Thursday, August 21, 2008

Stoops a financial savior for OU

By Jake Trotter

August 21, 2008

NORMAN — Upon his arrival to Oklahoma's athletic director post, Joe Castiglione found a mess.

"I had never been involved with a department that had lost money, in my entire career,” he said. "It was foreign to me.”

But that was the scenario in May 1998.

Because he wasn't there, Castiglione can't explain how or why, but the OU athletic department had accrued an estimated $15 million in debt following years of athletic budgets that fell in the red.

Something had to change.

"It was kind of like turning a battleship,” Castiglione said. "You can't wheel it around quickly.”

Today, OU is among just a handful of institutions that not only balance their budgets, but turn windfall profits that go into academic endeavors.

The department's $15 million debt has been paid down to $4.2 million.

And in just a decade, the OU athletic department's budget has ballooned from $26.5 million to $70.8 million and the school has added women's soccer and rowing.

None of that includes the more than $120 million that was raised to renovate Memorial Stadium, including construction of the east side's upper deck.

Or the endless increases in other capital improvements, alumni giving and admissions applications.

How did this all happen?

"We can tie everything back to Bob Stoops,” Castiglione said. "The success of our football program has been like the high tide in the harbor that has raised all of the boats.”

Turning the tide

In 1998, the Sooner football team finished with a fifth consecutive non-winning season.

And the athletic department budget was in the dumps. Football was not generating enough revenue to cover the rest of the athletic department.

The result was a $15 million debt, which was substantial considering the overall operating budget hovered around $25 million

The school was only reeling in about $700,000 in advertising and sponsorships, and just $300,000 in trademarks and licensing, according to executive associate athletic director Larry Naifeh.

Castiglione's first move was to balance the budget. He decided to cut 25 positions that had come open through retirement or departure, which put a strain on the other 85-plus employees in the department.

"Tough calls were made,” he said. "But one way or another, we were going to balance the budget.”

Castiglione's next and most crucial move was hiring a football coach who could not only produce wins, but revenue streams, too.

In December 1998, Stoops was hired, tasked with resurrecting a football program that had been dormant for more than a decade.

In Stoops' first year, OU went 7-5 and reached the Independence Bowl.

Said Castiglione, "We showed a lot of promise that first year.”

Months before the 2000 season, Sooner officials scheduled the public kickoff of a $100 million capital projects campaign for Oct. 27, the weekend of the Nebraska game.

Castiglione said he was questioned as to why he didn't schedule the campaign kickoff around a game the Sooners could win.

But in the end, the timing proved to be perfect.

In its two previous games, OU had beaten Texas, 63-14, and No. 2 Kansas State on the road.

The day after the campaign was announced, OU hammered Nebraska 31-14 to assume the No. 1 ranking on the way to the school's seventh national championship.

The campaign had a three-year goal, but raised the $100 million in less than two years.

In all, the campaign raised more than $120 million, which led to construction of the east side's upper deck and suites and building of an indoor practice facility, the Everest Indoor Training Center.

"The success of that season proved to be a great catalyst for the completion of that campaign,” Castiglione said.

But the capital campaign didn't factor into the annual athletic budget. Nor did the dollars earned from appearing in a BCS bowl — that money was divided among the Big 12 schools as part of the conference's bowl revenue sharing agreement.

The national title didn't help with ticket sales, either, because the stadium had already been sold out.

"People were already buying all the tickets we had,” Castiglione said. "Let's not be naïve, there were ticket price increase. But we weren't going to get into price gauging.”

Still, the national title helped raise the value of a ticket.

In addition to raising its ticket pricing, the athletic department was able to reorganize its season-ticket pricing. In the past, season-ticket holders were given roughly a 35 percent discount on each ticket's face value.

OU was able to eventually lower that to between 10 and 12 percent.

OU also increased the giving categories of season-ticket holders, though about two-thirds of the stadium's seats still require no contribution.

That next year, the athletic department revenues shot up from $27.5 million to $38.1 million.

Ever since, the athletic budget has grown by average of $5.2 million a year and has turned a profit in every year.

