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College Football Looks to Mega-Donors to Help Bail Out Athletics

College Football Looks to Mega-Donors to Help Bail Out Athletics

The 2020 college football season is in jeopardy, and billions of dollars are at stake.

Ultra-wealthy donors are likely to be called upon to save the day in the face of an unexpected evaporation of revenue. But for athletic departments with less-enthusiastic donor bases, financial catastrophe may be on the horizon.

The Big Ten and Pac-12, two of the nation’s so-called Power Five football conferences, called off their fall seasons last week, joining several smaller conferences. Both said they’re open to a spring season, but there are obstacles.

College Football Looks to Mega-Donors to Help Bail Out Athletics

Lay-offs, salary cuts and axing entire sports programs are possible outcomes for athletic departments if their No. 1 rainmaker, football, is shut down for the year. That’s where the donors come in.

“Schools that have a more robust alumni base will be able to weather the storm more easily than other schools,” said Patrick Rishe, an economist and sports business professor at Washington University in St. Louis. “I suspect those asks could be afoot.”

College Football Looks to Mega-Donors to Help Bail Out Athletics

Included among the billionaire donors funding college football programs are Nike Inc. founder Phil Knight, who has given about $800 million to the University of Oregon for athletics and academics; Miami Dolphins owner Stephen Ross, who has contributed nearly $400 million to the University of Michigan; and Buffalo Bills owner Terry Pegula, who has donated more than $100 million to Penn State University.

Three power conferences -- the SEC, Big-12 and Atlantic Coast Conference -- have said for now they’re moving forward with the fall season.

Requesting contributions to cover an operating deficit instead of something specific, like a stadium upgrade, can be a tough task for schools. But the programs that have access to billionaire boosters will be in the best position to ask.

‘Less Guilty’

“When you have donors who have not been as impacted by the economy, and their stock portfolios have done really well throughout this whole pandemic, you feel a little less guilty about going back to those folks,” said Karen Weaver, a sports management professor at Drexel University and former athletic director.

The requests are coming because schools really do need the cash. In a report released last week, Moody’s Investors Service analysts wrote that some schools will not be able to cut expenses enough to offset revenue losses from football. And falling donations are expected play a key role in the struggles.

“Donor support may also wane with potential disruptions in household income, tax changes and booster disinterest because of canceled seasons,” the analysts wrote.

Major football schools generate more than half their athletics revenue from media-rights payments and ticket sales, according to data from the National Collegiate Athletic Association. Nearly all of that could disappear if games aren’t played.

The next largest source of revenue, donations, will be key to keeping athletic departments afloat.

College Football Looks to Mega-Donors to Help Bail Out Athletics

Among the top quartile of Division 1 Football Bowl Subdivision schools, donations make up the largest share of revenue, according to NCAA data. That could further divide college football’s elite programs that are flush with cash from the stragglers, even within the Power Five.

Requesting Handouts

Billionaires aren’t the only source of donations athletic directors will look to tap. Several schools are asking season ticket holders to treat the money they spent for canceled games as donations instead of asking for a refund.

Penn State, which generated the sixth-most revenue in the country last year at $164 million, has angered fans by refusing to refund the mandatory donation that comes with buying season tickets, even though the games have been canceled.

Texas A&M University, consistently one of the top fundraisers in college athletics, urged donors to step up in a recent video posted by the 12th Man Foundation, its athletics-fundraising arm.

“The financial impact of the global health crisis on Texas A&M athletics is significant,” the foundation’s president, Travis Dabney, said in the video. “Our donors have the ability to help us through this very challenging situation. “

The Southeastern Conference school raised a record-breaking $740 million in fiscal 2013 when Heisman Trophy winner Johnny Manziel was quarterback.

Awkward Time

The appeal to fans during a recession comes at an awkward time for athletic departments that have spent hundreds of millions of dollars over the last decade building world-class facilities that rival their professional counterparts.

“Schools asking their fans to convert money already paid to a donation are risking future damage to customer relationships,” Rishe said.

At least once conference, the Pac-12, is taking drastic measures to mitigate the lost revenue and potential lack of donor interest. It’s working with a boutique investment bank to secure a $1 billion loan for its teams to tap in the event no games are played, according to a report in the San Jose Mercury News. One of its members, Stanford University, announced it was scrapping 11 teams, such as fencing and men’s rowing.

Uncle Phil

The presence of ultra-wealthy donors has some fan bases more confident than others about their teams’ financial situation.

When Oregon athletic director Rob Mullens said at a news conference Thursday his school expects to lose $50 million to $80 million from not playing football this fall, Twitter users were quick to point out the school’s close connection to its biggest donor.

“Nike will pick up the tab,” wrote one user. “Good thing we have Uncle Phil,” said another.

A spokesman for Nike and Phil Knight declined to comment on whether he’ll be donating to the university this year.

©2020 Bloomberg L.P.