Longhorns, Inc.

Author:
Steven Lassan
Publish date:
Jul 5, 2011

The operative word in college athletics today is “business.” Schools are searching for more creative and effective ways to fatten their bottom lines, whether it’s through sponsorship deals, stadium expansions, media partnerships or all of the above. Financing a broad-based and successful program takes money and lots of it. Generating the revenue necessary to be first class these days involves a collection of moving parts and a vision that is always trained on future opportunities and revenue streams.

When DeLoss Dodds took over as athletic director at Texas in 1981, he didn’t have to try so hard to learn everybody’s name. With only 70 or so people working in the department, he probably needed less than a month to meet his staff and become acquainted with their job descriptions. A welcome luncheon or two and a couple trips around the building probably did it.

Of course, anybody trying to do the same thing at UT today would need a collection of mnemonic devices, a mandatory name-tag policy and an assistant willing to follow him around whispering people’s names and their positions just to get a good start. Maybe after a year, he would know that Doris coordinates team travel, Bob is in charge of the equipment room and Mack is the football coach. Okay, so maybe remembering Mack’s name wouldn’t be so hard, especially since he’s responsible for about $94 million in income for the department each year.

“We have $143 million in revenues, and that’s different than when I came — it was just $4.5 million,” Dodds says. “It takes more people to run that kind of a business.”

The operative word in college athletics today is “business.” Schools are searching for more creative and effective ways to fatten their bottom lines, whether it’s through sponsorship deals, stadium expansions, media partnerships or all of the above. Financing a broad-based and successful program takes money and lots of it. Generating the revenue necessary to be first class these days involves a collection of moving parts and a vision that is always trained on future opportunities and revenue streams.

Right now, no school does it better than Texas, which has the highest revenues of any NCAA school and which should hold on to that title for years to come thanks to the new Longhorn Network, a UT-centric TV initiative that will generate $300 million over the next 20 years and provide the kind of promotional vehicle that is unparalleled in college athletics. When added to Texas’ already-successful collection of initiatives — including the Big 12 Conference’s recent 13-year, $90 million per year deal with Fox Sports — the groundbreaking partnership with ESPN will establish the department further as not only the wealthiest but also the most innovative in the nation.

“(The network) is a huge branding thing for the university, not just athletics,” Dodds says. “We have a network we can use for promoting the brand of the university.”

For years, schools have been using successful sports programs as first-tier methods of attracting interest. Win a national championship and watch admissions applications double. Reach the Final Four and set new records for alumni donations. Although faculty members grouse — rightly — about high salaries and facilities arms races that require huge expenditures, there can be no denying the impact of winning on the fields and courts. Texas, which has captured 13 national titles and more than 100 conference crowns during Dodds’ tenure, certainly has the résumé to justify its spending ($136.7 million in ’09-10) and the profit ($6.8 million in ’09-10) to counter any argument about frivolous economic practices.

Face it: Although Texas has the second-largest endowment of any university in the nation, behind Harvard, and has several world-class academic programs, its identity for many involves a full football stadium and the band’s playing “The Eyes of Texas” after a touchdown. To that end, Dodds and his people are working to improve every facet of the program, from facilities to personnel to fundraising and more. That way, the Longhorns will be able to maximize the use of their athletics success for the university.

“On many campuses, athletics are looked at as separate,” Dodds says. “We don’t want to be separate. We want to be an integral part.”

While Dodds works on that synergy, other Big 12 members are in lower tax brackets. Sure, Oklahoma is trying to set up a sports network of its own, but the state’s small population (one-sixth of the Lone Star State’s) won’t guarantee a payday like Texas received. Although the Fox deal, coupled with the league’s relationship with ESPN/ABC, will guarantee most schools between $15-17 million a year, Texas will go well beyond that, thanks to the Longhorn Network. UT also reaps more money from the other TV deals, thanks to its stronger national profile. In 2007, the last year tax data was available, Texas received $10.2 million from the league’s TV deals, while Baylor got only $7.1 million. Believe it or not, that does not bother the other schools, who understand Texas’ value to the Big 12 — it would have broken apart had the Longhorns left for the Pac-12 last summer, as was rumored — and what it means to have the chance to play in Texas.

