going to have advertisers wanting to advertise there.
That makes the television networks money. And in the case of the Big 10, makes them money because they're a part owner of the network that those people are advertising on In the SEC and others cases, that's giving you larger checks because the networks are making more money off of your product, which in this case is your games.
So the big question moving forward as we wrap this up is going to be how on earth do college athletic departments reconcile the need to have more money in their budgets because they are voluntarily said now that they're going to pay college athletes directly? And how successful are they going to be in trying to limit outside payments knowing that some schools don't actually want to limit outside payments?
And this is the big rub with this entire structure with the house settlement, because it is supposed to be 20 and a half million dollars Max coming out of athletic departments going directly to athletes. And then NIL deals are supposed to be legitimate NIL, and they're supposed to be an arbiter that will ultimately decide whether or not an NIL deal is legitimate or not. Why are colleges doing that? Like, what is the purpose of that?
And that's really the set of questions that we're going to be exploring on future episodes. But think about everything that we've learned today. And so much of it really, in my opinion, comes back to college athletics wants to consolidate revenue back into athletic departments. It's been, obviously, even with all these increases, it's been uncomfortable for college athletic departments to essentially feel like they're in financial competition with their
own athletes. And it's been difficult for those athletic departments and those coaches to have to go in and say you need to give to the NIL collective because that's the money that athletes want. Mike Locksley has complained like athletes don't want facilities or this or that. They want, they just want to check. And that's probably where we're headed. It's going to be interesting though, because what college athletics wants is control over all the money that's flowing in.
And again, going all the way back to what happened in the 70s and 80s, they want to control as much of that and have as much of that coming to them directly as possible. And then they want to be in charge of metering the money out to athletes. The fact that we've gotten to the point where athletes will make any money at the college level is clearly a big evolution and a much more equitable system
than what existed before. The flip side of it is there's a significant amount of money in this system. And as that continues to grow, colleges and universities want to amass as much of that revenue going directly to them as possible and limit as much as possible what's going to the athletes outside of this sequential system that they've tried to come up with this house settlement.
And The thing is, I don't know that the courts are going to agree with college athletics because college athletics doesn't really agree with itself on what the method's going to be. And for all the proclamations from these conference commissioners, as we've heard over the course of the last week about how NIL GO is going to regulate this system, and, you know, they're going to tie money to enrollment, which it'll cut down on transfers.
They've got this clearly defined system in their head, but it's not really legally enforceable. There's no antitrust exemptions in play. They're relying on a bill from Congress that will almost certainly not come, at least not in this legislative cycle. And they fundamentally refused to sit down and just kind of establish an actual business involving a certain number of participants from across the
various conferences. So what I think is going to be fascinating is whether or not college athletics find themselves in a position where now they're out laying a bunch of money in revenue share to athletes, but they're still finding themselves in a position where significant amounts of money is flowing to college athletes outside of the
distribution process. And as you seen with like Texas Tech and with some of these other schools who SMU being another one where the donors have said, we want to be great in college athletics, we're willing to do whatever it takes. We're just going to pay and people can sue us and we'll win because there's nothing that says that we can't.
That's going to be the really interesting thing as we move forward, you know, and I think it's important to have the whole backdrop of what's happened financially over the last 25 years because that's where the seeds have been planted for the direction that we seem to be going in right now.
So it's going to be a really fascinating next couple of years as these things play out in court and as we see what the market will actually bear when it comes to college athletics and, and how it all meters itself out from a financial perspective and where the money's flowing and then ultimately who has access to it. So anyway, hope that this was informative and useful. We'll be back.
We've got Ben Portnoy coming up. I think tomorrow we'll have more podcast next week as I do a full breakdown of what's going on with NIL go and how that's going to impact what IU is doing and other schools across the country.
So thanks for paying attention and hopefully this wasn't too dry for you, but some really interesting stuff and I think, you know, popping the hood and actually getting a sense of what's going on in college athletics really does help you better understand what you're reading and hearing about on a day by day basis. We'll be back with more here on Crimson Cast. Thanks for listening. Thanks for watching. Thanks for being a part of the back home network. We'll catch you folks.
On the flip side, stay never daunted. So on everybody.