SCC Blog
Bowl Business
January 7th, 2009There has been an awful lot of banter in the sports talk world of shifting the post-season model in college football from a series of bowl games (all 34 of them) to some type of playoff format. Personally, I can see the arguments for both scenarios, but I think we all know a major factor in any decision that will be made will relate to dollars.
As many of you will inevitably be dissecting this argument in class, I thought I’d try to provide some resources to help fuel the discussion. With that, I present to you in this week’s blog on the eve of the National Championship Game, “Bowl business by the numbers”…
Payouts
Each participating school in a post-season bowl game receives financial compensation for their commitment and participation. For example, participants in this year’s Humanitarian Bowl in Boise, Idaho (sponsored by Roady’s Truck Stops) will earn around $750,000. Payout figures refer to a payout for each team, so both Maryland and Nevada will take home a nice check.
It should also be noted that the “prestige” associated with a particular bowl game has a direct correlation to the size of the payout. The games associated with the BCS championship (Bowl Championship Series) will each yield a projected $17.5 million payout. On the other end of the spectrum, participants in the Papajohns.com Bowl in Birmingham (NC State vs. Rutgers) will only see $300,000 each.
Here is a sampling of estimated payouts for other bowl games (according to wikipedia):
Hawaii Bowl (sponsored by Sheraton): $398,000
Armed Forces Bowl (sponsored by Bell Helicopters): $600,000
New Mexico Bowl (no sponsor): $750,000
Meineke Car Care Bowl (sponsored by, you guessed it, Meineke): $1,000,000
Alamo Bowl (sponsored by Valero): $2,250,000
Capital One Bowl (sponsored by, yep, Capital One): $4,250,000
As you can see, the payout scale from bowl game to bowl game offers a pretty wide range.
Payouts vs. Profits
Just because a team earns a significant chunk of change for participating in a bowl game does not necessarily guarantee the game will be profitable for the school. It is a pretty costly endeavor for a team to travel for a bowl game, factoring in costs for players, coaches and staff to be a part of the bowl experience. The perception (at least publicly) is that most, if not all, bowl games are a financial boon for colleges and universities, thanks to the success of their respective football programs. That, however, is often times a misconception.
Consider the following excerpt from an article published on Tuscaloosanews.com:
“The University of Alabama will receive a payout that will total nearly $2 million for playing in the Sugar Bowl, making the bowl trip basically a break-even proposition for the UA athletics department.”
Or this from Western Michigan University Director of Athletics Kathy Beauregard via mlive.com in Michigan:
“Western Michigan is all but certain to lose money in the short term on its Dec. 30 Texas Bowl game with Rice — likely more than the approximately $300,000 the International Bowl set the school back two years ago.”
And this from the Honolulu Advertiser:
“The University of Hawai’i, is struggling to break even in the postseason despite playing a bus ride away in its backyard bowl.”
Not exactly the kind of profit margin you were thinking, right? At the end of the day, bowl games come down to creating and maximizing exposure for the schools and offering an exceptional experience and opportunity for the student athletes. For those schools who do realize a profit, that’s just icing on the cake.
Added Compensation
Paying players is a clear violation of NCAA rules. In fact, the NCAA closely monitors any advantage given to student-athletes. If an athlete were to accept any type of “gift”, often including discounts or tickets to games, the school and athlete could face punishment because of a rules infraction. One place where those rules do not apply is bowl games. Players, coaches and staff from participating teams typically enjoy a number of “gifts” as compensation for playing in the game. Gift packages are not to exceed a $500 value per package, but I’m not sure how strictly that limitation is enforced.
In case you’re curious as to what types of gifts participants receive, here are some examples:
Participants in the Rose Bowl (USC vs. Penn State) received a Sony DVD Camcorder, a commemorative Fossil watch, a backpack, fitted hat, commemorative plaque, commemorative autographed football and year long subscription to ESPN the Magazine. (source: LA Times blog)
Going home with some premium loot isn’t reserved for the major bowl games like the Rose Bowl though. According to rivals.com, participants in the Champs Sports Bowl between Florida State and Wisconsin were given a $400 shopping spree at Best Buy, a watch and a “goodie” bag. Participants in the Independence Bowl which featured Louisiana Tech and Northern Illinois received a Trek mountain bike, baseball cap, watch and souvenir football.
