clock menu more-arrow no yes

Filed under:

Maryland is making less money than most of its peers in the Big Ten

New, 59 comments

The Big Ten's biggest cash cow is football, and Maryland lags behind in that sport.

Mitch Stringer-USA TODAY Sports

In part one of our look at the financial impact of the move to the Big Ten on Maryland athletics, we showed how the move resulted in a revenue increase of more than 25 percent for the Maryland athletic department.

We also saw that Maryland's AD experienced a significant increase in its expenses as well. Even in isolation, this is interesting information for many supporters and fans. However, Maryland needs to compete with 13 other institutions both on and off the field, so some context seems warranted.

In their first year, Terrapin teams fared surprisingly well, winning five conference championships and three tournament championships. The Terps dominated sports where coming from the ACC provided a native advantage. Those sports include field hockey, lacrosse and women's basketball. The Terps struggled in sports like volleyball and wrestling, where the B1G held its natural advantage. Other sports were something of a mixed bag.

An accounting joke

Before we delve into the numbers, I'm going to relate one of my favorite accounting jokes. (Yes, there really are such things.)

The president of a large and successful company found himself in need of hiring a new Chief Financial Officer. A thorough search had narrowed the pool to three candidates and the president scheduled private interviews with each of them. When the first candidate came into his meeting, the president surprised him by talking about everything but financial matters.

As the interview came to a close, the president said, "I have a mathematical question for you and you need to answer it without using a calculator. How much is two plus two?"

Somewhat abashed, the candidate answered. "Four." The president shook his hand and promised a decision within a day or so.

He then repeated the process with the second candidate asking the same question and receiving the same response at the interview's close. When the president asked the third candidate, "How much is two plus two," she looked carefully around the room, rose from her chair, leaned across the president's desk and gestured for him to do the same. Bringing her mouth close to his ear she whispered, "How much would you like it to be?"

I tell this joke to emphasize that accounting is not always cut and dried. Accountants can make decisions and develop policies that might reach different conclusions even from identical starting points. In this instance, not only will the number of athletic teams each school fields differ but each institution likely has its own set of accounting policies and methodologies all of which could legitimately fall within the scope of Generally Accepted Accounting Principles.

Please keep that in mind as you consider these comparisons. Not only are we comparing different schools with different numbers of athletic teams but we really don't know how each institution calculated these financial statements. One accountant's write-off might just be another's depreciable asset.

Total Revenue

Let's get to it. In part one, we reported a revenue jump from $68 million in 2014 to $86 million in 2015. That's a significant leap for Maryland athletics. But where, exactly, does that stack up in the B1G?


REVENUE

Ohio State

$170,903,135

Michigan

$132,336,025

Penn State

$127,930,142

Wisconsin

$125,790,567

Iowa

$107,404,210

Minnesota

$105,561,601

Nebraska

$103,763,277

Michigan State

$93,878,291

Indiana

$87,265,729

Maryland

$86,863,794

Purdue

$75,474,370

Illinois

$74,469,976

Northwestern

$70,028,074

Rutgers

$65,125,833

TOTAL CONFERENCE

$1,426,795,024

Suddenly, that shiny $86 million appears a bit tarnished. We can see that in spite of the huge increase in revenue, Maryland still finished tenth in the conference. Had the Terps maintained their 2014 revenue, only Rutgers would have had less revenue than Maryland. (I included the conference total so you can calculate that Maryland lies approximately $15 million below the conference mean and because $1.4 billion is a really big number.)

Let's break it down a bit further to see the sources of the money:

