The ROI of Big Money Coaches

[jimmyNU]

I'm trying to wrap my head around the economics of college football. It seems that as of this year the new standard is a minimum of $100M for a 10-year contract. I really only follow NU so I don't know exactly how other schools profit from that kind if salary expense.

If a school like LSU gives Brian Kelly a mega deal, it might hope to get two national titles in the span of the 10-year contract. Do they really earn $50M+ by winning a national title? From what I can tell, all of these schools already have sellout crowds at home and fixed income from their TV contracts. It seems like the only additional revenues stream is selling more national title hats and t-shirts.

Again, I'm a layman but this math doesn't seem to add up.

 

[phatcat_rivals223240]

I'm trying to wrap my head around the economics of college football. It seems that as of this year the new standard is a minimum of $100M for a 10-year contract. I really only follow NU so I don't know exactly how other schools profit from that kind if salary expense.

If a school like LSU gives Brian Kelly a mega deal, it might hope to get two national titles in the span of the 10-year contract. Do they really earn $50M+ by winning a national title? From what I can tell, all of these schools already have sellout crowds at home and fixed income from their TV contracts. It seems like the only additional revenues stream is selling more national title hats and t-shirts.

Again, I'm a layman but this math doesn't seem to add up.

I feel like they are backed up by bagmen oops wealthy boosters who would rather write a check to hire/fire coaches than to do things like Pat Ryan and build facilities etc.

 

[techtim72]

What I don't understand about the money game is the often reported news that Disney is not happy with ESPN's returns and has been cutting costs. The Power 5 leagues are up for renewal at different times but they keep spending like the money train will keep on rolling. For every $10 mil coach there are a lot of other coaches looking for the same plus assistants looking for $2 mil plus.

 

[Curdog7]

I'm trying to wrap my head around the economics of college football. It seems that as of this year the new standard is a minimum of $100M for a 10-year contract. I really only follow NU so I don't know exactly how other schools profit from that kind if salary expense.

If a school like LSU gives Brian Kelly a mega deal, it might hope to get two national titles in the span of the 10-year contract. Do they really earn $50M+ by winning a national title? From what I can tell, all of these schools already have sellout crowds at home and fixed income from their TV contracts. It seems like the only additional revenues stream is selling more national title hats and t-shirts.

Again, I'm a layman but this math doesn't seem to add up.

When Dano Swinney was renegotiating his contract after winning the NC, his team presented all kinds of statistics showing how much the school benefited (applications sky rocketed, caliber of student increased, marketing of the school was easier, paraphernalia sales, etc). Basically he was arguing that paying him $9mm or whatever the number was a bargain. And he was right. The flip side is that for every Dabo, there are dozens of Lovie smiths who make millions yet don’t win.

 

[Hungry Jack]

I think the biggest direct financial impact is from alumni giving when programs are highly successful. The conference network payouts are contractually determined, so there is not a direct immediate benefit there. Programs may sell more season tix, concessions, merchandise, etc., but top tier programs are typically maxed out in those areas (unless they have really cratered).

Keep in mind that Kelly's contract was the price of prying him away from ND. It is probably more supply side than demand side (Kelly is one of a handful of successful coaches who has proven he can win at a top tier program).

 

[phatcat_rivals223240]

I think the biggest direct financial impact is from alumni giving when programs are highly successful. The conference network payouts are contractually determined, so there is not a direct immediate benefit there. Programs may sell more season tix, concessions, merchandise, etc., but top tier programs are typically maxed out in those areas (unless they have really cratered).

Keep in mind that Kelly's contract was the price of prying him away from ND. It is probably more supply side than demand side (Kelly is one of a handful of successful coaches who has proven he can win at a top tier program).

While I agree that Kelly has been successful by nearly every measure, I am not sure it is good enough for LSU, who expects to beat Bama and win NC's, neither of which he has been able to do. He has 3 top 5 finishes out of 12 years, and a ~500 bowl record. Averages like 11 wins a year in the last five years. Really, really good. Not sure it will be good enough for them if they have the inevitable consecutive mediocre years. But - it's their (boosters) money.

 

[Hungry Jack]

While I agree that Kelly has been successful by nearly every measure, I am not sure it is good enough for LSU, who expects to beat Bama and win NC's, neither of which he has been able to do. He has 3 top 5 finishes out of 12 years, and a ~500 bowl record. Averages like 11 wins a year in the last five years. Really, really good. Not sure it will be good enough for them if they have the inevitable consecutive mediocre years. But - it's their (boosters) money.

I think it's a bet that Kelly can up the ante in recruiting. There is a narrative--and I am not sure how real it is--that ND academic restrictions make it harder (relative to SEC schools) to recruit there (was brought up by Wanny on The Score today). LSU has a nice homefield advantage in Louisiana, and with Texas floundering, he can sell a lot of Big Star talent on his vision.

