c.2013 New York Times News Service
c.2013 New York Times News Service
Neither Rutgers University nor the University of Maryland has been considered a traditional football powerhouse. In the past decade, though, both have invested heavily in coaches and facilities in the hope of competing with the likes of Ohio State and Alabama. On the field, the outcomes have been mixed. Financially, the results have been dismal.
A year ago, the Rutgers athletic department’s deficit was nearly $28 million, bringing the hole it has dug since 2005 to $190 million. To offset the losses, student fees have been raised and state funds reallocated. Last summer, Maryland’s athletic department cut seven varsity sports in trying to patch a $21 million shortfall.
Both schools have hit upon the same solution to their athletic and fiscal troubles: Next summer, they will join the Big Ten, among the most storied conferences in college football.
To understand how Rutgers and Maryland — and college athletics in general — got to this point, you need to understand Jim Delany, the Big Ten’s 65-year-old commissioner, now in his 25th year on the job. It was the Big Ten, which will crown a football champion when Ohio State meets Michigan State on Saturday, that Forbes magazine recently proclaimed the “cash king” of college sports.
The conference generated $315 million in revenue in the fiscal year ended in June 2012, the most of any conference, and was expected to reward most of its member schools with a split of $25.7 million each the next year. The primary source of the money has been television — most of it coming from a lucrative contract that Delany negotiated with ESPN and from the conference’s own cable network, which Delany was mostly responsible for creating in 2007.
“Jim is a superstar,” said E. Gordon Gee, a former president of Ohio State, a Big Ten stalwart. “He knows the power of TV better than anyone.”
Delany was among the first to recognize the influence of cable, then satellite. His biggest coup has been the creation of the Big Ten Network, which is expected to produce $270 million of revenue in 2013 for the conference and its schools. And yet, for all of the TV money now in college sports, according to a recent Moody’s study, 90 percent of athletic departments at public schools require subsidies from their universities to meet their budgets.
Even as the TV ratings grow, the National Collegiate Athletic Association, college sports’ governing body, faces mounting litigation and questions about the core purpose of college athletics, most prominently: Who should benefit from all of the money that college sports generate? And why do most athletic departments still run at a deficit?
As Delany pushes the Big Ten into the New York and Washington metropolitan areas, he acknowledges the issues but says, “I’d rather have the problem of too much money than too little.”
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One morning in July, Delany hosted a breakfast in a ballroom at the Hilton Chicago for athletic directors and bowl executives. The Big Ten is affiliated with 16 bowls from coast to coast, and Delany, dressed in a dark suit, posed for photographs with a representative from each one, from the Rose Bowl to the Gator Bowl.
Delany navigated the crowd as the morning’s main attraction, schmoozing, shaking hands and making introductions. When his guests sat, he addressed them about the conference’s East Coast expansion.
“Our footprint is Colorado to the mid-Atlantic, Canada to the mid-South,” he said. “We wanted to have a national slate of bowls because we’re the closest thing to a national conference.”
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From 1953 until 1990, the Big Ten comprised 10 schools. In 1990, Delany’s second year, Penn State, previously independent, joined. Then, in 2010, Delany plucked the University of Nebraska from the Big 12, and schools have been jumping from one conference to another ever since.
After the Southeastern Conference expanded to include the University of Missouri and after the Atlantic Coast Conference added the University of Notre Dame (the school’s football program remained independent) and the University of Pittsburgh — both schools within the Big Ten’s geographic footprint — Delany concluded that the Big Ten was in danger of ceding strategic ground.
“We felt threatened,” he said.
Delany countered with the invitations to Rutgers, then of the Big East, and Maryland of the ACC. With their addition, the conference will cover roughly 30 percent of the country by population and more than 15 percent by geography. There are 4.7 million Big Ten alumni scattered nationwide, part of what Delany calls the Big Ten diaspora.
The strategy is about television. Delany does not expect New Yorkers to start following Rutgers football the way they follow the Giants or the Yankees, but the Big Ten alums spread throughout the New York region are likely to pay attention when Michigan and Ohio State show up. In essence, Delany has found a back door into two of the largest television markets in the country and a way to tap into that alumni diaspora.
The move is the latest play in a grand plan that has kept the Big Ten a step ahead of rival conferences for years. In 2006, Delany negotiated a 10-year, $1 billion agreement that gave ABC and ESPN, both owned by Disney, the right to broadcast Big Ten matchups.
In 2007, driven by Delany, the Big Ten Network was founded as a 20-year joint venture with Fox, which owns 51 percent. For the Big Ten, the original agreement was worth $2.8 billion over 20 years. The network is also set to earn $234 million in satellite and cable fees this year, according to media analysis firm SNL Kagan.
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The Big Ten Network, which is available on basic digital cable packages across the Midwest and usually as a premium channel outside it, showed 47 of the conference’s less-prized football games this season, as well as a slate of other sports ranging from basketball to swimming to wrestling. It is in 53 million homes.
During the negotiations to join the Big Ten, when Maryland’s president, Wallace Loh, expressed concern about the limited capacity of the school’s football stadium, Delany reassured him.
“He told me it’s no longer butts on seats,” Loh said, “but eyeballs on screens.”
Delany is not a businessman, neither in training nor in self-perception.
“That’s not why I went into college sports,” he said. “I see myself as a point guard, more about getting the right balls to the right players at the right time.”
