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Bowl Math for Dummies (& College Presidents)

I like to think of myself as a fairly agreeable, friendly person.  However, there are a few things that I hate to my core.  They include sanctimony, intolerance and the college Bowl system.

I’m only a sports guy to the extent that I’m a fan. So all you MSAs can show off your big brains and poke holes in my logic.  But as a fan, I HAAAAAAATE the college Bowl system.  It’s fascist and unAmerican on every level.  Since only one game counts for anything, I only really watch one game. I might stumble upon the Fiesta Bowl for 30 minutes to watch Texas beat the snot out of OSU, but I’m certainly not going to plan my day around it. And every 38th year when OU gets a bid, I’ll watch a 2nd bowl game. (Yay 2044!) But I have a hard time even getting very excited about that. Our season’s over whether we win or lose.

By contrast, I try to watch every second of every game that I can during March Madness. It doesn’t matter who’s playing.  Yesterday (12.18.08), I asked that a meeting not be scheduled for 03.19.09 because I know that the tournament starts at noon that day.  Now, I’m willing to acknowledge that I may be at the end of the bell curve re: my devotion to the tournament and this might be a good time to note that my office is located in the former state mental asylum on The Ridges, but I am absolutely convinced that there are millions of people like me who’d watch a heck of a lot more college football in December and January if it was part of a tournament.  More viewers = more money.

Others can argue the entrenched interests of the BCS and the distribution of proceeds to the power conferences as reasons there will never be a tournament.  I’m not going to challenge that.  That’s a money coming out the bottom of the funnel argument.  I’m arguing the money going in the top of the funnel.  The total economic activity around post-season college football would be much greater in a tournament than it is in the current arrangement.

I’m also not going to argue for the complete dissolution of the bowls.  You love the San Diego County Credit Union Poinsettia Bowl?  Fine!  Keep it.  Make it an early round game in the tournament.

I’m a finance guy.  I think justice, decency and patriotism demands that we do the thing that generates the most money.  And looking at the performance of the early rounds of March Madness compared to the non-BCS bowls, I believe our esteemed college presidents are leaving several hundred million dollars per year on the table.

In 1999, CBS paid $6 billion for the rights to the NCAA Men’s Basketball Tournament for 11 years.  Let’s assume CBS is paying a flat $545 million per year for these rights.  They pay this every year for a tournament that features about 38 hours of prime time programming and draws about 8.4 million viewers for early-round games and 20.5 million for the final.  Last year, CBS drew 132 million television viewers and 4.8 million online viewers from whom they earned $543 million and $23 million respectively in ad dollars, equating to $4.12 and $4.83 per person. That’s $21 million profit for CBS and a fairly paltry 3.8% return.

By comparison, there were 27 non-BCS bowl games last year.  Using a 1.7 viewer-to-rating point conversion factor, I estimate that they drew 145 million viewers or 5.3 million per game – almost 37% less than the early rounds of the NCAA Men’s Basketball Tournament.  Given that college football is indisputably more popular than college basketball, only drawing even with the early-round ratings of the basketball tournament seems very conservative. Need evidence of that? Last year’s football national championship game drew nearly 34 million viewers – almost 66% more than its basketball counterpart.

So here’s my proposal and my estimate of the viewership it would draw and the revenue it would generate from broadcast rights.  A 24-team playoff played over 5 weeks in which the top 8 seeds get first round byes.  That’s 23 bowl games to determine a national champion.*  I would expect that the first 3 rounds of the tournament (20 games to get to a Final 4) would draw at least 33% more than the early rounds of the basketball tournament.  That’s 11.1 million viewers per game; 223 million over 3 weeks.  I’d expect the national semifinals to draw as many viewers as the basketball championship.  And I’d expect the championship game to draw about the same number that it currently does. That’s more than 300 million viewers, nearly 80 viewers more than watched the 5 BCS games and top 18 non-BCS games in 2007 combined.  At $4.12 per person, that’s $322,151,740 that could have/should have been generated by CBS.  And since we know that CBS’s hurdle rate is apparently only 3.8% return, that’s about $310 million that NCAA member institutions left on the table.

