Is investing in sports worth it for universities?

0:01NPR.

0:06College football season is underway, and universities aren't just trying to win on the field, they're also trying to win over prospective students. You'll probably notice that in the commercials between plays. At Ohio State. The University of Maryland has helped me become more fearless. We are the never afraid to innovate. It's really allowed me to see that the opportunities are really endless. This is The Indicator from Planet Money. I'm Ohio State alum, Ricky Mulvey. And I'm University of Maryland alum, Adrian Ma. Go Terps! Yes, the football games you watch are also advertisements. Look at all these students having fun.

0:45And have we mentioned our world-class research departments? I certainly think athletics can be a front door to a university. That's Jonathan Coffington. He does PR for Indiana University, and it's been seeing a lot of interest since its football team won the national championship last year. Competing for students matters even more now. Colleges are facing a demographic challenge. In the coming years, fewer American high school students will go to college. So, how much does a winning football team matter for one of the biggest economic questions in a young adult's life? Where do you go to college, and why should it be Ohio State?

1:18To tackle this serious subject, get ready and grab your red Solo Cup. We've got a keg, and we're throwing an economics rager after the break.

1:30Support for NPR and the following message come from Rippling. Your sales team is at risk of missing quota. Don't panic. Just ask Rippling AI. Built on your real-time people and business data, Rippling AI instantly pulls metrics from Rippling and your CRM into a meeting-ready dashboard so you can see what's behind your quota risk and fix it before it's missed. Head to rippling.ai slash indicator to get an AI built to give you full visibility and take complex actions across your business. This message comes from Superhuman. Superhuman brings together connected tools like Grammarly, Docs, and Mail into one productivity suite.

2:08Built on the idea that low-value tasks crowd out meaningful focus, Superhuman meets teams where they already work. It operates proactively alongside writing and email workflows to help clear what is in the way. Superhuman, from the makers of Grammarly. Start streamlining your workflows with Superhuman today at superhuman.com. Doug Chung remembers being a grade schooler, watching Boston College versus Miami in 1984. This game was actually the first game, first American football game that I saw. Three wide receivers out to the right. The matchup was a back and forth offensive battle. As the game ticked down to its final seconds, Boston College was down by four against the Hurricanes.

2:54I saw it live on TV with my father and was just blown away by how exciting a football game can be. Boston College needed to move the football about half the length of the field in just one play. Doug Flutie, the quarterback from Boston College, threw this miraculous Hail Mary pass. Throws it down. Caught by Boston College. I don't believe it. It's a touchdown. Oh, touchdown. I mean, picture the drama. Like, what a magical TV moment to have associated with your school. Yeah, can you imagine how hard it is to throw a football over 60 yards? I mean, back in 82, I used to be able to throw a pigskin a quarter mile.

3:39Yeah, you and Uncle Rico. This walk-off touchdown, though, it led to a lot of attention for Boston College's football team and the university itself. The following year in the application process for Boston College, their applications went up tremendously. And so the popular media, the newspapers back then, they called this term the Flutie effect. Since that play, Doug, the quarterback, went on to play professional football for two decades. And Doug, the researcher, went on to find out how much a winning college football program actually mattered for students applying to colleges. He wanted to quantify it.

4:16he found that athletic success functioned like a commercial. A big win created a stock of goodwill for a school. That's the role of advertising, right? So, you know, a potential high school applicant who's applying to colleges sees that and sees the excitement on that. Never heard of this school, but now you know. You know, that's a big advertising effect. So yes, big wins led to more college applicants. But the results were nuanced. The number of applications increases. That's true. Now, it tends to be towards the lower end of in terms of standardized test. Doug found that students with lower than average SAT scores had a stronger preference for schools with a lot of athletic success.

5:02But like so many things in economics, this is a on the one hand, on the other hand situation. Some people would argue then, hey, then that's not a good thing. I could argue the opposite, saying that, hey, maybe standard of test is one of those things. But, you know, the more people apply, the school has a better choice set. Applications to Boston College rose by 30 percent in the two years following that Hail Mary pass. And other colleges saw a similar boost. The University of Cincinnati's football team made the college football playoff in the 2021 season. and a couple years later, first-year enrollment rose about 20%.

5:42But this increase is anecdotal. Plus, it happened after a COVID dip, and the playoff run coincided with the University of Cincinnati going test-optional. In other words, some applications probably came in from the excitement over the school's athletic success and others from the ease of applying without submitting a test score. And even the original Flutie effect was disputed. John McGuire, who formerly ran Boston's admissions, said that more applications were coming in because the university invested in things like residence halls and financial aid offerings. What's not in dispute is that winning a major championship is a great commercial for the university.

6:18Jonathan Coffington is the chief communications and marketing officer for Indiana University. Last football season, the school won the national championship, something that sports pundits didn't see coming. What we brought to life was an alumni network of 822 ,000 people, the largest in the country. So when folks get excited at that scale, it gets really fun. Yeah, the bookmakers, they gave the Indiana Hoosiers about a 1 % chance of winning the national championship when the season opened. And for sure, Jonathan says that Indiana got more shine from a national championship, but the school was already seeing a surge of interest.

6:53Applications to the university have been up 74 % since 2021. And that doesn't count applications that have come in since the national championship win. You know, football's an accelerant, but ultimately we're showing the academic excellence of Indiana University. Jonathan could not get us early application numbers, but he says that Indiana's social engagement is up more than 140 percent from a year ago. And that's just for the university, not athletics. He says that the key is tying athletic success to the academic programs. There was a particular video that we had highlighting when Fernando Mendoza won the Heisman.

7:28It was a kind of a series of screens in Times Square that celebrated Fernando, but also celebrated the Kelly School of Business, our O 'Neill School of Public Affairs. But does this mean all schools should invest more money into athletics? I mean, many already invest a lot. And yeah, colleges are facing a real long-term economic problem. Fewer American high school students will go to college in the coming years. It's a structural decline that started in the 2008 financial crisis when Americans started having fewer babies. And right now, colleges are seeing fewer international students coming through their doors, which is due in part to the Trump administration's policies.

8:05College enrollments are expected to drop by 13 percent in the next decade and a half. Investing in athletics is one way to generate more demand for classes. But Doug, the Flutie effect researcher, says this isn't a straightforward bet for colleges. For a smaller school, yes. You know, if you're good in sports, it will get that advertising effect. But is it worth the amount of investment that you have to put in? Right. As many sports fans know, simply dumping money into an organization doesn't guarantee wins. It's not a straightforward investment. Rutgers University is a big school, and it has spent a lot on sports since joining the Big Ten in 2014.

8:48But the school hasn't won major championships or played much competitive football in conference games, especially against the best teams in the division. An investigation by NJ.com, a New Jersey news outlet, found that Rutgers athletics is in the hole. Spending on sports has cost about half a billion dollars more than the revenue it's brought in since they joined the Big Ten. Applications to the school are dramatically up over the past two years, but that's primarily due to the school joining the Common App. The school got more selective, but actual enrollment isn't up much. Doug Chung says that spending on athletics is just one lever to attract students.

9:22Is it better to focus on the quality of education, hiring more, better faculty or providing financial aid or, you know, better career services? That might actually improve more in attracting more applicants. A commercial gets attention. Understanding the economic tradeoff of going to college, I concealed the deal. Or, you know, having a really good rec center. This episode was produced by Corey Bridges with engineering from Travis Hagen. It was fact-checked by Cooper Katz McKim. Kate Kincannon edits the show, and The Indicator is a production of NPR. This message comes from HomeServe. A burst pipe, a dead water heater, the AC calling it quits.

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