Thursday, March 18, 2010

Accounting Madness 

In an article today on CNN.com, the normally quite sharp Chris Isidore, a senior writer for CNNMoney, perpetuates one of the most enduring myths in sports economics: that college sports teams generate significant profits for their host institutions.

The article shows the individual revenues, expenses, profits, and margins for essentially all NCAA Division I men's basketball teams and finds that across the 340+ D1 institutions in the country, basketball made a profit of nearly $280 million last year. As noted by Isidore, "it's clear that men's basketball is a major source of funding for many colleges, and that profits are still far more common than losses for the major teams in March Madness." It's a nice story. It's also 100% wrong.

Let's just take a look at two schools, my own Holy Cross and big-time power North Carolina to highlight the flaws.

According to the article, the Holy Cross basketball team racked up $1,549,329 in expenses while generating an identical amount in revenue and therefore exactly broke even. Nearly a third of the schools on the list show exactly zero in profits as well. A quick look at the source data, however, shows that about $1 million of the supposed revenue for the team came from direct institutional support. The team didn't break even. It lost about $1 million. Large numbers of D1 basketball programs include direct and indirect insitutional support, direct government support, or student fees as part of basketball "revenues". In fact, these are simply tranfers from students, taxpayers, and other parts of the college that disguise losses in the basketball program and athletics in general.

But what about a powerhouse like North Carolina? While Holy Cross sells, perhaps, $100,000 in tickets per year, UNC boasts basketball revenues of nearly $20 million, and this money comes from hard sources like ticket sales, NCAA and conference distributions, and media rights. While the most current year's data from the Department of Education is not broken down into great detail, older data from the IndyStar shows no shenanigans on the revenue side at UNC.

Costs, however, are another matter. Nearly half of all the Tarheels' athletic expenses are not allocated to any individual team, but instead expensed to the athletic department as a whole. The older IndyStar data shows that the University allocated exactly zero dollars in expenses to the basketball team for things like medical trainers, facilities and maintenence, promotion, or indirect institutional support. It's pretty easy to have a profitable basketball team when all of your revenues count towards the bottom line but many of your expenses don't.

Sometimes it is worth presenting the best information you have even though it's not perfect, i.e. something is better than nothing. Other times the information is so flawed that it less than worthless, verging on the harmful. This is one of those cases, and CNN should know better.

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Thursday, March 04, 2010

Student Demand for College Sports 

Funding has dried up for a lot of things in the Great Recession, including college sports programs. At Cal State San Marcos, the most recent addition to the UC system, students recently voted on a measure to increase their fees from $80 to $200 per year to support their fledgling intercollegiate athletics program. CSUSM is an interesting case. This is a campus in which the prospects are remote for a major college football team, or even a basketball squad seeded 64th in the NCAA tourney. The revenues generated by the fee increase would apparently add $1.2 million to a current budget of $1.7 million. This looks like a significant step up in funding for a very small program of intercollegiate athletics. I assume that the students who voted had a decent sense that what they were voting for was to better fund a small-time program, rather than an entry into the major college sports landscape. Turnout was not large: about 1300 out of 9200 students voted, with 866 supporting the proposal. The immediate consequence would appear to be the formation of men's and women's basketball teams.

Roger Noll once made the observation that sports on campus must be demand driven, ultimately, and not just the result of a conspiracy among boosters, coaches, and board members. After all, boosters and million-dollar coaches are nowhere to be found at small private colleges, which operate in an unsubsidized, competitive market. Yet small colleges compete for students, in part, by spending a significant (5%) chunk of revenue on small-time intercollegiate sports. If reallocating this expenditure yielded a better crop of applicants, you'd expect to see that choice made.

Student votes are taking place at a number of institutions in the current environment, and not all of the sports-funding initiatives are winning. Students at Long Beach State, for example, rejected a $190 per year increase in fees that would have covered "rising costs, cuts, and a new soccer-track stadium." My sense is that Long Beach is a commuter school, and soccer and track don't exactly "galvanize the community." That package seems a tough sell.

Here's the story on CSUSM, with a brief discussion of other fee-based sports funding proposals around the country.

