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Men's basketball still a cash cow at IU

November 27, 2010

With the college football season waning, Indiana University Athletics Director Fred Glass’ attention is turning to basketball.

And with good reason.

Despite its serious ills since 2007, IU basketball remains a national power—at least financially. The men’s basketball program ranked No. 8 among all NCAA Division I schools in revenue generation during the 2008-2009 season, accounting for 25 percent of the school’s entire athletics department revenue.

Fred Glass Glass

The school’s reliance on basketball revenue has again stoked talk of replacing the 39-year-old Assembly Hall.

“It’s been talked about a lot, and it’s something [IU] trustees have indicated they want,” Glass said.

Land adjacent to Assembly Hall has been set aside for the new venue, but Glass said a massive fundraising effort would be needed, and there’s been no timetable decided for such a project.

“It would be the mother of all capital projects, probably $200 million,” Glass said.

During the 2008-2009 season, in which the team won only six of 31 games, IU’s men’s basketball team brought in $15.2 million of the athletics department’s $60.6 million revenue. Only six schools in the top 25 in basketball revenue count a bigger percentage of their athletics department revenue from men’s hoops than Indiana.

IU’s financial success has been so phenomenal in light of its recent on-court struggles that Glass said other schools have probed IU officials for their secret.

But counting to such an extent on one sport is a two-edged sword.

“That type of reliance is a blessing and a curse,” said David Ridpath, a professor of sports administration at Ohio University and past president of The Drake Group, a not-for-profit that bills itself as a watchdog for academic integrity in the face of big-time college sports. “It represents a revenue stream the school banks on. But it puts tremendous pressure on the program to produce, regardless of the circumstances.”

When IU was rolling under Kelvin Sampson in the 2007-2008 season, the team generated more than $17 million, third nationally, representing 31 percent of IU athletics revenue. IU’s situation is in stark contrast to many of its Big Ten brethren. Ohio State, for instance, counts on its men’s basketball team to bring in only 13.4 percent of its total athletics revenue. Michigan State’s basketball team tallies 20.6 percent and Wisconsin’s brings in 16.8 percent.

Purdue is further down the hoops list, but makes up for it with football revenue. During the 2008-2009 season, Purdue’s football team generated $18.3 million, while the men’s basketball team scored $7.5 million. Its total athletic department revenue for that year was $59.9 million.

Even perennial powers like Kentucky don’t count on men’s basketball as much as IU. Kentucky’s $14.8 million in basketball revenue during the 2008-2009 season was 20.5 percent of its athletics department revenue.

With Coach Tom Crean recently securing several commitments from top-flight recruits this fall, Glass thinks a little more revenue can be milked out of the men’s basketball program. But with Assembly Hall, he said the program’s money-making potential is “about maxed out.”

IU chartThat’s why Glass has focused on football, where the upside potential is much greater. Hired to replace Rick Greenspan in October 2008, Glass has increased football attendance and revenue each of the last two seasons.

For decades, IU basketball brought in more than its football program. During the school’s 2008-2009 fiscal year, IU’s football team brought in $5.66 million more than the men’s basketball team.

But the football team’s $12 million to $13 million annual budget far exceeds the $6.5 million to $7 million spent on basketball, making football’s profit margin razor-thin.

Basketball profits, Sheehan said, are largely responsible for keeping the school’s athletic department in the black. During the 2009-2010 season, IU was one of 14 Division I schools whose athletic department was not running at a deficit.

Most IU athletics revenue not generated directly by the football and men’s basketball teams comes from the Big Ten’s revenue-sharing plan, which splits revenue coming from post-season football and basketball appearances.

Football at IU is at a crossroads. With the team wrapping up another disappointing season, many school supporters are calling for the firing of Coach Bill Lynch.

Glass said he intends to let Lynch, the lowest-paid Big Ten football coach, serve out his contract, which runs through next season. To get a top-notch coach, Glass would have to pay five to 10 times the $250,000 that IU pays Lynch annually.

“Building a stellar football program is extremely expensive,” said Richard Sheehan, a University of Notre Dame sports economist and the author of “Keeping Score: The Economics of Big-Time Sports.” “And you’re not likely to see much return on that investment for four or five years.”

The more immediate return, Sheehan said, is why schools like IU and Louisville typically spend more time nurturing their basketball programs.

Louisville brings in more revenue through its men’s basketball program than any other Division I program, scoring $25.5 million during the 2008-2009 season.

Louisville this year moved into the $238 million, 22,000-seat KFC Yum! Center, which has the potential to push its basketball revenue even higher.

“Schools like Indiana and Louisville that have the basketball fan base and revenue stream in place are smart to try to maximize it,” Sheehan said.

Some sports-business experts think IU has no choice but to bolster its basketball infrastructure.

Ohio University’s Ridpath figures Louisville’s new arena is bound to cause IU and other basketball-dependent schools to consider the possibility of milking those programs for more money. And that’s not necessarily a good thing.

“Anytime you put so much in your athletics budget that one program supports, you’re kind of sitting on a house of cards,” Ridpath said. “If basketball at IU fails, that house comes crashing down.”•

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