Kelly is probably a good a bet as any coach out there not named Saban. He has won everywhere. I do think he has a better shot at a Natty at LSU than at ND, where the lack of a conference championship game may cost them a playoff spot (if GA and OKST win).

 

[NUCat320]

What I don't understand about the money game is the often reported news that Disney is not happy with ESPN's returns and has been cutting costs. The Power 5 leagues are up for renewal at different times but they keep spending like the money train will keep on rolling. For every $10 mil coach there are a lot of other coaches looking for the same plus assistants looking for $2 mil plus.

The 1% is doing better than it has ever been. Underwriting somebody’s $10 million contract is nothing — it might even be a ‘charitable donation’.

 

[corbi2961]

I think it's a bet that Kelly can up the ante in recruiting. There is a narrative--and I am not sure how real it is--that ND academic restrictions make it harder (relative to SEC schools) to recruit there (was brought up by Wanny on The Score today). LSU has a nice homefield advantage in Louisiana, and with Texas floundering, he can sell a lot of Big Star talent on his vision.

Kelly is probably a good a bet as any coach out there not named Saban. He has won everywhere. I do think he has a better shot at a Natty at LSU than at ND, where the lack of a conference championship game may cost them a playoff spot (if GA and OKST win).

No one will outperform Orgeron in recruiting at LSU, certainly not Kelly. I think Kelly will do a good job but he will fall short of sky high expectations at LSU. They believe they should be in the NC game every year and I just don’t see that happening. I doubt Kelly feels differently. He made this decision solely based on the money.

 

[AdamOnFirst]

It's not that hard to understand. Revenues for Power 5 football has skyrocketed over the last two decades, mostly due to television money. There are only so many places for that money to go. I apologize I can't find the particular research I'm thinking of (I think it's from 538), but a variety of articles on the topic have concluded that fully half of the revenue increases have been eaten up by coaches salaries. You can't pay the players and you can only spend so much on their food and things, so there simply are only so many places for the money to scale up quickly. The remaining half is mixed between facilities and things like admin with a tiny sliver for other sports.

There is literally money burning a hole in ADs pockets and finding its way into coaches pockets. Coaches are overwhelmingly the big winners in the revenue explosion sweepstakes.

 

[corbi2961]

It's not that hard to understand. Revenues for Power 5 football has skyrocketed over the last two decades, mostly due to television money. There are only so many places for that money to go. I apologize I can't find the particular research I'm thinking of (I think it's from 538), but a variety of articles on the topic have concluded that fully half of the revenue increases have been eaten up by coaches salaries. You can't pay the players and you can only spend so much on their food and things, so there simply are only so many places for the money to scale up quickly. The remaining half is mixed between facilities and things like admin with a tiny sliver for other sports.

There is literally money burning a hole in ADs pockets and finding its way into coaches pockets. Coaches are overwhelmingly the big winners in the revenue explosion sweepstakes.

They could use that money to meet their Title IX obligations by funding scholarships for other sports.

 

[AdamOnFirst]

They could use that money to meet their Title IX obligations by funding scholarships for other sports.

Their obligations were already funded before the revenue growth, and they can't materially increase compensation to those players either. Scholarship costs are basically fixed. I guess they could add programs, sure, but the reality is they haven't done that to a large extent and it's very hard to do that to the tune of millions and millions of dollars. The probably haven't done it for good reason, since if you're an AD at most places who doesn't want to get fired, you probably want to keep up with the Joneses and keep your successful coach around, or make a hire that pleases the donor class that keeps you in your job. Most the money has stayed within football, and its gone to the coaches. That's why salaries are so high.

It will be interesting to see how NIL impacts this, does it cause a redirection of revenues from department budgets to the players, or does it just create an entirely new line of revenue with the players actually getting a piece of the accelerated growth this time.

 

[jimmyNU]

No one will outperform Orgeron in recruiting at LSU, certainly not Kelly. I think Kelly will do a good job but he will fall short of sky high expectations at LSU. They believe they should be in the NC game every year and I just don’t see that happening. I doubt Kelly feels differently. He made this decision solely based on the money.

I have to believe that nearly all of these top coaches make decisions solely based on money. Sadly, the way the contracts are written with buyout clauses, they are set for life if they make it through three seasons, regardless of their record.

 

[techtim72]

Call me crazy, but I don't see Kelly as a cultural fit at LSU. To start, he doesn't speak the language. He's about as far removed from a warm good old boy as you can find plus I don't think the fans will give him any points for being charming. He's an uptight Irishman. If he brings in coaches he needs some that can go into the homes of players in Louisiana and East Texas. On the other hand, I thought Orgeron was a perfect cultural fit and they ran him out of there quick.

