Revenue Value in Belonging to a Power Conference: Chad McEvoy

Think Tank Thoughts

• Why do so many teams switch conferences?
• To find out, we measured the revenue gains of moving to a power conference.
• Membership in a BCS power conference is worth $24.4 million in revenue annually.
• The mean total athletics revenue at BCS schools is $35.9 annually.
• The playoff may shrink the power conferences from six to five, meaning: more realignment to come.

As I recently sat with my 9-year-old son Andy in the stands at the Carrier Dome for the last Georgetown-Syracuse Big East regular season matchup, he asked me about the reasons for the significance of the game and the record-setting attendance of greater than 35,000. We talked a little about the great coaches of Boeheim and Thompson and spectacular players like Ewing, Anthony, and Iverson. Andy probed deeper about why so many schools, including Syracuse, had switched conferences in recent years. I felt as though answering “Daddy, why is the sky blue?” might be easier to answer.

Without question, the conference realignment of the past few years is one of the most significant intercollegiate athletics issues of our time. Dozens of schools have changed conference affiliations since 2010, including such high-profile athletic programs as Nebraska, Texas A&M, and Maryland. Reasons driving schools’ realignment decisions included the desire to move to a more prestigious league, to escape leagues seen as instable, to affiliate with stronger academic peers, and, of course, financial benefits.

One interesting aspect to the realignment movements has been the desire of a number of schools to move to the six power conferences that we’ve known as the “Bowl Championship Series (BCS) conferences” since the 1990’s. ¹ Schools such as Utah and Texas Christian were able to join the Pacific 12 and Big 12 conferences, respectively, while a number of other schools joined the Big East before it became apparent that league would eventually cease to be considered among the elite power conferences. In addition to access to BCS bowl games, these schools sought to receive the financial benefits of belonging to a power conference.

Working with colleagues Alan Morse from Mississippi State University and Stephen Shapiro from Old Dominion University, we sought to measure the revenue implications of moving to a power conference. We created a revenue data set capturing athletic department revenues in Division I athletics over a five-year span from 2003-2007. ²  We elected to focus specifically on department-generated revenues, thus removing student fee monies and other similar line items from the revenue pool to have a truer apples-to-apples comparison of revenue generation, and the impact of belonging to a BCS/power conference, for a Division I-FBS athletic department.

To isolate the effect of BCS conference membership on athletic revenues, we created a multiple regression model with 23 independent variables, allowing for the control of various factors influencing athletic department revenue generation. These factors included current year, previous year, and long-term historical performance of the department’s football and men’s basketball teams, the department’s total number of sports and student-athletes, time variables to account for relatively consistent year-by-year increases in athletic revenues among FBS schools, and institutional variables such as university enrollment, local population, and per capita income for local residents.

The resulting regression model was both significantly significant and strong (R²=.767) in predicting department-generated revenues. The following were the most powerful predicting factors of revenues in the regression model:

1. Whether the school was a member of the six BCS conferences
2. Historical performance of the school’s football program
3. University undergraduate enrollment
4. Historical performance of the school’s men’s basketball program

As shown above, the variable representing whether the school was a member of one of the six BCS, or power, conferences (ACC, Big East, Big Ten, Big 12, Pac-12, or SEC) was the most significant factor in athletic department revenue generation. The regression model also provides an equation we can use to estimate the effect of BCS conference membership on department-generated revenues while holding all other factors constant in the model.

Our regression equation shows that membership in a BCS/power conference was worth $24.4 million in revenue annually to member athletic departments, all other factors held constant. This value is particularly staggering when noting that the mean total athletics revenue among BCS schools in our data set was $35.9 annually.

In other words, if a typical non-BCS athletic program generated $25 million in annual revenue, which was fairly standard in the 2003-2007 years examined in our data set, a BCS athletic program with comparable past and present sport success and other similar institutional/athletic factors would be predicted to generate twice as much revenue at approximately $50 million annually.

Accordingly, it should be no surprise that the desire of many non-BCS conference schools scrambling to move in to a BCS conference was one key factor in the shifting college landscape of conference realignment over the past few years. The opportunity for these schools to realize revenue gains in areas like conference television deals and shared bowl game revenues, along with gaining the notoriety and prestige of belonging to an elite, power conference was extremely appealing for schools like Utah and Texas Christian.

Further, we saw several non-BCS schools join the Big East Conference in the early part of this decade (with some later changing course), including Texas Christian, Boise State, San Diego State, Central Florida, Temple, Tulane, SMU, and Houston, despite concerns about the conference’s instability and future. The results of our regression analysis, showing the financial allure of belonging to a power conference, help explain why schools have been willing to leave conferences where they have a long history and tradition to join more power conferences, even the relatively unstable Big East.

As the new college football playoff appears to shrink the list of power conferences from six to five, we won’t be surprised to see further conference realignment. The recent skyrocketing of conference television rights contracts will only exacerbate the revenue gap between power conference schools and those in other FBS leagues. If Maryland’s move from the ACC to Big Ten becomes a first signal that the landscape could again shift and eventually lead to the formation of four “superconferences,” the motivation to join a more stable conference with increased revenue generation may again bring about substantial conference realignment.

Dr. Chad McEvoy is Research Advisor for Winthrop Intelligence and Professor of Sport Management in the David B. Falk College of Sport and Human Dynamics at Syracuse University. He can be contacted at cmcevoy@syr.edu or (315) 443-0364.