The cost of doing business
The unfinished story of the dark side of this bout of realignment
By now, I’m sure you’ve heard the news. Oregon and Washington are bound for the Big 10. The Four Corners schools are heading to the Big 12. The PAC-12 could not stand.
Realignment can be fun. Watching a sport grow and evolve around you is not something you can see every day. Especially when you can go full Sicko and turn on the live streams of Board of Regent meetings to follow along with the chaos in real time.
Realignment also has a major impact, though. Hidden behind the conference battles and media rights deals are the well-being of a school and its student-athletes. Sometimes, the dollars talk too loud. This is one of those times.
Much has been written about the insane travel schedules that will accompany either a Big 12 spanning from Orlando, Florida to Tempe, Arizona or a Big 10 with teams in New Brunswick, New Jersey and Los Angeles, California. That’s not what this newsletter is about. Instead, it focuses on the bigger issues at hand.
Washington State University is a public research university in rural Pullman, Washington that opened its doors to its first class of students over 130 years ago. Today, Wazzu boasts one of the nation’s top veterinary programs that produces 65 vets each year. They also have one of the nation’s top broadcasting programs. Additionally, Washington State’s general education structure is a model that other schools are encouraged to adapt to, according to the National Endowment for Humanities.
Currently, the Cougars are one of the teams on the outside, or perhaps stuck on the inside, of the PAC-12’s disintegration. They don’t have a Big 10 or Big 12 to flee to. Instead, they’re going down with the ship.
Washington State reported 490 student-athletes across 17 sports in their Fiscal Year 2022 Equity in Athletics Disclosure Act (EADA) report. Additionally, Washington State had 116 coaches on their payroll, including both full-time and part-time employees. Overall, the school reported $84,195,555 in revenue and $82,858,720 in expenses, leading to a final revenue of $1,336,834 for the athletic department.
While it is true that most Division I universities do not report revenues from athletics, Washington State is a lucky one. Still, that $1.3 million is a small margin of error when we’re talking $80+ million in revenue or expenses.
The PAC-12’s currently standing media deal paid out $24,221,502, with an additional $13,181,438 kickback from conference distributions, according to Washington State’s FY2022 financial report to the NCAA. At the end of the day, WSU’s membership in the PAC-12 brought the university $37,402,940 in revenue in the 2021-22 academic year, which accounts for 44.4 percent of the athletic department’s revenue.
What happens next now that the PAC-12 isn’t pulling in that media deal, or even existing? One of the most speculated landing spots for the Cougars is the Mountain West, which just signed a media deal of its own in 2020. That media deal, which runs through the 2025-26 season, pays out $4 million annually to its members.
Now, media deals are very complex, as we talked about with the Big 12’s pro rata clause in my last newsletter. For simplicity, let’s assume that Washington State gets a full media share from joining the Mountain West, even though that’s very unlikely. If we apply the same numbers that Washington State reported in 2022, but sub in the Mountain West’s media share, the WSU athletic department would have suffered roughly a $32,066,105 loss over that academic year. That’s not sustainable.
Oregon State University is located in Corvallis, Oregon, and is one of two FBS schools in their state. Oregon State focuses on research, with top-five national rankings in Forestry, Oceanography, and is the nation’s second-leading agricultural school. They also boast the seventh-largest engineering school in the United States.
Like Washington State, Oregon State is left out of the realignment fuss, being left to drown as their longtime conference mates jump ship.
Oregon State reported 541 student-athletes across 16 sports in their 2022 EADA report. They also had 58 reported coaches, including both full- and part-time employees. Overall, OSU’s athletic department reported $87,727,179 in revenues, and $87,727,179 in expenses, exactly breaking even.
OSU did not make their PAC-12 shares public, as far as I can see, so if we assume they had the same $37,402,940 media share, it would have made up 42.6 percent of the Beavers’ FY2022 revenue. Now, if we trade their PAC-12 media share for the Mountain West, where most people assume they’ll land, the Beavers would fall roughly $33,402,940 in the red last season.
The University of California, Berkeley is one of the most prestigious schools in the United States. They boast the nation’s top music program, nine Nobel Prize awards across their staff, and the top spot for a public school, and fourth overall, in the U.S. News & World Report’s university rankings.
While the future points towards conference realignment for Washington State and Oregon State, the water is murkier for Cal. Unlike other schools, they don’t need a robust athletic department to bring people to the school. Cal Berkeley does that on its own.
Still, let’s continue this exercise. Looking at the athletic department’s revenue and expense report, Cal receive a media share of $24,221,500 alongside a kickback of $11,310,384 in PAC-12 distributions for a grand total of $35,531,884 from the conference. They reported an overall operating revenue of $120,479,489. While that number is much larger than what we’ve seen from Washington State and Oregon State, the Cal alumni base is doing some heavy lifting here. $11,593,208 came from endowment, and a whopping $30,952,340 was direct institutional support, which “includes non-recurring emergency COVID-19 relief and loan.” Cal also reported $107,305,109 in total operating expenses.
While that may appear to be a massive net gain for the Golden Bears, there’s more. Cal allotted $9,004,767 to “Athletic Facilities Debt Service,” and an additional $443,282 going towards capital projects. At the end of the day, Cal saw a revenue of $3,726,331.
In turning our attention to the PAC-12 share, Cal received 29.5 percent of their revenue from their now dying conference. But, we can’t just plug in the Mountain West media share and see what happens, because this is a lot more complicated.
Let’s take a detour north to Palo Alto, California, the home of one of the nation’s other most prestigious schools: Stanford University. Like Cal, Stanford is built on academics, boasting one of the top law schools in the nation and placing third in the world overall according to the U.S. News & World Report’s global rankings. Like Cal, Stanford’s football program has suffered in recent years, likely due to a more difficult recruiting path with admissions standards that rule out many players.
