Making the Grade: NCAA Revenue Distribution and Academic Excellence

Today’s post is part of Ruling Sport’s three-day series discussing the NCAA Presidential Retreat, in conjunction with Kristi Dosh and www.businessofcollegesports.com.  For Kristi’s piece on day one detailing the fiscal portion of the retreat, click here.  On Friday, Kristi and I will take to our sites to discuss the integrity component of the NCAA Presidential Retreat.

On August 9 and 10, 2011, NCAA President Mark Emmert summoned 54 Division I university presidents and other NCAA leaders to Indianapolis for a presidential retreat.  The retreat focused on three issues:  “continued expectations for student-athlete academic success, fiscal sustainability in Division I, and fortifying the integrity of the enterprise.”

On the second day of the retreat, participants discussed several key issues related to academics and NCAA student-athletes, including:  raising academic standards of current student-athletes, raising academic requirements for incoming freshmen and two-year college transers, and requiring “appropriate academic performance. . . [from] all participants [of] NCAA championships.”

The common thread of the retreat was that participants seemed committed to implementing thorough reform measures promptly.  As such, the Division I Board of Directors will meet today–one day after the conclusion of the retreat–in Indianapolis and will likely move forward with endorsing stricter academic guidelines.

The NCAA presidential retreat’s targeting of academics, finances and integrity as the three keystones of discussion signals the importance of these topics to the association.  Given this, one current NCAA practice stands out as an issue the NCAA Division I Board of Directors should consider.

In 2010-2011, the NCAA distributed $452,200,000.00 in total revenue.  Of that $452,200,000.00, forty percent–or $180,467,000.00–was distributed to the “Basketball Fund.”

Through the Basketball Fund, the NCAA distributes revenue to conferences based solely upon their Division I Men’s Basketball teams’ performances in the Division I Men’s Basketball Championship games.  Conferences receive a payout of one “unit” per each game that a program in their conference participates in throughout March Madness.  Thus, the more games that a team plays throughout March Madness, the more money their respective conference receives from the NCAA the following year.  In 2010-2011, one unit was worth approximately $222,206.00.  Additionally, the payout made to conferences does not include the payout made to participants in the Division I Men’s Basketball Championship Game.

Arguably, the large payout of revenue to the Basketball Fund is the result of a sizeable contract the NCAA entered into with CBS to televise the NCAA Men’s Basketball Tournament.  In 2010, the NCAA entered into a 14-year agreement with CBS to the tune of $11 billion.

In contrast to the proportion of revenue distributed by the NCAA to the Basketball Fund, is the amount distributed to the Academic Enhancement Fund.  In 2010-2011, $22,461,000.00 of the NCAA’s revenue– or 5 percent–was distributed to the Academic Enhancement Fund.  From this distribution, each Division I institution received approximately $66,000.00 from the NCAA.  Thus, the Academic Enhancement Fund differs from the Basketball Fund, as the money is distributed directly to the schools, whereas the Basketball Fund money is delivered to conferences to ultimately distribute as they wish.  The NCAA website notes that the Academic Enhancement Fund was “. . . created to support efforts to improve team Academic Progress Rates (APR). . .”

In 2004, the NCAA adopted a method to measure and “track the academic achievement of Division I teams. . .” called the Academic Progress Rate (“APR”).  APR scores are calculated using a metric where each student-athlete has the potential to earn “one retention point for staying in school and one eligibility point for being academically eligible.”  A given team’s APR score is equal to its total points earned divided by total points possible, and then multiplied by 1,000.  Teams receiving APR scores below 925 may receive sanctions from the NCAA.

The APR scores of the most-recent Final Four contenders lend credence to the argument that the NCAA Division I Board of Directors should consider restructuring its revenue distribution system, or put in place academic requirements in order for a team to qualify to receive a “unit” for its respective conference through championship play.

School 2009-2010 Multi-Year APR 2009-2010 APR Percentile Rank Within Sport Percentile Rank Within All Sports
Connecticut 893 826 1st-10th 1st-10th
Butler 1000 1000 90th-100th 90th-100th
Kentucky 974 979 80th-90th 40th-50th
Virginia Commonwealth 949 900 50th-60th 10th-20th

Before I analyze why the above APR scores require the NCAA to re-evaluate its revenue distribution system in order to further its goal of promoting academic achievement of student-athletes, I would like to note two things:

1.  I love college basketball more than most.  Friends know that on any given Saturday, I am glued to the television watching games.  One of my proudest moments came in 2006, when I was the female champion of my college’s intramural March Madness bracket competition.  I went to an engineering school, so yes, that was an intramural sport.