REVENUE

Football

Men's BB

Other Men's

Women's BB

Other Women's

Non-Allocated

TOTAL

Ohio State

$83,547,428

$24,060,718

$4,218,761

$1,003,869

$1,938,256

$56,134,103

$170,903,135

Michigan

$88,251,525

$14,192,368

$3,957,870

$287,106

$1,216,024

$24,431,132

$132,336,025

Penn State

$71,305,219

$11,326,195

$8,918,101

$857,786

$7,070,667

$28,452,174

$127,930,142

Wisconsin

$44,797,138

$21,309,114

$7,354,588

$1,638,185

$4,824,797

$45,866,745

$125,790,567

Iowa

$52,354,781

$8,982,803

$3,023,775

$1,388,859

$981,439

$40,672,553

$107,404,210

Minnesota

$35,772,983

$12,890,066

$7,936,880

$771,931

$1,799,249

$46,390,492

$105,561,601

Nebraska

$60,621,628

$8,853,129

$1,997,091

$1,478,031

$3,864,308

$26,949,090

$103,763,277

Michigan State

$59,227,831

$17,836,717

$3,611,176

$716,605

$2,056,911

$10,429,051

$93,878,291

Indiana

$27,508,477

$24,015,117

$693,840

$201,266

$400,981

$34,446,048

$87,265,729

Maryland

$30,891,641

$16,720,500

$2,653,668

$1,033,076

$4,399,531

$31,165,378

$86,863,794

Purdue

$17,073,335

$9,869,091

$1,077,952

$666,974

$3,280,272

$43,506,746

$75,474,370

Illinois

$30,819,615

$17,823,570

$2,345,758

$584,398

$2,106,336

$20,790,299

$74,469,976

Northwestern

$31,664,655

$15,053,433

$1,115,731

$122,759

$1,121,028

$20,950,468

$70,028,074

Rutgers

$26,903,695

$5,790,981

$5,534,119

$4,166,123

$10,427,059

$12,303,856

$65,125,833

TOTAL FOR CONFERENCE

$660,739,951

$208,723,802

$54,439,310

$14,916,968

$45,486,858

$442,488,135

$1,426,795,024

Thus, by percentage, football provides 46.3 percent of the conference's total revenue. Think about that for just a moment. The revenue from every other sport at every other school plus the "unallocated" amounts together account for just a bit more than half the total revenue of the B1G.

Within the conference the range is a high of 66.69 percent (Michigan) to a low of 22.62 percent (Purdue). Maryland lies toward the low end of that scale with its football program churning out 35.5 percent of the AD revenue. If Maryland can grow its football revenue to the conference mean of 44.9 percent, even with no other growth from any source, Maryland's AD would move very close to that $100 million dollar plateau.

With respect to men's basketball, Maryland is in the middle third of the conference with the sixth best total of gross dollars. However, only at Northwestern (21.5 percent), Illinois (23.93 percent) and Indiana (27.52 percent) does basketball contribute a higher percentage of total AD revenue than the 19.25 percent it generates at Maryland.

Women's sports in the aggregate contribute a higher percentage of total revenue (6.25%) at Maryland than at any other B1G institution except Rutgers. The range runs from 0.69 percent at Indiana to Maryland's 6.25 percent with a mean (excluding Rutgers) of 3.75 percent. Somehow, Rutgers women's revenue comes in at 22.41 percent. (See what I mean about accounting and accounting?)

Total Expenses

So, we've situated Maryland tenth in the B1G with respect to revenue. Although it is somewhat less important, we'll look at where Maryland falls with respect to expenses. In this case, expenses relative to revenue is much more important than the raw dollar value of expenses. If, for example, Rutgers had incurred Maryland's $84 million AD bill, they'd be in deep voodoo with only $65 million in revenue. With that caveat, here are the total numbers:


EXPENSES

Ohio State

$136,966,818

Michigan

$131,003,957

Wisconsin

$122,975,876

Penn State

$117,818,050

Minnesota

$105,561,601

Nebraska

$99,125,587

Iowa

$90,436,883

Michigan State

$89,491,630

Maryland

$84,134,516

Indiana

$81,161,423

Illinois

$74,469,976

Northwestern

$70,028,074

Purdue

$66,164,834

Rutgers

$65,125,833

TOTAL CONFERENCE

$1,334,465,058

Maryland fares a bit better with respect to expenses with the ninth highest total among all B1G schools. To save you the trouble of scanning back up the page and breaking out your calculators, the next table shows the net income reported by each institution.


NET REVENUE

Ohio State

$33,936,317

Iowa

$16,967,327

Penn State

$10,112,092

Purdue

$9,309,536

Indiana

$6,104,306

Nebraska

$4,637,690

Michigan State

$4,386,661

Wisconsin

$2,814,691

Maryland

$2,729,278

Michigan

$1,332,068

Illinois

$0

Minnesota

$0

Northwestern

$0

Rutgers

$0

TOTAL CONFERENCE

$92,329,966

Again, the Terps find themselves entrenched in the ninth spot in the conference. I will leave it to your imaginations to consider the manner in which four schools managed to perfectly balance their revenue and expenses.

As we did with revenue, we'll break down expenses into the same categorical sets used in the EADA Report. This table, when compared to the revenue table above, will reveal some interesting facts. You will see that where Michigan tops the list in football revenue they occupy the number three spot with regard to expenses.

Standing atop the mountains of the Nittany Valley, it is Penn State that runs the costliest football program in the B1G. Michigan operated the most profitable football program in the conference generating $56,370,978 in net revenue while Purdue's football program desperately needs extra feed as it generated only $1,475,139.

For Maryland, the move to the B1G allowed the Terps to more than double the net contribution from their football program to the AD budget. In 2014, Maryland football reported $21,716,970 in revenue and $15,398,021 in expenses or net revenue of $6,318,949. Football revenue in 2015 was $30,891,641 with expenses of $16,151,389 increasing the net revenue to $14,740,252. For the conference as a whole football generated net revenue of $316,692,250.

