Bowl economics 101

The facts are pretty simple: 18 bowl games just 10 years ago, 32 this year. The reason for the surge is explained in this terrific article appearing in The San Diego Union-Tribune, Bowls gone wild!. (h/t The Wizard of Odds) It’s an essential read for anyone who’s been engaged in the discussion about college football playoffs.

Because – surprise! – it’s all about the money:

… now there are a record 32 bowl games for major college teams, four times as many as there were in 1966 and 14 more than 1996-97. Combined, they will pay out about $210 million to NCAA schools, up from about $101 million in 1996-97. Twenty-three bowls will be aired by properties of the Walt Disney Co., which owns ABC and ESPN. [Emphasis added.] One third of the participants (21 teams) will enter the game with records of 7-5 or 6-6.

QUADRUPLE PLAY The number of major bowl games has quadrupled in 40 year. Bowl games since the 1966-67 bowl season: 1966-67: 8 1976-77: 12 1986-87: 18

1996-97: 18

2001-02: 25

2006-07: 32

Like many industries that make powerful companies rich, the bowl system keeps growing. But whether that’s good or bad depends on your rooting and financial interests …

ESPN actually owns five bowl games outright.

The result has been to turn the traditional rationale for bowls on its head:

“I think there are too many bowls,” former NCAA President Cedric Dempsey said. “We’ve moved away from the two main objectives of the bowl system. One is to reward excellence. It’s hard to say a 6-6 record is excellence. Secondarily, it was supposed to be a celebration of the game by the community. Many are now just television-driven.”

If you’re a playoff proponent, you’re probably thinking “so what?” about now. After all, if the bowls are being slowly shorn of their traditional purposes, isn’t that just another reason to urge a shift to a playoff set up?

Not so fast, my friend. The economics of the bowl system are truly twisted. The networks that drive the payoffs to the colleges don’t make money on the big games; they make the bucks on the Las Vegas Bowl and others of similar stature:

In February 2004, ABC representatives testified before the Knight Commission, which pushes for academic reform in college sports, that they were losing money on the BCS games. A report done by UCLA researcher John Sandbrook for the same commission surmised that ABC was subsidizing those BCS games with all those lesser bowl games it televises.

Consider that the cumulative rights fees paid by ABC to televise the four BCS games was $100 million. The rights fees paid to the other 24 games played in 2003-04 was about $19.6 million, according to Sandbrook’s report.

But the total gross ratings points (which attract sponsors) for the cheaper, lesser bowl games made up 57 percent of the total gross ratings points, suggesting that those lesser games give those networks a much bigger bang for the buck.

“The opinion one would have to form is that ESPN and ABC were subsidizing the license fees they paid to the BCS on the backs of the other bowls,” Sandbrook said.

That’s why ABC dropped out of the most recent bidding for the BCS games (except for the Rose Bowl), after lowering its bid figure from the amount it had previously paid for those rights. It makes more money now.

There are a few conclusions to be drawn here. First, there appears to be a ceiling as to how much revenue the BCS games can generate. Second, the real money more and more comes from expanding the size of the field engaged in post season play. Third, as the last section of the article indicates, trying to come up with some sort of bowl/playoff hybrid would be extremely difficult at best and destructive to the bowls at worst.

All of which brings me back to a point I’ve belabored regarding college football playoffs, namely, where’s the money going to come from to cover the need for increased payoffs under an NCAA “everybody in D-1 shares” formula? The economics of the current arrangement practically mandate a large post season in order to generate the revenue the schools would expect. Yet many proponents of a smaller (4-16 team) playoff system insist without any evidence that it would easily generate more money than the bowls currently do (an assertion weakly made in the article, again without any support).

I just don’t see it.

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