(Note: The original post confused CSU San Marcos with UC Merced, which I attribute to my pre-6am reading and posting on the story. Thanks to CM Gayley for the correction.

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Thursday, April 02, 2009

Conference Dating Game: Winners and Losers 

Several college athletic conference realignments have taken place over the past 20 years in a process not unlike Match.com. Different parties size each other up based on similarities of athletic programs and TV market appeal. Many matches make sense, such as Florida State, BC, and Miami "hooking up" with the ACC, Oklahoma and Texas matching up in the Big 12, or Louisville and UConn joining forces in the Big East. Just as with dating, this process leaves some players out in the cold such as Rice, SMU, Temple, and others.

One interesting result of the matching and leftovers is that sometimes being left behind works to your advantage and sometimes getting a date works against you. Memphis has benefited and may continue to benefit by its exclusion from the C-USA schools that went to the Big East. Instead of scratching and clawing just to keep their head above water in the Big East anarchy, their dominance of C-USA provided them with nice seeds and a run to the finals and the Sweet 16 over the past two seasons.

In contrast, DePaul received the Big East invite and schools like Seton Hall and Providence retained their places. However, are these non-football schools really a fit for the current 16-member Big East behemouth. An NJ.com post by Steve Politi addresses some aspects of the current dilemma, including touching on whether it make sense in terms of money:
so much of what made the Big East special in its heyday of the late '80s is missing from its monstrous state in 2009. For every St. John's-Georgetown tilt, like the 64-59 victory for the Red Storm Tuesday, you end up with a Cincinnati-DePaul.

For every matchup between two longtime rivals, you end up with two teams thrown together out of necessity, in a league that might be too big and too competitive for its own good.

"It's good for the cash register," Carnesecca said when asked about the 16-team tournament, but even that seemed debatable. The bottom eight Big East teams squared off Tuesday, but in an era when it seems like every dribble is televised, the four games were only available on the internet.
Would some of the weaker, non-football members of the Big East be better suited for a conference tailored to their interests. A conference made up of DePaul, St. John's, Seton Hall, Providence and mix them with a group such as Xavier, Dayton, Temple, St. Louis, UMass, Butler and give or take one or two of these or others, and one is left with something more similar to what the Big East started out as in the late 1970s.

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Wednesday, October 15, 2008

NCAA graduation rates 

An NCAA report proclaims that graduation rates of student athletes are at their highest ever. I certainly join in the applause for any improvement in the academic performance of student athletes. In conjunction with this report, the organization is releasing its own graduation statistic, the "Graduation Success Rate." This measure is higher than the graduation rate measured by the Federal government. Schools don't like the latter, in part because if fails to track transfers (are athletes more or less likely to transfer? I would think eligibility rules would make them less likely to transfer.) But they like the GSR measure for another reason, since they are allowed to "subtract student-athletes who leave their institutions prior to graduation as long as they would have been academically eligible to compete had they remained."

Comparing the GSR to the Federal measure indicates that - spin games aside - they are measuring pretty much the phenomenon. Here are the data, as reported by Inside Higher Ed:



Sport

Grad Success Rate

Federal Rate

Baseball

68%

47%

Basketball (Men’s)

62%

46%

Basketball (Women’s)

82%

64%

Bowling (Women’s)

68%

57%

CC/Track (Men’s)

74%

60%

CC/Track (Women’s)

84%

70%

Crew/Rowing (Women’s)

91%

75%

Fencing (Men’s)

86%

78%

Fencing (Women’s)

90%

81%

Field Hockey

94%

81%

Football — Bowl Subdivision

67%

55%

Football — Championship Subdivision

65%

54%

Golf (Men’s)

79%

61%

Golf (Women’s)

87%

71%

Gymnastics (Men’s)

86%

70%

Gymnastics (Women’s)

95%

85%

Ice Hockey (Men’s)

83%

64%

Ice Hockey (Women’s)

90%

74%

Lacrosse (Men’s)

88%

74%

Lacrosse (Women’s)

94%

84%

Rifle (Men’s)

80%

60%

Rifle (Women’s)

82%

64%

Skiing (Men’s)

82%

73%

Skiing (Women’s)

96%

73%

Soccer (Men’s)

79%

58%

Soccer (Women’s)

89%

71%

Softball

86%

70%

Swimming (Men’s)

83%

69%

Swimming (Women’s)

90%

75%

Tennis (Men’s)

83%

64%

Tennis (Women’s)

89%

70%

Volleyball (Men’s)

83%

69%

Volleyball (Women’s)

88%

71%

Water Polo (Men’s)

87%

71%

Water Polo (Women’s)

86%

76%

Wrestling

72%

54%



The GSR averages 15% higher than the Federal measure. Neverthless, at .92, the correlation between the two figures is quite high.