At 19.20 percent, Maryland occupied the bottom rung of the range of football expenses as a percentage of total expenses while Michigan State and Rutgers stood atop that ladder at 30.95 percent. The conference mean was 25.96 percent. The table below is sorted by total athletic department expenses:

EXPENSES

Football

Men's BB

Other Men's

Women's BB

Other Women's

Not Allocated

Total

Ohio State

$32,588,493

$8,987,900

$15,619,769

$4,170,589

$17,829,496

$57,770,571

$136,966,818

Michigan

$31,880,547

$7,475,989

$16,337,307

$3,338,261

$18,709,360

$53,262,493

$131,003,957

Wisconsin

$26,643,793

$7,473,012

$12,233,181

$3,344,856

$14,442,459

$58,838,575

$122,975,876

Penn State

$35,146,623

$5,342,457

$14,538,512

$4,041,361

$14,975,269

$43,773,828

$117,818,050

Minnesota

$26,292,215

$9,049,050

$12,810,788

$5,280,664

$13,678,462

$38,450,422

$105,561,601

Nebraska

$29,179,492

$6,521,834

$7,738,124

$4,083,611

$12,786,886

$38,815,640

$99,125,587

Iowa

$25,482,299

$6,868,122

$8,371,006

$4,417,429

$12,598,601

$32,699,426

$90,436,883

Michigan State

$27,694,367

$10,696,689

$9,686,628

$3,590,923

$11,842,997

$25,980,026

$89,491,630

Maryland

$16,151,389

$7,308,359

$6,869,483

$4,242,541

$10,444,157

$39,118,587

$84,134,516

Indiana

$18,010,927

$11,352,554

$8,958,907

$3,598,817

$12,492,457

$26,747,761

$81,161,423

Illinois

$18,336,909

$8,414,091

$6,696,649

$3,156,273

$8,656,924

$29,209,130

$74,469,976

Northwestern

$20,884,258

$6,267,376

$6,000,563

$3,216,976

$12,210,368

$21,448,533

$70,028,074

Purdue

$15,598,196

$6,910,907

$5,610,104

$3,479,155

$8,405,532

$26,160,940

$66,164,834

Rutgers

$20,158,193

$5,083,432

$5,534,119

$4,166,123

$10,427,059

$19,756,907

$65,125,833

TOTAL CONFERENCE

$344,047,701

$107,751,772

$137,005,140

$54,127,579

$179,500,027

$512,032,839

$1,334,465,058

The other revenue generating sport for the conference was men's basketball. Ohio State generated both the highest gross and net revenue with its basketball program planting a bit more than $15 million dollars in its treasure garden. That net revenue number was followed by Wisconsin, Indiana and Maryland.

For the Terrapins, the move to the Big Ten combined with their NCAA appearance to produce net revenue of $9,412,141. This compares quite favorably with the $6,749,841 from the prior year. Together, football and basketball accounted for more than $12 million of the $18.8 million revenue increase. Perhaps more critically, Maryland football's net revenue, which in 2014 trailed men's basketball by a bit over $400,000, now exceeded it by more than $5 million.

For those interested in how one of Maryland's signature excess cost sports fared, the women's basketball program had income of $1,033,076 (fifth highest in the B1G) and expenses of $4,242,541 (third most in the league). The loss, $3,209,465, was greater than every team except Indiana and Minnesota. Once again, excluding the outlier Rutgers, which somehow managed to precisely break even, Wisconsin had the smallest women's basketball deficit - $1,706,671 - of any B1G institution.

Overall, women's sports generated a mean of 4.96 percent of allocated conference revenue while requiring a mean of 17.86 percent of the allocated expenses.

One critical area

We have yet to discuss one critical expense item the EADA report isolates: recruiting expenses. While it's true that the population density of the east coast allows a significant number of quality athletes to be easily geographically accessible, it seems unlikely that this alone can can account for the chasm that exists between Maryland and its B1G competitors. The Terrapins were one of only two Big Ten members - the other being Northwestern - that spent less than $1 million for recruiting in the 2015 fiscal year.

In fact, Maryland not only reported the smallest recruiting budget of any conference member, three B1G schools reported higher recruiting expenses for women's athletes than Maryland spent recruiting for its men's teams. This is noteworthy because every member of the B1G spends at least 1.5 times as much recruiting men. Sometimes a table speaks more clearly than text:


Men's Teams

Women's Teams

TOTAL

Nebraska

$1,729,915

$499,999

$2,229,914

Michigan

$1,554,421

$659,771

$2,214,192

Penn State

$1,490,994

$506,759

$1,997,753

Ohio State

$1,222,130

$655,846

$1,877,976

Illinois

$1,421,590

$439,709

$1,861,299

Indiana

$1,365,757

$389,013

$1,754,770

Iowa

$1,041,047

$568,157

$1,609,204

Michigan State

$1,087,467

$437,690

$1,525,157

Minnesota

$1,087,467

$437,690

$1,525,157

Purdue

$972,990

$338,424

$1,311,414

Rutgers

$876,458

$389,227

$1,265,685

Wisconsin

$602,921

$397,946

$1,000,867

Northwestern

$603,421

$313,919

$917,340

Maryland

$546,457

$292,313

$838,770

TOTAL CONFERENCE

$15,603,035

$6,326,463

$21,929,498

All in all, it's apparent that Maryland's move to the B1G was, in its first year, an enormous boon for Terrapins athletics. The next steps are critical. Maryland needs to build on the momentum established in that first year and continue strengthening its finances. If Maryland was able to field competitive teams using only its middling budget, imagine what the Terps could do if they can move into the conference's financial upper tier.