In 2007-08, the budget was at a record $69.4 million. Football brought in $30.5 million in direct revenues, mostly from ticket sales, while contributing only $15.2 million in expenses.

But that only tells half the story.

Football has the heaviest hand in OU's other revenue streams, such as conference revenue distribution from bowl appearances, advertising and sponsorship dollars, licensing and trademark dollars, concession and program sales and alumni contributions — none of which are treated as football revenues in the budget.

Since Stoops' arrival, advertising and sponsorship revenues have increased from $700,000 to $7 million. Licensing and trademark revenues have gone from $300,000 to $3.2 million.

The athletic department has also been able to raise an additional $65 million in capital donations that has gone to other projects, like construction of indoor facilities for baseball and softball.

And the $15 million debt has been paid down to $4.2 million. The loan is expected to be repaid in full by 2012.

"The football program obviously ushered in enormous interest,” Castiglione said. "It reinforced people's faith in athletics.”

OU's athletic budgetary turnaround is even more impressive when put in context.

Prior to 2004, the NCAA commissioned Dan Fulks, an accounting professor at Transylvania (Ky.) University, to analyze the budgets of 313 athletic departments over a three-year span.

Unlike those done in the past, Fulks' report ignored allocated revenues (student fees, institutional support and government support) and focused on revenues directly generated by athletics (ticket sales and alumni contributions).

The study produced startling results.

Of 119 Football Bowl Subdivision schools, only 19 operated in the black in 2006 without allocated revenues.

The rest spent more than they earned by an average of almost $7.3 million.

"The schools that are making money are schools like Oklahoma that put 80,000-100,000 in the stands for every football game,” Fulks said. "Football is what pulls the train.”

This season, Stoops will receive a $3 million bonus from the university for having remained at OU for 10 years. That's on top of $2.77 million he'll receive in guaranteed compensation this year.

High coaching salaries like Stoops' have drawn criticism in the past.

Fulks' report, however, suggests that having a winning, revenue-generating football program prevents the institution, the state or the students from having to pay for athletics.

"He is worth every penny he earns,” Castiglione said.

Only $220,000 of Stoops' annual salary comes directly from the university. The rest Stoops makes from supplemental compensation coming from endorsements and appearances.

"The vast majority of his compensation package comes from sources we wouldn't have without the level of success of the football program,” Castiglione said. "The endorsements, the radio and television, the events that he attends. Those things are successful because the football program under his leadership continues to be successful.”

Giving back

While interviewing for a dean's position at Boston College, Fulks asked the school's president how diverse the student body was on campus.

"That depends,” the president told Fulks.

Pre-Flutie, he said, 80 percent of the students were from the eastern seaboard. Post-Flutie, only 50 percent.

In 1984, Boston College quarterback Doug Flutie won the Heisman Trophy, which increased the university's visibility outside New England.

"The Flutie Effect is very real,” Fulks said. "The visibility of a football program has non-financial benefits.”

OU president David Boren said Stoops and his winning football teams have had profound effects on the university's academic side.

"The national attention given to our football program brings many outside visitors to our campus where they become much more aware of our academic strengths,” Boren said.

"During televised football games we are also given an opportunity to provide a message outlining the strengths of our university including our academic excellence.”

Other effects are more financially tangible.

Two dollars from every Sooner football ticket purchased go toward academic endeavors. The OU athletic department also contributes an annual $1 million endowment to the university library.

Boren also believes that the success of the football team has contributed to an uptick in admissions applications and alumni giving to the non-athletic sides of the university.

"It is very difficult to exactly quantify coach Stoops' financial impact,” said Boren, who estimates that Stoops has made at least a $40 million impact to the university's non-athletic side. "An outstanding athletics program does attract students and tends to increase applications for admissions. The pride generated by athletic success does encourage private giving to the university. Much of the additional private giving results from visiting other parts of the university when friends and graduates come back to attend football games.

"Bob Stoops has had a very healthy impact on the high standards of the university in all areas. There is no doubt that he has helped to create a very positive image for the University of Oklahoma all across the nation.”

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