Are College Football Coaches Worth the Money?

December 13, 2009

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Texas football coach Mack Brown recently got a raise and will earn $5 million per year.  Several college football coaches make more than $3 million per year.  These coaches make considerably more than the athletic directors and university presidents who are their superiors.  Are they worth the money?

Let’s take a look.  I’ll use a local example – $3 million per year coach Kirk Ferentz of the University of Iowa Hawkeyes  – as a case study.  Iowa is a successful, but not elite, program.  They frequently contend for conference titles, but aren’t at the same level as teams like Florida and Texas who are constantly in discussions for the national title.  They have a devoted fan base, but when the team falls on hard times, they fail to sell out the stadium.

How many more tickets will a team sell if they have a successful coach (let’s say, one who makes $3 million per year) versus a coach that has lackluster results and makes $500,000?  I’ll say that this can be 10,000 or more tickets.

In our case study, the Hawkeyes topped 70,000 in average home attendance in 1991 and 1992.  The 1991 Iowa team finished 10-1-1, while the 1992 team was 5-7 (but would have pre-sold many tickets on the basis on the 1991 team’s success).  In 2000, the team drew an average of just 61,123 fans per home game, due to lackluster seasons in 1998 (3-8), 1999 (1-10), and 2000 (3-9).  Legendary coach Hayden Fry had ridden off into the sunset following the 1989 season, and new coach Kirk Ferentz took over a program in need of rebuilding.

By 2004, the success of the team had once again caused the attendance to top 70,000 – topping out at a capacity average attendance of 70,585.  This represents an increase of 9,462 fans above the 1991 low water mark.  You’ll notice that this is less than the 10,000 figure I mentioned above.  However, we also don’t know how far attendance would have dropped if the team had kept losing.  The 61,123 figure from 2000 may have become a stepping stone along to path to a sub-50,000 average attendance.  For the sake of this case study, we’ll use the 9,462 figure with the knowledge that this will most likely produce a conservative estimate.  Most teams in BCS conferences play seven homes games, so that means that a good Iowa team can sell 66,444 more tickets than a bad Iowa team.

The University of Iowa’s season ticket price in 2009 was $339 ($48.42 per game).  So, how much revenue did those 66,444 tickets generate?  $3,217,218.48 – with negligible marginal cost to the University.  There’s more cash where that came from, though.  Let’s estimate $750,000 ($11.29 per person) in concession stand revenue from brats, nachos, popcorn, soda, and other high margin items.

Successful teams can also tap into a larger revenue stream outside the stadium.  A team’s hard core fans will always buy t-shirts and coffee mugs, but a successful run means that more fair-weather fans (and every team has them) will jump on the bandwagon.  Then there is the issue of money from donors.  Successful teams attract considerably more money from donors.  Every dollar a donor puts toward a project is a dollar the university can save.

Kirk Ferentz is worth the money – no doubt about it.  The revenue increase more than offsets his $3 million salary.

Am I suggesting that a successful football coach has more importance in society than a university president – or, for that matter, a social worker?  No.  But from a pure economic standpoint, hiring a successful football coach can often be worth the money.

Did you find this article interesting?  You may also like my article that asks “Should College Athletes Be Paid?

11 Comments (+add yours?)

  1. Financial Samurai
    Dec 13, 2009 @ 11:23:52

    Awesome topic Cosmo! JEff Tedford of my beloved Cal Bears makes 3 mil a yr too, but Cal is in the Ponsetta I donno bowl.

    It’s a question of flux. When they are winning, we can pay our coaches anything. When they are losing, we can pay them nothing and still that’s too much.
    .-= Financial Samurai´s last blog ..Why The World Forgives Rich And Famous People For Cheating =-.


  2. kosmo
    Dec 13, 2009 @ 11:33:30

    Well, I’d say that any competent coach has financial value, even if the team is mediocre. If I coached a team, I might do it for free, but I doubt we’d draw more than 500 fans per game. Throw a competent guy (probably having to pay him $500K/year) in there, and you can draw 30,000 per game fairly easily at a school in a BCS conference. Those butts in seats are cold hard cash.

    I can’t immediately find the historical infomation on Cal’s attendane compare to the attendence under Tedford’s predecessors?


  3. Financial Samurai
    Dec 13, 2009 @ 12:17:31

    The real money is in what the Boosters give, as well as the money earned from Bowl games no?

    All Pac 10 bowl game proceeds goes into the pool and gets split evenly. The good socialist way!
    .-= Financial Samurai´s last blog ..The Public Loves Wall Street Again! =-.


  4. kosmo
    Dec 13, 2009 @ 13:22:11

    Yep, very true. That swings it even more heavily in the favor of hiring a good (expensive) coach. My example was just to show that even the additional seats paid the freight. I mentioned boosters (donors) toward the end, but didn’t discuss it in great details because the amount of variation makes it hard to quantify. For example, T. Boone Pickens has donated more than $265 million to atheletics at Oklahoma State. Many university, regardless of their success, simply don’t have a donor capable of writing that big of a check.

    I’m pretty sure that in some (most?) conference, the team going to to bowl game gets a greater share of the revenue.


  5. Financial Samurai
    Dec 13, 2009 @ 16:09:43

    Regarding T Boone and OSU, I tought Tboone gave OSU all the money in terms of STOCK. When the market melted down, the university lost 75% of the donation no?
    .-= Financial Samurai´s last blog ..Federal Government Employees Raking It In =-.


  6. kosmo
    Dec 13, 2009 @ 16:59:18

    He donated cash, which they then immediately invested in his hedge fund (fees are waived). So there was a signicant decline due to overall economy … but I would hope this has rebounded a bit recently. OSU had previously done similar things with their money, with good success.

    Regardless of how the money performed, though, he had the ability to write the check (OK, EFT) for this amount in the first place – something very few people can boast.


  7. Financial Samurai
    Dec 13, 2009 @ 19:22:47

    Ahhh, I see. So recirculation of money kinda.

    Phil Knight from Oregon/Nike is a money booster.

    All Cal has is the lead guy from The Counting Crows! haha.
    .-= Financial Samurai´s last blog ..Federal Government Employees Raking It In =-.


  8. Evan Kline
    Dec 14, 2009 @ 08:39:54

    At Penn State (and I’m sure elsewhere), the football program is huge business and pays for the cost of all the other sports there. Despite overseeing a program that saw a stadium grow to a capacity of over 100,000, Joe Paterno’s salary, revealed a few years ago, was surprisingly low compared to other coaches. That has changed since, and I’m sure he makes plenty of money via other avenues.
    .-= Evan Kline´s last blog ..How to Password-Protect Evernote (Updated) =-.


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