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?“