Is Guaranteed Revenue Really Guaranteed?

Prior to the pandemic, the discussion around finances in college athletics – especially at the Power 5 level—was the shift of revenue generation from a variable model to a fixed model. Even before COVID isolation, athletic departments saw increases in fans choosing to watch the games at home. And while ticket sales didn’t grow, television and multimedia contracts did. A bigger piece of the revenue pie was seemingly guaranteed. That was great news!

But March of 2020 threw everyone for a loop as COVID emerged in the United States. The NCAA March Madness tournament, a huge revenue generator for the college athletics ecosystem, was cancelled. As the pandemic continued, snafus popped up around multimedia rights and apparel contracts. It became apparent that nothing in life is guaranteed.

Now in 2023, we’re out of the pandemic and interest in college sports is booming! We’re seeing realignment of the autonomy conferences to coincide with new tv contracts. Companies large and small are investing in student-athletes through NIL deals. And more people are getting out of the house to attend events.

What we’re also seeing, however, is not everyone in the industry is rebounding. So what do you do if you hear rumors that an organization you rely on for revenue is struggling?

Work with your general counsel to review your contracts. Determine what your rights and obligations are, including any provisions for termination or renegotiation in the event of financial instability. You might be in the position to renegotiate any of these contracts. If so, consider the consequences of entering into exclusive deals that bundle all of your assets into one provider. Use hindsight to your advantage as you evaluate whether putting all of your eggs into the “guaranteed revenue” basket is the best strategy.

You could also perform an analysis of whether you bring some of these functions in house. Work with your legal team to assess the risks and rewards tied to these large contracts or doing it yourself.

Meanwhile, don’t lose focus on your variable revenue streams. Now is a good time to revisit your ticket prices while you can cite inflation for widespread price increases. It’s probably too late for 2023 football season tickets, so focus on single game tickets/bundles. You could also evaluate pricing for your 2023-24 winter and spring sports.

Additionally, think longer term about how you can offer the best fan experience to continue selling out your events. We know you’re looking at opportunities to incorporate more space for premium seating and experiences in your facilities. If you have major renovation or construction plans on the horizon, prioritize those with big revenue opportunities to help you diversify your revenue streams.

Do you have concerns about your revenue contracts or how to develop longer-term strategies to diversity your revenue streams? Your collegiate athletics CPAs can help you refine your goals and develop clear steps so you can move forward with clarity and confidence.

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