Monday, June 8, 2015

"Giving Up Raises" = Reallocation from Coaches to Players

In a recently re-worked contract, MTSU's head football coach Rick Stockstill is "foregoing" raises ($100,000 per year, next 4 years) that were in his previous contract (Will Borthick, DNJ 6/4/15).

He and the AD at MTSU claim it was Coach Stockstill's idea. And it's to make sure the MTSU athletic department can catch the wave of offering full cost of attendance (FCOA) to football recruits.   And the coach hopes maybe some of the $400,000 can go toward facilities (unspecified, but presumably football).

The tone of the article is that this is a sacrifice on the part of Coach Stockstill, but the result also has another economic explanation tied to the reallocation away from coaching salaries (and AD salaries, facilities) due to gains by players.  The gains are both real, e.g., the Power 5 move toward FCOA, and more probabilistic, e.g., the pending decision in O'Bannon.

Now, just how would markets reallocate in the face of the Power 5 choice to move to FCOA, and at "Group of 5" departments like MTSU that are not in the Power 5 but choose (and I stress the word) to move to FCOA anyway?

Since all of the money is already being collected by very effective ADs, and taking as given that MTSU has already determined its optimal athletic department size, the answer is: Just what you see happening at MTSU. Whether Coach Stockstill sees the handwriting on the wall, or whether it would have happened a bit later at the AD's insistence, this is the expected outcome across all departments choosing FCOA.  Reallocation away from coaches toward players.

[Should O'Bannon go the players' way, the same thing will happen at departments that choose to pay up to the court's "lid" on image rights payments.  The decision under appeal did not require any department to do so, remember.  But those departments that do choose to pay for image rights will behave the same as MTSU's athletic department.]

I find it simply fabulous that it is happening at MTSU, a "Group of 5" member rather than a Power 5 member, and it is happening as many of us have predicted--with coach's pay, not cutting sports as predicted by doom and gloom forecasters at places like the Knight Commission.

And make no mistake.  If it were truly charity, Coach Stockstill could have taken the raise and given it to the athletic department as a gift.

Instead, revenues being generated by players, being spent elsewhere in the department, will be diverted from those other spending areas to players at those departments moving to FCOA.

Of course, the behavior of one school does not make a data set.  But this is the shape of things to come. And don't be distracted when you see raises and FCOA going hand in hand at some departments. The raises would have been higher in the absence of the new FCOA policy.

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