Thursday, May 22, 2008

ASU drops Three Varsity Athletic Programs

Arizona State University recently announced the immediate elimination of men’s swimming, men’s tennis and wrestling, which impacts about 70 students (and 6 coaches). ASU estimates that it will save about $1 million annually, or over $14,000 per student directly affected. This leaves ASU with 20 varsity sports, and according to the school, puts them in line with other Pac-10 schools, and other major institutions around the country. None of the institutions mentioned was a Big 10 school. I wonder how Pac-10 schools view the Big 10.

According to Lisa Love, ASU’s Athletic Director, “… these three sports were selected with the following criteria: financial impact, potential competitive success, conference/regional support and gender equity.” Any firm, including a university, faces finite resources, and thus must make decisions that are in its best interest. Since ASU has been facing financial challenges, how does it make a decision as to best utilize its scarce resources? Should the decision be random – like throwing a dart at a board, or should it be strategic? I would argue that it should be strategic.

From the criteria listed above, what ASU did makes sense. Let’s look at the four criteria: financial impact – (i.e. program cost), potential competitive success (i.e. the sport’s performance), conference/regional support (i.e. program demand and revenues generated from the sport) and gender equity (i.e. Title IX law). ASU has to be in compliance with Federal law and given the number of scholarships – something around 85 – that goes to football, choosing a women’s sport was not likely an option. My guess is that there is not a lot of revenue for swimming or tennis, although wrestling on a national scale can be a revenue generator, but that may not be the case recently at ASU. Program costs can vary all over the place. Looking at data from the 2004-2005 academic year, revenues for all programs other than football, men’s and women’s basketball were less than $2 million while the other programs costs were over $11 million. That’s over a $9 million deficit! Yet, since ASU is keeping men’s and women’s diving, women’s swimming and women’s water polo, the substantial fixed costs of maintaining a pool are not going to be cut, and it seems reasonable to expect limited cuts in fixed costs to men’s tennis. Finally, it seems as if ASU decided that these three varsity sports were not likely to be very competitive in the near future. Honestly, I am not that well versed on ASU athletics to be able to know if that is an accurate statement.

Yet, it is not total revenues and costs that really should be looked at, but rather marginal revenues and costs. This is alluded to in the following statement by the AD. “The profile of our operations budget and donation base does not lend itself to the sponsorship of 22 athletic teams. While our revenue streams are achieving a positive trajectory they are simply not keeping pace with the current size and scope of the department”, according to Love. In other words, we are increasing athletic revenues but just not as fast as we are increasing athletic costs. So programs that have significantly higher marginal costs than marginal revenues are likely to go first, given the constraint of Title IX compliance.

Of course, different schools have different priorities. Given Iowa’s excellence in wrestling, Iowa is not going to be eliminating wrestling. Iowa is also making a significant commitment to its swimming and diving program with the ground breaking of a $69 million recreation and wellness center, which is housing a brand new 50 meter indoor pool with a separate diving well.

On a personal note, having three boys who are swimmer’s we are very excited about the new pool set to open in Fall 2009. While it is sad to see men’s swimming, tennis and wrestling eliminated, the economics facing the athletic department cannot be ignored.

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