Stanford breaks even on Orange Bowl

April 18, 2011, 3:04 a.m.

Stanford Athletics received “zero” net income from the football team’s recent trip to the Orange Bowl, according to officials in the department. The Daily was unable to independently verify this figure, as Athletics declined to provide its NCAA expense report or other financial documentation.

Stanford breaks even on Orange Bowl
(ANASTASIA YEE/The Stanford Daily)

“I would say roughly, at the end of the day, with all things being considered, we’ll break even,” said Brian Talbott, chief financial officer for Stanford Athletics. “We broke even at worst.”

Officials within the University’s budget office, including University CFO Randy Livingston, did not comment on financial returns from the Orange Bowl and directed all inquiries to Talbott.

The Cardinal defeated Virginia Tech, 40-12, in the Jan. 3 game, held at Sun Life Stadium in Miami Gardens, Fla.

Stanford earned revenue from its bowl trip through a payout from the Pacific-10 Conference, which pools bowl revenue from all of its teams and distributes it to schools to cover bowl-related expenses, chiefly travel and tickets. Stanford paid for transportation, lodging and meals for the team, the band and University administrators and was required to cover 7,500 tickets—out of an allotment of 17,500 from the Orange Bowl—that it was unable to sell.

In terms of profit, Stanford ranked in the middle among teams that participated in the Bowl Championship Series (BCS).

Talbott added that Stanford broke even on its trip to last year’s Sun Bowl in El Paso, Texas, where it lost to Oklahoma, 31-27.

“That would be my goal for any bowl—to break even on a strict revenue and expense basis, in the hope that the fact that you went to a bowl creates those ancillary benefits,” he said.

“Ancillary benefits”

Though Stanford was unable to profit directly from the Orange Bowl, Talbott pointed out that playing in the game will bring the athletics program a wide range of benefits, many of which are not quantifiable now but could translate into financial gains in the long term.

“We know the numbers that the Pac-10 gets as a payout; we know what it costs us—that piece is easy,” he said. “What’s a lot tougher is quantifying the ancillary benefits: how many more ticket sales we’re going to get this year than last year because we went to the Orange Bowl, how many more donations are we going to get this year because we went to the Orange Bowl, how much better is our recruiting going to be because we went to the Orange Bowl.”

Season ticket renewals for next year are already up—Talbott said he expects to beat the 90 percent renewal target “substantially”—and even though new ticket sales have yet to open, Athletics has already collected four times as many deposits to date as it did for all of last year.

“Even taking it a little further, the more people who come to any game for us, the more they’re going to have to pay to park, the more they’re going to buy concessions, the more they’re going to buy merchandise,” Talbott said. “All of these things trickle down.”

The publicity from the game, especially because it was the only football game on during the 8 p.m. EST timeslot, could also be beneficial in recruiting players and retaining coaches. He noted that while coaching impacts are felt more immediately, the recruiting gains will probably be seen in the 2012 class, as this year’s group had already committed by February.

“Everybody was watching,” Talbott said. “That gets recruits’ eyes; they say, ‘Hey, I could be on TV if I play for Stanford.’ And it helps retain coaches to some extent, although it makes them more popular too, so they could leave, but coaches like to be part of a successful program.”

Talbott also noted that the University as a whole could reap financial benefits from its football victory, as donations could benefit from the Orange Bowl being “a very public success.”

“It should break even, from a strict ‘revenue and expense related to the bowl itself’ perspective,” he said. “I find it hard to believe that we won’t see significant upside in those secondary areas that will make it well worthwhile over time.”

Sizing up the competition

Nine other universities participated in last season’s BCS, a set of five marquee bowl games including the national title game and the Orange Bowl. From a profit standpoint, Stanford was right in the middle of the pack.

Unlike Stanford, which is a private institution, public universities are required to disclose their NCAA bowl expense reports upon request due to open-records laws, most notably the federal Freedom of Information Act. For the eight public schools that participated in the BCS, The Daily was able to collect detailed financial information, including figures for profit or loss.

Among those schools, only two—Ohio State and Wisconsin—made a significant profit, with the Buckeyes earning $288,876 on their trip to the Sugar Bowl and the Badgers receiving $79,168 from the Rose Bowl. Two other teams, Oklahoma and Arkansas, were close to break-even—the Sooners earned $9,350 from the Fiesta Bowl, and the Razorbacks received $5,525 from the Sugar Bowl.

The remaining four schools took significant financial hits. Most notable was Connecticut, which lost just under $1.8 million on its Fiesta Bowl trip. Virginia Tech, the Cardinal’s opponent in the Orange Bowl, lost $421,046. Both participants in the BCS National Championship Game, Auburn and Oregon, ended in the red, with the Tigers paying $614,106 and the Ducks losing $312,437.

Records were not available for the Rose Bowl’s second participant, Texas Christian University, because it is a private institution.

It appeared that conference affiliation was an important factor in determining whether a team made or lost money. Both Ohio State and Wisconsin are members of the Big Ten Conference, which generally pays out more revenue to its member schools than other conferences.

For perspective, Ohio State received $2 million from its conference for its bowl appearance, while Virginia Tech received just $1.725 million from the Atlantic Coast Conference (ACC). The Pac-10 also appeared to be slightly more generous, as Oregon received just under $2.3 million—with the caveat that the Ducks played in the title game and thus were expected to have higher expenses as well.

The Daily also compared financial returns from the two participants in the 2010 Orange Bowl, Iowa and Georgia Tech. The Hawkeyes made a $55,954 profit, while the Yellow Jackets took a $198,910 loss. However, the two teams did have a large gap in revenue, with Iowa getting $1.95 million from the Big Ten compared to Georgia Tech’s $1.6 million payout from the ACC.

