Wednesday, October 26, 2016
(Photo: Jeffrey Becker, USA TODAY Sports)
By Brent Schrotenboer and Steve Berkowitz
October 26, 2016
On a warm, sunny day last month at the University of Iowa, head football coach Kirk Ferentz wore a white shirt and gold-striped tie to a special announcement about his future. He had just signed the deal of a lifetime — the biggest contract of his life, with enough guarantees to make him a rich man well into his retirement, win or lose.
The new contract included several generous provisions:
► Even if he’s fired after this season for not winning enough games, the 61-year-old Ferentz would be owed more than $25 million, payable in monthly installments until 2026.
► He’s guaranteed an additional $22 million from 2021 through 2025 if he sticks around and wins at least seven games each season through 2020. It wouldn’t matter if he’s dismissed in 2021 after finishing 0-12.
► If that’s not enough, those guarantees wouldn’t even be reduced if Iowa fired him and he took a lucrative new job somewhere else.
“I certainly appreciate the trust and confidence demonstrated by athletic director Gary Barta,” said Ferentz, who also thanked Iowa president Bruce Harreld.
Less than two months later, Iowa has lost three consecutive home games, adding more buzz to a popular question about contract guarantees for college coaches: Why?
Why did Iowa make Ferentz almost too expensive to fire after averaging about seven wins per season during his previous 17 years in Iowa City?
And why are schools, including Iowa, increasingly willing to provide gold-plated parachutes for coaches in an industry where their success is never guaranteed?
Harreld, the top decision-maker on Ferentz’s contract, declined comment. But the simple answer is leverage. Buoyed by rising revenues in college sports, college football coaches are getting paid more than ever, with at least 36 earning at least $3 million this year, up from nine in 2011 and one in 2006 — the first year USA TODAY Sports conducted the head coaches salary survey. They also have more bargaining power than ever and are using it to guarantee their pay at unprecedented levels to match.
From the schools’ viewpoint, that means the potential price of failure has skyrocketed, according to a USA TODAY Sports analysis of hundreds of coaches’ contracts obtained over several years.
Ferentz is one of at least seven football coaches who would be owed at least $20 million in guaranteed money if he were fired on Dec. 1 for losing too many games — a list led by Florida State’s Jimbo Fisher, whose buyout this year would be a little more than $33 million. In 2011, there were 15 coaches with guaranteed buyouts of at least $8 million. This year, at least 33 are guaranteed that much — well more than half of the 53 publicly available coaches contracts in the Power Five conferences.
The bargaining table
The buyout boom isn’t just caused by the rising pay market, experts say. In some cases, schools appear to be getting out-leveraged in contract negotiations by coaches and their agents, perhaps because multi-year contract signings are usually sunshiny occasions. With so much optimism in the air at the time, schools might not be considering the dark possibility that the honeymoon might not last.
“There’s such tremendous pressure to generate revenues and win that basically these universities are sort of bending over contractually to get these coaches in the door,” said Martin Greenberg, a Milwaukee-based sports attorney who has represented several coaches in contract negotiations. “Euphoria sometimes overtakes objectivity and intelligence.”
There generally are two types of firings in college sports:
► Those fired for legal cause, such as breaking the law or major NCAA rules. In these cases, coaches generally aren’t entitled to additional guaranteed money.
► Those fired for losing too many games — which almost always entitles coaches to additional guaranteed money from schools according to their contracts. This is the most common type of firing (17 of 33 coaching changes since the start of the 2015 season), and the terms of divorce are usually set before marriage or renewed vows during contract negotiations, as they were with Ferentz’s guarantees.
“We’re going to call that a sweetheart deal” for Ferentz, Greenberg said.
Many others could be described the same way, and arguably for good reason: Coaches are helping drive those rising revenues. With contract guarantees, coaches also taking what they can get from the market and ensuring themselves some stability in an otherwise turbulent profession.
Consider Texas, where many are speculating about the future of Charlie Strong, whose record in three seasons is 14-18. If he’s fired in December, Strong would be owed more than $11 million. By contrast, Strong’s predecessor at Texas, Mack Brown, never had a potential buyout larger than $3.5 million from 1998 until his resignation in 2013.
Coaches these days “are in the driver’s seat,” Stanford economist Roger Noll told USA TODAY Sports.
On the other side of the bargaining table, schools are taking on even more risk with these contracts — at least until they decide they can’t. Just ask Kansas, which recently bucked the big buyout trend after getting snake-bit by it several times.
Learning the hard way
It started in 2001, when Kansas fired coach Terry Allen with one year left on his contract at an annual salary of $320,000.
Since then, the Jayhawks have paid three coaches not to coach.
► In 2009, one year after Kansas' last winning season, coach Mark Mangino received a $3 million settlement from KU after quitting amid allegations that he mistreated players. The settlement helped KU avoid a fight for the $6.6 million Mangino would have been owed if he were fired without legal cause.
► Coach Turner Gill succeeded him and went 5-19 in two seasons before KU fired him in 2011 and bought out the remaining $6 million left on his contract.
