A Year in the (COVID-19) Life
Originally published on March 25, 2021
Updated on November 14th, 2024
One year after the COVID-19 pandemic, we’re looking back at the effects of the 2020 March Madness cancellation and subsequent restrictions on college sports. From revenue impacts to name, image and likeness and equality in hiring, it’s certainly been quite a year.
NCAA Revenue and Allocation
The public perception is that “football is king” for the NCAA and helps fund its success. This common misconception, however, is far from the truth. The NCAA does not receive revenue from these competitions as the Division I College Football Playoff (CFP) and its bowl games are independently owned and operated.
Instead, each year the NCAA receives most of its revenue from two sources: the Division I men’s basketball championship television and marketing rights, and ticket sales from the championships. It’s no surprise that the cancelation of the 2020 men’s basketball tournament had a huge impact on the collegiate athletics business landscape.
COVID Cancelations and Effects
The NCAA released its FY20 audited financial statements. They tell the story of the financial impacts from the March Madness cancellation—namely a massive $600 million decline in revenue from $1.1 billion to $0.5 billion.
The NCAA was previously scheduled to receive $827 million from its television and marketing rights deals with CBS and Turner for the 2020 men’s tournament but ended up receiving just $113.1 million with the cancellation. In the association’s 2019 fiscal year, it reported nearly $868 million in such revenue. The NCAA was able to distribute $246 million in 2020 (down $365 million from its 2019 amount).
While some institutions receive shared revenue money directly from the NCAA, most allocations go to conferences that conversely have revenue-sharing arrangements with their member institutions. As a result, most of the impact will be realized by institutions in their 2021 fiscal year—meaning the fiscal year 2020 member financial reports do not reflect this impact.
Additionally, the NCAA’s FY20 audited financials show that while it obtained a $125 million line of credit with PNC Bank, it had no outstanding balances owed on the credit line as of Aug. 31. And through its event cancellation insurance policy, it received $270 million during the fiscal year. The NCAA also has $640 million in financial assets available within one year to meet cash needs for general expenditures (should the need for liquidation occur).
More Ambiguity
Uncertainties remain regarding other forms of revenue available to athletics programs and how long it will take to return to normal. Football season ticket renewals, sponsorships, fundraising, university enrollment and state funding are still questionable.
The pandemic did shed light on something known for a while: The current college athletics business model doesn’t necessarily work anymore. This has forced institutions to evaluate other innovative revenue generating options and identify opportunities for cost containment.
While conferences may recoup most of their revenue this year, at the individual school level, “It’s going to be a matter of years before the institutions have fully recovered,” according to Big 12 Commissioner Bob Bowlsby in a recent call with reporters.
The Pandemic Didn’t Act Alone
While COVID-19 took a front seat during the last twelve months, other factors will impact the outlook for college athletics.
Name, image and likeness (NIL) legislation will go into effect in some states as soon as July 2021. The Federal government and NCAA continue to work toward a universal solution. Much is still unknown about the direct and indirect financial ripple effects NIL will have on athletics programs. Yet institutions are feeling the pressure to invest big dollars in NIL consultants to support their revenue generating teams when the time comes.
Diversity and inclusion also became front of mind during 2020 and had financial implications. On one hand, initiatives like the Collegiate Coaching Diversity Pledge promotes diversity in head coaching hires. This has potential for financial benefits that can result from widening the pool of qualified head coaching candidates. On the other hand, some schools have experienced a wave of boosters asking for refunds after student-athletes took a stand to promote the Black Lives Matter movement.
Additionally, the Knight Commission released their proposal to the NCAA to change the revenue distribution model for FBS member institutions. It’s unlikely the proposal will come to fruition as is, but significant realignment in the next 5-10 years could positively impact the biggest and smallest programs (and leaves mid-majors in a bind).
The Bright Side
Subsequent reports reflect NCAA plans to release $613 million in revenue distribution to members as long as the NCAA tournament is completed as planned. The 2019 revenue distribution was $610 million, so the 2021 plans are on par with pre-pandemic distributions.
Looking further ahead to 2025, the new basketball media contract is an $8.8 billion deal over eight years. This increases annual television and marketing rights fees revenues from this contract to $1.1 billion as compared to the planned $850 million for 2021. The NCAA will realize an approximate $250 million increase in annual revenues from this new contract alone.
One thing is for certain: The pandemic brought opportunities for synergies and sharing best practices across campuses and between institutions.
“In the situation where there’s a good governance structure and there’s good communication, (financial conversations) are naturally occurring because there’s vested interest,” said Melissa Stuckey, Associate Athletics Director at the University of Florida. “The format—whether it be board meetings or emails or various other communication tools—that you would have used during a normal situation, now becomes that much more important.”
Intentionally building relationships across campus and having friends in high places is also an asset when you need someone to collaborate during these uncertain times. Simon Dover, CFO of West Virginia University Athletics, said, “One of my initiatives right from the get-go was to create those lines of communication for the department, and to enhance the ones that the other leaders had with their colleagues and peers on campus.”
There have also been many stories on how institutions have banded together to navigate the pandemic. In New Mexico, athletics directors began having weekly calls to work together in navigating the challenges imposed by the state.
“It was great to collaborate and be able to consolidate our message, and all of our student-athletes from all the schools, the SAC groups, all wrote a letter to the governor, noted Mario Moccia, Director of Athletics at New Mexico State University. “Even in my five years (at NMSU), I knew who some of those people were…but we have not had this level of communication. I think it’s pretty historic that every Friday we get on (a virtual meeting) just to touch base about what was going on in the state and how we can help each other.”
Chris Iacoi, CFO of UCLA Athletics, weighed in about working together with peer institutions. “It’s a unique situation we had out here in Los Angeles,” he said of working with cross-city rival USC. “We have two really high achieving academic and athletic institutions competing at the highest level for the same thing, and a lot of their concerns during this time were the same as ours. How do we safely compete, bring our student-athletes back, let them do what they love, and facilitate that for them? So, whenever we’ve reached out to LA County, it’s been in conjunction with them.”
The pandemic has also allowed schools to connect with their fans and donors in a different way, which has helped foster engagement when social distancing prohibited live attendance.
“The priority for us has been, ‘How do we stay connected with our ticket holders? How do we stay empathetic to what they might be experiencing?’” said Marvin Lewis, CFO of Georgia Tech Athletics. “We’re trying to make sure that we’re not focusing on the transaction right now, but we’re focusing on the relationship.” Interestingly, under this approach, Georgia Tech Athletics had impressive results this past year with their Support the Swarm fundraising campaign.
Athletics programs also have the opportunity to exhibit how valuable college athletics is to universities and their local economy. Tiffany Edlin, Senior AD/Business Manager at Long Beach State, noted, “When you read the numbers and you read between the lines, you’re looking at higher education going, ‘We know we’re extremely important and we are vital.’ I often talk about how college athletics and the economy go hand in hand.”
The James Moore Collegiate Athletics team remains tuned in to the industry and have been proud to work alongside so many institutions this past year. We’ll continue sharing updates as the collegiate athletics landscape continues to evolve.
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