Branding and the Business Side of College Athletics

I am fortunate to be a long-standing member of the Young Presidents’ Organization (YPO). I should clarify that given that as I no longer qualify as “young,” a criteria that you fail to meet when you turn 50, I am officially a member of the World Presidents’ Organization (WPO). Both organizations merged together several years ago and frequently hold combined educational events for their executive members.

On March 11, two hundred and thirty eight YPO and WPO members and their guests from thirteen chapters attended the “Challenge Yourself” regional education event at the University of Michigan in Ann Arbor. Hosted by the Ross School of Business, it was the third such session at UM since the program was envisioned and founded by a group of Motor City WPOers.

The program kicked off with a keynote presentation on the Business Side of College Athletics by Dave Brandon, the Director of Intercollegiate Athletics at UM. A former YPOer, Dave brings a unique perspective to his role as AD having played football for UM under Bo Schembechler, and having been CEO of Valassis and Domino’s Pizza, both publicly traded companies. He drew parallels from his experience in the corporate world to running an athletic program. His job description could be that of any corporate leader:

• Recruit and retain a team of talented leaders who share our vision and high expectations
• Create a high performance culture
• Benchmark against the best competitors
• Grow revenue and manage costs
• Generate capital and ROI
• Compete to win

Dave explained that the Athletic Department was a stand-alone not-for-profit organization that was expected to pay its own way each year. It is no small feat to run a cash flow positive program, and UM is one of only 22 out of 127 athletic programs in the country to do so. He shared his P&L and broke down the sources of revenue, the costs, capital expenditures and challenges of managing the $150 million business that is UM Athletics. He identified revenue streams as being:

• Spectator admissions
• Preferred seat donations
• Media rights, which the conference district divides equally among the schools.
• Sponsorships and licensing. Dave noted that the University of Michigan is one of only two schools that do not sell advertising in their stadium. Our competitor to the south (and my alma mater), Ohio State, generates $6 million annually from advertising.
• Donations
• Facility rentals. Dave has significantly advanced the use of the stadium during non-game season with events such as the Big Chill, the NHL Winter Classic and even private weddings. It was just announced that Manchester United and Real Madrid will play soccer at the Big House on August 2, 2014 as part of the Guinness International Champions Cup. Tickets are already sold out!

Costs included:

• Salaries, wages and benefits (340 employees)
• Financial aid to students (357 NCAA scholarships)
• Team and game expenses. (They now charter jets in order to meet TV schedules)
• Facilities and operations. (Annual capital expenses, such as $200 million for Michigan stadium improvements, dwarf the operating budget.)
• Recruiting (900 student athletes)
• Interest expense

He explained the competitive national athletic environment, the challenges of attracting top talent (72% are from out of state) and how the UM brand plays a big role in recruiting talent and donations. Conversely, it is interesting to note the important part athletics plays in the overall university brand, with 60% of gifts to UM occurring during football season. Managing that brand requires maintaining standards of excellence across a number of critical assets including:

• Coaching talent
• Facilities and equipment
• Academic support
• Training and medical support
• Strength and conditioning
• Nutrition and counseling
• Preparation for life after athletics

On this last point, Dave noted that 73% of NFL players declare bankruptcy within five years of leaving the NFL. The UM goal is to prepare athletes not just to compete in sports, but also to be successful in life. The goal is that they are able to manage pressure, perform academically, stay healthy and have a successful career after sports.

My personal take-away from Dave’s presentation was that I could not think of a more perfect role for him, nor a more perfect person to head up Michigan Athletics. His business acumen, retail branding experience, professionalism and personal passion for the brand and the students all combine to make him a great leader. It is possible that not everyone will be comfortable with his fairly aggressive approach to building the brand and the revenue of the organization. However, he is an impressive leader and it will be interesting to see how the program develops. Needless to say, winning games ultimately is one of the goals.

Speaking of competition, the ball is being kicked south to our Columbus chapter for next year’s regional education event at The Ohio State University on March 10-11, 2015. It will focus on innovation and tap into the latest and greatest thinking at OSU in all areas – business strategy of course, but also technology, big data and healthcare – all with an eye toward how it can inspire CEOs to drive innovation in their own companies. Given the natural competition between OSU and UM, I expect that it also will be a program that I won’t want to miss!