CFB Arms Race: The Harbaugh Effect

Tenacious D · Mar 1, 2017

The University of Michigan athletic department sits atop $240 million in debt at a time when several major college athletics programs are grappling with enormous and potentially crippling debt loads.
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UM is keenly aware of a catastrophe taking place out West.

In the first week of the new year, Bloomberg Businessweek published an analysis of college athletics debt highlighted by the University of California at Berkeley, which may have to slash its number of intercollegiate teams because of a $22 million athletic department budget deficit last year on $445 million in debt. The rest of the story explains the origins of the college sports debt crisis — mainly the arms race for bigger and better facilities, especially for football — and how schools are coping.

The analysis showed Michigan, based on 2014 data, as being among the top 10 in athletic department debt nationwide.

But while there is worry in Berkeley, there's guarded optimism in Ann Arbor.
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Good God, Dros, can't you guys get anything right? You better just go all-in on your now-poorly-closeted Tennessee fandom, because at least we're likely to exist in 10 years. Oh, we'll be shitty, for sure, but will exist, nonetheless - that's the tragic truth of our reality.

Michigan's fiscal 2016-17 athletic department budget of $161 million includes a $15 million debt payment for eight projects, including $9.2 million for the 2011 Michigan Stadium renovation, according to UM Athletic Director Warde Manuel's June 2016 operating budget report to the university's board of regents. The budget predicts an $800,000 surplus while factoring in a 4 percent annual increase in costs.
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And yet, despite their shortfall and debt load.....they still found a way to hire Harbaugh, and made both he and his staff the highest paid coaches in the game today, bar none. Spoiler Alert Tennessee: And they are infinitely better off for having done so.

So, the University would be on the hook for the debt, but only if things "go bad for athletics".

If a financial crisis did erupt and debt default loomed, the athletic department would have to repay any bailout by the university as a whole.

"If things did go bad for athletics — I'd give that a low probability — the University of Michigan at large would be obligated to backstop that obligation," Hegarty said. Instead, the university could write the athletic department an internal loan from cash on the overall balance sheet, and the department would pay it back with interest, he said.
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Good thing that nothing bad is happening, I guess. Fortunately, these indebted and cash-starved AD's aren't getting any sustenance from a source as volatile as, say, television, and particularly, ESPN. Oh, wait..

At first, it seems silly that major schools would worry about broadcast rights money. After all, the Big Ten recently signed six-year deals with ESPN and Fox Sports worth a combined $2.64 billion. Those deals begin in the fall, and UM is expected to nearly double its share of broadcast revenue to about $40 million.

But there are cracks in the paint.

In 2013, ESPN had 99 million subscribers. It now has 90 million, its lowest subscriber base since 2005. Daniel Salmon, analyst at BMO Capital Markets, recently estimated that ESPN could lose about 4 percent of subscribers in fiscal 2017. Other insiders say the losses could be even worse. And those ex-subscribers take with them cash ESPN uses to fuel its billions of dollars in professional and college sports broadcast rights deals.
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But it's not all doom and gloom:

Hegarty said the athletic department can absorb the increased annual debt payments because revenue is expected to rise equally quickly.
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"People like University of Michigan bonds," he said. "People want to invest in winners. It can drive revenue."
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So, if people want to invest in winners (they do), and this is why UM has such optimistic expectations of quickly-rising revenues....then what is it that they believe will bring this all about?

A better question is "Who is bringing it about?"

A lot - all? - can be traced right back to when Michigan stopped trying to make stupidly near-sighted and budget-driven hires, and realized that it's just the opposite - that the great and right hire will drive the budget, instead.

Do you think they have one whit of regret that they've hired Harbaugh? Bama that they hired Saban? Of course not, because those guys pay for themselves 10-fold and many multiples over even their undeniably largesse salaries.

Will Tennessee ever experience the same awakening, and if so, when?

Link: http://www.crainsdetroit.com/articl...-lift?X-IgnoreUserAgent=1&X-IgnoreUserAgent=1

droski · Mar 1, 2017

it's all bullshit. the debt service is completely manageable. they are including principal that we aren't even paying in that release because of amortization which is ridiculous. but we should cut a shitload of sports anyway

IP · Mar 1, 2017

Schools like cal and Michigan have a lot more sports than Tennessee, I think.

droski · Mar 1, 2017

IP said: ↑

Schools like cal and Michigan have a lot more sports than Tennessee, I think.
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we have more than any other school in the pac-12. it's retarded. of course now we can't cut them because of title ix.

NorrisAlan · Mar 1, 2017

Don't you dare cut men's synchronized swimming.

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CFB Arms Race: The Harbaugh Effect

Tenacious D The law is of supreme importance, or no importance

droski Traffic Criminal

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NorrisAlan Founder of the Mike Honcho Fan Club

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CFB Arms Race: The Harbaugh Effect

Tenacious D The law is of supreme importance, or no importance

droski Traffic Criminal

IP Super Moderator

droski Traffic Criminal

NorrisAlan Founder of the Mike Honcho Fan Club

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