UA Revenue, Salaries Have Little in Common

The University of Arkansas recently approved its 2011-12 operating budget, and athletic department revenue is again projected to rank in the bottom fourth of the Southeastern Conference.

While money coming into the department has grown each year under athletic director Jeff Long, it isn’t growing fast enough for the Razorbacks to gain significant ground among their peers.

That hasn’t, however, seemed to impact the financial commitment to head coaches in major sports. Football coach Bobby Petrino, basketball coach Mike Anderson and baseball coach Dave Van Horn are all believed to be among the top third of league coaches in their respective sports when it comes to salary.

Petrino recently signed a deal that keeps him in Fayetteville until 2017 at $3.56 million annually. Anderson agreed in April to a seven-year contract at $2.2 million per season. Van Horn will make an average of $593,600 until 2020.

Few schools are able to match what the UA pays its head coaches in revenue-producing sports. Baseball has developed into a moneymaker for the Razorbacks, though at most schools it is a drain on the bottom line.

Meanwhile, the UA athletic department ranks behind all but three SEC schools in total operating budget. The University of Alabama led the conference with $123 million in revenues for 2010-11, nearly $60 million more than Arkansas. Florida is at $106 million. Yet the Razorbacks are paying their head coaches at a level similar to Alabama and Florida.

Clayton Hamilton, associate athletic director for finance, said competing with conference powers in terms of pay for head coaches was a source of pride for the athletic department.

“It’s difficult to make a blanket comparison with salaries and budget because every school handles compensation differently,” Hamilton said. “We do, however, feel we are competitive with our salaries and compensation packages.”

Based on the most recent figures available, Petrino ranks third in the SEC in salary. He’s the highest-paid coach in the league without a national championship. Van Horn ranks third in the league thanks to his recent raise. Anderson is the third-highest-paid basketball coach.

Van Horn has guided the Razorbacks to nine NCAA Regional appearances in 10 years. Petrino took the program to its first Bowl Championship Series game last season. Anderson just arrived on campus, but has a Sweet 16 and Elite Eight on his resume at Alabama-Birmingham and Missouri. The expectation is Anderson’s success will increase at a school with more tradition and resources than he has previously coached.

 

Return on Investment

Simply throwing money at something isn’t a surefire way to ensure wins or losses. But it’s a start, and there’s an argument to be made that paying for quality head coaches is the right way to begin generating wins and revenue for other parts of the department.

Kristi Dosh, an attorney, author and blogger with an emphasis on sports business, sees it that way. Dosh, who runs BusinessofCollegeSports.com, said she views head coaching salaries as an area where athletic departments are most likely to see a return on their investment. Football – often the only sport in an athletic department to generate revenue – is an area where the philosophy “spend money to make money” fits.

It works like this: Attracting quality coaches helps improve the product on the field. Fans, in turn, are more likely to invest their money by buying tickets and making donations to athletics, and the more money made by sports like basketball, football and, in the UA’s case, baseball, the more money that trickles down to other areas in the department.

“Coaching salaries – especially with football – are where schools can spend money and see it as an investment,” said Dosh, who is working on a book focusing on the business of college athletics. “Hiring a top coach and paying more will, over the course of a number of years, bring improvement and more revenue.

“You can’t just hire a football coach for $200,000 and hope for the best.”

 

Various Revenue Streams

Arkansas has proved it is willing to make the investment in head coaches. But how does a school lagging in revenue afford to pay better than many of its peers?

Money for salaries is coming from a number of different sources. That’s what enables the Razorbacks to spend the money they do for Anderson, Petrino and Van Horn.

Naturally, the athletic department contributes to the salaries, but there is a line-item maximum on what can come from the general budget. Funds are coming from elsewhere.

Media rights money has always been part of the equation, but the stream of revenue is greater for the school now that IMG (formerly ISP), a worldwide sports marketing agency, is pumping millions of dollars into the coffers through Razorback Sports Properties. Both Petrino and Anderson are contracted to do coaches shows, and they’re asked to make appearances on behalf of RSP. Because of that, media rights money is funneled into the Razorback Foundation to help with payroll.

It is unclear what role the Razorback Seat Value Plan plays in funding salaries. But the seat-licensing venture was projected to generate an additional $5 million annually for the athletic department. Money generated by fans buying the right to buy season-ticket packages through RSVP is housed in the Razorback Foundation.

Outside sources of income – like Van Horn’s consulting fees with apparel companies – also help keep the salaries competitive.

Associate athletic director Chris Wyrick is involved in fundraising for capital projects and serves as the department liaison to the Razorback Foundation. Wyrick said work remained to be done even with coaches locked up long term, but the administration’s vision for the department is coming closer to a reality.

“Jeff has said since he got here one of his primary goals was to create an environment where we’re competing for SEC championships and national championships,” Wyrick said. “Our job as administrators is to be able to support that financially. We are in a position that these aren’t just words. And we’ll keep working to make that possible.”