One notices immediately that for the same sport, the graduation rate for women is consistently higher than that for men. This is true for both measures: the average differential is 8% using both the GSR and the Federal measure. Only in the case of the GSR for water polo do women graduate at a lower rate than men. The female-male gap is smallest for fencing and rifle shooting, sports with little or no professional market, and volleyball, in which the market opportunities are more similar than most sports. This lends some credence to the idea that the low graduation rates for baseball, basketball, and football are driven in part by professional opportunities and not just the dumb jock syndrome, a tag that the NCAA is clearly trying to avoid. Perhaps reporting the GSR will help puncture this myth, but as long as the drive to win in the major sports remains strong, the incentive to cut corners with marginally qualified students will remain intact.

As an aside, for anyone interested in studying these data, this NCAA website has loads of it (including that from the Feds). Although the NCAA may be deploying a bit of puffery with the GSR, they should get some credit for making this data easily accessible.

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Thursday, August 21, 2008

"The Bob Stoops Economy" 

Exhibit 1 in "Why College Football Coaches are Paid so Much Money." This is the fifth story in a ten part, all you can eat, series on Stoops at the Oklahoman.

If you are interested in what the chairman of the board directors of the NCAA has to say about NCAA policy & potential reform, check out this Q&A from The State's Paul Strelow. As Jim Barker is my boss as president of Clemson University, I'd be a fool to throw smack at him in a blog, but trust me, he's a serious man who takes bold initiatives and knows how to get things done. Particularly notable is his comment on "the price of admission" to Division I athletics and academic accountability.

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Monday, June 23, 2008

Is the NBA - NCAA market division in jeopardy? 

Basketball is the one uniquely American game. (Our baseball and football were adaptations of English games). It would be ironic if increasing appreciation of basketball in Europe chips away at the cartelized, market division arrangement that works so well for the NBA and NCAA. The things is, Europe pays more than the NCAA, and they don't have any problem with luring teenagers to emigrate for the purpose of sport. William Rhoden reports:
Brandon Jennings smiled Sunday afternoon when someone suggested that he might be considered a trendsetter.

If he makes good on a threat to go from high school to professional basketball in Europe, Jennings will become the first high school player to spurn college to go overseas and play professionally.

Trendsetting.

This is the latest — and most brilliant — plan yet to combat the three-tiered maneuver by the N.C.A.A., the N.B.A. and the players union to prevent talented high school players from going directly to the N.B.A.

The N.B.A. instituted an age limit of 19, and required that a player be at least a year removed from high school, as part of its collective bargaining agreement with the union. The N.C.A.A. didn’t protest, and why would it?

Under this arrangement, the great high school players have little choice but to do time in college for a season at a high-profile college. Kevin Love wound up at U.C.L.A., Michael Beasley at Kansas State, Derrick Rose at Memphis and O. J. Mayo at Southern California. All entered this week’s N.B.A. draft after one season in college.

Jennings, an 18-year-old from Los Angeles who played the last two seasons at Oak Hill Academy in Virginia, signed a letter of intent to play at Arizona.

Jennings was pushed into action by the N.C.A.A. After doing poorly on his first standardized test, he did well on the second, but because of the difference in the scores, the testing service asked him to take the test a third time. He relented, but at that point Jennings decided that he was through with the N.C.A.A. Why jump through hoops to go to Arizona, endure the charade of an academic regimen, then switch into N.B.A. mode the instant the season is over?
A little European experience might be more beneficial than sitting in Astronomy 101 for these cats, no?

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Tuesday, May 13, 2008

Arizona State Eliminates Three Sports 

A quick note: Arizona State has eliminated three sports.

