Posted by John Vrooman on Wednesday, March 28, 2018 in NCAA Football.

Interview with Bloomberg News.

B10 revenue splits.

The B10 poverty cycle is the positive feedback loop from winning to talent to revenues to expenditures for the bottom 7 programs. The success cycle is the opposite talent revenue loop for the top 7 programs. This is the major problem in almost all sports where the rich teams get richer and the poor get poorer.

These causal talent-revenue circles polarize leagues into perennial dynasties and doormats. For example there are about 120 football programs in NCAA Division 1. NCAA D1 is currently being split into Power 5 conference haves and the Group of 5 have nots. In the near future the 60 or so Power 5 schools will completely break away from D1 FBS to form a Power 5 meta conference.

ESPN’s College Football Playoff check has become a critical link in the talent-revenue cycle creating the de facto breakaway of the Power 5 meta-division.

In a similar dynamic each of the Power 5 conferences (and Group of 5 for that matter) have systematically polarized into the top and bottom programs within the conferences in terms of talent, on-field production and revenues. The B10 can be arbitrarily but discretely split into the Power 7 an the Second 7 based on revenues, expenses, coach salaries, recruiting classes and ultimately, winning on the field between the lines. Those teams in the Power 7 are riding the almost automatic talent revenue cycle up while those in the Second 7 are trying to break out of the talent-revenue cycle spiraling down.

The Fighting Illini have at #11 have been trapped in the Second 7 for a long time. The spending gamble on Coach Lovie Smith and the $79 million Football Performance Center are obvious attempts to break the talent-revenue cycle and make the leap to the Power 7/8. In terms of public bond finance the implications are clearly that bond issues backed by Power 7 revenues are “money”,while bonds backed by Second 7 bond issues are risky business.

V

---

The decision to break the Big 10 poverty cycle was probably made when the Fighting Illini hired ex-NFL coach Lovie Smith in 2016.

My rule of thumb for reasonable head coach salaries is from 5 percent to 7 percent of Football Revenues. Coach Smith’s salary bubble of 9 percent hints at the underlying decision to break the cycle. (I use Lovie’s salary because it is the only reliable ratio available). I would not be surprised if the $80 million Center was not part of the original or follow-up negotiations with Lovie Smith.

It is also interesting to note that the current cost estimates of the $79 million Football Performance Center are about one-half of the original estimates of $140 million, which apparently also included now delayed stadium reno. The Performance Center is all about recruiting which is the link where the Illini are next fighting the B10 football poverty cycle. The immediate goal is to probably generate at least $50 million in football revenues (up from $32 million) which would bring the expenditures into line with football revenues. (Lovie Smith’s salary would drop to 6 percent of revenues.)

The economic efficiency of publicly financing the stadium debt is of course determined by the riskiness of the instrument being used, and B10 football is still risky business especially for the second 7.

V

---

---