Friday, November 17, 2006

Heady and costly days for Rutgers football

Rutgers University shocked the college football universe last Thursday night after the Scarlet Knights defeated the number three ranked Louisville Cardinals 28-25 on a last second field goal. Louisville’s national championship aspirations ended, and the improbable took a gigantic step forward – the little school that can’t afford to, playing for a BCS Championship.

A school without a football history, an athletic department fighting for any recognition overnight was thrust into the national spotlight. Rutgers may not make it to the January 8 BCS title game in Phoenix, but the remarkable rise of Rutgers football may be the college football story of the year.

A year ago the Scarlet Knights finished with a 7-5 record, losing 45-40 in the Insight Bowl to Arizona State. In Rutgers 136 year football history, prior to the school’s bowl appearance last year, the only other time the school’s football program appeared in a bowl game was the defunct Garden State Bowl, a bowl game created for Rutgers to play in. The Scarlet Knights lost the 1978 Garden State Bowl again to ironically Arizona State. It’s a pretty safe bet wherever the Scarlet Knights go bowling this year; they won’t be playing Arizona State. Rutgers played in the first Garden State Bowl at Giants Stadium; four years later the Giants Stadium hosted the last Garden State Bowl.

If the Scarlet Knights defeat the Cincinnati Bearcats Saturday, defeat Syracuse in their last home game next Saturday, and then beat West Virginia at Morgantown on December 2, Rutgers may not make it to the BCS title game (despite being 12-0) but the school will appear in a BCS game, earning a payday of $14 million. The Scarlet Knights will have to share most of appearance fee with their fellow Big East conference members, but at the very least the school will be able to break even on their bowl appearance.

The Scarlet Knight’s appearance fee in last years’ Insight Bowl -- $1.25 million. The school didn’t break even on their first bowl appearance 28 years. According to a report in The Bergen Record, the Rutgers athletic department spent $19,000 more than it took in. And that didn’t include the $206,312 bowl bonuses awarded to coaches and other athletic staff. Clearly the University and the athletic department realized a young football team making it to the school’s first bowl game in nearly 30 decades was well worth the investment. Doing things the right way sends a strong message – you believe in where the football program is headed.

"We were going to do it right," said Athletic Director Bob Mulcahy. "Because frankly, your reputation among the bowls and among recruits and among everybody else is a direct result of how they perceive you handled this."

Not everyone on campus appreciated the vision the athletic department had for the football program.

"By the time they flew everybody out there, we even lost money on this pathetic bowl. ... It's just money going down, down, down the drain." said William Dowling, an English professor at Rutgers and longtime critic of the school's sports buildup.

If Mulcahy believed spending a few extra dollars last year after the school’s Insight Bowl appearance, the 2006 season spent in the rarified air of the top ten has proven to be an entirely different financial experience.

The Bergen Record offered several ‘added expenses’ the athletic department has experienced this year. There's $2,900 for an Atlantic-City-to- Manhattan helicopter ride for the million-dollar head coach.

It cost $10,000 to hobnob with the elite of college football at a black-tie dinner at the Waldorf-Astoria. The school has spent millions of dollars more than the football program has generated.

"We're doing it because of the extreme visibility of the football program and its importance to the image and reputation of the university," said President Richard McCormick.

Last year, including the money the school lost of their Insight Bowl appearance, Rutgers spent $13 million on their football program. According to The Bergen Record, the price of success has been considerable – an $80 million shortfall in state aid. More than 600 jobs and 800 course sections have been lost. Six high-performing Olympic sports are being axed.

"It's a straight upward line for the football team and a straight downward line for the academic and physical conditions here," said Richard Gundy, a statistics professor. "This is a political issue, not only within the university, but it should be a political issue in the state."

One of the more interesting expenses relating to last years’ money losing Insight Bowl appearance was the $88,000 the school spent on Insight Bowl rings -- $299 each. One of the rings was presented to New Jersey Senate President Richard Codey.

"It's great for the university," Codey, who proudly wears one of the Insight Bowl rings, told the Bergen Record. "On New Year's Day, if there is a choice between watching the Gator Bowl or the academic bowl, I'd want to watch the Gator Bowl."

"People can make arguments about whether this expenditure should happen and that expenditure should happen -- I understand that," Rutgers Athletic Director Robert E. Mulcahy III told The Bergen Record. "If you're not going to do things in a first-class fashion ... then you're not going to attract the kinds of recruiting classes that we've been able to attract in the last few years."