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Delany grew up in South Orange, N.J., and earned a basketball scholarship to the University of North Carolina. Following two trips to the Final Four with legendary coach Dean Smith, he received a law degree from North Carolina and a plea from his father, a teacher and a coach, not to make a career out of sports.
But he did not stay away long, soon joining the NCAA’s enforcement division as an investigator. He was hired, at 30, to run the Ohio Valley Conference in 1979 — the same year ESPN was founded. And it was there that Delany had his epiphany about college athletics and television.
Delany persuaded the conference’s schools to play weekly basketball games at 11 p.m. Fridays so local TV stations would broadcast them live. Some doubted that viewers would watch, but the late-night series, known as “Friday Night Live,” became a hit. Eventually, ESPN bought the rights.
When he arrived at the Big Ten in 1989, the conference had annual revenue of around $20 million. In 1996, he struck a groundbreaking 10-year, $100 million contract with ESPN to televise almost every conference football game.
In 2004, with that contract nearing expiration, Delany flew to ESPN headquarters in Bristol, Conn. ESPN offered an inflation-based raise; Delany rejected it. He had long admired the success of the New York Yankees, who in 2002 figured out that rather than selling their broadcast rights to a network, they could make more money by creating their own. He started looking into creating a Big Ten network.
Even some of his colleagues thought that he was bluffing.
“I said to him, this is a brilliant strategy,” said Dave Brandon, the athletic director at Michigan and a former chief executive of Domino’s Pizza. “You’re going to head-fake ESPN into believing that you have an alternative.”
A month later, ESPN came back with a 50 percent bump on its initial proposal, but Delany rejected that offer, too.
“Most college presidents are happy to accept modest, steady growth,” he said. “I thought we could do better.”
Len DeLuca, a longtime television executive, said, “He’s got that Jersey lawyer mentality.”
In the end, Delany got the best of both worlds: a billion-dollar deal with ESPN for the Big Ten’s national slate of games and the Big Ten Network to cover everything else. When the two agreements were completed, Delany told Big Ten presidents that they had the fifth-highest TV revenue of any sports entity in the country — after the National Football League, Major League Baseball, the National Basketball Association and NASCAR. Other conferences have since surpassed it, but the Big Ten is expected to reset the bar with its next national deal, in 2017.
“Jim’s going to blow past them again,” DeLuca said. “He’s got the big product.”
Not everyone is convinced that the schools are coming out ahead. In fact, even in the Big Ten, athletic departments continue to produce average losses of around $10 million a year, according to the Moody’s report.
James Duderstadt, who was president at Michigan from 1988 to 1996, said he worried that the needs of the network had superseded the mission of higher education.
“Jim’s role in this is that he is responsible for the Big Ten Network,” he said. “The danger is that the presidents have not challenged that it decouples from the longstanding academic relationships and could destroy something of great value.”
While tuition at schools in the Big Ten and around the country has grown, most athletic department budgets remain separate from central administration. The influx in cash goes mostly to cover stadium improvements, new training facilities and rising salaries for coaches. In many states, coaches are now the highest-paid state employees. Delany made nearly $3 million in 2011.
“The hypocrisy is that money that’s generated makes a few people very, very rich,” Duderstadt said. “Athletic directors, coaches, assistant coaches, commissioners, too. But institutions are not winning, and student-athletes get very little.”
Delany counters that those TV revenues paid for athletic scholarships worth $150 million last year in the Big Ten. Others question the value of scholarships for big-time football and basketball players, considering that the graduation rate for football players is 58 percent, and for basketball players, 47 percent; many also argue that these athletes should be paid, in light of the huge revenue they generate.
“I’m not ashamed of anything I’ve done,” Delany said. “The access to higher education is more important than ever. I know some people don’t view it as a fair deal, but I personally feel like it is a fair deal.”
In February, Delany told the Big Ten trustees they could see payouts for schools reach $40 million after the new national TV deal in 2017. According to some estimates, Maryland could receive $100 million more over the next six years than it would have from the ACC. The move stands to be an even bigger boon for Rutgers.
“It’s a coup,” said Tim Pernetti, the former Rutgers athletic director, who negotiated the Rutgers move to the Big Ten. “No one did better in conference realignment than Rutgers.”
But the school has been doubling down on athletics for years — and it’s far from clear that trying to go big time has paid off. It certainly didn’t pay off for Pernetti.
In just one of a string of recent high-profile scandals across college sports, Rutgers fired its men’s basketball coach, Mike Rice, after a video surfaced of him physically and verbally abusing players at practice. Pernetti was later forced to step down. He was replaced by Julie Hermann, who was then accused of using abusive language herself when she was a volleyball coach at the University of Tennessee. Hermann denied that she had engaged in abusive behavior, and Rutgers has defended her hiring, saying she is the right person for the job.
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Few expect the pressures to compete at Rutgers to lessen now that it’s joining the Big Ten. Ohio State’s athletic department spent $124 million in 2012, while Rutgers spent $64 million.
“We’re supposed to compete with Ohio State?” asked Mark Killingsworth, a Rutgers economics professor.
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As Delany negotiates new subscription rates for the Big Ten Network, Hermann knows her objective.
“We have to make our contribution to the Big Ten,” she said, “and get cable companies to pay for the Big Ten Network out here.”