I’m hesitant to uncritically read too much into Cal cutting its baseball program — also lacrosse and gymnastics — partly because I haven’t read very much about it, but also because I suspect that it may have less to do with broad #sportsbubble trends than with conditions unique to the Great Recession and the ridiculous, wolf-face crazy budgetary clusterf**k that we call California.
Still, after a spring and summer in which Kyle Whelliston‘s “Sports Bubble” theory has become more relevant than ever amid talk of megatournaments and superconferences, it’s impossible to ignore the possibility of broader implications. Luckily, @SPORTSbyBROOKS is talking about those implications so I don’t have to. Here are his tweets this morning on this topic, offered without comment, for discussion purposes.
Cal baseball players: NCAA’s dirty little secret is if BCS was replaced by playoff, you’d still have a program.
NCAA Football playoff rights fee would dwarf BCS rights. $ used to shore up massive non-rev sport shortfalls. W/out playoff expect more cuts
What is more valuable, rights fees for March Madness of NCAA football playoff? Not even close. Multiple billions.
The biz model for non-rev sports is broken. W/out something drastic, Cal cuts are tip of the iceberg. Playoff talk will emerge from that.
The entire reason NCAA re-opened March Madness rights was b/c of non-rev sport shortfalls. To stop the bleeding. Temporarily.
The only untapped NCAA revenue stream to save non-rev sports in future is NCAA football playoff rights fees.
A future NCAA football playoff will not be about football, it will be about saving non-revenue sports. It’ll come from school presidents.
At public schools there has to be financial accountability. With non-rev sports, there is none. Needs to change. Self-sustaining or a no-go
Bottom line: Football playoff rights fee is last bullet in school presidents gun to save non-rev sports. Will shoot when time comes.
If Cal, of all schools, is cutting major non-rev sports like baseball, there’s something seriously wrong with the system.
why not? RT @sportsologist: @SPORTSbyBROOKS schools can’t just have football & men’s basketball (only 2 profitable sports).
If there’s no more money, there’s no more Title IX. Financial reality starting to set in. See Cal.
Financial losses facing public schools b/c of non-rev sports are enormous. There has to be fundamental change. There will be, eventually.
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re: “only two sports” thing. Is that a generalization or is true in an absolute sense? Are there a few schools where, for instance NCAA Division I Ice Hockey is profitable? What about Men’s Lacrosse? Just curious, a few moments of googling didn’t really provide any answers.
Wait, i’m confused. If there is really this so called “sports bubble” then how can creating a tournament going to fix anything? Isn’t that just drawing more money from thin air? If football isn’t worth as much money now as it really should be as the “sports bubble” theory claims, then adding more games should mean they are only balancing things and those games should simply bring in the same amount of profit, i.e. less money per game. So where is the incentive to change other than from people who believe in the “sports bubble”?
Incidentaly one of the arguments for the sports bubble is the number of athletic departments that generate a positive revenue stream. While its true the number of self funding departments is low, is that new? Is it a downward trend over a long time? Has it always been that way?
As I mentioned on Facebook, i’d be curious if baseball wasn’t cut because they HAD to due to Title IX compliance. Given the chance to cut one mens and two womens programs and keep baseball, would they have done so if it were legally possible?
The “sports bubble” theory would hold that grabbing at more money by first trying tournament expansion, then superconferences, then a playoff, etc., are all examples of delaying the inevitable, which is the bursting of the bubble and the return to sanity in the valuation of these sports. It all comes back to TV money, really. So yes, you’re right, I believe Kyle (if he could be bothered to think about football, which he hates) would say that the notion of having a playoff in order to cover the non-revenue sports’ costs is just another bubble-icious patch to temporarily prop up an unsustainable system. It’s a bit like how Wall Street kept coming up with new and creative ways to get people mortgages because there was so much investor money desperate to enter the mortgage-backed securities market, and they needed mortgages to make the financial instruments those folks wanted to invest in. At the time, this seemed like an example of a boom, and the innovations to get people mortgages seemed like a great way to keep the ball rolling and prevent things from a grinding to a halt (much like a football playoff would “save” the non-revenue sports). In retrospect, it looks like obviously unsustainable grasping at straws. Kyle would posit, I think, that this will look that way eventually too.
