Economist Tallies Up Hidden Profits Sports Bring Schools
OAKLAND, Calif. (CN) - As they make millions off athletic departments and the students who populate them, colleges underreport that revenue, a sports economist testified Friday in the antitrust class action against the National Collegiate Athletic Association.
Dr. Daniel Rascher helped close out the first week of the closely watched federal trial before U.S. District Judge Claudia Wilken. Former UCLA basketball player Edward O'Bannon is the lead plaintiff in the case, which accuses the NCAA of forcing thousands of student athletes to sign away rights to their images, while cheating them out of their share of television broadcast dollars.
Pointing to the University of Texas, Rascher said the school generates $109 million every year from its football program but has just $27 million in expenses.
"What you learn from this is the net surplus is very large," said Rascher, a professor of sports economics at the University of San Francisco.
The 69 Bowl Championship Series, or BCS, schools net $1.3 billion in revenue from football alone last year, he added.
Meanwhile "NHL profits are down around $7 million per team," Rascher said. "The profitability is much higher than these professional NHL clubs."
He also noted other ways that athletic departments boost a university's profits. A successful college football or men's basketball team, for example, can foster a fanaticism that drives up application numbers, brings in more tuition dollars, and encourages larger alumni donations. "It's often said the athletic department is the front porch of the university," Rascher said.
Then there are the profits from concessions, merchandise, sports camps and parking, which Rascher said schools count differently.
A team jersey purchased at a campus bookstore, for example, would not be credited to the athletic department, even though the athletic department technically generates that revenue, he noted. "It looks like on paper sometimes that those athletic departments are losing money," Rascher said. "It can be millions of dollars a year, yet they don't show up on financial statements of the athletic department. Instead of 10 percent of schools making money from athletics, which is a phrase the NCAA likes to use, only 10 percent of schools are losing money from athletics."
Rascher also refuted the argument at the forefront of testimony Thursday from former CBS executive Neal Pilson that fans watch college sports primarily to root for the schools, not the players.
"There's a belief out there that fans just root for their alma maters," Rascher said. "I've looked at a couple of different measures of demand. One of them being attendance, another ratings; the idea being the athletes are a major part of what makes a team play well. If fans were just rooting for laundry as Jerry Seinfeld said, the quality of the team shouldn't matter that much."
But, he added, "in college football and basketball, when a team wins, it has a bigger impact on demand, and when a team loses it drives demand down - even more than the NFL."
"Fans care more about the winning and losing when they make the decision in watching a college football game than with the NFL," he continued.
The trial got heated with the cross-examination of Rascher by NCAA attorney Rohit Singla with Munger, Tolles and Olson. One of Singla's tactics was to try and have Rascher say that bigger schools with more broadcast revenue will be able to pay athletes more than schools with less revenue, therefore giving them the advantage of acquiring the most skilled athletes.
Singla also attacked Rascher's testimony that schools are underreporting athletic-department revenues. Several times, the court reporter had to interrupt Singla's cross-examination to remind men not to talk over each other.
Singla continued to fire off questions, trying to rattle Rascher. "You have no idea what volume you think these revenues that are being mis-accounted for represent? You have no idea how much it is? You have no idea what the volume represents at the average school, do you?" he asked.
Singla also asked Rascher whether he had ever seen an athlete paid royalties from broadcast earnings, aside from special Tiger Woods appearances and the Roger Federer v. Rafael Nadal tennis matches. "You have never seen royalties paid to any athlete in any sport from broadcast revenues, have you?"
"Not that I can think of," Rascher answered.
Then Singla brought up Tonya Harding. "Do you remember the violent incident between Harding and Nancy Kerrigan where Kerrigan was attacked?"
Rascher said he barely remembered.
"The competition between the two of them was one of the most highly watched," Singla said.
Rascher still could not recall a whole lot about the Harding and Kerrigan sports rivalry.
"You wouldn't say that because a lot of people tuned in to watch these two in an ice-skating competition means it's OK to violently attack someone," Singla said, to which Rascher replied, "That has nothing to do with amateurism."