If CBS was willing to pay $6 billion over 11 years for a tournament that draws 132 million viewers per year, what would they be willing to pay for a tournament that draws 300 million viewers or more?  $13 billion?  $14 billion?  Come on, College Presidents!  The American economy needs all the stimulus it can get.  You’d be doing your country a great service if you voted to institute a playoff in 2009.  This is change we can believe in!  Pleeeeeeeease, pleeeeeeeeeeeeeeeeeeease, give us a playoff and take another $310 million per year for yourselves.

*If you want to make room for the other 18 teams and 9 bowls games played in 2007, put a second pool of 16 teams in a football equivalent of the NIT playing 15 bowl games over 4 weeks.  They probably wouldn’t generate any more interest than those bottom tier bowl games do today, but it would preserve those games and those postseason opportunities for those schools, their student-athletes, and fans.

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December 20, 2008 - Posted by | BCS, Football | , ,

12 Comments »

  1. I agree with the logic that Paul uses to make his argument and I wish it would happen for the integrity of the sport and for the pure financial reasons he expressed. However, I have to bring him back to reality. It is not gonna happen anytime soon.

    I will admit up front that this is a little disorganized and rambling, but I just wanted to provide some additional BCS info so here we go. First, the BCS was decisive during their summer 2008 meetings that no changes were going to be made.

    The television rights for the BCS are up 51.5% in the new ESPN deal as compared to the current Fox rights. In the current rights deal (through Jan 2010), Fox has been paying about $82.5 million annually to air the Sugar, Orange and Fiesta, and the BCS National Championship Game. ABC holds the Rose Bowl rights as a separate deal.

    The new rights negotiations concluded in mid-Nov 2008 and resulted in ESPN paying $500 million for four years (2010-2014). Fox pulled out of the bidding when they refused to match the ESPN offer. The new deal adds radio, international and digital rights. There is also some shoulder programming on ESPN as part of it. The deal includes the Fiesta, Orange and Sugar Bowls and the title game from 2011 to 2013. The Rose Bowl is under a different contract and will still be broadcast by ABC through 2014 (The Rose Bowl is the 2010 and 2014 title game). This also eliminates the chances for the Cotton Bowl to become a BCS bowl until 2015. ABC’s Rose Bowl contract is worth $30 million per year through 2014. Remember, Disney is the parent company for both ABC and ESPN.

    A little info on BCS payouts….
    The BCS bowl payout, currently (2009) $18 million a team, will grow to $22 million to $23 million under the new contract. A conference with a second team in the BCS bowl receives about $5 million more.

    No way are those in power are going to agree to slice the money pie into more pieces, remember right now only those teams that get into a BCS bowl see these large payouts. The decision-makers are from conferences earning $20 million plus per year. Although I’m sure an extra $200 million would get their attention. Then, there are the twenty-one bowl games have a payout of less than $2 million dollars per teams and thirteen more guarantee less than $1 million per team. So, those schools not consistently making a BCS Bowl are certainly pro playoff given the fact that for many of them a bowl game is a financial loser for them.

    There has been some excitement lately due to President-Elect Obama expressing his support of a playoff on 60 Minutes and to Chris Berman on ESPN. But, the LA Times responded appropriately by stating that “He’ll get the polar ice caps to stop melting before he gets “sensible” people to come to a college football consensus” and “My guess is he’ll sooner have North and South Korea over for tea.”

    Finally, by the time these television deals are up for bidding again, college sports may be bankrupt anyway if mid-major schools continue to escalate their spending at the current rate (which far outpaces new opportunities for revenue generation). Then, all we’ll have left anyway are the BCS Conferences.

    I’m hoping others will have some additional insight on this.

