It’s no secret college football is big business. There’s been a long-time debate about whether student-athletes should get some of the profits (this blog post won’t go down that road). But how do you put a price tag on a team?
Having fans throughout the country focused on top-ranked teams during the season can really boost a university’s brand. A winning football program can lead to a university’s higher student enrollment, better alumni engagement, more scholarships, high-profile donors and increased visitor spending in the community on gamedays.
So, which college football program has the highest net worth? According to a 2017 analysis, Ohio State. The program has a $1.5 billion value, a 50% jump just from the previous year. The increase perhaps because of the Buckeyes’ 2015 national championship win. Texas and Oklahoma trail Ohio State valued at $1.2 and $1 billion, respectively.
Ryan Brewer, associate professor of finance at Indiana University-Purdue University Columbus, conducted the study. He looked at what each program would be worth if sold on the open market like a professional sports team. Brewer broke down the football program’s most recently available revenues and expenses, making cash-flow adjustments, risk assessments and growth projections.
Brewer considered many variables and valued the programs by:
- analyzing financial data including revenues and expenses;
- assessing cash flows;
- developing a risk profile using relevant publicly available characteristics; and
- developing a capitalization of cash flows using quantitative risk assessments and growth forecasts.
A few years ago, Forbes.com used a weighted scoring system to compile its list of the most valuable college football programs and looked at value to the:
- university – football profit used for academic purposes including football scholarships;
- athletic department – net profit generated by the football team that is kept by the athletic department;
- conference – distribution of the bowl game payout; and
- surrounding community – estimated spending by visitors on days of home games.
The two methods have clear differences. Brewer’s risk profile used adjusted cash flow generated by the programs, incorporated historical performance and rankings, attendance, proximity to and association with the nearest “major league” town or franchise, school reputational quality, and power conference affiliation. By diving in a bit deeper, Brewer’s valuations painted a different picture of college football’s powerhouses.
As for the two teams colliding tonight on the gridiron, Alabama came in fourth on Brewer’s list valued at $900 million. Georgia was eighth at $822 million. Will the Tide roll past the Bulldogs once again?
Price tags aside, which team are you pulling for in the title game? Leave your pick in the comments below.
The valuation field offers practitioners a range of unique opportunities. There’s a widespread demand for CPAs with expertise in forensic accounting and business valuation, and that’s why the AICPA offers the Accredited in Business Valuation and Certified in Financial Forensics credentials.
Paul Wapner, CPA/ABV, CGMA, Lead Manager – Forensic and Valuation Services, Association of International Certified Professional Accountants
Football courtesy of Shutterstock.
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Originally published by AICPA.org
