CR Gazette: ISU AD facing potential $147M deficit by 2031 with direct to player payments

[CapnCy]

Don't disagree on any of your arguments, but let me know when that B-roll footage of the bridge they show for 10 seconds at the top of the broadcast or when they cut to commercial starts sending residual checks. Then we can talk ROI.

Speaking of ROI, i was talking to a friend about all of this and just how not only the financial stuff has changed quickly (used to be all about facilities and a few key coach/program salaries) and now it's this deficit to catch up to and it's on paying players.

We were discussing how lets say you/your family are die hard fans and your loved one passes and leaves $500k-750 and you want to honor them and support ISU. You could use that to donate to a project and maybe have your name on part of it....endow a scholly for someone, etc. Now it'd be like "all of grandpa's hard work and estate now goes to 1/3 of Joshua Jefferson's season"

 

[Trice]

Where is this giant infusion of cash coming from in the next 24 months? The headline is accurate.

Yup. It isn't nuanced - that's how headlines work, and that's what the article is for - but it's accurate. We are "facing" a deficit. We do not "have" a deficit.

And the subhead clarifies. If ISU's message to the BoR was "but don't worry, we've got this" it would have been reflected in their comments. Instead they said, "ISU views this effort as one of the top priorities and challenges facing the university."

 

[NWICY]

Literally the same argument the city of Cedar Falls and UNI have been making for years that has fallen completely and totally on deaf ears. The legislature nor the BOR give a damn about that.

The Iowa legislature IMO lacks vision for the state other than bare bonesing everything. I'll stop at this statement before caving this thread or getting banned.
To the mods please give me the leeway on this comment.

 

[NWICY]

Speaking of ROI, i was talking to a friend about all of this and just how not only the financial stuff has changed quickly (used to be all about facilities and a few key coach/program salaries) and now it's this deficit to catch up to and it's on paying players.

We were discussing how lets say you/your family are die hard fans and your loved one passes and leaves $500k-750 and you want to honor them and support ISU. You could use that to donate to a project and maybe have your name on part of it....endow a scholly for someone, etc. Now it'd be like "all of grandpa's hard work and estate now goes to 1/3 of Joshua Jefferson's season"

In my family it would go to scholly or building. To me ISU is way more than athletics.

 

[hoosman]

Not sure if this would even reduce cost. Anyone paid in the higher tier to play could be deemed a university employee, not a student. They don't go to classes. Might as well call a spade a spade. I think there is only one pay tier now. Most recruits want a degree, but some are in it only for the money.

Otherwise, separate profit generators vs losers for all the sports. Cut scholarships or programs accordingly. Football might not even be in the profit category any more after payroll expenses.

Another idea would be a pod system for scheduling to reduce travel costs. For lesser programs, reduce conference games and replace with local matchups. Maybe that is already being done for tennis, golf, volleyball etc.

Time to dance with devil. Allow alcohol at games. Put corporate logos on uniforms. Pole dancing cheerleaders. Replace the marching band with a DJ. Rename JTS (hate this one). All disgusting options . Would need to get rid of the "Honor before Victory" plaque at the stadium and replace it with "Show me the money" .

 

[CascadeClone]

Click bait. Where is the report about Iowa being #7 with the most athletic related debt?

CFP Title Clash: Undefeated, Underrated and Debt-Laden

College football championship opponents Michigan and Washington owe $263 million and $244 million, respectively, in athletics-related debt.

www.sportico.com

View attachment 153141

Here's the thing about all this, and it also ties to the recent CF pod about program values by the Athletic.

All this business and financial stuff, you can't simplify it to just one number, or even two numbers. A&M with $279M debt -- but if they have $750M in revenue annually, that's a lot different than say Arizona St with just a little more debt, but maybe half the revenue. A&M can afford to service and payoff that debt over time, where ASU will never get out from under it.

