Colleges will lose $150 million playing "conference-only" games due to coronavirus
Some of the nation's largest college athletics programs stand to lose up to $150 million total this fall because their governing body has banned games outside their region to help control the coronavirus. The Big Ten and Pacific-12 conferences said their decision to play conference-only games announced this month was aimed at decreasing the spread of COVID-19, but sports business experts said the announcement also has major financial implications.
The Big Ten said students who play fall sports — including football, hockey and soccer — can play only against the other 13 teams in the conference, whose members include college athletics powerhouses such as the University of Michigan, Ohio State and Penn State. The Pac-12, comprised mostly of West Coast schools like the University of Oregon and UCLA, is taking similar measures.
Sports business experts said schools' football programs will see the hardest financial hit, citing the billion-dollar revenues the Big Ten and Pac-12 conferences generate. Total college football generates more than $4 billion per season.
All the elite college football teams typically play their first game of the season against a smaller school from a different conference. The smaller team travels to the bigger school to play and, in return, the smaller school is given a percentage of that day's ticket sales. The amount of money is pre-determined between each school in what is known as a "guarantee game" contract.
"The payment varies," said Nicholas Schlereth, who teaches sport management at Coastal Carolina University. "Sometimes it's hundreds of thousands of dollars, but it can get up to $1.2 million or $1.5 million."
Although smaller colleges are often trampled on the field or court by big schools, such games can provide a large windfall. Large universities guarantee their opponents a percentage of the gate receipts, which often amount to millions of dollars. Some large schools offer almost $2 million for a "guarantee" game, said Patrick Rishe, a sports business professor at Washington University in St. Louis.
"The purpose of this is to give the weaker football schools a financial enticement to take a beating on the field," he said. "Meanwhile, the power school pads their win record and their balance sheet since these games still generate millions of dollars for the home team."
Without those lucrative games, smaller football programs are projected to lose at least $110 million in contracts from Big Ten or Pac-12 games combined this fall, Rishe said. That number could grow to $150 million if other major conferences, like the ACC and SEC, resort to conference-only play.
Prominent schools often have multi-million-dollar media rights contracts that will help soften the blow of reduced revenue from a constricted playing schedule. Such TV broadcasting arrangements brought in $375.5 million for the Big Ten and $163 million for Pac-12 in 2018 alone, according to data from the Knight Commission on Intercollegiate Athletics.
But for small schools, money from guarantee games typically represents 5% to 8% of their athletics department budget, data show.
Broadcasters could seek to renegotiate their contracts with college conferences because of game cancellations. But Amy Perko, CEO of the Knight Commission on Intercollegiate Athletics, noted that the Big Ten and Pac-12 both have their own television networks and are able to broadcast games.
It's too early to determine how much money the Pac-12 conference as a whole will lose, spokesman Andrew Walker said in a statement to CBS MoneyWatch. Only playing other schools within the conference "will have an impact on revenues, but as there are many scenarios still possible, it is too early to be able to speculate on the exact impacts," he said.
When a Big Ten or Pac-12 football team plays an out-of-conference opponent, many die-hard fans and students will drive to the game and buy tickets and concession stand items, including team paraphernalia. But the decision by the Big Ten and Pac-12 only to play conference foes means that gate money will disappear.
On-site ticket sales are a major revenue generator for elite football programs, bringing in $18 million to $22 million each season. Schools can also generate as much as an additional $2 million each season from concession and merchandise sales, Rishe said.
Experts said a good chunk of that money will be lost because most colleges won't be welcoming the usual crowds of fans into the football stadium this fall.
"Of course, for those schools who end up trying to host fans at 20% to 40% of their facility capacity, the losses would be further mitigated," Rishe said.
