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Patrick Hruby

Mo' Money, Mo' College Football Problems

A Q&A with "Billion-Dollar Ball" author and Pulitzer Prize-winner Gil Gaul.
By Patrick Hruby | VICE Sports | October 2015


Editor's note: Welcome to our new VICE Sports Q&A, where we'll talk to authors, directors and other interesting people about interesting sports things. Think of it as a podcast, only with words on a screen instead of noises in your earbuds.

Published in late August, the book "Billion-Dollar Ball: A Journey Through the Big-Money Culture of College Football" takes a clear-eyed look at the causes and effects of the vast amount of cash coursing through America's second-most popular sport. I spoke to author and journalist Gil Gaul about the book and what he learned while reporting and writing it.

You've won two Pulitzer Prizes and have reported on everything from homeland security to the prescription drug black market. How and why did you decide to write a book about the finances of big-time college football?

There are a couple of answers. I was a Division I athlete in college in track and field. I have a long background in sports. I've always been interested in college football. Not as a fan of a particular school—I don't have that emotion in me—but I like the games, I like the competition.

My background as a journalist is that I spent a lot of time as a business and economics reporter. I had written a series 10-15 years about about the business of college sports. That lingered in my head. And there has been this incredible spike in the money coming into college football. So why not try to understand it?

How much money is the big-time college football industry brining in on a yearly basis, and what kind of spike are we talking about?

There are accounting issues here, but if you look at the 120 biggest schools, it's somewhere in the neighborhood of $2 to 2.5 billion, depending on how you're counting.

As for the spike? In 1999, I tracked the top 10 football revenue schools—they were making like $240 million. By 2013, just those 10 schools were making about $800 million. Those are fairly breathtaking numbers.

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So where is all the money coming from?

There are basically four major sources of revenue for college football. The first is television. The scaling up of TV contacts in the last round of network negotiations was rather dramatic. Extraordinary sums of money. Transformative in the PAC-12. Not transformative in the SEC, but only because they already were gigantic and are just going to get richer with the SEC Network.

Another stream is what I call the general corporate category—Nike and Under Amour contracts, advertising on digital scoreboards, trademark money, stadium naming rights, most of which in one way or another involves football.

Two other major streams of money are the tickets themselves, season tickets, and then related to the tickets but in a separate category are the seat donations—what people call "contributions." The money you give to the athletic department in order to buy your seats. That's huge. Hundreds of millions of dollars. The United States Treasury estimates they lose $250 million that every year in tax deductions.

I've written about those deductions—college sports fans being able to write off much of the cost of their tickets as well as "donations" that are essentially athletic department personal seat licenses. What's the rationale behind them?

If you look at it historically, for better or worse—and this is something I know a fair amount about, I wrote a huge series on nonprofits 20 years ago and I'm still something of a geek on the subject—the general argument is that athletics were considered part of the university, and in theory an integral part of the university, because they encouraged student participation and building community and so on.

You can make a strong argument that by the 1950s that this was no longer true. That commercialization had entered college athletics. And that has just ramped up. By the 1980s, anyone looking at this form outside the zip code of college football understood that this had become a clearly commercial business—in many cases, operating like a stand-alone business inside the university.

If that's the case, then should the tax breaks still stand—are college football season ticket holders somehow supporting education, which we traditionally exempt from regular taxation?

No. That's just wrong in any case. Some colleges have set up their athletic departments as charities. And the booster clubs are all charities, which is also sort of preposterous. Look at the Tiger Athletic Fund at Louisiana State University and pull up their tax returns. Or the Seminole booster club at Florida State University. It's fun. It's not charity.

Historically, every time the [Internal Revenue Service] has tried to challenge this, they've caved on the issue or backed away after being beat down politically by Congress. I interviewed former directors of the exempt organizations section of the IRS. They wanted to take this on. And they couldn't. So they didn't.

Meanwhile, the college presidents still contend that college football is a pure educational experience, as it was 100 years ago. I find it flabbergasting that they can do this with a straight face.

Where does all this money go?

When I talk to people who don't know much about college football, they usually assume two things: that it's all going to scholarships, and that a significant chunk goes to academics as a whole at schools.