Flaws in the bowl system

Matt Sanderson, one of the co-founders of Playoff PAC, a political committee whose goal is to establish a playoff for college football, discussed Stanford’s bowl finances—and the flaws of the bowl system in general—in an interview with The Daily.

“It shows you how bizarre this system is, that actually breaking even on a bowl is considered a success story,” he said.

Jeff Passan, a Yahoo! Sports columnist and a co-author of the book “Death to the BCS,” added that it was “surprising and not surprising” that Stanford broke even on the Orange Bowl.

“Surprising, sure, because its peers in BCS-level bowl games almost all took massive baths,” he wrote in an email to The Daily. “It’s not surprising because the Stanford athletic department always has struck me as being more conscientious than most.”

Passan also said that not being a traditional football powerhouse, like Virginia Tech or Ohio State, actually made it easier for Stanford to break even.

“The difference between a school that breaks even and one that bleeds is conscientiousness,” he said. “Football rules Virginia Tech. Everyone wants a part of it…Rather than leave itself open to criticism for being like every other school and overvaluing football, Stanford’s approach was pragmatic: enjoy the experience, don’t go overboard.”

Sanderson said that the bowl system, and the BCS in particular, is set up to make it difficult for universities to make profits.

“There’s a lot more revenue that college football’s decision-makers are leaving on the table,” he said. “If we were to move to a playoff, a lot more revenue would be available to participating schools and to schools that don’t participate in the playoff.”

Much of the blame for the distortions in the bowl system is placed on ticket guarantees, where participating schools are required to sell a certain number of tickets and cover any unsold ones. Thus, bowls transfer the majority of financial responsibility onto the participating schools and actually take very minimal risk.

“The bowls are foisting blocks of overpriced tickets on schools,” Sanderson said. “Fans can hop on StubHub and get the same tickets for a fourth of the price. The bowls are pushing all the risk of not selling tickets off onto the schools.”

“The false market created by necessitating universities and conferences to purchase tens of thousands of tickets at full price, when ticket brokers and resale services offer day-of-game tickets for as little as 10 percent of face value, elucidates more than anything what a terrible deal bowls are for schools,” Passan said.

The money trail: from bowls to conferences to schools

Stanford’s zero profit estimate is based on a number of expenses—most substantial among them are unsold tickets and travel expenses for the team, the band and University administrators—and one major revenue source: a bowl payout.

Stanford breaks even on Orange Bowl
(ANASTASIA YEE/The Stanford Daily)

According to the BCS media guide, supplied by the Orange Bowl Committee to The Daily, the BCS pays out $21.2 million to each of the six automatic qualifying conferences, including the Pac-10, plus another $6 million if a conference qualifies a second team for the BCS. This season, both Stanford and Oregon qualified for the BCS, giving the Pac-10 a $27.2 million payout in total.

The Pac-10 also received payouts from its other bowl teams, Arizona and Washington, which played in the Alamo and Holiday bowls, respectively. The conference pools these payouts to cover travel and unsold ticket expenses for each participating team and then divides the remainder equally among all 10 conference teams, regardless of their involvement in a bowl.

“Basically what happens is all of our bowl revenue is brought into one pot from every bowl game we participated in this year, from the Championship Game, roughly $17 million from that, $6 million from the Orange Bowl and then there’s the other bowl games: the Alamo Bowl and the Holiday Bowl,” said Kirk Reynolds, vice president of public affairs for the Pac-10. “Those revenues all come into one pot, minus the expenses from each, and then the rest is distributed among all 10 institutions.”

“Stanford would have gotten, because they played in a BCS game, $1.4 million plus change, and then travel expenses for 600 people,” he said.

However, it seems the bulk of that went this year to covering travel and tickets. Stanford had an obligation to sell 17,500 tickets to the Orange Bowl but only managed to sell about 10,000, a figure given by Talbott and corroborated by Reynolds.

“We did not meet the ticket obligation,” Talbott said. “We sold or used about 10,000 tickets and our obligation was about 17,500, but part of the payout from the bowl to Pac-10 is used to help offset some of those ticket that we weren’t able to sell, so at the end of the day, we won’t have to eat 7,500 tickets.”

The payout from the Pac-10 also helped cover Stanford’s travel expenses, which included an eight-night stay for the team at the Fontainebleau Miami Beach as well as three nights at the Renaissance Eden Roc Miami Beach for the band, according to Max Chang ’13, director of public relations for the LSJUMB. The University also chartered a plane for about 130 of the 180 band members and subsidized travel for the rest.

Despite the pooling of both risk and revenue achieved by the Pac-10, significant differences existed between the three other Pac-10 bowl teams. Due to its participation in the BCS National Championship Game, Oregon received a much higher expense allowance and had much higher expenses than the other two schools. NCAA bowl expense reports revealed that Arizona lost $274,932 on the Alamo Bowl, while Washington came out slightly ahead on its Holiday Bowl trip, with a $3,796 profit.

Both teams had roughly equivalent expense allowances of around $1.1 million. However, the Wildcats were forced to cover $552,375 in unsold tickets, while the Huskies only had to take $102,130 in ticket losses, with those figures coming after the Pac-10’s contributions to covering unsold tickets. Oregon paid for $555,575 in unsold tickets on its way to a $312,437 loss, out of a $2.2 million expense allowance.

UPDATE: Below is the full NCAA bowl expense report of the University of Oregon, obtained by The Daily through an open-records request. The bottom line of page 2 indicates that Oregon absorbed 1,761 tickets at a cost of $555,575.

Oregon Expense Report: 2011 BCS National Championship Game

Kabir Sawhney is currently a desk editor for the News section. He served as the Managing Editor of Sports last volume.

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