    Sources:
    1. http://www.hollywoodreporter.com/hr/content_display/news/e3ib1d3bc0a150e14c6f208b44931d9ba16
    2. http://sports.espn.go.com/ncf/news/story?id=3710477
    3. Television Sports Rights, 2008 Edition
    4. http://sports.espn.go.com/ncf/news/story?id=3709030
    5. http://www.latimes.com/sports/la-sp-dufresne20-2008nov20,0,5148713,full.story
    6. http://sports.espn.go.com/ncf/news/story?id=3713759

    Comment by Heather Lawrence | December 21, 2008 | Reply

  2. My husband and I have often commented on how we would like to see a college football tournament. I think it would add a lot of interest and viewers to post-season play. It would also give some of the smaller schools with weaker schedules more exposure and a chance to prove themselves. I can’t comment much on Paul’s financial analysis but it makes sense to me.

    Comment by Liz Lawrence | December 22, 2008 | Reply

  3. “Finally, by the time these television deals are up for bidding again, college sports may be bankrupt anyway if mid-major schools continue to escalate their spending at the current rate (which far outpaces new opportunities for revenue generation). Then, all we’ll have left anyway are the BCS Conferences.” – Heather Lawrence

    I agree with this statement in its entirety. I also agree that the presumption that the BCS will be “all we have left” at the corrupting, over-commercialized, semi-pro game that is currently FBS football.
    A misplacing of priorities that is proving to be caustic on several levels (overall budget, gender equity, recruiting of athletes outside the character of the mission of the institution, pandering to corporation’s marketing instead of creating partnerships for learning and growth, etc.) has arisen from something great, the Division I Men’s Basketball national championship tournament. The success of Gonzaga, George Mason, Butler, Kent State, St. Joseph’s and Xavier (among others) over the last five to ten years has given birth to the Hoosier-esque dreams of a non-BCS conference school gaining notoriety, fame and hopefully lasting prestige through athletic triumph. In the last 30 years, exactly ONE school without BCS conference affiliation has won a D-I men’s basketball title, UNLV in 1990.*(see notes below) It is a dangerous and false “Bracketbusting” hope that calls for and justifies six-digit overspends in basketball budgets. The costly dreams increase by an order of magnitude in football budgets.
    In football, glory is not a good three-person recruiting class and couple of favorable bounces away. Football success is built on practice facilities, seven-digit recruiting budgets, monster compliance and academic services staffs who keep the even larger media and booster hordes at bay while trying to facilitate something other than playbook learning during the two-and-half to five academic years that the player has use to the gridiron machine.

    To expect Mid-American Conference, Sun Belt Conference, Western Athletic Conference, Conference USA and Mountain West Conference teams to continue in the 85-scholarship football coaching and facility arms race is foolish. Let the BCS conferences run NFL junior (or should I say freshman through junior) replete with end of year, commercialized to the gills, “one shining moment”-filled tournament of gluttony. But expecting these fifty-some odd schools to pay similar budget numbers for one spot at the dance (and big money which is then split amongst all their conference siblings) where the sixty-plus BCS families are fed a regular diet is criminal.

    At least in the March “madness” there are automatic bids reserved for all but one conference champion (even then the majority use their March tournaments to decide who gets the ticket, rendering the other 30 games an elaborate warm up) and at least cuts those schools into the profit structure.
    The key to fixing mid-major FBS school athletic department budgets is giving up the BCS dream as it proves to be a Ponzi scheme. The truth is the BCS conferences need the mid-major football teams and fans more than vice-versa. Those programs need pre-conference opponents that will carry the social cache to fill stadium club areas with wealthy individuals who feed the system with their 80% tax-deductible “contributions” and increasingly pro-style perqs and access to the “education-based” programs (hence the tax break). The continued out-sourcing of media rights is a fair and positive business practice for the departments, but hinders access to institutional messages that are primed for what are often the largest community gatherings of the year at the institution. If conferences set limits on scholarships (see Pioneer League or Ivy League in FCS football), the paydays from BCS teams would not stop or diminish. Ohio State would still write MAC teams big checks to take September beatings as would others. The alumni base and support would still follow, as beating the rival regularly is much more important than beating Michigan once (regardless of what Toledo alums say – look what it did for their coach).

    Let’s allow the mid-majors the freedom to do what is right for them and keep the bowl system in place as a way to congratulate those student athletes on a good season. Have a playoff amongst the big boys if you want, but count little brother in (and pay him) or don’t (and he will go be his own man).