Editor's note: at this point, I laughed, and so did Gaul.

Let's talk about the 65 elite super conference football schools. What's interesting when you go through their athletic department financial reports—and I was able to get about 100 of those, total, through online documents and Freedom of Information Act requests—is that scholarships, on average, only account for about 10 percent of the spending.

Now, at one or two schools it's actually higher, because they're private and they account for costs differently. And some people will argue that scholarships don't count for as much actual spending as they do on as a line item on a budget, because much of the listed cost is just the athletic department moving money to another part of the school. Whatever the case, scholarships are a relatively small cost center.

In a few cases, a few million dollars go back to general academics. But it's not many cases, and it's always a very small percentage of the total school budget. Now, there has been a rise of building academic support centers for athletes over the last 20 years. That has exploded. But you can never really argue that those affect academics affecting regular students. It's great for keeping athletes eligible, and maybe helping them get a degree.

Okay, so where does the money go?

The big category is salaries. Say you have 10 football coaches at a given school. At a place like the University of Alabama, Nick Saban is getting $7 million or whatever, and the nine assistants are carving up $5.5 or $6 million. That accounts for a significant amount of the football budget. It also accounts for half the money available for all coaching salaries at Alabama—in other words, the school has 60 coaches, and 10 football coaches account for half the money.

Facilities are big part of it. There are the costs of the game day operations. That tends to be reasonably high. Some schools you'll see a fairly large number going to the guaranteed money games, where little schools come in and lose in order to make money.

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I've written in the past about the "gold-plating" of college sports—that is, athletic departments are incentivized as non-profits to spend every dollar they make and then some, and since the cost of their labor force is essentially fixed, all the money that comes in ends up sloshing over into bigger coach salaries, bigger administrator salaries, more bureaucratic and support staff, fancier locker rooms, and so on. Is that consistent with what you observed?

I have a throwaway line in the book—I went looking for an example of an efficient college football program, and I couldn't find one. It's truly a revenue theory of costs. You take in every penny and you spend every penny.

There's no question the amount of money spent on facilities, coaches' salaries, all the back office operations—look, everyone has a director of player recruitment, a director for football operations, at Alabama they have nine people just doing data mining and looking at game film—there's no question that the system is bloated and excessive. The fact that this happens under this tax-exempt umbrella within universities is what drew my attention to it.

If you had a system where you actually were more disciplined—say because you had to pay taxes—would you be quite that lavish? No, you wouldn't.

What's the most lavish thing you saw while reporting your book?

The University of Oregon's facilities are just stunning. Their academic support center is basically a museum of modern art. You walk into the atrium and there is an open glass fire pit. You know at the airport how they have flight boards? They have one in Oregon with schedule of the tutors for the day. As big as a plane board.

The kids have biometric keypads to get in and out after hours. The computer lab has 60 computers. There's a reading and writing lab with frosted glass. There's a three-story mural of Albert Einstein, of all people, made with 5,000 images of Oregon athletes stitched together on stainless steel plates.

But I'm hesitant to call it gold-plating because [Nike founder] Phil Knight pad for all of it. It's lavish. It's probably excessive But is it gold-plating? I don't know. He did take a tax break on it.

The NCAA likes to claim that even big-time college sports are a money-losing proposition, and that only a handful of schools break even or turn a profit. In the business world, people enter industries that are profitable and get out of ones that aren't. If big-time football is such a bad business, why do we see schools jumping into Division I instead of exiting?

I think here are a bunch of answers to that. One is that maybe it's not quite as terrible as some people argue. I would argue that's the case in the power conferences.

With the have-not schools outside those conferences, it gets more interesting. Look at a place like Eastern Michigan. Why have a team? Okay, if you just want to have a team and fund it through student fees and the students don't mind paying, fine. God bless you. But economically, does it make sense to run a program at that level with that little success? They have no revenue. A tiny, tiny bit of money coming from a TV contract. Nobody goes to the games. They have to buy back their own tickets to make the NCAA requirement of selling an average of 15,000 tickets over three years. They have to offer up the team as sacrificial lamb to play elite schools in order to bring in money. It's implausible to me that they aren't losing money.

