Do The Economics Of Bowl Games Make Sense For Schools, Sponsors?

Jan 1 2014, 2:23pm CST | by

Do The Economics Of Bowl Games Make Sense For Schools, Sponsors?
Photo Credit: Forbes Business

It’s January 1st, and thus, we have the obligatory onslaught of college football bowl games.

Six to be exact.  Among them, the TaxSlayer.com Gator Bowl, the Heart of Dallas Bowl, the Capital One Bowl, the Outback Bowl, the Tostitos Fiesta Bowl, and last but not least, the granddaddy of them all…The Rose Bowl presented by Vizio.

Throughout the last week, folks from Bloomberg, CNBC, and Aljazeera America have asked me three general questions:

1) Why so many bowl games?

2) Do schools really benefit?

3) Do corporations that splash their names on these games really benefit?

As to the first question, there are 35 bowl games.  That’s a lot of clutter, and of course only one game during the BCS era really has had any significance in settling the national championship.

But the reason for all these games is quite simple.  Someone is able to make enough money to justify producing and operating the game.

That somebody could be one or two executives that run the event (i.e. who do all the marketing, media, sponsorships, etc), or it could be a network like ESPN that runs/operates several of the games so that they can have programming content during the holidays.  Sure, the Gildan New Mexico Bowl may not sound sexy…but it still gets ratings because people like to gamble and/or people get bored and/or people need an escape from their families during tense holiday reunions.

Bowl game execs earn between $200 K to $1 million for running a single game annually.  And if you get local special interest groups to support your endeavor if they believe tourism will be boosted, yet another justification for bringing a game to town.

Of course, you have to raise sponsor dollars, and you have to get participating schools to commit to buying a certain number of tickets.  Without these, the game may not survive…unless subsidized by a media outlet or local special interest group for tourism purposes.

As to the second question, how much a school benefits depends upon which type of benefits you are talking about.  Financially, most bowl game payouts range between $400 K and $1 million, with a few non-BCS yet marquee games (Cotton, Chick-Fil-A) paying $3-4 million to participating conferences, and then of course $18 million for the BCS games and $22 million per participating conference for the championship game.

But it is well documented (here is but one source) that each year at least 10 and perhaps as many as 20 schools lose money after subtracting travel expenses and mandatory ticket purchases.  Plus they only receive a share of the total bowl payout since the payout goes to the conference.

Rather, these games can serve as great marketing tools for the programs and the universities at large.  In the case of Michigan State in today’s Rose Bowl, this is great exposure for a program that has not been in a Rose Bowl since 1988.  It will certainly impress potential recruits, and it serves as a great marketing platform for the institution.

But some schools hurt their cause.  I previously wrote that I felt Fresno State and USC both did a disservice to their brand in this year’s Royal Purple Las Vegas Bowl.  Fresno with their poor play, and USC with their unsportsmanlike conduct for a school still trying to rehabilitate the reputation of their program./>/>

Ultimately, the spike in visibility and marketability is greater for either small schools who have break-out years (like Northern Illinois did 2 years ago, and like Boise State did when they beat Oklahoma in the Tostitos Fiesta Bowl a few years back) or large schools who haven’t been to the big show in a long time (like Michigan State this year at the Rose Bowl).

As for the final question, most corporations must commit to 3-year sponsorships and spend between $300 K to $15-20 M annually to sponsor bowl games.  Is it worth it?  Well, there is some evidence (linked here) that the BCS games generated millions worth of sponsorship and advertising value.  But that’s just the BCS games.

For 50-70% of these games, I would seriously question how much sponsorship and ad value is generated there.  And ultimately, do these sponsorships boost awareness, intent to buy, and actual sales?  Only the companies know this, and often times this is information that simply won’t share.

But again, given that ratings for even the lesser bowl games are still higher than most live TV events, and given that sometimes these sponsorships are motivated by a company wanting to expand its geographic exposure in the region of the host city, you can understand why companies are still tempted to lock into sponsorships.

=================

Patrick is an Economics Professor at the George Herbert Walker School of Business and Technology at Webster University in St Louis, MO, and the Founder/Director of Sportsimpacts.  Follow him on Twitter.

Source: Forbes Business

 
 

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