OSU Athletics
Ninety Million is Not Enough - Part Two of a Two-Part Series
By John Porentas

[Editor's Note: This is part two of a two-part series. We recommend reading part one before part two.]

Administrators in the Ohio State Department of Athletics have a problem.

The Ohio State athletic department has grown into a broad-based program that supports 34 athletic programs and 900 student-athletes. The engine that pulls that program financially is the football program which generates most of the 90 million dollar annual budget. The problem for administrators is that football has been exploited financially to nearly its maximum, and any rise in operating costs dictates that either programs be cut or support services curtailed, or new sources of income be found. OSU, it turns out, is not the only one in that position.

"From what I understand, nine of the 11 Big Ten schools have a situation where they have the same problem because the costs just go up so significantly each year," said Senior Associate Athletic Director for External Affairs Tom Hof.

To cope with the the upward spiraling costs and the nearly-flat revenue stream produced by football, OSU administrators have taken a two-pronged approach. In the near-term, they are seeking to improve their revenue from all other sources of operation within the Department of Athletics. In the long term, they have undertaken an aggressive and ambitious endowment program.

The Near Term

"Our biggest upside exists in the other sports and some other auxiliary areas such as the golf course, the ice rink, rental rates for our facilities," OSU Director of Athletics Gene Smith told the-Ozone in a recent exclusive interview.

"Our facilities are rented quite a bit, most people don't know that. There are growth opportunities in all those areas."

Over the past year Smith and his staff have set about evaluating which sports programs might best be developed as revenue producers.

"We really believe that the next growth phase for revenue for the athletic department is going to come from women's basketball, men's ice hockey and some of our other non-traditional sports, baseball, soccer, gymnastics, wrestling, there's a slew of them that actually have a following but they don't produce the numbers that you get from football or even men's basketball," said former ticket director Richelle Simonson.

"Gene Smith has started a department-wide marketing group that consists of members of the ticketing staff, members of the marketing group, members of the development staff, sports information, to figure out strategies that we can implement so we can draw more fans to some of these other sports and not rely so heavily on football," Simonson said.

That committee is not naive. They know that the trick to making those sports profitable is to put people in the seats, and that making that happen requires an essential ingredient - winning.

"Everybody loves a winner, whether it be men's basketball, field hockey, soccer, winning is the part of the equation that we have no control over but it has the biggest impact on what is going to happen," said Simonson.

Smith is in full agreement.

"No doubt, and we are at a window of opportunity that sometimes is missed in intercollegiate athletics," Smith said.

"We have programs like men's basketball, women's basketball, gymnastics, that are winning. We have to take advantage of the product's performance. We have great leaders in those programs. Thad Matta and Jim Foster are willing to do what is necessary to develop increased attendance, so we, by developing business plans now, are able to position ourselves to take advantage of the performance of those products."

Smith has taken an unorthodox approach toward capitalizing on the programs perceived as having the most revenue potential. Instead of creating a single plan for the promotion of those sports, he and his team have created individual small business plans for each sport in an effort to turn each of of them into revenue producers.

"When we went through our reorganization, a large part of that was in external affairs and putting together our marketing, our fund raising, all of our external affairs together such as media relations, branding, all that so that they could focus on developing business plans for ice hockey, soccer, gymnastics, all those sports can generate more revenue," Smith said.

"We have to be a little bit more strategic in how we approach them, so we're developing plans right now and each week we kind of develop an outline of where the plans are with our leadership team every Monday morning. Most of those plans will be done by the early part of June, then the individual responsible for leading that plan will get it going. It's a priority for us," Smith said.

The plans are in place, or soon will be, but ultimately it will be up the coaches and players on the fields and on the courts to produce the essential ingredient, a winner, or the perception of the potential to be a winner. A perfect example of that is the OSU men's basketball program, which won last season and is expected to win big again this season. That has Simonson excited.

"Men's basketball has gone up and down (financially) over the years, but we're in a place now where we have the biggest building not only in the conference, but in the entire country. It's our anticipation that we'll be able to start selling that building out and contributing even more than they already do," Simonson said.

It will be an uphill climb for each of the programs to become revenue producers, but the best opportunities lie with the programs that play in the largest venues. Simply stated, more tickets can be sold in a large venue. Men's and women's basketball as well as men's hockey play in the Schottenstein Center, while wrestling, gymnastics, and volleyball make use of St. John Arena. Men's and women's soccer, lacrosse and track and field all use the Jesse Owens track facility, and baseball uses Bill Davis Stadium. All of those venues have seating capacity to allow the sports which use them to become profitable. It's just a matter of selling the seats.

It sounds simple, but ironically, one of the biggest impediments to succeeding at developing sports other-than football as spectator sports at OSU is football itself.

