The NCAA Tournament is a reminder that the economics of college sports is bonkers.

March 21, 2013

The first few days of the NCAA Men’s basketball tournament is a highlight of the year for sports fans. It is a time that brings people together, as when an entire bar full of people who have never met root for some 14-seed to upset Duke.

But the biggest college sports event of the year (Sorry, football, until you have a proper playoff of your own, you’re out of the running) is more than an opportunity for once-a-year gamblers to defeat the guys who spent hours analyzing probable outcomes in the office brackets pool. In effect, universities have evolved to become the United States's leading provider of minor league sports entertainment. The tournament, then, offers a window into the strange economics of U.S. higher education.


Hoya Saxa, etc. etc. (Nate Shron/Getty Images)

There is big money involved in college sports, of course: $150 million in 2011 revenue for the most lucrative school, the University of Texas, for a tidy $17 million in profit. But for schools with less vaunted athletics programs, sports is a break even proposition at best. The highest profile sports, namely football and men’s basketball, cross-subsidize the more obscure ones, and if things go OK it is all a wash. More typical, in 2011, the University of Maryland had $61.634 million in athletics revenue, and $61.632 million in athletics expenses. (The data is drawn from a remarkable database USA Today compiled from public records requests).

But those headline numbers mask the role that college sports has evolved to play for universities, a strange pattern that exists pretty much nowhere else in the world.

For bigger colleges and universities, big-time sports—and the visceral connections they form—are a crucial piece of their longer-term relationships they form with their key constituents.

Alumni of U.S. colleges and universities donate to their alma maters on a scale unknown in the rest of the world—and sports are part of the reason why. Sometimes the connection is merely emotional; one imagines that victories on the playing field are part of the gauzy memories that make adults more inclined to write checks to their old school. But often it is more explicit than that. I go to Georgetown University basketball games regularly, and a couple weeks ago the school was selling tickets to its much-anticipated final home game of the year, against Syracuse. You had to donate $50 to the university, though, before you would even buy the ticket at list price. It is a safe bet that the people with close-in season tickets for Georgetown or any other elite program donate a lot more than that.

Even bigger are the emotional connections created by sports for flagship state universities, particularly in the Southeast. Anyone who hasn’t spent time in a state like Alabama or Louisiana can’t fathom what a big deal University of Alabama or Louisiana State University football games are there. Even people who have never even gone to college still root for their state university’s teams as if the games were life or death. (Take a look at Warren St. John’s book “Rammer Jammer Yellow Hammer” for a window into that passion)

This almost manic all-encompassing intensity surrounding big-time college football to the benefit of the universities themselves. Imagine how much goodwill Alabama or LSU (or the Universities of Texas or Kansas or Oklahoma) win for themselves in their state legislatures simply by having their school’s football team serving as a vehicle for a state’s pride. For a university president, it surely doesn’t hurt come appropriation time to have tickets in a club suite available to hand out to lawmakers so that they might adequately research that school’s programs on the gridiron. Sports thus becomes a tool to get recalcitrant state legislatures to fund higher education more than they otherwise would be inclined to.

Finally, sports is one of the few ways that a small school can vault itself toward national prominence. Just in the last several years, Butler University, George Mason University, the University of Richmond, and Davidson have had magnificent runs in the NCAA basketball tournament. Each school has a great deal going for it academically—but no amount of success churning out successful doctors, lawyers, and business people can match the public relations benefit that comes from one great run in the NCAA tournament (or two, in the case of Butler. Be sure to read my colleague Jenna Johnson’s piece today about how the school is trying to capitalize).

Basketball is particularly well-suited for schools looking to make a leap into greater national prominence. With only five starters, even a couple of great recruits can vault a program to national competitiveness, and that combined with a little luck can lead a program deep into the NCAA tournament and with the accompanying national glory that comes with it.

In the first round of the tournament, Georgetown will be playing something called Florida Gulf Coast University, which started its athletics program in 2000 and became fully certified as Division I in 2011. Earlier this season, they beat the University of Miami, one of the best teams in the country; if they can pull off an upset over Georgetown and maybe two or three more after that, it will put a school that only started offering classes in 1997 very much on the map.

It makes no real sense that the job of educating the workforce and the job of offering sports entertainment should be provided by the same institutions. No one in Europe is trying to recreate our system, getting people excited about Stuttgart State playing the Sorbonne in soccer. It would seem to violate the idea of specialization: Is there any reason to think that the managers who are best at running an educational institution are the same as those who are best at running a minor league sports league?

But it is the system that has evolved, and these intricate entanglements between education and sports aren’t going to come unwound anytime soon. That being the case, I have some brackets to fill out.

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Ezra Klein | March 21, 2013