I love sports. I love talking about sports, I love arguing about sports and I love writing about sports. But if aspiring journalists ever wish to be taken seriously, it is imperative that we share these passions with equal attention paid to the facts we reference in support of our arguments.
After reading the entirety of a recent Daily Cardinal op-ed entitled, “College athletes deserve to be paid” by Samantha Wilcox, I think that a clear distinction between the terms “profit” and “revenue” should be reestablished to help readers understand the consequences behind confusing the two.
Now, because I am not an accounting major, nor would I assume the vast majority of our readership to be, I took the liberty of including Merriam-Webster’s “simple definition” of both profit and revenue below.
Profit: “Money that is made in a business, through investing, etc., after all the costs and expenses are paid: a financial gain.”
Revenue: “Money that is made by or paid to a business or an organization.”
From what I understand, the easiest way to think about the relationship between these terms is in the form of the following equation: Revenue – Expenses = Profit.
While most find it laughable to recognize the NCAA as a nonprofit association, as the IRS designates it, the NCAA is technically incapable of earning a “profit” by definition.
Interestingly enough, it was suspiciously challenging to dig up any clear references of current annual revenues the NCAA generated. The most recent one I could find was listed in a Huffington Post article published in 2015, that documented how the NCAA’s $989 million revenue in the 2014 fiscal year was the most it totaled in 10 years.
Don’t get me wrong, $989 million in revenue is still a real chunk of change, but it’s not “$6 billion annually in total profit.”
Here is the real kicker: the NCAA also had $908.6 million in expenses over the 2014 fiscal year. So by my calculations, that brings us from our original claim of a $6 billion annual profit, all the way down to a $80.4 million surplus.
Now wait a minute. What’s a surplus?
A surplus is similar to a profit, but not the same.
Professor Henry Hansmann, an expert in corporate law Yale Law School, helps explain some of the key differences between much of the economic jargon covered so far.
“It should be noted that a nonprofit is barred from earning a profit,” Hansmann wrote in the Yale Law Journal. “Many nonprofits in fact consistently show an annual accounting surplus. It is only the distribution of these profits that is prohibited. Net earnings, if any, must be retained and devoted entirely to financing further production of the services that the organization was formed to provide.”
I also noticed the numbers pulled regarding the Badgers’ own finances seemed a little off. To be more specific:
“According to ESPN, the Wisconsin Badgers are the eighth most profitable college football team in the country, making a total revenue of just above $95 million every season from ticket sales, donations, media rights and branding,” Wilcox wrote.
There are two critical errors in Wilcox’s reference to ESPN’s data: these numbers reflect athletic department revenues from data compiled exclusively in 2008.
According to the most recent data from USA TODAY, University of Wisconsin was the 12th largest revenue generating athletic department in the country from 2014-15 with a $123,895,543 annual total.
It is important to consider that while these may be large sums of money, these huge revenues cover huge costs. The debate over how much money the athletic department needs to operate should be the real topic for debate here.
Another key concept to understand is that a college football team is not synonymous with a university’s athletic department. These numbers represent total athletic department budgets, not solely the money made and spent on their respective football teams.
As for the 1 percent of NCAA athletes who do achieve their dreams of playing at the professional level, they are also not being paid as much as Wilcox claimed.
“According to the International Business Times, first-draft rookies in the NFL made as much as $28 million last year and first-draft NBA rookies could make as much as $12 million,” Wilcox wrote.
By “first-draft” rookies I am assuming Wilcox is referring to first-round draft picks selected by teams in the National Football League and National Basketball Association.
If you revisit the International Business Times article discussing potential earnings of the NFL’s 2016 first-round draft picks, one will also see that the $28.65 million figure listed was a projection no less of what the expected No. 1 overall pick would make over a four-year contract, and not and annual total from a single season.
According to Over the Cap, the NFL’s No. 1 overall pick, Jared Goff, signed a four-year contract worth just under $28 million that guaranteed him to earn a maximum of $5,079,577 in his rookie season. This was the same misinterpretation of the NBA rookie earnings mentioned as well.
I recognize that as students, balancing schoolwork and thoroughly vetting all facts referenced in a piece such as this can be difficult. But our mission is to use our voices to illuminate topics with the utmost validity — not for ourselves, but for our readers. While I actually agree with vast majority of Wilcox’s argument supporting the compensation of student athletes, I worry for those who may have based their own opinions on the inaccurate data in this article.