Similar to the Athletic article. You can't value a business just as a multiple of revenue without looking at other factors. If KU has $400M in revenue but $350M in costs, they are not worth the same as KSU with $400M in revenue but $250M in costs. It's pretty easy to understand.

You need to know debt level, costs and thus profit, cash flow. And that's not even to talk about trying to value the "brand name" which is also a significant factor in what a program would be worth. But you get these dumb articles because it's easy to get one simple number. And because there is A number given, laypeople take it like its handed down by from Mt Sinai.

And I get it, its hard to do a real analysis- you have to tease out costs and debt by program, financials get massaged and you have to sort that out, private schools may not release any info, and there are just a lot of schools to do this for. Its a months' worth of work. No journalist is doing that for an online article. But I bet a nickel the PE folks have done it. Heck, if the data was relatively easy to get, I would do it for fun.

Sorry for finance rant.

 

[BCClone]

Cytown was built primarily to fund the upkeep and renovations on CY Stephens, Scheman and Hilton if I recall correctly. It remains to be seen if any of it will eventually flow into the athletic dept for all the other crazy stuff. For those in the know, feel free to correct me or add on.

The AD is now paying for that stuff. So if cytown takes care of it, that frees up that money to go to other stuff. It’s just an accounting game basically.

 

[CycloneT]

I remember hearing that there was another concert planned and that it was cancelled on the performers end, but can't recall who or why.

Kenny Chesney right? I think dates were double booked

 

[StPaulCyclone]

In my family it would go to scholly or building. To me ISU is way more than athletics.

I agree but they aren't mutually exclusive. The #1 threat to the university is the athletic situation right now. The AD is the driver of marketing, brand, etc. of the university.

 

[CascadeClone]

I’m thinking they may have to sell it to private investors if they were going to go that route. Apparently Kansas State’s athletic department is in an llc, but I’m assuming it’s owned completely by the university and subject to title ix.

And then you’re opening up a whole new can of worms. Does the money work, can an independent company compete in ncaa football, do the fans follow, etc.

I think the likely thing is probably cut costs where they can, add revenue where they can, and then don’t pay out the full amount if they can’t make it work

If that KSU AD LLC is generating $20M in cash flow annually, the university could sell it for say, $200M. They could also negotiate a lower price, but a residual of $X annually as well based on profit. Actually, probably just the FB program gets sold, not the whole AD. And then lease out the facilities, and use that revenue to fund olympic sports.

Then all the risk and cost flows to the new owners, and the university gets cash now and eliminates any liability. This is really the model that people are talking about, but I think it would be just for FB, and not the whole AD. The university is losing out on control to some extent, and any future growth and profitability, but maybe that would be a good thing - the university could then focus on other priorities, like maybe education.

 

[BCClone]

If that KSU AD LLC is generating $20M in cash flow annually, the university could sell it for say, $200M. They could also negotiate a lower price, but a residual of $X annually as well based on profit. Actually, probably just the FB program gets sold, not the whole AD. And then lease out the facilities, and use that revenue to fund olympic sports.

Then all the risk and cost flows to the new owners, and the university gets cash now and eliminates any liability. This is really the model that people are talking about, but I think it would be just for FB, and not the whole AD. The university is losing out on control to some extent, and any future growth and profitability, but maybe that would be a good thing - the university could then focus on other priorities, like maybe education.

If someone bought the whole AD, the number of Olympic scholarships would drop hard if not eliminated

 

[dirtfarmer]

Yup. It isn't nuanced - that's how headlines work, and that's what the article is for - but it's accurate. We are "facing" a deficit. We do not "have" a deficit.

And the subhead clarifies. If ISU's message to the BoR was "but don't worry, we've got this" it would have been reflected in their comments. Instead they said, "ISU views this effort as one of the top priorities and challenges facing the university."

Any time you are burning cash reserves, you have a deficit. There is nothing financially sound about using savings to fund an operating deficit. It's the last ditch strategy of every business that they hope they never have to do. Athletics is a business, and any business that tries that without a long-term plan to change will get laughed out of their banker's office!

