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Do Even Losing Sports Teams Benefit a University?

These days, there is no question that the football teams with big names, from big conferences and qualifying for the big playoffs are ‘profitable’. Each of the four teams in this year’s College Football Playoff—Alabama, Clemson, Ohio State, and Washington generate millions of dollars in net profits from their football operations alone.

However, there is evidence that winning sports teams, especially football and men’s basketball, may also benefit universities in three important non-financial ways; most conclusively is that the publicity gained by success in big time sports helps attract larger student applicant pools. It is also suggested winning teams help generate gifts and donations that support academic programs, and heighten morale among students, alumni and their local community.

But what about programs on a losing streak…or those who rarely see a winning season?

Sports competitions are a zero-sum game. For every game winner there is a loser, and for every conference champ there is a team that finished in last place. What are the benefits to that large group of schools that see rather limited sports success? Joel Maxcy, PhD, associate professor and head of Sport Management in the Center for Hospitality and Sport Management claims economic analysis of college sports can show that even athletic departments whose teams are not regular winners offer universities many of the same advantages as the frontrunners—just to a lower degree. While they may not rack up trophies or multi-million dollar bowl payoffs, they still do have the capacity to generate important “spillover benefits” to their schools.                                                                             

So how?

Maxcy explains the returns to sports go beyond the athletic department’s bottom line and that these spillover benefits do provide an advantage the rest of the university. Intercollegiate sports generates publicity more efficiently than most other methods of advertising and in particular football and basketball games receive far more media attention than other extracurricular clubs and organizations. For example, a nationally televised football or basketball game is effectively a 2-4 hour advertisement for the university, and one for both the winning and losing team. Not to mention the tag along media attention from print, web, and social engagement with the university.

Consumers of college sports programming are well represented within a key demographic of high interest to universities—high school students with an interest in sports, many of whom are soon to make college decisions.  Publicity from sports acts as an advertisement, and an effective one that helps builds out the applicant pool. As is the case for the winners, publicity for losing teams may also have the potential to increase donations and, for public universities, increase political support. Sports also provides them the same intangible benefits – including camaraderie of the community and increased school spirit.

The proof.

Maxcy says the steady requests for entry to the NCAA’s highest competitive level (Division 1 and FBS football) and the corresponding  lack of attrition is evidence that many universities realize the net benefits of an investment in big time athletics. A staple of economics is that firms don’t enter declining industries and unprofitable businesses fold. However, twenty-one universities have moved up to the FBS level in the last twenty years, nine of those just since 2012. Meanwhile, the last FBS team to drop football was the University of Pacific in 1996. Moreover those moving up to the top level and remaining active there aren’t all big-time universities – and include those such as Buffalo, Nevada, Western Kentucky, and Arkansas State. The basketball evidence not quite so convincing as football, yet in thirty years over 85 men’s basketball teams have entered Division 1, while only 15 have left.

Want to learn more? Maxcy gave an overview on the economics of college sports during a Public Affairs Forum at the Federal Reserve Bank of Atlanta.

Media interested in speaking to Maxcy should contact Emily Storz at 215.895.2705 or els332@drexel.edu

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