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September 24, 2011 - TV revenue fueling huge explosions in football coaching salaries

The Charleston Post & Courier reported on the continuing increase in the compensation of major college football coaches.   From 1986 to 2010, the increase in pay for head football coaches far outpaced the increase in salaries for professors and presidents at major college football schools.  Over the past 25 years, professors' salaries at major college football schools rose 32 percent. Presidents at those institutions received increases of 90 percent. And football coaches' compensation grew 750 percent, according to an inflation-adjusted study of 44 schools by Duke University economist Charles Clotfelter.

Clemson University economist Raymond Sauer, who has written extensively about the sports marketplace, told the Post & Courier that TV rights fees are the main driver of compensation growth."The main thing is the media income," Sauer said. "It's the size of those contracts that is driving coaching salaries. Trace the money over the last 30 years to the growth in revenues in revenue-generating sports, it has just been enormous. This has spilled over into compensation for the best coaches."

The newspaper compared the salaries of head football coaches at several higher education institutions.  In 1981, Danny Ford led Clemson University to the national football championship. He made $50,000. Adjusted for inflation, that would be $140,000 today. Dabo Swinney, the current head coach at Clemson, whose team lost more games than it won last season, will receive $1.75 million in compensation this season. And Swinney's contract is only in the middle of the pack for major-college coaches. At the University of South Carolina, Steve Spurrier will make $2.8 million this season; the head coach at University of Alabama-Tuscaloosa, Nick Saban, will receive $4.7 million.

The salary spike is linked to the increase in television revenue.

Athletic directors justify the huge contracts for coaches by saying the market determines salaries. Economists such as Clotfelter agree, but he noted that it is an unusual market in which the labor — the players — are not compensated at their true value.

"The only participants in this whole enterprise that don't get market wages are the players," Clotfelter said. "Studies have (revealed) the value of a draft-quality football player is $500,000 to a university, the value of a draft-quality basketball player is $1 million.

"That money has to go somewhere."

That money helps pay for nonrevenue sports, but it also makes coaches rich.

The Knight Commission — a group of academic and athletic officials, as well as journalists, whose mission is to ensure athletic programs operate within the educational mission of their universities — recently polled 95 major-college presidents and found that the majority consider coaching compensation "excessive" and the "greatest impediment to sustainability."

But Knight Commission Executive Director Amy Perko does not foresee any regulatory means to control compensation levels in the near term.

"Securing an exemption from the anti-trust laws for any reason, including trying to regulate coaching salaries, is a complicated, time-consuming and an expensive endeavor," Perko said, "and by no means is assured of success."

To slow spending, the commission recommended in June to have greater transparency with financial data and to tie financial incentives to academic performance.