    * Hardly a hardscrabble story of triumph and rise to subsequent educational and social prominence- taking nothing away from a fine regional university with a nationally recognized hospitality and gaming research institute. Georgetown and Villanova have also won titles without a BCS football program, but with BCS-infused Big East conference media monies.

    Comment by packymoran | December 22, 2008 | Reply

  4. http://www.insidehighered.com/news/2008/12/23/bowls

    Inside Higher Ed with a chart that ignores the conference element (bowl revenue pooling after each school’s expenses are paid).

    The Conference question does carry one large caveat; ten to thirteen university presidents would have to act in concert. But then again, for a BCS playoff system to come to fruition we are talking about sixty-plus presidents, heads of television networks (who all but ignore the MAC, Sun Belt and WAC anyway) and Bowl directors and their sports commissions. Who would you rather sell to?

    As institutions of higher education we have this concept of “peer institutions.” Sometimes schools have aspirational peers and recruiting peers; the difference between who we would like to be and who Timmy and Suzie choose between us and others. Sometimes our peers are based on other demographics (area surrounding campus, what state we are in, what programs we offer, etc.) It is time for “mid-major” athletic departments to redefine their peer groups and stop trying to force a San Diego Credit Union Poinsettia to be a Rose presented by AT&T.

    Comment by packymoran | December 23, 2008 | Reply

  5. I think everyone has made some good points. When talking about playoffs though, people often forget about the bowls and the cities they are in. These bowls bring in tourism dollars for communities that might not have much tourism during this time of year. Even if the bowls themselves do not generate money, they help the community and are a since of pride. A perfect example of this is the Sun Bowl in El Paso, TX. It takes only one trip to this bowl for a person to truly appreciate how much the community rallies around the entire affair. My parents have chose to spend December 31st in El Paso 3 times, because of how wonderful this event is. I think it is important that we stop looking at this as a BCS issue and look at the affect a playoff would have on the rest of the bowl games that are often ignored on TV, because they are not “one of the big boys.”

    Comment by Mike Rose | December 24, 2008 | Reply

  6. Though I agree with Packy’s sentiments in Post #3 regarding the false dreams of basketball glory for non-BCS schools, I have to make one correction:

    The titles won by Georgetown and Villanova were before Big East football, so they didn’t have the benefit of big-time football revenues at that point. I agree that this is extremely unlikely to happen today.

    On the bowl/playoff debate, I have never understood the logic that the lesser bowl games would suffer if a playoff were instituted. I think the lesser bowls could coexist with a playoff, although a 4 or 5 round playoff would probably have a negative effect. An eight-team playoff, which is most realistic for a number of reasons, would not mean the end of the lesser bowls.

    Comment by airwright | December 24, 2008 | Reply

  7. After watching Utah give Alabama a beating today and end up as the only undefeated team this year, I stand by my earlier comment about a tournament giving smaller schools a chance to prove themselves. It’s too bad Utah won’t have a chance to play for the National Championship.

    Comment by Liz Lawrence | January 3, 2009 | Reply

  8. Mike your praise of El Paso is generous–but this is the only sport in the world without a playoff. Paul is correct–the bowl system, the lower tier bowls can still be an NIT if you will and will still attract fans. For every El Paso there is Detroit, Albuquerque, San Diego Credit Union, and who can forget the Papa Johns Bowl in Beautiful Legion Field (half falling apart BTW). There is just no justification not to have conference championship games for everyone, let the 11 conference champs in along with 5 at large teams and have a real playoff. Will some be left out–absolutely, and that is part of the fun. It doesn’t water down the regular season at all and it leaves many good teams for those Sun Bowls you profess to love so much :).

    If all of Division I doesn’t have a chance, then those teams should not be in Division I. I can see the wisdom of including the four major sites as playoff locations and rotating the national championship game–but the lower tier bowls–overall–are nothing more than money losers that really do nothing for the overall product or the local economy and it further makes the CFB postseason a sham.

    Comment by ridpath696 | January 13, 2009 | Reply

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