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Monday, March 24, 2008

Eight per cent 

The latest estimate of the applications bump from winning the national title in college football or (men's) basketball is 8 per cent. A top twenty-type finish is worth 2 to 3 per cent. The systematic analysis is in a paper by Devin Pope and Jaren Pope, forthcoming in the Southern Economic Journal.

I always find the anecdotal cases in this subject area informative (I last blogged about this with regard to Rutgers football). This is from the AP story on the paper by Dena Potter, "Schools Score Big When Sports Teams Win:"
For George Mason University, just outside Washington, the positive effects of its unlikely Final Four appearance two years ago were wide-reaching.

In addition to increases in fundraising, attendance at games and other benefits, freshman applications increased 22 percent the year after the team made its magical run. The percentage of out-of-state freshmen jumped from 17 percent to 25 percent, and admissions inquiries rose 350 percent, said Robert Baker, director of George Mason's Center for Sport Management who conducted a study called "The Business of Being Cinderella."

Baker also found that SAT scores went up by 25 points in the freshman class, and retention rates as freshmen moved into their sophomore year increased more than 2 percentage points.

"You will certainly have critics who say it would have happened anyway, but I think the general consensus is that it happened faster because of this and that it allowed this university to reach new heights more quickly," Baker said.

Gonzaga was virtually unknown in most parts of the country until it broke into the national tournament in the mid-'90s. The Zags have been in the tournament every year since 1999, and during that time enrollment has grown from just over 4,500 to nearly 7,000, said Dale Goodwin, a university spokesman.

Inquiries have jumped from about 20,000 per year to 50,000, and the Spokane, Wash., school attracts students from eastern states where it doesn't recruit.

"There's no other way they would have heard about Gonzaga," Goodwin said.

The study found that private schools saw even larger increases than public universities.
Potter wrongly states that the evidence was "mostly anecdotal" prior to Pope and Pope, who make no such claim, but that's par for the course I guess. Potter is right to emphasize that the applications boost is temporary (absent any additional investment to capitalize on the increased awareness). Once on the NCAA treadmill, always on the treadmill. Unless you are Chicago.

For the record, here is the abstract from Pope and Pope's paper:
Many analysts question the role of college sports within higher education. However, one hypothesized benefit of high-profile college sports is that they can influence college choice decisions. Empirical studies that have analyzed the impact of a school’s athletic success on the quantity of student applications and the average quality of those students have produced mixed results. This study uses two unique datasets to shed additional light on the indirect benefits that sports success provides to NCAA Division I schools. Key findings include: (i) football and basketball success significantly increase the quantity of applications to a school, with estimates ranging from 2-8% for the top 20 football schools and the top 16 basketball schools each year; (ii) the extra applications received are composed of both low and high SAT scoring students, thus providing potential for schools to improve their admission outcomes, and (iii) schools exploit these increases in applications by increasing both the number and the quality of incoming students.
Update: The link to the Pope and Pope paper has been changed to a more recent version.

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Sunday, March 02, 2008

Ladies Hoops & Bucks 

From Greg Auman in the St. Petersburg Times, where the Women's Final Four will take place next month:
Much seems rosy in the women's game until you get to the bottom line for the 2005-06 season: a staggering $169-million in losses. That total is for the 333 schools in NCAA Division I as reported to the U.S. Department of Education. The figure is probably conservative because 80 schools reported their expenses matched their revenues, to the last dollar.

Still, proponents say it's a worthwhile investment in giving women's basketball a chance to catch up to the older and more established men's game.

"The emphasis has been placed on putting more money, more energy, more manpower on women's basketball," said Candice Storey, senior women's administrator at Vanderbilt, which lost more money on women's basketball than any school in 2005-06. "It's just a slow process getting it to translate to real dollars."

At the sport's highest level, in the 11 largest conferences, the losses are more than $1-million per school, with 18 schools losing more than $2-million, according to the DOE. Men's basketball, by comparison, generated a $240-million profit in the same year, largely on two things the women still lack: a lucrative TV package and strong attendance. The women's game is still working to build the national audience and fanatical interest the men have enjoyed for decades.
The bottom line for women's hoops should not be on revenue. The fact is that just about all intercollegiate sports lose money. That men's football and basketball help pay the bills of the other programs at big time sports schools is nice, thanks very much.

