The Big Ten Can’t Cure Maryland’s Financial Woes Right AwayPosted by Chris Johnson on August 15th, 2013
Chris Johnson is an RTC Columnist. He can be reached @ChrisDJohnsonn.
There were two reactions when Maryland announced its move to the Big Ten last fall. First, indignant Big Ten fans cried foul and lamented the erosion of its historic Midwestern football tradition and groused about how the Terrapins could never, ever, ever be a good fit in their conference. They aren’t one of us. The other reaction, this one from a smaller strain of the national sports populace, was a grudging acceptance of why Maryland was making its move in the first place. In fact, university President Wallace Loh came right out and said it at the official press conference. Maryland was leaving the ACC for the Big Ten for one reason: money. Conversely, the Big Ten was adding Maryland for one reason: to expand its conference television network into a mostly untapped East Coast television market. In today’s college sports world, when monetary interest and potential broadcast rights bounties mesh so harmoniously, no force – not geographic interest, or cultural fit, or the total renouncement of traditional hoops rivalries – is going to stand in the way. Maryland to the Big Ten was, in the eyes of both parties, a perfect fit. No move in the recent realignment frenzy made more financial sense. There was no mystery.
The move looked even more prudent after details emanated about Maryland’s massive athletic department budget shortfall. The Terrapins cut seven varsity sports in June 2012 due to rising costs, and moving to the Big Ten – where teams reportedly earned an average of $24.6 million payouts in Big Ten network revenue and NCAA Tournament earnings last year – seemed like a convenient vehicle to streamline Maryland back to financial stability. The premise was that the Terrapins were on their way to a more comfortable economic life in their new conference. The Big Ten was their financial panacea. Turns out, Maryland’s new conference could be inheriting a more dire financial proposition than most believed possible when the school announced its conference switch last fall. The university commission released a report earlier this week uncovering the breadth of the Terrapins’ current financial peril, and the optics are even more harrowing than last year’s money-driven conference hop implied. According to the report, the athletic department operated at a $21 million budget deficit in the past year, which is attributed to “past financial decisions” and the ACC’s denying Maryland roughly $15 million in conference revenue as part of an effort to collect the $52 million exit fee conference members had voted into place. The report also projects Maryland’s athletic department will continue to operate in the red until at least the 2017-18 academic year, more than three years into its Big Ten membership.
The Washington Post has more details on the report, one of which cites Maryland’s inability to cash in on the Big Ten’s full member revenue payout (the $24.6M number) until 2020 due to its status as a “new” conference member. Maryland’s financial travails are not surprising. The basic details of its budgetary issues and concerns about the long-term viability of many non-revenue-producing sports were revealed in the midst of the compacted media attention surrounding its realignment move last year. Maryland explained exactly why it was joining the Big Ten, and no one – besides the patronizing group of crusty Big Ten traditionalists – seemed to quibble with the motivations of either party. The most interesting part about Loh’s commissioned report has to do with the ACC, which – in forcing Maryland to forfeit $15 million in revenue, a fee that could climb to as much as $52 million – is doing everything within its administrative purview to ensure Maryland’s exit from the league is as financially strenuous as possible. The Terrapins won’t be able to circumvent the league’s massive exit fee just because their athletic department is hemorrhaging money; league membership agreed to disincentivize realignment moves with financial sanctions for this very purpose. If Maryland’s leaving, the ACC – pending litigation – is going to make it pay.
Once Maryland enters the Big Ten and becomes eligible to receive the chunk of conference TV revenue most (save Rutgers and Nebraska) of the league membership currently shares, it should quickly recover whatever money it lost as punishment for leaving the ACC. Competing with more soundly-financed Big Ten programs, particularly when Maryland enters the Big Ten as the only school without an indoor football facility, will not be easy — most conference transitions aren’t. Maryland’s current economic state will make its move even more challenging, and while many may have underestimated the degree of the athletic department’s cash shortage, restricted spending power is not a zero-sum predicament. Maryland can heal its financial woes over time, and the Big Ten’s television deal renegotiation in 2017 should provide an extra boost along the budget recovery curve. Its financial troubles will gradually recede, and the alarmist projections being tossed around this week will be hushed into moderation.