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

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

How The Corinthia Hotel Lisbon Became Extraordinairly Energy Efficient
In an interview with Pedro Ferreira, engineer at Corinthia Hotel Lisbon, we discussed the hotel’s efforts to become more and more energy efficient—and why—resulting in the property being awarded the Western Europe...
 
 
Consumers Hunt For Easter Bargains
Easter weekend is time to celebrate a religious holiday, spend time with family and friends and welcome the upcoming spring weather. Consumers look forward to shedding winter coats, planting flowers and riding bikes in...
 
 
Social Intrapreneurism: How Business Innovators Are Helping To Build A More Sustainable World
In a joint interview with Professor David Grayson, Melody McLaren, and Heiko Spitzeck, we discussed their new book, Social Intrapreneurism and All That Jazz: How Business Innovators are Helping to Build a More...
 
 
How To Repeat Your Initial Success: Coming Up With An Encore
Some 30 years ago, I began work on my first  book: Sweat Equity which profiled America’s best entrepreneurs. Even though the book is long out of print (so this is as far from a plug as possible), I thought it would be...
 
 
 

Latest from the Network

Miley Cyrus postponed Bangers tour until August
Miley Cyrus has postponed her 'Bangerz' tour until August. The 'Wrecking Ball' hitmaker has been forced to reschedule the remaining US dates of her tour after suffering from a severe allergic reaction to antibiotics...
Read more on Celebrity Balla
 
Hearthstone vs. Rollercoaster Tycoon 4: The Battle For The Soul Of Mobile Games
It’s been an interesting month for mobile games, one that I believe clearly illustrates a split for the scene with the release of two high profile games, Blizzard’s Hearthstone and Atari’s RollerCoaster Tycoon 4....
Read more on Apple Balla
 
Emails Reveal What Samsung Planned After Steve Jobs’ Death
Back in October of 2011, Tim Cook announced that they were going to release the iPhone 4s as well as the iPhone 5, with preorders starting the next week. Samsung had a meeting over what they could do about this, in an...
Read more on Apple Balla
 
Yahoo Wants Apple To Switch For iOS Searches
Apple devices have used Google search engine results for a long time now, but that might be changing if other forces have their way. Re/code is now reporting that the CEO of Yahoo, Marissa Mayer, would like to convince...
Read more on Apple Balla
 
Experts Encouraging Investments In Apple Stock
According to an Analyst at Morgan Stanley, Apple’s stock isn’t seen as a risk at the moment and if anyone is still trying to make up their mind about buying in, this is the time.During research and development phases at...
Read more on Apple Balla
 
How The Corinthia Hotel Lisbon Became Extraordinairly Energy Efficient
In an interview with Pedro Ferreira, engineer at Corinthia Hotel Lisbon, we discussed the hotel’s efforts to become more and more energy efficient—and why—resulting in the property being awarded the Western Europe...
Read more on Business Balla
 
Consumers Hunt For Easter Bargains
Easter weekend is time to celebrate a religious holiday, spend time with family and friends and welcome the upcoming spring weather. Consumers look forward to shedding winter coats, planting flowers and riding bikes in...
Read more on Business Balla
 
Social Intrapreneurism: How Business Innovators Are Helping To Build A More Sustainable World
In a joint interview with Professor David Grayson, Melody McLaren, and Heiko Spitzeck, we discussed their new book, Social Intrapreneurism and All That Jazz: How Business Innovators are Helping to Build a More...
Read more on Business Balla
 
How To Repeat Your Initial Success: Coming Up With An Encore
Some 30 years ago, I began work on my first  book: Sweat Equity which profiled America’s best entrepreneurs. Even though the book is long out of print (so this is as far from a plug as possible), I thought it would be...
Read more on Business Balla
 
Onsite Generation: Can Utilities Rethink Their Business Proposition?
Can utilities adapt to emerging innovations that allow customers to “bypass” their services? Or, will power companies become the modern-day dinosaur? The trend is toward more independent customers who are able to...
Read more on Business Balla
 
 
Auto Balla Sexy Balla Sport Balla TV Balla Politics Balla Movie Balla Apple Balla Business Balla Ad Balla Celebrity Balla