Attendance
Typically bowl games are very well attended. One of the factors that influence the decision making process for event marketers who maintain the rights to a bowl game in determining who to invite to the game is predicated upon how well their fans travel. This year, however, the economy presented an additional challenge to those marketers. Many of the host stadiums have extremely high capacities, rough economic conditions only add to the pressure bowl game marketers face when managing their annual events.
Achieving a sell-out is the desired result of all bowl game organizers. Revenue isn’t generated just from ticket sales, but attendance also impacts concessions sales, parking revenue, sales of licensed merchandise and the value provided to sponsors.
Here is a look at some of capacities of the host stadiums:
Bronco Stadium, home of the Roady’s Humanitarian Bowl: Capacity 32,000
The Sun Bowl, home of the Brut Sun Bowl: Capacity 51,000
Florida Citrus Bowl Stadium, home of the Capital One Bowl and Champs Sports Bowl: Capacity 65,500
University of Phoenix Stadium, home of the Tostitos Fiesta Bowl: Capacity 73,000
The Rose Bowl in Southern California, home of the Rose Bowl: Capacity 91,000
Licensing & Merchandise
Speaking of merchandise sales… The Bowl season is typically one of the hottest selling times of the year for sales of NCAA licensed merchandise. Each December and January, college football fans ascend upon stadiums around the country decked head to toe in gear supporting their team like badges of honor. Of course, they don’t want to leave the stadium without a new sweatshirt or souvenir commemorating their experience at the game. As a result, merchandise sellers usually do pretty well this time of year.
If you need evidence to support the merchandise sales boom claim, look no further than the statistics published in the Clarion Ledger’s website:
“When Ole Miss meets Texas Tech on Friday at the 2009 AT&T Cotton Bowl Classic in Dallas, the Cotton Bowl organization expects to sell $600,000 worth of logo items in the stadium. It will do another $100,000 in sales at the hotel and on the Internet, said Michael Konradi, a spokesman for the group.”
Those sales numbers reportedly did NOT include merchandise sold on campus and other locations.
Television Ratings
One of the common denominators for any sporting event’s quest to maximize revenues is its ability to draw a large television audience. Bowl games are no different, and more often than not they deliver.
Here’s a sampling of ratings for this year’s bowl games:
The Tostitos Fiesta Bowl game between Ohio State and Texas gave Fox an easy ratings victory over other networks on Monday night. They averaged 5.5 (according to Nielsen). ABC finished second with a 3.1, a rating 77 percent lower than Fox’s.
Last Thursday’s Orange Bowl attracted 9.3 million viewers to Fox, and last Friday’s Sugar Bowl drew 13.4 million to the network. Compare that to specials that aired on New Year’s: ABC’s “Dick Clark’s New Year’s Rockin’ Eve ‘09″ drew 8.6 million viewers and NBC’s “New Year’s Eve With Carson Daly” drew just 3.9 million. (source: latimes.blogs.com)
It should be noted that this year’s BCS bowl games ratings are down from previous years, but the bowl games are still luring a lot of viewers.
Economic Impact
In a year where the economy has reduced the economic impact of bowl games in various host markets, the numbers are still very impressive. According to the LA Times, the estimated direct economic impact of the Rose Bowl game between Penn State and USC and the Rose Bowl Parade on Southern California is around $189 million.
The Fiesta Bowl in Arizona traditionally generates a reported $250 million economic impact throughout the area, and this year’s figure is expected to be in that range. Initial reports suggest that Ohio State fans were “big spenders” which should help keep them on pace to reach that mark.
The Outback Bowl in Tampa has generated had a $40 million impact on the city in year’s past. This year’s analysts anticipate a figure in the same neighborhood, helped no doubt by cold weather in Iowa encouraging Hawkeye fans to flock to Florida.
Wrap Up
Clearly the college bowl season is big business. It is big for sponsors, media outlets and television networks. It is big for the schools, the players, the coaches and the fans. And that is something that is not going to change, regardless of the post-season college football format.
Hopefully this post provides you with some good information to help spark a lively class discussion surrounding the business of college bowl games. There are a lot of valuable lessons here.
*** Questions for Classroom Discussion ***
1) What do we mean by “economic impact” as it relates to sporting events?
2) What sports marketing lessons can we learn from the business of college bowls?
3) What is event marketing? Do bowl games provide an example? Why or why not?
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