That may indeed be true, but it’s scary when Mulcahy admits it will be at least five years before the football program makes money. It may be comparing apples to oranges but the Notre Dame football program generates more than $60 million, pays the entire athletic department budget and pays for 2,000 academic scholarships. Regardless of where the Rutgers football program is in five or ten years it will never generate the tens of millions of dollars the fighting Irish do on an annual basis. The question has to be asked, is it worthwhile to invest tens of millions of dollars in a football program that has constantly lost money and games since 1869.

"Real students are being marginalized and cheated in 100 different ways," said William Dowling, an English professor and longtime critic of Rutgers' Division I-A buildup. "Now the financial situation makes more dramatic what big-time athletics does to an institution."

Rutgers hired Mulcahy as athletic director in 1998, under Mulcahy’s leadership the athletic department has gone on an amazing spending spree. Spending has nearly doubled to a record $41 million last year in only seven years. A third of the budget is dedicated to the football program, a program filled with some very interesting perks.

Last year, $239,000 in recruiting costs included $31,640 spent at ESPN Zone, a dining and entertainment center. For home games, rooms for players and coaches, food and rental of audiovisual equipment at the East Brunswick Hilton cost Rutgers more than $165,000. An additional $8,000 was spent busing the team between the training center and hotel.

Is this a classic case of having to spend money to make money? According to The Bergen Record, the athletic department generated a record $5.9 million in fund raising-- $2.1 million was given for football.

Robert H. Frank, an economics professor at Cornell, studied the revenue potential of Division I-A programs for the Knight Commission on Intercollegiate Athletics.

"If you're a school that has a history -- a University of Michigan, a University of Texas -- there are some built-in advantages," said Frank. "For somebody coming in from the outside hoping to crack that circle, it's almost certainly a losing proposition."

"If they have a $3 million deficit in football it's a chase for the Holy Grail," said Andrew Zimbalist, an economist at Smith College who has studied college sports. "It's not absolutely inconceivable that they'd ever become a surplus department, but it's quite unlikely, and a hundred other schools are out there trying to do the same thing."

Zimbalist told The Bergen Record, "a half-dozen to a dozen in any particular year that have a true surplus in their athletic programs. If you want to be an athletic department that has a surplus, you'd better be one of the top 10 football programs and do it consistently."

Given Zimbalist’s reputation is second to none when it comes to understanding the economics of college athletics, Rutgers consistently producing a losing record before last years 7-5 record, is it realistic the runaway spending habits of the athletic director directing much of that increased spending to the football program appear to be nothing more than a dream.

McCormick, the Rutgers president, made it clear to The Bergen Record he doesn’t share Mulcahy’s vision of the football program becoming a money-making machine in five short years.

"Bob says five years? Good luck," said McCormick. "We're not doing this to make money."

So the question becomes – if you’re spending tens of millions of dollars in hopes to generating revenues, that established economists do not believe have a realistic snowball’s chance in hell of taking place, why then spend the tens of millions of dollars?

Rutgers football was the toast of the Big Apple last weekend. The New York Times has published 13 different articles directly related to the football program since last Thursday night’s win over Louisville. 13 stories between November 9 and November 16, eight days where the Rutgers football has dominated The New York Times sports section. In the last week the Rutgers football program has received more space in The New York Times sports section then any of The Big Apple’s nine major sports franchises. The Washington Post has published three features on the Rutgers program in the last seven days.

The Opinion Research Corp. of Princeton conducted a survey of 1,031 people after the Scarlet Knights' dramatic football victory over Louisville last week, 34 percent said they had heard of Rutgers in the news recently, up from 22 percent in a similar survey two weeks earlier.

"We wanted to see what impact a winning football team has on the awareness level of a school," said Joel Henkin, vice president of ORC, a global research and consulting firm.

And that’s where the great divide between schools spending tens of millions of dollars in building bigger and better sports palaces, taking money away from the academic side of an ‘institution of higher learning’. There are those who believe the publicity the football program at Rutgers is generating will increase enrollment. The football program may never generate enough dollars to pay its bills, but if overall enrollment and tuition fees increase (Rutgers cost $20,000 a year in tuition) it’s the classic scenario of taking the money from one pocket, and get the money back in another pocket. It may be at best a weak business argument but it’s the only rationale Rutgers will be able to use to justify the inevitable tens of millions its football program will lose in the years ahead.

For Sports Business News this is Howard Bloom. Sources cited in this Insider Report: The Bergen Record

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