Still, there is the sense that women's hoops has the potential to generate more revenue. Connecticut coach Geno Auriemma thinks his team needs to be taken down a peg for that to happen:
If powerhouses such as Connecticut are the rare economic model, the success story that all women's programs hope to be, they also may be part of the difficulty schools have in getting there.

Auriemma told the Times before this season that the parity coming to women's basketball may be something that helps the sport become profitable. As much as dynasties such as Tennessee and the Huskies have given exposure to their game, Auriemma said the sport needs the any-given-Sunday chaos of the NFL, where huge upsets can come on any field, even at the Super Bowl.

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Tuesday, January 08, 2008

UGA Wants a Playoff 

The Georgia Bulldogs were the hottest team in college football at the end of the season this year, and will finish second in the AP poll behind LSU. Perhaps they could have done better in a playoff system. Certainly, the BCS process led to a series of weird match-ups in the bowls, with teams like Missouri, Southern Cal, and Georgia -- all strong teams with great resumes -- paired against relatively weak opponents. Things would have been much different in a playoff system, probably to Georgia's benefit. Which may explain this open letter from Georgia President Michael Adams to NCAA President Myles Brand:
In recent years ... I have become increasingly troubled about the commercial influence of how the college football season is played out, particularly with the post season bowls. The television networks ... have grown too powerful in deciding who plays and when they play, and indeed, whom they hire to coach. The BCS has become a beauty contest largely stage-managed by the networks....

Colleges need to regain ownership of their football teams.... reorienting the national football championship is an important step in managing a model that benefits students, institutions, and our constituents.
Adams is proposing an NCAA-managed 8-team tournament that begins with the New Years Day bowls, to be accompanied by a return to an 11 game season. Adams is the chair of the NCAA executive committee, so this proposal - and the money that will flow from it - carries some weight. Here is Adams' letter to Brand, and a similar statement of the issue.

Adams' take changes my view of this issue - (I'm an advocate of league championships as being the focal point rather than playoffs, but the reality is that we will have some form of playoff, so I've been baying at the moon...). Moreover, the salaries paid to the bowl directors -- $490,000 for the Outback Bowl!!! --- suggest that the colleges are leaving money on the table in a system which is fraught with conflicting interests. While history provides many episodes that make one skeptical of NCAA coordination, there is clearly scope for improvement on the current setup. Let the negotiations begin!

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Thursday, May 24, 2007

Should Duke Lacrosse Players Get Their Eligibility Back? 

Duke has made a request to the NCAA that its men's lacrosse players - who had their season cut short last year by the rape allegations - get that year of eligibility back.

Duke hopes the NCAA will give back the year its men's lacrosse players lost during last season's now-debunked rape scandal.

The school is asking the NCAA to grant an extra year of eligibility for team members, who played just eight games in 2006 before the university canceled the rest of the season amid rape allegations against three players.

Still - as his team prepares for this weekend's Final Four - coach John Danowski figures the proposal is "a long shot."

The university made the decision to cancel the season in the wake of the allegations, not the NCAA. Unfortunately for the players, Duke must deal with the consequences. If the NCAA decides to give the eligibility back, it sets a precedent that penalties for wrongly cancelling seasons won't be as harsh. It is not as if schools will go willy-nilly in cancelling seasons in the future, but it does make a repeat more possible. Universities should not expect a bailout at the hands of the NCAA.

As heinous as the treatment of the players was, the NCAA has no duty to help bail Duke out.

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Tuesday, April 03, 2007

More on Toeldo 

Proud partisans at the University are "stunned" that a point shaving scandal could happen on their campus. I was surprised too, but for different reasons. The idea that an operator could get $100k down on a Toledo game without the line adjusting or being taken off the board -- one of you betting hounds can check the data on that -- suggests to me that online sportsbooks may have added a lot of liquidity to the point spread market in recent years.