My question to a school like that is, why don't you just play at D-I AA? Why can't you be happy playing at that level? But you could argue that the presidents are so addicted to playing football and thinking that if they don't have a major football team in a big new shiny stadium, then they are not a real university. I can't tell you how many times I heard this. It's just staggering to talk to presidents who have teams that appear to be losing money and they never win, and when you ask them why not fold up the tent they're flummoxed. They always answer there is no other sport where we can get as much attention as having a big-time football team. If we don't have that, we won't have alumni support, student support, we won't have people happy.

There's a lot of magical thinking going on.

You write that the influx of money into big time college football is changing campus values and distorting the academic mission. What do you mean by those two things?

On the academic side, I'm really taking about who do you accept on the front end? Special admits. People who are a standard deviation or two behind the mean of the student population. This occurs at all levels of college football, including very elite academic institutions.

This leads to the creation of academic support centers, class checkers [Editor's note: people who literally walk athletes to and from class to make sure they attend], 17,000 hours of tutoring a week a Oregon, you name it. Obviously, there are some football players who are exceptions to this, but overall, you're compromising your standards to have them on campus.

Now look at the way you treat the rest of the undergraduate body. Or your honors colleges. You smartest students. You see these huge distortions in spending, what you do for a struggling football player versus what you do for the rest of your students.

That tells me the values of football are superseding the values of education.

A lot of university presidents would argue that winning football teams serve as the "front porch" of a university—that they encourage enrollment, get alumni excited about making donations, help brand a school in a competitive higher education market, and so on.

I know all the arguments about it being the front porch. But I still find it troubling. Besides, as a business, is football actually the most efficient way to brand and market yourself? There may be a smarter way to do it. Maybe take that money and offer more academic scholarships. Maybe that would lead to more applications.

I've deconstructed the idea that football brings in more students and makes the school smarter. The notion that Alabama is getting more National Merit Scholars enrolling because Nick Saban is there? C'mon. Give me a break. It turns out they're getting more because they increased their scholarships.

This sounds harsh, but unfortunately not enough people stop to ask the most obvious questions.

Of the things you saw and reported on, what best illustrates changing values and a distorted academic mission?

I think the spending on the academic suppers centers and the rise of them. It's hard not to look at the $43 million one at Oregon that really is like a museum and think, wow, this is a very extreme response to a problem we've created by accepting players who aren't prepared to be there are simply have no interest in being there.

The guy who ran the academic support center there, at Oregon, he even said that to me. You have a bunch of guys there who have no interest in studying, no intellectual curiously, are really there to prepare for the NFL.

If you're spending the morning with a guy whose job is to make sure football and baseball payers go to freshman math class—well, as a class-checking at Kansas told me, "that's not my proudest moment." Meanwhile, regular students have to pay for tutoring in some cases, or are studying in some dank basement.

Of course, the schools don't see it as extreme. They see it trying to fulfill their recruiting promises that they will try to help players get degrees.

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When the NCAA argues—as it has in the Northwestern unionization case and the various antitrust lawsuits challenging amateurism—that big time football players are really just students who happen to be good at football and participating in an extracurricular activity, does that jive with what you observed?

No. Clearly, that's not true. I don't disagree with the argument that they are closer to being employees than being just students. Some happen to be good students as well. But all of them spend so much damn time playing football, 40-50 hours a week, that they they couldn't be good students even if they wanted to. I had a number of professors tell me that.

I'm not naive. For football, this is not an amateur operation. It hasn't been for a long, long time.

So when the NCAA also argues—as it did during the Ed O'Bannon federal antitrust case—that there is a connection between amateurism and education, and that allowing players to be paid would hurt their ability to study, learn and walk out of college with a degree, what would you say?

I would say to remember that when the schools make that argument, they are making a tax argument. If they are no longer doing football for educational purposes, they then could lose the tax umbrella that they are operating under. I don't think education has anything to do with it. I think what they are doing is protecting the franchise.