Unlike Cal, though, Stanford has a top-notch athletic department. In fact, Stanford has the nation’s best athletic department. That’s right, Stanford has the best overall athletic department. The Cardinal won the 2023 LEARFIELD Directors’ Cup, which is determined by a point-based scale where championships and success in all sports are rewarded. That’s the 26th overall Directors’ Cup win for the Cardinal.
Also unlike Cal, Stanford is a private school. That means that they don’t have to publicly report their finances, as the previous three universities did. That means assessing Stanford’s financial state is incredible difficult.
What we do know is the Cardinal have a whopping 36 sponsored sports, which doubles most of their previous conference-mates. (As an aside, LEARFIELD Directors’ Cup only takes into account 15 sports, so the massive amount of sponsored sports doesn’t rig the system towards Stanford) Stanford also has a sizeable donor base, and one of the nation’s strongest Olympic sports traditions.
In the remnants of the PAC-12, Stanford stands as the conference’s top remaining brand. What is good for the Cardinal, is that they don’t have to go begging for a new conference home if they don’t want to.
While Oregon State and Washington State need to find a conference home, the doors are much more open for Cal and Stanford. Their academic prestige speaks for itself. The two Pacific Northwest schools have made some great academic headways, they do need athletics for some national-level admissions intrigue. Stanford and Cal don’t.
So, what’s next for two of the world’s premier academic institutions on the field?
Let’s start with Stanford, who has an easier road. They have 26 Directors’ Cup wins. They can find a conference if they want. Key word: if. Remember, one of Stanford’s biggest rivals is eternally independent Notre Dame. Could the Cardinal go the same route? It’s very possible.
Sure, it’s been reported that Stanford and Cal both have interest in the Big 10, but it seems like that interest is one-sided. The PAC-12 (4?) is technically still a conference, and they could try to build with some Mountain West and American Athletic Conference schools, but that seems unlikely as well. Realistically, Stanford is likely looking at an independent run for the near future. They have the donor base and sports acumen to pull it off. That also means that they can simply schedule their old PAC-mates for out of conference matchups. Does that hurt their chances to make a run in the NCAA basketball tournaments and College Football Playoff? No more than simply being Stanford does.
Now that we’ve established that Stanford could go to independent status, what does that look like? Well, a media deal is important. The Cardinal could stage their own contract with Apple TV if they wanted, or just pitch to get on standard cable channels. More often than not, their football and basketball games would be covered by whoever’s conference they are playing, so there’s no worries there. They certainly have to put in work to maintain that independence, though. But, they know they always have a dance partner in Notre Dame for some games.
Let’s head over to the more complicated of the two: Cal. Do the Golden Bears join Stanford in independence? Not likely. As we’ve already talked about, Cal has a very debt-leveraged athletic department. Would the endowment and donations keep coming if the Golden Bears are in a non-power conference? How much of the institutional support comes from COVID relief, which Cal can’t get back?
Cal’s athletic department and board of regents have some tough conversations to come. The board of regents has scheduled an emergency meeting tomorrow (August 8) to discuss Cal-Berkeley’s PAC-12 status. An answer is coming soon.
As for what that answer is, let’s look at the rest of the University of California system, which the board of regents controls. Most of the UC system resides in the Big West, a Division I-FCS conference. UC Santa Cruz resides in Division III Coast-to-Coast Conference. UCLA is off to the Big 10, and little brother Cal isn’t coming.
Half of the Big West is UC schools (UC Davis, UC Irvine, UC Riverside, UC San Diego, and UC Santa Barbara). I think that’s a natural landing spot for Cal, and can allow the school to work off some of that debt at a lower level. But this is a dire financial situation. Could Cal consider a drop all the way to Division III? Plenty of top global universities compete at D-III, such as Johns Hopkins (ranked 10), University of Chicago (ranked 22), and New York University (ranked 31). Cal-Berkeley could join those ranks.
In these massive financial decisions are the well-beings of student-athletes and staff. If a university suddenly has to deal with a roughly $20 million deficit year-by-year, they have to prune the branches of that department. Scholarships will be decreased. Staff will be laid off.
For more drastic situations like Cal, this could be catastrophic to the school’s athletic department. A move to D-III, while unlikely, would mean all those student-athletes could not accept athletic-based scholarships. While Cal could move money around and likely honor those scholarships, that hurts future student-athletes that may have wanted to earn a top-notch education while playing sports.
Stanford’s independent move is hard to judge, but we can assume they’d play a lot with the Big West, Mountain West and some Big 12 schools. Travel costs would be cut down and the school would have more control over what was happening. Donors could help keep the athletic department afloat while they work on media rights and other major deals.
Oregon State and Washington State are staring down a permanent drop in revenue, and will have to look at the structure of their department. Individual departments within athletics, coaching staffs, and potentially sports will get cut or trimmed down.
That’s not to talk about the barely-possible travel schedules that the eight departing schools are imposing on their student athletes. Have a big econ test coming up? Too bad, Washington basketball has a trip scheduled for Rutgers in New Jersey. Need to knock out a major essay for your English class? Not today, Arizona State baseball is heading to UCF.
Realignment hurts student-athletes. Travel is obvious, but these budgets will get cut. It’s great that the leaving schools are getting more funding to take care of their student-athletes, but they also have to give up the student piece of the puzzle more. And now the leftover schools have to fight to keep students and staff in place. This is ugly, and will hurt college sports as a whole. I hope the PAC holdouts can figure something out to make sure they don’t cut a program or hurt their student-athletes, but that’s the bed that media companies and major conferences have made. This is the future, apparently. Gear up.