► KU then turned to Charlie Weis, the industry legend for making a living off of getting fired. Before KU, Notre Dame terminated Weis after a 6-6 season in 2009 and subsequently paid him more than $16 million to settle his contract, with a final payment remaining at the end of 2015.
At KU, Weis did it again. He compiled a 6-22 record before getting fired in 2014 with more than $5.4 million still owed to him in monthly installments, the last of which is due in December.
To replace Weis, KU hired David Beaty and this time drastically changed the buyout provisions in the school’s favor.
If he’s fired for losing, Beaty’s buyout is to be no larger than two years’ pay ($1.6 million total), according to his contract. He also would be required to seek “similar or related employment” and reduce his buyout from Kansas by the amount of pay he receives at his new job — a contract provision that is common in college football but also negotiable.
Beaty’s record at KU so far is 1-18.
Kansas officials declined comment on the contract through a spokesman.
But there’s still a tradeoff for the Jayhawks, no matter how sensible Beaty’s contract might seem for them. Such deals won’t attract the kind of big-splash hire they might have wanted instead — the kind that Michigan got in late 2014.
Star coaches in demand
With $9 million owed him this year, Michigan coach Jim Harbaugh is the highest paid coach in the 2016 USA TODAY Sports survey of publicly available contracts. He’s at the top, in large part, because he has huge leverage, an example of why schools fawn over star coaches and give them much of what they ask for during contract negotiations.
All schools want a coach like him — somebody who can turn a flat brand name into a shiny national power practically overnight.
“There are lots of coaches, but not all are able to win and generate money,” said Greenberg, who has written about coaches’ buyouts for the Marquette Sports Law Review. “That’s where the leverage is.”
Before Harbaugh, Michigan had sagged to a 5-7 season under Brady Hoke, who was owed $3 million for his termination in 2014.
After hiring Harbaugh, Michigan’s football team has become an undefeated, top-two program and likely an even bigger cash cow after contributing $88 million of the athletic department’s $152 million revenues in the fiscal year ending in June 2015.
The problem for schools is that there’s a very limited supply of coaches of this caliber.
“Part of what is going on is the iron law that only 25 schools can rank in the top 25,” said Noll, the Stanford economist. Yet there are 128 teams in major college football. About 20 coaches are capable of being consistently in the top 25, Noll estimated, with about 50 to 75 programs able to generate enough revenue to be among the bidders for one of these coaches.
So the bidding increases, bringing the rest of the market up with them as each school chases more wins and more revenue with more spending.
“Coaches are better positioned in today’s market to negotiate guaranteed deals,” attorneys Russ Campbell and Patrick Strong said in a statement to USA TODAY Sports. They would know. Their firm, Balch Sports, has negotiated more than $350 million in coaching contracts since 2007.
The agent factor
No other major college head football coaches have been at the same schools longer than Ferentz and Oklahoma’s Bob Stoops, both of whom were hired at their respective schools in late 1998.
The two happen to be friends and share the same agent: Neil Cornrich, who is based in suburban Cleveland.
They also have two of the top buyouts in the nation at about $25 million each, a byproduct of their recent success and the stability they’ve brought to their programs.
Cornrich declined to comment on contract negotiations but made a case for why the relatively long tenures of Ferentz and Stoops have added value to their schools.
“It’s important to understand the continuity, stability, and branding that they have provided,” Cornrich told USA TODAY Sports. “People have grown up with Bob Stoops and Kirk Ferentz being the only coaches at their respective institutions for their entire lives. That creates substantial additional value, especially when both coaches have been so successful, on and off the field.”
He noted that “coaches are the people who are producing the revenue” and their compensation reflects “the value being added and the very few people who can consistently add that value.”
Ferentz’s new contract this year comes on the heels of a 12-2 season last year, after finishing 19-19 the previous three years.
If Iowa had insisted that Ferentz’s buyout provisions be less generous, it’s hard to say what Ferentz would have done instead, though he has been mentioned for other jobs in previous years. Unlike at many other universities, the board of regents that oversees the University of Iowa does not review or approve coaching contracts as a matter of policy. Some say such oversight is necessary because these contracts involve such huge financial commitments.
“This might be a very good wakeup call to the board to be more proactive to ensure they can exercise their fiduciary responsibilities in a more robust way,” said Michael Poliakoff, president of the American Council of Trustees and Alumni (ACTA), a nonprofit committed to accountability in higher education.
The Board of Regents for the State of Iowa delegates this oversight at Iowa to President Harreld, who was hired last year.
“Even if the board delegates it authority, it can’t delegate its responsibilities,” said Armand Alacbay, ACTA’s vice president of trustee & legislative affairs. “It does so at its own peril.”
Ferentz and Iowa athletic director Barta declined comment to USA TODAY Sports through a spokesman.
Whatever happens, rising revenues still might be able to cover much of Iowa’s rising costs, even if a hefty buyout is in order. Iowa’s Big Ten Conference distributed roughly $34.6 million to each of its 11 longest-standing members during the fiscal year ending in June 2016 and is projected to distribute more than $38 million in 2016-17.
That’s expected to go up even more with a new television deal with Fox and ESPN.
“If you don’t have a buyout in a contract,” Barta told reporters last month, “it’s not a long-term contract.”