"There are a lot of people who think that men's ice hockey and basketball start in January," lamented Simonson.

Simonson's lament stems from the reality that the OSU fan base simply does not turn to other sports until football is over. Attendance at hockey in October and November and basketball in November is marginal at best. When football winds up, things begin to pick up in the other sports, providing of course that they are winning. Changing that habit will be challenge, but the administrators involved believe that when the other sports begin winning on the same level as the football program, they will succeed in garnering attention and bring fans into the stands.

The Long Term

In the long term, the department of athletics endowment program will provide funding for OSU sports far into the future. The endowment effort is essentially a fund raising campaign in which funds are raised but not used for operating expenses, but instead are invested in the hopes of generating investment income that will fund the athletic department far into the future. Hof, who heads up that effort, explained how it works.

"Someone invests 100,000 for an athletic scholarship endowment," said Hof using the exact figure that OSU is currently using.

"That goes into the University's general endowment fund, which is now nearly two billion dollars.

"The spending policy of the University is that between four and five per cent is available for spending, so 5,000 is available from that 100,000 dollar endowment to be used immediately.

"The hope is obviously that the endowment will earn greater than five per cent. If it earns 10%, five per cent comes out for operating, but the remaining five per cent gets plowed back into the endowment. Over time, it continues to grow," said Hof.

"Obviously, the higher the endowment, the more guaranteed money that we have. It's a long-term solution," Hof said.

The OSU endowment program was not impressive until Andy Geiger took the reigns of the Department of Athletics. Geiger saw the importance of endowment and made it a priority.

"In the last ten years we've gone from about 5 million to about 30 million," said Hof.

A six hundred per cent increase in endowment is impressive, but what makes that accomplishment all the more impressive is that the endowment effort was somewhat handicapped by other projects completed in the Geiger era. Funds were raised to complete the Schottenstein Center, Bill Davis Stadium, renovate the football stadium, build the Jesse Owens facility, help fund the building of the McCorkle Center, and fund the upgrade of the Woody Hayes Facility. All of that fund raising diverted funds from endowment, you can only wring so much blood out of a turnip, but yet the endowment fund was able to grow significantly while major capital improvements were made. It was a remarkable achievement.

"We have been funding all the facilities, which was very necessary, but at the same time we were building the endowment," Hof said.

"When we build a new facility they are all private dollars. When we built Bill Davis Stadium, that was all generated privately. The football stadium project was 200 million. That debt is being retired by the revenue generated by the club seats, the suites, and a portion of the ticket costs. The McCorkle Aquatic Center, Woody Hayes Renovation is a 19 million dollar project, and all of that is raised privately," said Hof.

There are still facility projects to be funded, including a renovation of the softball stadium, building of an indoor tennis facility and building of a boat house for crew. Those are major projects, but not close to the scale of the ones already completed in the Geiger era. With less competition for fund raising dollars for building projects the endowment should now grow at a faster rate. Hof has set a lofty goal for the endowment program.

"We need to get to several hundred million. That would put us in tremendous financial shape," said Hof.

Hof says that number is not at all out of the realm of possibility.

"Stanford's athletic endowment is probably about 300 million. They lead the country," Hof said.

It's no accident that Geiger brought with him an aggressive endowment plan. He was, after all, the AD at Stanford before coming to Columbus and saw first-hand the impact that a large endowment can have. He brought that attitude to Columbus, and Hof has carried it on despite Geiger's absence.

"It is a top priority," Hof said.

"We are obviously fiercely protective of our sports and want to make sure that we can always provide the fencer that opportunity, the football player that opportunity, the field hockey player that opportunity.

"The way we can solidify our financial foundation is by the endowment which will perpetually be there.

"Currently we raise around 7.5 to 8.0 million from the Buckeye Club annually that is used for current expenses.

"We have another 1.5 million that comes in from endowment income. That still leaves us a gap. Our scholarship costs, the check that we write to the University is of the magnitude of around 11 million dollars. We have to make up about 1.5 million dollars through other operating revenue. We need to close that gap," Hof said.

The hope is that the growth of the endowment, coupled with revenue growth from sports other than football, will allow OSU to not only continue a broad-based athletic department, but will also provide athletes the very best opportunities to succeed in their respective sports.

"We feel that if we offer a sport we have an obligation to the students who come to participate, and their parents, that we're going to provide them with the best possible experience. We do that by hiring the best coaches, providing the best competition and practice venues, because those are our laboratories, " said Hof.

All it takes is money, and 90 million is not quite enough, or soon won't be. The OSU athletic department is working hard to make sure they have what it takes in both the near future and the distant future. It's a big job.

Return to O-Zone Column and Features

Return to O-Zone Front Page