The University of Texas is profiting from a decision to renovate its football stadium four years ago instead of investing in securities.
As the worst recession since the Great Depression beat down the S&P 500 Index 41 percent between July 2, 2007, and July 1, 2009, athletic departments such as Texas used their on-field success to drive increases in operating revenue.
Among the largest schools – the nine with at least $90 million in operating revenue – the biggest winners were Texas, up 32 percent to $138.5 million; LSU, up 32 percent to $100.9 million; and Texas A&M, up 33 percent to $98.1 million, according to a review of athletic department financial records.
Good grief, who is in charge down there? said Texas athletic director DeLoss Dodds, making a joke. He needs a raise.
Dodds, 72, said the schools annual debt payment from the football stadium construction is about $14 million, while revenue from the renovation is about $24 million per year.
Bloomberg News received financial statements for the fiscal years ending in 2007 through 2009 from 51 public universities in the Atlantic Coast, Big East, Big Ten, Big 12, Southeastern and Pacific 10 conferences after filing open-records requests. The average increase in operating revenue – money from things like tickets, concessions and program sales, but excluding items such as interest on investments – was 11 percent.
The Longhorns renovated their football stadium in stages between 2006 and 2009, adding 13,000 seats priced from $65 to $95 depending on the game; 2,200 club seats starting at a minimum $2,000 annual donation, plus the cost of the ticket; 2,450 chair-back seats priced at a minimum $750 annual donation, plus the ticket; 47 suites priced from $62,000 to $75,000 plus the tickets and catering; an $8 million, 55- foot-by-134-foot video scoreboard; and ribbon scoreboards that offer more opportunities for advertisers.
Had we gone with endowments, wed be down 30 percent, Dodds said. This is a huge success.
Michigan increased its sponsorship and licensing revenue by 43 percent to $17.3 million after exiting an apparel sponsorship with Nike for a new agreement with Adidas in June 2007. In August 2008, the Ann Arbor-based school bundled most of its athletic sponsorship accounts and outsourced them to IMG Worldwide Inc., the U.S. largest collegiate licensing and multimedia rights agency, representing more than 200 properties.
We had fortuitous timing, said Jason Winters, the chief financial officer for Michigans athletic department. Its a challenging market. But our brand is sustainable. We have a long history and tradition of success.
Nineteen of the 51 schools in the Bloomberg survey showed declines in operating revenue in the final year of the three-year survey. Andrew Zimbalist, an economics professor at Smith College, said when 2009-10 data become available, it will probably show back-to-back years of revenue declines for many schools.
The sharp impact of the downturn happens around the beginning of October 2008, he said. By that time, many of the season tickets, the booster donations, the catering functions have already been booked for the 2008-09 year.