Studying the Investment

By Staff

Athletic Management, 16.6, October/November 2004, http://www.momentummedia.com/articles/am/am1606/wuinvestment.htm

The idea that winning sports teams mean more alumni donations or better students has been doused with a big bucket of cold water by Cornell University Economist Dr. Robert Frank. Sponsored by the Knight Commission on Intercollegiate Athletics and released just as the current academic year began, Frank’s study found very few links between athletic success and increases in either alumni donations or applications for enrollment.

The study acknowledges that individual schools do get the occasional significant boost from a spectacular year. But taken generally and from the perspective of what should be public policy, Frank concludes, it’s a winner-take-all market where as the pie gets bigger—as television contracts and bowl payouts balloon—the slices get harder to win because those very sums lure in more competitors. It’s like an entrapment auction for a $20 bill in which all the participants lose what they bid: The bids might start at 50 cents, but after a while, someone’s willing to risk $51 just to top a rival’s $50 and avoid losing the $49 they’ve already put in the pot. "Any given athletic director knows that his school’s odds of having a winning program will go up if it spends a little more than its rivals on coaches and recruiting," Frank writes. "But the same calculus is plainly visible to all other schools."

Knight Commission Chairman William Friday, President Emeritus of the University of North Carolina, used the release of Frank’s report to call for some sort of collective action by universities to limit their spending on athletics. He didn’t specify what that would be, and the NCAA’s previous efforts to reign in spending on coaching salaries ran into antitrust laws.

Still, the Frank report will probably make it harder for athletics administrators to cite spending on sports as an investment with a definable return when they address presidents and trustees. Gerald Turner, president of Southern Methodist University and a member of the Knight Commission, said about Frank’s findings, "Having it all summarized can be useful to presidents as they try to answer issues about winning and losing and fundraising, and all the things that are associated with it in the public mind right now."

The study can be seen at: www.knightfdn.org/default.asp?story=athletics/index.asp.