 

[Katatonic]

Maybe the out control/spiraling coach's salaries will finally put an end to the notion that CFB is about amateurs.

Mel Tucker, a coach who hasn't even won a divisional title, makes more than Tomlin, Reid and Arians - all with a SB ring.

 

[NREPP Fraud]

When Dano Swinney was renegotiating his contract after winning the NC, his team presented all kinds of statistics showing how much the school benefited (applications sky rocketed, caliber of student increased, marketing of the school was easier, paraphernalia sales, etc). Basically he was arguing that paying him $9mm or whatever the number was a bargain. And he was right. The flip side is that for every Dabo, there are dozens of Lovie smiths who make millions yet don’t win.

Schools like Bowling Green are gonna be in trouble

 

[CatManTrue]

I'm trying to wrap my head around the economics of college football. It seems that as of this year the new standard is a minimum of $100M for a 10-year contract. I really only follow NU so I don't know exactly how other schools profit from that kind if salary expense.

If a school like LSU gives Brian Kelly a mega deal, it might hope to get two national titles in the span of the 10-year contract. Do they really earn $50M+ by winning a national title? From what I can tell, all of these schools already have sellout crowds at home and fixed income from their TV contracts. It seems like the only additional revenues stream is selling more national title hats and t-shirts.

Again, I'm a layman but this math doesn't seem to add up.

@jimmyNU , you’ve hit a pretty big nail on the head. You know who else I’ve heard has been having these same thoughts (or concerns)? Our incoming president who is also a pretty respected Economist.

I’ve got a fuller story of her time at Wisconsin - and relationship with athletics - that I think I’ll share soon.

 

[AdamOnFirst]

Schools like Bowling Green are gonna be in trouble

Many many schools like Bowling Green - maybe not exactly them, but many unprofitable G5 and FCS schools - are going to end up non-scholarship pretty soon.

 

[phatcat_rivals223240]

Many many schools like Bowling Green - maybe not exactly them, but many unprofitable G5 and FCS schools - are going to end up non-scholarship pretty soon.

Hopefully EXACTLY them, I can't stand BGSUcks

 

[corbi2961]

Call me crazy, but I don't see Kelly as a cultural fit at LSU. To start, he doesn't speak the language. He's about as far removed from a warm good old boy as you can find plus I don't think the fans will give him any points for being charming. He's an uptight Irishman. If he brings in coaches he needs some that can go into the homes of players in Louisiana and East Texas. On the other hand, I thought Orgeron was a perfect cultural fit and they ran him out of there quick.

I agree. This was a bad hire. They should have hired Aranda or Joe Brady. Kelly will do ok but I don’t think he’ll last long. The guy took the job solely because of the money.

 

[Bweiny]

Hopefully EXACTLY them, I can't stand BGSUcks

Because of McCall? If anything, BGSU is preferable among MAC schools after a good RB like Clair comes over and they hand PJ Fleck a supremely embarrassing loss. Their terrible defense let us catch our first glimpse of Larkin's burst. Oh what could have been. His quickness was second only to Venric's in the Barnett-current from which I'm qualified to speak to.

 

[phatcat_rivals223240]

Because of McCall? If anything, BGSU is preferable among MAC schools after a good RB like Clair comes over and they hand PJ Fleck a supremely embarrassing loss. Their terrible defense let us catch our first glimpse of Larkin's burst. Oh what could have been. His quickness was second only to Venric's in the Barnett-current from which I'm qualified to speak to.

No, I'm from Toledo, my wife is a Toledo grad, they have bitter rivalry. Back when I lived there and newspapers were relevant, the local paper was full of BGSUcks journalism grads and they clearly favored them. BGSUcks has zero casual fans but the paper would give them higher billing than Toledo. Not making this up, after they beat our near-comatose team in 01, they must have referred to beating "defending big ten champ Northwestern" like 20 times over the next SEVERAL years. Over and over. Also they beat us in that bowl despite like 400 yards rushing by the Cats.

They are like a mini-Michigan to me.

 

[CatManTrue]

No, I'm from Toledo, my wife is a Toledo grad, they have bitter rivalry. Back when I lived there and newspapers were relevant, the local paper was full of BGSUcks journalism grads and they clearly favored them. BGSUcks has zero casual fans but the paper would give them higher billing than Toledo. Not making this up, after they beat our near-comatose team in 01, they must have referred to beating "defending big ten champ Northwestern" like 20 times over the next SEVERAL years. Over and over. Also they beat us in that bowl despite like 400 yards rushing by the Cats.

They are like a mini-Michigan to me.

We’re 1-2 against BGSU all-time (thankfully we beat them 49-7 in 2017!).

So we have a 33.3% winning percentage versus BGSU, and a 19.7% winning percentage versus Michigan.

A mini-Michigan, indeed.