The other interesting news today is that the perpetrators are being chased down on the basis of a tip to the FBI by Las Vegas Sports Consultants. These are the people who make the initial lines for the Vegas sports books. One thing they do is pore over the betting action, seeing which teams are developing a "following." Or something slightly different in the case of point shaving. It is intriguing that Vegas now runs to the FBI rather than a kneecapping hoodlum to keep the market straight these days.

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Sunday, April 01, 2007

Point shaving at the University of Toledo? 

From the Detroit Free Press.
A running back for the University of Toledo Rockets has been charged with recruiting fellow athletes to shave points and fix games on behalf of a Macomb County gambler.

A criminal complaint filed in U.S. District Court in Detroit said the player, Harvey "Scooter" McDougle Jr., 22, a senior, recruited football and basketball players to participate in the scheme spearheaded by a Sterling Heights man identified only as "Gary."

Gary’s recruitment of players allegedly included inviting the athletes to gamble and dine at Greektown Casino in Detroit.

The complaint said one player was offered $10,000 to sit out a football game. Other players received cash, groceries, merchandise and other gifts, the complaint said.

McDougle told the FBI that he received a car, telephone and other things of value from Gary, but insisted that he never changed the way he played to affect the outcome of games.
Toledo? I didn't think the betting market was thick enough for crooks to fool with mid-level programs.

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Sunday, March 11, 2007

NCAA sued (again) 

As a football player at UCLA, Ramogi Huma found there was always more month than money when it came to the reality of daily living.

His scholarship paid for tuition, books, food and housing, but didn't cover toothpaste, travel expenses or phone bills. When "people came peddling credit cards in front of the athletic department," Huma applied and accepted a sports water bottle as a free gift.

He charged what he needed to survive.

"I thought I could get a job in the summers to pay it off, but when I was playing, I wasn't allowed to work because the NCAA didn't allow it," said Huma, who owed $6,000 at 19 percent interest upon his 1998 graduation.

That experience -- and the National Collegiate Athletic Association's suspension of a teammate who accepted groceries when his scholarship money ran out -- led Huma in 2001 to found the Collegiate Athletes Coalition to improve conditions for student athletes.

Now, as the NCAA prepares for its annual "March Madness'' basketball championships, it is locked in a legal battle with the CAC that could change the future of college sports.
That's the opener from Robin Acton and Richard Gazarik's article. It's an important story that will slowly unfold over the next couple of years, so file it for future reference. Rod Fort and Steve Ross are quoted, among others.

The headline reads "NCAA: USW (United Steel Workers) trying to make athletes "paid employees." Well, that's certainly preferred to "unpaid employees."

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Sunday, March 04, 2007

NCAA takeover completed 

There are several interpretations one might make of Joe Drape's front page story in today's New York Times: "Facing N.C.A.A., the Best Defense Is a Legal Team." My take is quite simple: the lawyers are in charge of college athletics.

It's a bit of a shame really. But it's to be expected in a market that is both highly competitive yet cartelized, where the most valuable inputs are up for grabs but unpaid.

Here's the opener from Drape's fine piece:
The black binders contained more than 700 pages and documented the misdeeds of the University of Kansas men’s and women’s basketball and football programs. Among the findings were payments to athletes and academic fraud. The report suggested remedies like self-imposed probation and a reduction in scholarships.

The investigation and the sanctions did not come from the National Collegiate Athletic Association. Instead, they were produced by a private law firm stocked with former N.C.A.A. investigators and hired by Lew Perkins a day after he became the Kansas athletic director in 2003.

Last October, the N.C.A.A. accepted most of the recommended sanctions and agreed not to impose a postseason ban on its teams. For two years of legal work, Kansas paid the law firm, Bond, Schoeneck & King, nearly $480,000. It was nothing, however, compared with the $23 million that the basketball and football programs generate annually.
Actually, the cost comes to about 1% of revenues on an annualized basis. While obviously worth the investment, it's just one illustration of the rent dissipation that is rampant in major college athletics. Drape reports that there are "15 to 20 hearings a year held by the N.C.A.A.’s Committee on Infractions," and law firms specializing in the business of pre-emptive investigation (like Bond, Schoeneck & King) attend every one. And I'd wager that most athletic departments now have a lawyer on staff. That's how the game is played these days.

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