2.  From the beginning of the 2010-2011 season and after the Maui Invitational, I pegged Connecticut to win it all.  Feel free to ask any of the loyal followers of my personal Twitter account about this.  I tweeted about UConn.  A lot.

But in terms of academics, Connecticut’s Men’s Basketball team clearly did not “win” in 2009-2010.  While their 2010-2011 championship run was nothing short of impressive, the fact that the team ranks in the bottom ten percent not only of all Division I Men’s Basketball teams, but of all NCAA sports in terms of their academic success, demonstrates the problem with the NCAA’s revenue distribution system.

Because Connecticut beat Butler to win the 2011 Championship game, Connecticut collected the most units and hence, the most amount of money possible for any team for the 2010-2011 season.  Thus, the Big East will receive a nice chunk of change due to the Championship status of its member, Connecticut’s Men’s Basketball team.  However, this team sports an APR score 90 percent lower than every other NCAA team.

For an association who defines its purpose in-part as, “integrat[ing] intercollegiate athletics into higher education so that the educational experience of the student-athlete is paramount” and that just spent two days discussing ways to improve the academic success of student-athletes, it is clear that restructuring of the NCAA’s revenue distribution system is a topic which must be addressed.

Clearly, there will be naysayers to proposals limiting the amount of revenue distributed to the Basketball Fund or instituting academic criteria for distribution of funds to conferences through the Basketball Fund.

As noted above, it is likely that at least a portion of the forty percent of NCAA revenue devoted to the Basketball Fund is funneled in through the enormous television contract between the NCAA and CBS.  The monetary significance of this contract was likely attributed to the vast number of viewers tuning into March Madness match-ups.  Arguably, schools with larger basketball followings and with teams who have achieved greater success throughout the years (such as UConn, who won its third title this past year), have greater viewership numbers.  Thus, there is an argument that because these teams bring in a higher number of viewers–and hence, a greater amount of money to CBS through advertising and other revenue streams–their school’s respective conferences should be rewarded with revenue from the Basketball Fund regardless of their team’s academic success.

Additionally, there is the Butler paradox in this equation.  There is much to be said about Butler Bulldogs’ coach Brad Stevens and the positivity he brings to college basketball.  In the coaching world, Stevens definitely stands out, as in his first four years as a collegiate head coach, he led Butler to the NCAA Division I Men’s Basketball Championship game twice.  I’m not sure if there was a person in America who thought Stevens would return to the Championship Game before Coach Krzyzewski.  However, arguably, what is more impressive is that Stevens’ Bulldogs boast perfect multi-year and 2009-2010 APR scores.  Thus, every player on his team earned both his retention and eligibility points.  Given the APR scores of other teams, this is clearly a feat.

So, because Stevens’ teams have taken home the second-most amount of money from the Basketball Fund to the Horizon Conference over the past two years, and have obtained perfect APR scores during that period, some will argue that the current revenue distribution system does not need adjustment in order to promote academic success of student-athletes.

However, like much of his career, what Stevens has done at Butler in terms of the team’s APR score, appears out of the ordinary.  This is demonstrated by considering the APR scores of the two other 2011 Final Four contenders, Kentucky and Virginia Commonwealth University.

Kentucky, a fourteen-time Final Four contender maintains an APR score which is fifty percent lower than that of every other NCAA team.  VCU, who made its first Final Four appearance in 2011 has an APR score just ten percent higher than UConn’s–meaning it is 80 percent lower than every other NCAA team’s.

This being said, if the NCAA wants to demonstrate that the NCAA President’s Retreat was a cataclysmic success in terms of adopting new measures to promote the academic achievement of its student-athletes, it should consider one or both of the following:

1.  Restructuring its revenue distribution system, which currently allocates 40 percent of NCAA revenues to the Basketball Fund and just 5 percent to the Academic Enhancement Fund.

2.  Developing academic criteria, potentially based upon a team’s APR score, to determine the percentage of funds to be allocated to a conference through the Basketball Fund as a result of one of their respective team’s Men’s Basketball Championship performance.

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