Presidents’ Forum

The Presidents’ Forum is a periodic feature in The NCAA News that provides presidents and chancellors the opportunity to present their views on important intercollegiate athletics issues. Previous topics have included the relationship between college presidents and boards of trustees, the division affiliation aspects of NCAA membership, and whether the NCAA should be involved in social issues in addition to its primary role of administering college sports. Our topic this time is how institutions ensure that their commercial activities related to athletics align with the university’s educational mission.

By Myles Brand

When it comes to generating revenue for intercollegiate athletics, commercialism is not a four-letter word. Quite frankly, the collegiate model of athletics depends on commercial activities to succeed, as does higher education itself. That reality alone does not distort or even compromise the intercollegiate athletics enterprise or the educational mission.

Yet many people are uncomfortable when intercollegiate athletics engages in any kind of business activity. They believe relationships with corporate entities somehow tarnish the amateur status of those who play the games. Not so. As I said in my speech at the January Convention, “amateur” describes the participants in intercollegiate athletics, not the enterprise. Equally important, corporate relationships and commercial activity must be undertaken within the values, goals and mission of higher education.

First, let’s be clear: Over-commercialization is not rampant in college sports. Only about two dozen athletics departments, all in Division I, are self-sustaining or generate a profit. It is expensive to support a broad-based, competitive athletics program in any of the NCAA’s three divisions, and especially in Division I. Almost all rely on subsidies from the university to balance their budgets, and most schools subsidize because they understand the value that intercollegiate athletics brings to the university community.

But here is the problem: The reliance upon subsidy is growing. During the past half dozen years, the rate of growth of expenditures in Division I athletics has been about three times the rate of growth of the general university budget. And while increases in revenues for athletics are somewhat higher than the general university, they are not nearly high enough to balance the rate of growth of expenditures in athletics.

The most rapidly growing revenue category in college sports is “allocated funds,” or money provided to athletics at the discretion of other entities that also allocate funds for other educational purposes, such as state or local governments, student bodies or the university general funds. For Division I-A, allocated funds as a share of total revenue have increased from 14 percent to 18 percent since 1993. The percentages are much higher in Divisions I-AA (from 61 percent to 70 percent) and I-AAA (from 62 percent to 71 percent).

That trend has placed additional financial stress on the university and it puts athletics directors in a tough situation. Why? Because universities will be reluctant to continue to increase subsidies from the academic side to the athletics side; after all, the academic side is under significant pressure from the faculty, boards and students to invest in academics. While increased subsidies will not bankrupt the university (athletics expenditures constitute only about 3 to 5 percent of the university budget), there nonetheless is a realistic limit on the amount that a university should or would spend on intercollegiate athletics.

Also, students in general have resisted special fees or portions of their tuition being devoted to athletics, so significant increases in those fees are not likely. Athletics directors can push for more philanthropic dollars, but there are real-world limitations there, too. For the larger programs, most games already are sold out, so they can’t sell more seats, and there are limits on the ticket prices people will pay. Increasing the number of contests in the revenue sports of football and basketball also has natural limits. Media rights also have leveled out.

So where do athletics directors get the money to sustain competitive programs? Those in larger schools have to look for commercial partners, whether in the venue itself or from the media. They look for corporate partners to buy use of the university logo and name. Some of that is perfectly fine; in fact, the NCAA does some of that itself. So does higher education. Universities engage in corporate relationships all the time in myriad areas. But they are rightly careful to do so in ways consistent with their educational mission.

Higher education operates as other nonprofits do by acting with good business acumen on the revenue side and abiding by the nonprofit mission on the expenditure side. Colleges and universities collect revenue from federal and state governments, the sale of services (dormitories and room and board, in general), philanthropic activities and investments. University budgets are not small — many public institutions have billion-dollar budgets, and it is malfeasance if they are not managed correctly.

Intercollegiate athletics operates under the same nonprofit approach. If people think athletics departments compromise the collegiate model because they are serious about revenue generation, they fail to understand how colleges and universities themselves operate financially.

Perhaps what bothers people about commercialism is not that it exists at all, but because there is too much of it. Interestingly, what is regarded as being overly commercialized changes with time. What may have been considered as “over the top” in 1976, 1986 or even 1996 is common practice in 2006. The fact that the line moves does not mean intercollegiate athletics has lost its way.

Our guiding benchmark has to be that we engage in revenue generation in ways that align with the institutional mission. There is no algorithm or set of rules that would apply in each case that would automatically determine whether a commercial activity is consistent with the values of higher education. Normative statements are not so simple to judge. In the extremes, it is easy to determine whether a commercial activity is obviously consistent or obviously not, but there is a gray area on which people of good judgment can disagree. We just have to use the best judgement of those who are experienced in university matters, unbiased and knowledgeable.

University presidents, conference commissioners and athletics directors do their due diligence to ensure that intercollegiate athletics toes the commercial line. Most campus venues are not overly burdened with advertising — our games are clearly college, not professional, sporting events. Similarly, our NCAA championships have almost no corporate presence. Even our most “commercial” entities — the Men’s and Women’s Final Fours — are not commercially cluttered.

We in fact leverage the equity in NCAA championships and the NCAA itself to engage in commercial activities under our own rules. Institutions do the same with their athletics departments. The amount of commercialism an institution is willing to allow is up to the university leadership to decide. There is no one-size-fits-all solution.

Is commercialism good for college sports? Handled properly, yes. Commercial dollars help thousands of student-athletes reap the benefits of athletics participation as part of the college experience. If that were not a laudable goal, institutions would not allocate funds to support athletics in the first place. Commercialism also reduces a university’s reliance upon allocated funds to support athletics, thus freeing up dollars for other campus resources.

Is commercialism bad for college sports? It can be if the activity is out of context with the university’s educational mission. I am not advocating, for example, that institutions sell naming rights for their football teams. Nor especially do I want television networks to exert pressure on institutions to act in ways that are not in the best interests of student-athletes.

But it is a mistake to argue that some amount of commercialism is not necessary to sustain the collegiate model, or that any commercialism at all compromises the integrity of higher education. University presidents and chancellors simply need to know where to draw the line, and I believe they understand that distinction.

No, commercialism is not a four-letter word. We just need to make sure we conduct athletics commercial activity — as well as all university commercial activity — with good judgment and in a manner that aligns with the values, goals and mission of higher education.

Myles Brand is president of the NCAA.