If the Big 12 is worried about anything, it shouldn’t be whether Texas is making more money — it’s whether the Longhorns will consider going independent, the better to cut TV deals that will bring them more money and greater scheduling flexibility. The loss of the Longhorns would cripple the Big 12 and perhaps signal an exodus of Oklahoma, Texas A&M and Oklahoma State. Against that doomsday scenario, what’s a few million dollars?

“Our overhead and expenses at Kansas State are lower than those at Texas,” says John Currie, athletic director at KSU, which received $8.21 million in TV revenues in ’07. “If they get two or three million more a year, that’s no big deal. Their expense ratio’s much larger.

“We’re not worried about how we share it. We have to worry about growing the pie. We have to realize individual institutions have different needs.”

It’s a pretty simple equation for David Carter, a professor of sports business at USC and executive director of the school’s Sports Business Institute. With each passing day and every new groundbreaking deal, college athletics become less about the competition and more about the money.

“The major Division I programs are looking and feeling more like professional sports all the time,” Carter says.

Few fans are naïve enough any more to think that the college sports climate of the 1950s and ’60s was of the idyllic, extra-curricular variety. Schools were trying to maximize success and revenues then, but the model had not yet been constructed to allow for a flood of profit. Visionaries like Michigan AD Don Canham in the 1970s helped lay the groundwork for modern marketing efforts, and the U.S. Supreme Court decision in 1984 that gave schools and conferences control over their television rights was a major step toward the Longhorn Network.

But as technology booms, new media spreads and promotional tactics (luxury suites, corporate sponsorships, merchandise options) become more sophisticated and professional in style, the potential for revenue increases is colossal. Thanks to the increased opportunities, schools are pushing ahead with programs like never before, to the point where the on-field competitions themselves seem complementary to the overall “experience,” rather than the reason for it all.

“Schools are recognizing the tremendous demands to consume their products in all forms,” Carter says. “So, they are running to daylight as fast as they can.”

Texas is certainly in full sprint. From 2005-10, the Longhorn athletic department’s revenues grew nearly 50 percent, from $98.1 million in ’05-06, to the $143.6 million that came in ’09-10. Many of the line items found in the department’s fiscal report — like concessions, camps or conference distributions — remained relatively the same or experienced modest growth. The real money was made in three primary areas — ticket sales, contributions and sponsorships. And each represents a new approach to the collegiate athletics model.

Consider Memorial Stadium, home to the Longhorn football program. Its capacity has swelled from 80,000 to 94,000, and a portion of the new seats has been of the suite/club variety. Revenue on football ticket sales went from $20 million in ’05 to $33 million in ’09, a big reason for the football program’s robust bottom line.

The Longhorns have also had a big spike in overall advertising and sponsorship revenues, with the bottom line growing from $9.7 million to $22.1 million from ’05-10. More sophisticated techniques and expanded partnership programs gave a greater number of businesses access to UT athletics during that time. Like many big-time athletic programs, the taboos of in-stadium/arena signage or overt promotional considerations, such as game sponsorship and scoreboard advertising, no longer exist for Texas. Memorial Stadium has not reached the level of many professional venues, which are festooned with ads, but don’t be surprised if that happens soon.

“There was no marketing staff a year ago,” Dodds says. “Now, we have 10 people on that staff. Our fundraising arm has tripled in size and tripled in revenues.”

It’s important to remember that a lot of that$143.6 million — and a sizeable portion of the football program’s $70 million net income in 2009 — funds other Longhorn teams. Only men’s basketball ($6.7 million net income) and baseball ($1.9 million) made money in 2009-10. Each of the school’s other 17 sports relied on money raised by football, men’s basketball and baseball to survive. Granted, the tennis teams’ combined budget of $1.68 million is nearly $800,000 less than what the football team’s travel expenses were in 2009-10, but those squads still depend on the athletic department’s ability to squeeze every dollar out of the profitable programs.

Then there are the facilities. In addition to improving and expanding Memorial Stadium, Texas has in the past five years added a new softball venue, expanded the school’s rowing center, built a golf academy and renovated the Erwin Center, which houses the men’s and women’s basketball programs. It’s one thing to have a successful program and another to have the types of arenas, stadia, fields and practice facilities to lure future athletes to campus.