When you were traveling and reporting this book and talking to people inside college sports, what did they say about the Northwestern unionization push and the efforts to overturn amateurism through antitrust lawsuits?

Not nearly as much as I would have liked to have gotten. And not nearly as thoughtful as you might expect.

First, a lot of presidents at elite football schools did not want to talk to me. That was fascinating. They are always traveling when I was in town. This was after me calling them months in advance. I was surprised they didn't have more confidence and courage.

I did interview [Big Ten] commissioner Jim Delany. He basically said, "I'm opposed to it. It's going to disrupt and ruin our model and who we are. I'm okay with paying players the full cost of attendance. But not okay with competitive bidding or paying them."

I was impressed with a lot of the people I talked to. I think PAC-12 commissioner Larry Scott is brilliant. Delany is a good businessmen. A lot of athletic directors are very smart. But they clearly have vested interests. If you are being paid $2-3 million as commissioner, you're not going to propose anything that will hurt your salary. People do that in all industries—protect what you have as long as you can, until it finally folds or collapses.

You devoted an entire chapter of your book to women's rowing. Why did you do that, and how does that tie into big-time football?

When I was going through athletic department documents, I noticed that every time I saw a large elite football program and saw the participation numbers, there was also a large women's rowing program. I knew enough about Title IX to realize there was something there. I put together a spreadsheet with all the football schools, comparing the number of football players versus number of women's rowers. They were pretty much equal.

I talked to a couple of women's' rowing coaches. They told me what happened. In the mid-1990s there was a explosion of women's rowing at D-I football schools. From 1995 to 2000, the number of programs doubled and the number of rowers went from 1,500 to 4,000-5,000.

Why? They needed a sport to offset rosters for Title IX proportionality. Go back and look—at the time, the biggest women's sports were track and field or soccer. You have 25, 30 athletes on the team. Not going to get you to football roster numbers. So they realized that with women's rowing, you pack people on to boats. It's not that expensive to have a program. You need a little bit of water. Yo need to buy the boasts. You have a head coach and generally two assistants. Salaries are not particularly big. It's cheap.

Oh, and the way you do the roster count is that the NCAA tells you to do it during tryouts! I am not a cynical person. I tend to give everybody the benefit of the doubt until they prove otherwise. But wait a second. Counting during tryouts? The number is going to be artificially high during tryouts. An athletic director explained it to me as, "well, we are giving them an opportunity."

Anyway, I fell in love with the damn sport. It's incredibly hard. The athletes have real majors. They don't get a lot of scholarship money, like 20 full scholarships for a squad of 80. But they are the true student athletes.

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You mentioned shifting campus values. If you look at schools as a whole, you see soaring tuitions, more and more spending on lavish facilities and addition administrators, and less and less spending on the classroom workforce — poorly-paid, non-unionized, essentially disposable adjunct professors instead of full-time faculty. So here's my question: are schools reflecting their athletic departments, or are the athletic departments reflecting the schools?

I don't know. I think you could make a good argument either way. If you look at schools, they have kind of gotten into the entertainment business. They're part of this larger phenomenon in American culture where entertainment has taken over everything. They're spending on workout facilities and making things as fancy and comfortable as possible for students, who are taking out bigger loans. That's a big issue. The administrative bloat is a big issue. I agree, they do mirror each other.

What's your best prediction of what the big-time college sports economy is going to look like in 10 years?

I purposely tried to avoid this in the book. It's almost like a whole other book. But let's blue sky it. I have no dog in the fight. I don't care what model they go to. But clearly, people are right—players are responsible for all this money, and while scholarships are valuable, given the size of what we are taking about and coaches' salaries, are scholarships enough?

The answer is probably no. I think we will get to that point in the next 20 years. And if you have a model in which you bid for players or simply pay them a fair amount of money—well, then question becomes, what does that mean for the rest of the athletic department? Does that mean do you push football and basketball father off into corner of the university? And if you do, are they still non-profit businesses at that point?

Maybe you can set up a system where you kind of have two professional sports in one corner of your campus, and then have the rest of the sports funded through the regular budget like old school sports. That wouldn't be a bad thing, necessarily.

Read the original article at VICE Sports