Collapse of Sports Brings Dire Scenarios to Schools Like Clemson
Collapse of Sports Brings Dire Scenarios to Schools Like Clemson
(Bloomberg) -- The U.S. economic slump is rippling through college budgets across the country. And it’s only going to get worse if the football season -- the largest source of sports revenue at most big schools -- is scrapped or delayed this fall.
For a snapshot of how U.S. universities are coping, look no further than Clemson -- the only school to participate in each of the past five College Football Playoffs -- where athletic officials are hoping for the best but also planning for the worst.
At its most optimistic, Clemson sees a revenue drop of about $7.5 million, a manageable hit on a sports budget that grew to $132 million last year. From there, administrators turn to more dire possibilities: a partially disrupted college football season or, in the worst case, one that doesn’t happen at all.
That last scenario has been the topic of apocalyptic talk across college sports. Iowa State Athletic Director Jamie Pollard notably compared a year without football to the Ice Age.
“Football is such a big driver of revenue, and certainly without it our operations are totally different,” said Graham Neff, Clemson’s deputy athletic director. “But the Earth has come out of the Ice Age. It will be all about bridging that gap to the next year.”
Clemson’s fiscal year starts in the summer, as is typical of universities, so budgeting for the 2020-21 school year is in full swing. And for everyone in higher education, the pandemic’s impact is top of mind.
Clemson has seen its athletic budget soar 60% in the past five years. The money comes from four main revenue sources: ticket sales, donations, media rights, and licensing and marketing.
Clemson’s “control budget” is built for a world where the virus outlook improves so much that football games are allowed to proceed as planned this fall. Even then, Neff said that scenario anticipates a 10% drop each in donations, ticket sales and marketing revenue. All told, it would be a $7.5 million hit.
From there, the school moves toward more drastic scenarios. A “sensitivity budget,” Neff said, might assume a 20% reduction in those main revenue sources, so a drop of around $15 million. Further down the road, the school will look at the larger loss scenarios if football can’t happen.
There are some other minor cost changes that will affect the school no matter what. The NCAA is distributing 63% less to schools this year because of the canceled March Madness tournament, a hit that will cost Clemson around $2 million. The NCAA also recently voted to let schools offer another year of eligibility to those who missed out on the canceled spring seasons, an offer that Clemson expects could cost a further $400,000 to $500,000, according to Neff.
Schools around the country are weighing the same factors. The University of Minnesota this month released its projections for its athletic department, which is roughly the same size as Clemson’s. Minnesota’s estimates were a $10 million hit in the “best case,” $30 million in the “moderate” scenario and $75 million in the “severe.”
Others are already taking drastic action. Old Dominion and Cincinnati have discontinued some sports. Louisville and Iowa State have announced temporary pay reductions for coaches and administrators.
“We are going to have the senior staff and head coaches forgo 10% of their compensation during the next fiscal year,” said Louisville Athletic Director Vince Tyra. “We’re committed to trying to do everything that would help the cause here. I just don’t want to put the university in anymore of a flux than it needs to be at this point.”
Neff said Clemson hasn’t yet discussed cutting sports or coaches’ pay. The South Carolina school has already halted a few capital projects, such as planned upgrades to its parking lots and a concourse in its football stadium. Other areas for immediate savings might include travel costs, stemming from changes in the number or schedule of games.
The athletic department also has about $70 million in reserve, which can help offset some damage but won’t be the sole line of defense. Insurance policies, covering losses such as game cancellations, are generally held at the conference level.
Also among the unknowns: what the athletic department might need to buy for health and security reasons to safely hold events in the fall.
“Are we getting into pricing out thermometers? We’re not there yet, but we do have the luxury that we’re not playing games until September,” Neff said. “Our hope is that college sports won’t be the first sports to return to play, so we’ll try to follow their lead.”
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