The world of college football has lately been obsessed with conference television deals, and rightfully so. Those wealthy contracts are the main driver behind the many recent conference realignments. The Big 12’s 13-year, $2.6 billion deal with ESPN and Fox attracted TCU and West Virginia, the latter of which paid $20 million to join up as fast as possible. Louisville, Pittsburgh and Syracuse also wasted little time jumping to the ACC to get a taste of the conference’s new deal with ESPN, worth $3.6 billion through 2027.
But even as TV deals drive up conference distributions and reshape the landscape of college sports, a college football team’s financial success still relies on what it earns individually.
Take the Texas Longhorns as an example. College football's most valuable team is now worth $133 million, up from $129 million last year. The Longhorns generated $104 million in revenue in 2011, the first time a college football team has ever cleared the $100 million mark. While the Big 12’s conference distributions increased to $19 million in 2011, about 40% of Texas’ football income still came exclusively from ticket sales ($32.4 million) and sponsorships ($8 million).
And those non-conference revenue streams were actually diminished from previous seasons because Texas hosted just six home games last year, one fewer than the previous season. Home games are the lifeblood of college football’s most financially successful teams. Almost every school-specific revenue stream – ticket sales, contributions, sponsorships, merchandise – is at least partly influenced by a team’s number of home games. And the financial impact of home football games reaches beyond the schools, as each team’s local community enjoys a sizable economic boost from the thousands of fans who flock to the area on gamedays.
Our methodology, explained in detail below, considers the economic impact of visiting fans, and it’s often quite big. A single home game could inject anywhere from $5 million to $10 million of direct spending into a school's local economy, depending on the team. Each Longhorns home game attracts more than 40,000 visitors to the Austin area, and we estimate those fans spent over $10 million per game last season. For the Longhorns to increase in value despite giving up a home game is a truly impressive feat.
Further proof of the importance of home games is that the Nebraska Cornhuskers, ranked No. 11 with a value of $82 million, were willing to pay Southern Mississippi $2.1 million to move their 2013 game from Hattiesburg to Lincoln. The move will certainly pay off for both the Huskers and the Lincoln community; an eighth home game means a roughly 14% increase in gameday revenue for the team and as much as $8 million in additional visitor spending for the local economy.
The dual impact of an added home game also contributed to the biggest change in this year’s valuations: Michigan has unseated Notre Dame for the No. 2 spot on our list thanks to a 28% increase in value. The Wolverines, now worth $120 million, were one of just three teams on our list to play eight home games last season (the others being No. 9 Tennessee and No. 15 Oregon). That eighth game alone generated more than $6 million for Michigan’s football coffers.
The Fighting Irish, in turn, played one fewer home game last year and experienced an accompanying slight dip in value from $112 million to $103 million. The loss of a home game especially hurts Notre Dame’s value because the team’s fans are unrivaled when it comes to traveling and paying to watch their team play. Yet while the team is down in this year’s valuations, we expect an undefeated season and title game appearance – worth a unique $6.2 million BCS payout to Notre Dame – will have the Irish fighting back toward the top next year.
A final note on home games: Increased gameday revenue is also partly responsible for the inclusion of our valuations' two newest members: Oregon and Washington. Oregon went from six home games in 2010 to eight last season, surging up to No. 15 on our list with a value of $74 million. Washington added a seventh game and took the 18th spot with a value of $65 million. The two teams are likely here to stay because of the Pac-12's new TV deal, which is currently in its first season and worth more than $20 million annually to each conference school.
But while we expect the Pac-12 will maintain its newly expanded representation (USC, just behind Oregon at $68 million, rounds out the conference’s three schools), Oregon and Washington may soon witness a decline in value. Part of Washington’s climb in revenue, which is up 35% year-over-year, is the result of seating contribution income that is distributed to the school every five years. Oregon, on the other hand, may see diminished profits with the passage of Oregon Governor John Kitzhaber’s budget proposal, which would redirect state lottery money from collegiate athletic programs to other educational initiatives.
Our college football valuations use a weighted scoring system to measure the value created by each team for four key areas. The four components, in order of weight, are the team’s university, athletic department, conference and local community. Academic value is the football profit (football revenue less expenses) directed toward the university’s academic programming, including football scholarships, while athletic value is considered the remaining team profit used to support other sports teams and athletic initiatives. Conference value is the distribution of bowl game payouts to fellow conference members, and community value is the economic impact of visiting fans detailed above.
Financial data is from the 2011-12 fiscal year, and we standardize revenues and expenses in order to account for differences in each school’s methods of reporting financial data to the Department of Education. Take luxury seating contributions as an example of such a discrepancy. Some schools will allocate a portion of contribution revenue to football while other schools will instead group the income as athletic revenue unallocated by sport, even though football is attributable for its vast majority. Another example is an item like loan collateral, which is included in team expenses by some schools but omitted by others.
The 20 most valuable teams are worth an average $86 million with team revenue of $65 million. The SEC dominates the top of the list, as usual. Seven of the top ten teams come from the SEC, led by fourth-ranked LSU, now worth $102 million. Though the Tigers generated less revenue than some of their SEC rivals last season, they made up for it with unrivaled value to their conference. The undefeated Tigers earned the SEC a $22.3 million payout for making last season’s BCS National Championship. Alabama, which defeated LSU in the title game, claimed a much smaller $6.1 million conference payday for being the SEC’s second team in a BCS game.
One of the biggest drops in value had nothing to do with home games, and it doesn’t come as much of a surprise either. The Penn State Nittany Lions, ranked third last year, fell to No. 13. The team's value is now $79 million, down 21% from a $100 million valuation last year. The sudden slide was expected as the team felt the first financial implications of the Jerry Sandusky child abuse scandal. Penn State's severance payments to former football staff and contributions to child abuse initiatives helped drive the team's expenses to $30 million in 2011, up 55% year-over-year. The team's revenue also fell $6.5 million last year, though for reasons unrelated to the Sandusky scandal.
Two teams fell off our list this year: Texas A&M and Iowa, which were ranked 17th and 20th, respectively, last year. We expect the Aggies will make a rapid return to the list thanks to its new SEC membership and the fanfare surrounding Johnny Manziel’s Heisman-winning season. Oklahoma State also barely missed the cut for a second straight season. The Cowboys had a superb year financially, boosting revenue by $8 million despite hosting one fewer home game, but it wasn't enough to crack the top 20.
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