College Cash Crunch – Part 1

If you have watched any college football this year, you’ve noticed that there are a lot fewer fans in the stadiums during this lingering pandemic year of 2020. 

Though it was nice to see 17,000 students and fans inside Jordan-Hare Stadium on Saturday afternoon to watch Auburn host LSU, it also means that 68,000 fans weren’t allowed inside.  Due to state and university precautions, the school is trying to maintain social distancing even if it is putting a choke hold on football revenues, too.    

Since college football is the primary cash cow for most universities’ athletics budgets, having just 20% of the fans in the stands for a college football game also means that the other 80% of the seats are empty.

For those 68,000 empty seats in Auburn, that means there were no tickets sold for those seats, no parking permits or concessions purchased along with other stadium-related merchandising normally peddled to thousands of enthusiastic college football fans at every Auburn home game this fall.

If that’s not bad enough, there is a significant negative effect caused to many local businesses in and around Auburn, Alabama.  Formerly sold-out hotels are struggling to sell rooms.  Restaurants and entertainment establishments in the lovely and historic Toomer’s Corner portion of downtown Auburn are even feeling the pain, too. 

Don’t get me wrong.  Having college football to watch on television or in person is a blessing in 2020.  The costs being extracted on the college athletics budgets and in the home cities of those universities will linger on long after the pandemic comes under control.   

This isn’t just an SEC issue.  The same scenario is playing out in college football cities around the nation this fall.

It’s a lot like the US national debt.  You know it’s rising at a meteoric rate right now.  During this pandemic year of 2020, though, you simply prefer not to look regardless of how ugly it has been getting. 

Since college athletics departments aren’t able to issue their own currency, though, they must find creative ways to cover their costs of operation.  When revenues are plummeting in the primary cash cow sport (football) and there is no improvement seen anytime soon, it is time to take drastic measures to get costs under control.

LSU recently announced that the school’s athletics budget shortfall could reach an astounding $80 million.  After the SEC cancelled all non-conference football games in 2020, LSU football would not reap the revenues from two home football games in 103,000 seat Tiger Stadium.   Coming off a national championship season in 2019, those two sellouts probably cost the LSU athletics department well over $6 million per game.  Let’s call it a $12 million loss this year in ticket sales alone.

For the remaining five SEC home games in 2020, ticket sales will be limited to 25% of capacity.  The loss of nearly 76,000 tickets per home game for those five games adds up quickly.  Assuming an average ticket price of $75 (a conservative estimate) with 76,000 fewer seats for five home games, the estimated ticket revenue loss for these five games reaches over $28 million. 

Again, these are my own ballpark estimates.  I am forecasting a $40 million revenue shortfall just in unsold football seats alone.  When adding on the loss of parking and tailgating revenue, in-stadium concessions and merchandising, LSU’s projected $80 million revenue shortfall is looking more and more realistic.        

As a result of these estimates, LSU eliminated twenty positions within the athletics department last week.  There will be no new hires except for positions considered “essential” into the year 2023.  

In addition, salaries were trimmed by 5% for those making more than $80,000/year.  Based on the poor performance on the field by the LSU defense this season, many Bayou Bengal football fans would have been fine with eliminating new defensive coordinator Bo Pelini and his $2.3 million annual salary (oops, it’s now “only” $2.185 million) .  

Though head football coach Ed Orgeron saw his salary take a $300,000 reduction (5% of his $6 million annual pay), it’s likely that the coach will find a way to scrape by on his reduced $5.7 million salary.

At the University of Alabama, the situation is much the same.  Bama’s athletics department has reduced its budget by 22% and instituted a hiring freeze.  Director of Athletics Greg Byrne said the Alabama athletics department is facing a $75 million revenue shortfall. 

The school’s Crimson Tide Foundation recently established the Crimson Core Fund to help student-athletes cope with pandemic-related financial challenges.  Donors and philanthropy account for nearly 40% of the Alabama athletics budget.   They are being asked to do more during this pandemic.

In Gainesville, Florida, the athletics budget for the University of Florida is approximately $140 million annually.  According to one report, 60% of that revenue ($84 million) comes from the college football program. 

Like at LSU, Alabama, and countless other universities across the nation, the University of Florida football team has lost two home games in 2020 and seating for the remaining five SEC home football games has been limited to just 20% of the normal 85,000 stadium capacity.  Gator Nation is being asked to help the athletics programs by stepping-up their financial donations.    

For smaller schools, though, the loss of college football revenue may cause the cessation of certain revenue and non-revenue sports.  That means there will be a loss of staff and student scholarship money, too. 

The dominoes are just starting to fall with regard to the impact on the athletics budgets for your favorite university.   Some will make small sacrifices to survive into 2021.  For the schools with smaller athletics budgets, their world in 2021 will look much different as many will struggle just to survive and make ends meet.

In our next visit, we’ll examine the smaller schools’ athletics budgets and see how they are faring with budget shortfalls during this ongoing pandemic. Stay tuned!