It seems like JP is in a corner and he is playing his last card...Playing high stakes chicken with the BOR/legislator to see if they cave on kicking money on first before the department is out of all of it;s savings. I'd guarantee that he shaken every big donor down once or twice already.

 

[CascadeClone]

If someone bought the whole AD, the number of Olympic scholarships would drop hard if not eliminated

Unless you made it a contractual requirement to maintain X number of olympic sports or athletes or whatever. That would reduce your purchase price, since that's probably a money loser. Unless some PE genius thinks he has a way to monetize it - maybe they start bringing in more flashy female gymnasts and banking on them making a social media killing they can cash in on.

But more likely, they would just buy the FB program and leave the rest.

 

[isu81]

If someone bought the whole AD, the number of Olympic scholarships would drop hard if not eliminated

The P/E “solution” sounds great. But the reality is P/E isn’t buying something that doesn’t make money.

Not sure fans would like some of the ramifications- significant reductions in cost of operations/facilities/game day experience as well as increased revenues in the form of ticket prices, PPV, etc.

 

[CyCity]

Dumb article. Everyone is $150 mill in the hole if you factor rev sharing thru 2031. Too many moving parts to worry.

 

[bphill4isu]

Just wait until the Boone News Republican publishes the hit piece on U of I athletics.

 

[SolterraCyclone]

Any time you are burning cash reserves, you have a deficit. There is nothing financially sound about using savings to fund an operating deficit. It's the last ditch strategy of every business that they hope they never have to do. Athletics is a business, and any business that tries that without a long-term plan to change will get laughed out of their banker's office!

It seems like JP is in a corner and he is playing his last card...Playing high stakes chicken with the BOR/legislator to see if they cave on kicking money on first before the department is out of all of it;s savings. I'd guarantee that he shaken every big donor down once or twice already.

The savings buys us a 2-year runway to come up with a plan to account for a 20% line item.

It’s not a “last-ditch effort”, it’s a short-term solution. It’s a lot easier to find 20% in revenue/budget cuts over 2 years versus 6 months.

There will be hard decisions to make though, certainly.

 

[clonedude]

If CyTown doesn’t end up doing as well as they had hoped, then I’m sorry…. just put padlocks on the doors of CY Stephens and shut it down.

It’s going to get to the point that if you aren’t a “money maker”…. then you gotta go. Including the Olympic sports… unless there is some kind of minimum requirement you have to have?

Of course this all sucks, and nobody wants to be in this position, but that’s where we are. The players just HAD to start being paid enough money to live on for the rest of their lives…. at least some of them. So stupid.

 

[dirtfarmer]

If CyTown doesn’t end up doing as well as they had hoped, then I’m sorry…. just put padlocks on the doors of CY Stephens and shut it down.

It’s going to get to the point that if you aren’t a “money maker”…. then you gotta go. Including the Olympic sports… unless there is some kind of minimum requirement you have to have?

Of course this all sucks, and nobody wants to be in this position, but that’s where we are. The players just HAD to start being paid enough money to live on for the rest of their lives…. at least some of them. So stupid.

I really think CY stephens and the other little building next to it, will end up back with the university to fund when athletics threatens to close it. It's the least they can do to help out.

You need to be compliant with NCCA and Title IX:
-Universities need 14(or could be 16) sports to be considered NCAA Division 1 currently
-To be Title IX compliant, the easiest way is to have equal numbers of men's and women's scholarships.

With football having so many scholarships, most women's sports are safe, even if NCAA removes the requirement for the number of sports

 

[Pope]

Don't disagree on any of your arguments, but let me know when that B-roll footage of the bridge they show for 10 seconds at the top of the broadcast or when they cut to commercial starts sending residual checks. Then we can talk ROI.

The bridge allowed them to develop the land east of the stadium, allowing them to create an RV park for the big donors. The checks began rolling in immediately.