Marketing Chapter 14 Homework What Problems May Exist The Relationship Between

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Chapter 14

College Athletics

Chapter Overview

I. Introduction

II. Financial status of intercollegiate athletics

a. The race to build new athletic facilities

III. Financial operations

a. National Collegiate Athletic Association

b. Conferences

c. Schools

i. Financial profitability

1. Department-generated revenues

2. Allocated revenues

IV. Athletic department fundraising

a. The capital campaign

i. Making a case

1. Campaign case statement

ii. Major gifts planning

1. Gift table rules

b. Annual giving programs

i. Athletic support groups

ii. Relation between annual giving and ticket sales

1. Point systems

VI. Conclusion

Key Concepts

When reading this chapter, students should focus on the following key concepts:

1. It is difficult for college and university athletic departments to generate more

operating revenues than operating expenses, despite the appearance that

programs are awash in money.

2. Allocated revenues are the foundation of most athletic department revenues.

Concept Check Responses

1. How does money flow from the NCAA to its member institutions?

Money flows from the NCAA to its member institutions through the conferences.

Each conference sets policy determining the amount of revenue that an

2. What differences in structure lead to financial differences among NCAA member

institutions?

The first difference is whether the school is in Division I, II, or III. Schools then

differ depending on whether they have a football program; if so, at what level (at

3. What financial role does college football play at NCAA Division I–FBS institutions?

How does this compare to Division I–FCS institutions?

For schools in major conferences, the largest portion of the athletic program’s

revenue comes from media rights deals, which leverage the popularity of

4. Why are an athletic department’s development efforts so critical?

With many public universities facing cuts in state appropriations, athletic

5. What problems may exist in the relationship between donations and ticketing at

college athletic events?

One problem is the equitable allocation of ticketing based on giving. Point

systems have been developed to assign tickets to donors in an objective way.

Responses to Practice Problems

1. As director of development for Southern Ohio State University (SOSU), you have

been charged with developing a plan to endow 12 men’s basketball scholarships.

The current cost of a scholarship athlete is $45,000. With tuition expenses

expected to increase at a 5.5% rate annually and the endowment’s return

expected to average 7% over time, calculate the total amount that will have to

be raised to fully endow the 12 scholarships.

2. Based on your work in Problem 1, develop a major gifts table for the capital

campaign. Explain the method you used to construct the chart.

A traditional gifts chart should be created for the campaign to endow the

scholarships. As this campaign appears to be separate from larger departmental

Responses to Case Analysis Questions

1. How are development efforts used to fund athletics at your institution?

Most colleges and universities have detailed development information on their

websites that can be used by students to gather information to answer this

2. How do these development activities at your institution compare to North

Carolina and Duke’s activities?

Duke and North Carolina are building endowments for their programs, especially

3. What risks are involved when relying on the interest earned from an endowment

to fund an athletic department’s program?

When the economy slows and/or stocks decline in value, the return from the

4. What are the benefits of using endowments?

Programs, if the endowment is managed properly, are funded in perpetuity. If