See, the problem is, i’d bet that most of these sports have NEVER generated revenue. Sports have been supported by money from the school/donations/etc. for decades. Unless there is data to show that the number of schools which operate in the black in athletics have been declining over a long period of time, I think the whole “sports bubble” thing is much ado about nothing. Clearly ESPN and others value this programming highly enough to pay millions of dollars in TV contracts for it, TV contracts that continue to increase in value each time they are evaluated. Bowl game money continues to be strong as well. If there is a bubble, then wouldn’t it hit ESPN first? Wouldn’t they be the ones who start losing money on sports programming? Yet they aren’t. They seem to be quite succesful and profitable, so much so that BYU was willing to go indepenent. So succesful that Texas wants to gain control of its own TV revenue stream. College football seems like its a highly valued commodity that only continues to gain value.but I fail to see where the burst will come from. Are people going to suddenly stop watching football? Is soccer going to take over?
If there is a bubble, then wouldn’t it hit ESPN first?
Yes. But just because it hasn’t happened YET, doesn’t mean it WON’T. The theory isn’t that the bubble is bursting NOW. It’s that the bubble is still INFLATING, and the increasingly desperate cash grab (arguably papering over structural flaws in the revenue distribution system with massive TV dollars) is something that will be seen, in retrospect, as a giant warning sign of trouble ahead, just like Wall Street’s activities in 2005-2006 — which were seen THEN as signs of boom, not bust — in retrospect look like obvious precursors of the crisis that followed.
I’m not saying you have to accept this theory, obviously, and your point that non-revenue sports have NEVER made money is a fair one. (This may not actually be the best example of the bubble.) But just understand, in no way does it contradict the bubble theory to say, “But sports is making lots of people lots of money right now!” Of course it is. So did real estate in the mid-2000s. That’s the whole point. A bubble always looks like a boom when you’re in the middle of it. BYU going independent! Texas looking to maximize TV revenue! College football continuing to gain value! Massive home building in Florida and Arizona! Soaring real estate prices! Reality TV shows about people “flipping” houses! These things are either signs of genuine, sustainable growth — a recognition of the inherent value of the enterprise — or signs of irrational exuberance, a misguided belief that the underlying enterprise is worth more than can reasonably be justified.
Are people going to suddenly stop watching football? Is soccer going to take over?
Of course not. Football (and to a lesser extent basketball and other big-time sports, both pro and college) obviously have significant value. But do they have ENOUGH value to justify the massive TV dollars, the huge stadiums, the behemoth contracts, etc. etc., at a time when the advertising industry is in shambles, the Internet is changing the dynamic of how we consume sports (and everything else), the cable TV industry is in flux (what will a la carte cable, if it comes, do to the Big Ten Network’s profits?), consumer spending is down and may not ever return to its debt-inflated pre-recession levels (#PANIC!!), etc.? In this broader context, does it make sense that TV contract values — which are based on certain assumptions about advertising value, which in turn are based on certain assumptions about consumer behavior, etc. — are soaring higher and higher? Is college football worth that much more than we thought a few years ago, when the most recent set of contracts were signed, and we’re only now properly valuing it at these new, higher levels? Or were the old levels more accurate, and the new values are inflated? That’s the question. I don’t profess to know the answer for sure, but Kyle’s theory makes a lot of sense to me, because I suspect these long-term TV contracts and so forth are based on a number of unrealistic assumptions about the broader economy, future consumer habits, the future of the cable and advertising industries, etc. They just seem totally out of whack, much like housing values in 2005 and 2006 and early 2007 did (or at least do in retrospect).
It’s a generalization that football and men’s basketball are the only profitable sports, but not much of one. Texas, Mississippi, and especially LSU make money at baseball, but I’d guess there’s only a dozen or so profitable baseball teams. Hockey I’m fairly certain Michigan, Michigan State, Wisconsin, and Minnesota are profitable, and likely Boston College.
As for the value of college football rights, I think those may honestly have become more valuable in the last year, given the NFL’s apparent determination to commit suicide.
There are troubling signs. More NFL games are getting blacked out. The New York Giants and Jets are having trouble selling season tickets, espicially at the inflated price they were starting at. In the UK, every major soccer team is losing money. I’m expecting some sort of crash here. I am definately one who thinks Kyle’s thesis makes sense.
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