“You have to keep up with the Joneses,” Carter says. “When you’re recruiting players, a lot of times it comes down to the training facilities and other amenities that in their minds prepare them for the next level.”

You can’t blame some people for thinking that any opponent that happens to take part in a game being televised by the Longhorn Network might just be in for a tough time. It’s hard to imagine Iowa State’s women’s basketball team getting fair analysis from courtside commentators who rode to the game on Bevo’s back and are dressed like members of the Longhorn Marching Band.

Okay, so maybe that is an exaggeration. A big exaggeration. Network broadcasters won’t have to sign off with a quick “Hook ’em” sign to the cameras or wear burnt orange blazers on the air.

“We might have ‘The Eyes of Texas’ playing during a broadcast,” Stephanie Druley says. “But we won’t have it running under commentary or analysis.”

Druley is a proud UT graduate (broadcast journalism, ’89) who is heading back to Austin to help oversee the Longhorn Network’s launch and subsequent daily operations. She and fellow ESPN alum Dave Brown are tasked with making the school’s TV initiative look and feel like a top-shelf outfit. They’ll employ the same production tactics that one finds on any other ESPN game telecast, studio show or remote broadcast and make sure to give viewers a high-quality presentation while advancing the Texas brand. “We intend this to look like an ESPN product,” Druley says.

When Texas’ multimedia rights holder IMG College first set out to find a TV partner for the school, which had the ability to create its own network because the Big 12 Conference does not own its members’ television rights, ESPN had never been involved in anything like it. It paid big fees to broadcast professional and collegiate games but never was allied directly with a team, league or conference. The idea of working directly with Texas was not only unheard of; it was also a big risk. It was one thing for the Big Ten to create its own network, since it included 11 (now 12) schools that spanned six (now seven) states. To create a station that would focus on just one school was a big step.

“There are 25 million people in the state,” Brown says. “If there were not 25 million people, the economics wouldn’t allow us to take a shot at making this work.”

The numbers just work in Texas’ favor. That’s not to say ESPN won’t try to build a partnership with another school down the road, but the numbers and flexibility available through Big 12 membership make Texas the perfect place to start.

So does the breadth of available programming options. Even though the Longhorn Network will televise only one football and eight men’s hoops games per year, there is plenty of other inventory across the school’s other 18 varsity programs. Plus, the network will air non-sports programming that provides avenues for the arts, sciences and general university activity. The Texas archives will also come into play. “Robert DeNiro’s personal archives are there,” Druley says. “There’s a wealth of stuff.”

The network’s overriding goal, as with everything done in the name of athletics, is to advance the university’s reputation — and bottom line. To that end, one-third to one-half of revenues for at least the first few years will go to the school, rather than the athletic department. The money will be used to finance a pair of endowed faculty chairs in physics and philosophy, among other things. At a time when UT is facing proposed cutbacks of nearly $100 million in the state’s two-year budget, everything helps, even though you don’t have to work hard to find faculty members who aren’t thrilled with Texas’ athletic expenditures when academic programs face the reaper’s scythe.

But as Texas builds its brand, what does it mean for the rest of the Big 12? The conference already distributes TV funds unequally, the better to reward its more popular teams. By generating another $10-20 million per year, UT can gain a competitive edge through better facilities, coaches and equipment. Dodds, of course, believes this rising TV tide will lift all Big 12 vessels.

“The other Big 12 teams are part of this network, too,” he says. “In the end, there are a lot of joint things going on in the conference. If we play Baylor in baseball, they could be on our network, and it’s a win-win for everybody.

“It’s not Texas getting too big athletically. We did it for our student-athletes and the university.”

Currie echoes that sentiment, although what other choice does he have? He points to Kansas State’s “national” alumni base as a reason for supporting Texas’ initiative and reminds us that the Wildcats beat Texas in football and basketball this year. So much for a competitive disadvantage.

“We like the Longhorn Network,” Currie says. “When Kansas State plays the University of Texas in any sport, we’ll be on the Longhorn Network in the state of Texas. That allows us to reach our second-largest alumni base, the Dallas Metroplex.”

And play a supporting role in Longhorns, Inc.’s latest initiative.