Inside Aggie Inc.

Why Texas A&M football tickets cost so much, and other secrets of the business of college sports.

When Wally Groff came to Texas A&M in 1966 to work as the business manager of the athletic department, the university’s entire sports budget was $863,000. Today that sum would not even cover the travel expenses of Aggie teams in an annual budget that has ballooned to $22 million and will soon increase by an additional $3 million. Following the course set by pro sports, intercollegiate athletics—at A&M and elsewhere—is big business. Its managers have to know more about profits and losses than they do about football and basketball. Today Groff’s official title at A&M is athletic director, but it would be more accurate to think of him as the CEO of Aggie Inc.

Once upon a time, athletic departments did little more than pay salaries, operate facilities, schedule games, and count gate receipts, but those days are long gone. Aggie Inc. has 177 full-time employees and about 500 part-time and student workers—not counting 500 or so student athletes. It retires the debt on bonds for stadium expansion. It has an entire division devoted solely to tutoring athletes and monitoring academic performance. As part of its never-ending search for more revenue, it licenses radio broadcast rights and hunts for businesses willing to sponsor special events, from the tu football game ($100,000 to call it the AT&T Lone Star Showdown) to a spring baseball tournament (forty plane tickets from Continental Airlines to help defray the travel expenses of nationally ranked teams).

As everyone in Texas knows, A&M is a unique institution. But in its pursuit of athletic success, Aggie Inc. faces the same economic problems as other schools do, and it tries to solve them in the same ways. In recent years A&M has joined a more prestigious conference, added luxury suites to its football stadium, scheduled big-name football opponents (Notre Dame in 2000 and 2001), and tried to upgrade its basketball program—all with the hope of bringing in more revenue from ticket sales and TV appearances. It has also made countless small decisions (say, trying to rein in the high cost of utilities) with the same goal in mind.

Clearly there are two scoreboards today: one on the field and one on the balance sheet. What follows is an explanation of the business of college sports, using A&M as a case study and the 1996-97 fiscal year (the most recent one for which complete figures were available) as the benchmark.

College sports is a very odd business. It is one of the most regulated activities this side of nuclear power. Its umbrella organization, the National Collegiate Athletic Association ( NCAA), requires all Division I schools—those with serious athletic aspirations—to compete in a minimum of fourteen sports, of which at least seven must be for women. The economic reality, however, is that at most schools only football and men’s basketball pay their own way. For that success they are punished: They must not only earn enough to cover their own costs but also cover the deficits posted in tennis, golf, swimming, track, baseball, softball, volleyball, and soccer. If Ford Motor Company were in the same position, it would have to offer not only Tauruses, pickups, and Expeditions but also Edsels, Model T’s, and Model A’s.

The federal government gets into the act too, through Title IX of the Education Amendments of 1972. This law mandates equal opportunity in athletics for women, which usually means that a university’s athletic scholarships and participation in sports must reflect the proportion of women to men in the student body. At A&M 47 percent of the undergraduate stu-dents are women, so at least 47 percent of the Aggie athletes ought to be women. Consequently Aggie Inc. operates ten women’s teams, versus only nine for the men.

Another problem faced by all athletic departments is that they are, in effect, wholly owned subsidiaries of holding companies—in Aggie Inc.’s case, Texas A&M. The main university enjoys a hefty government subsidy ($229,098,537 in state funds for fiscal 1997), but state law prohibits athletic programs from receiving any support from taxpayers. Intercollegiate athletic programs, that is. Professional franchises are, of course, getting hundreds of millions of dollars for new taxpayer-supported stadiums, but not one penny of public funding trickles down to Aggie Inc.

In fact, the money flows the other way: Aggie Inc. must reimburse its parent for such items as utilities and custodial help. In 1997 the athletic department was assessed utility charges of $327,000 for Cain Hall, the dormitory where many athletes live, and $36,000 for its offices in a campus building. When the Aggie basketball team moved its games from ancient G. Rollie White Coliseum to brand-new Reed Arena this year, it will pay an estimated $400,000 charge for rent, plus $250 a day for the use of practice facilities. Basketball has historically been a break-even sport at A&M (it showed a small profit of $314,000 in 1997), so the new costs could plunge it into the red. The hope, of course, is that the new arena will bring in better athletes, bigger crowds, more money, and more success to a program that has had little success in recent years. But this is only a hope, and in the meantime, the costs are real.

Aggie Inc. also has to pay back the main university for the cost of athletic scholarships—almost $2.2 million in 1997. The logic is that scholarship athletes pay no tuition but receive the benefit of professors and classrooms, so the athletic department must pay its share of faculty salaries and building maintenance. What this argument fails to take into account is that intercollegiate sports are already helping to pay for salaries and maintenance. More than any other activity, sports inspire former students to donate money to the university’s general fund. “We have made a conscious effort to relate athletics to the broader university and keep our missions in harmony,” says A&M president Ray Bowen. “At many universities there is no correlation between athletics and academics, but many of our major academic donors began by giving to athletics.” And yet the

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