Why are college coaches paid so much?

0:00NPR

0:11Student loans are getting serious now. If you don't pay, the government will soon start to do things like bring in debt collectors and garnish wages. So it's worth looking at exactly what tuition and fees are paying for. You've got building maintenance, administration, professor's salaries. Yeah, and what about the highest paid college employee? That's often the football coach. Yeah, take the University of Alabama. Its football coach is getting paid close to$11 million. University of Georgia, its football coach, was paid over$13 million last year. Meanwhile, the college's president was getting paid only about$1 million.

0:52This is The Indicator from Planet Money. I'm Darian Woods. And I'm Adrian Ma. Today on the show, why are college football coaches paid so much? Does it really make economic sense? We crunch the numbers after the break.

1:10This message comes from NPR sponsor, Capella University. Learning doesn't have to get in the way of life. With Capella's game-changing FlexPath learning format, you can set your own deadlines and learn on your own schedule. That means you don't have to put your life on hold to earn your degree. Instead, enjoy learning your way and pursue your educational and career goals without missing a beat. A different future is closer than you think with Capella University. Learn more at capella.edu. This message comes from BetterHelp. As a dad, BetterHelp president Fernando Madera relates to needing flexibility when it comes to scheduling therapy.

1:53I have kids under 18, so time is very limited. That's why at BetterHelp, our therapists try to have sessions sometimes at night, depending on the therapist or during the weekend. So I think that's what we need to tell the parents. You're not alone. We can help you out. If a flexible schedule would help you, visit BetterHelp.com slash NPR for 10 % off your first month of online therapy. To learn about why a football coach might be valuable for a university, we spoke to Greg Byrne. Greg Byrne is the University of Alabama's athletic director. So he's the one that hires the coaches. You know, we actually spoke to him mid-game.

2:34About our baseball game, we have the SEC tournament. We're up 2-1 on Missouri in the bottom of the sixth. I love that he's so dedicated to his job he wouldn't even tear himself away from a game to do an interview with you. Yeah, you know, sometimes his eyes were drifting, but you know, he's multitasking. Last year, Greg hired football coach Kalen DeBoer for that annual salary of almost$11 million. That puts him in the top 10 highest paid coaches in the country. And so we asked Greg, what's up with that? And he said, look, the football team turns a very healthy profit. So does basketball. But then they have a lot of other sports that don't make money.

3:10And so it's an economic model where football is the engine that pulls the train. It generates the revenues for us to be able to have broad-based programming across the board to not only offer great opportunities for your student-athletes, but it's a way to get people involved and engage with your university like few other things can. Along with turning a profit, Greg says the football team helps attract students. I grew up in Eugene, Oregon, a long ways away from Tuscaloosa, Alabama. I may have been the only student at my high school of 1 ,200 kids that knew where Tuscaloosa, Alabama was because I was such a college sports nut.

3:49And Greg points to Alabama's previous coach, Nick Saban. After a dry decade and a half, Saban brought the team to a national championship victory in 2009. And when Saban arrived, the student body was around 25 ,000. And we've gone to over, you know, 40 ,000 now. So it's almost like they're a coach, but they're also a form of advertisement. They are. I mean, when you're the head football coach at the University of Alabama, the recognition goes throughout the country. Greg is arguing that a top coach means a better football team, which means more ticket sales and also more buzz that can boost enrollment.

4:26OK, so case closed. It makes economic sense for colleges to pay top dollar for football and basketball coaches. Not so fast, Adrian. Andrew Zimbalist is a sports economist at Smith College. Unquestionably, there are individual cases of it, Alabama or a few other cases. But the general phenomenon is, no, they don't benefit from these large salaries. Andrew has run the numbers. He's looked at what happens when a new coach is brought in with a high salary. You know, if you're paying some coach$7 million and there's not a$7 million spike in revenue, then it's not paying off for you. In fact, Andrew finds that at the top leagues, athletic departments are each losing an average of$20 million or more a year.

5:14So the pricey coaches might not be paying off in terms of ticket sales. But what about increasing the school's brand? Basically, that evidence is not robust. Some people who look at it sometimes find a small benefit. Sometimes they find no benefit at all. Sometimes they find a negative relationship. That's not to say that it couldn't happen at a particular school. It can happen at a particular school, but does it happen as a regular process? It doesn't seem to. And therefore, the notion that you should make these investments in the form of losses, 10 and 20 million dollar losses every year on your team doesn't hold up as a positive economic strategy.

5:55So in general, if building up a top athletic department in a college does not make economic sense, why is it so widespread? I mean, in at least 39 states, the person with the highest salary on public payrolls is either a football coach or a basketball coach. The explanation is that it's an artificial market. It's not a normal business commercial market. Andrew says we shouldn't think of the market for football coaches as free markets, like the market for, I don't know, sandwiches or living room furniture. And he has five reasons. First, college sports has a bunch of tax benefits. Secondly, these programs are publicly owned, meaning they don't have private shareholders demanding they turn a profit each year.

6:39Third, there are often large subsidies from the university and state governments. Fourth, the students often subsidize sports through their college tuition. And finally, until recently, college athletes didn't get paid, and so there was more funding available for the coaches' salaries. So you don't have any of the normal discipline that happens in a typical commercial market when you move over to college sports. And for that reason, even though college coaches are being paid, it can be argued, a market salary. It's a very artificial and jiggered market. Meanwhile, the college president has a lot on their plate.

7:17Raising money from donors, keeping the alumni happy, keeping the faculty happy, keeping the student body happy, dealing with the local town, dealing with buildings and grounds and deferred maintenance. And then there's this other thing called athletics. And athletics is part of the culture. It's something that all the alumni love and like. And rather than trying to reform college athletics and create a different set of incentives and pressures. College presidents decide simply to leave it alone. The few college presidents historically who have stood up and said this is unacceptable, this is shameful what we're doing, they've gotten their wings clipped.

7:55This battle between presidents and athletic departments goes way back in American history. In the early 1900s, there was a president at UNC Chapel Hill who was, according to the New York Times practically run out of town after criticizing the athletic department. Fast forward to today, a 2009 survey of university presidents with major football programs found that 85 % felt that football and basketball coaches' salaries were excessive, but they felt they couldn't control them. And so let's go back to the University of Alabama, which pays nearly$11 million a year for one football coach. We did some math, and that's about$266 per college student at Alabama.

8:39And so we asked athletic director Greg Byrne whether that money was well spent. Do you think the students, you know, might be wondering, hmm, what if I had a$266 discount on my tuition fees? Well, those are two different buckets that the revenue comes from to pay for those things. The revenue to pay for our coaches' salaries come from revenue that we generate through ticket sales, through donations, through our conference revenue and television packages. So I can understand the question, but it's just completely two different sets of buckets of revenue that those are being paid by. In other words, Greg says students do not subsidize Alabama's football coach because the football program pays for itself.

9:22And maybe Alabama is a special case where it does pay off. But not every college can be a superstar school. You know, each institution has to decide what works for them. If you look at smaller colleges, let's say, they've decided, many of them, that athletics is worth investing in. And that it creates engagement for the university in many different facets. And they've decided that's a way to invest and market their program. but that's up to that individual institution. Any other final thoughts you want to leave us with? Well, I hope we win the baseball game today. What's the score now after the end of the interview?

10:03Still two to one. Okay, holding the line. That's right, we're in the top of the seventh now. And in case you're wondering, Alabama did end up winning the game. The baseball coach earns about$900 ,000 a year. Peanuts. What a steal. This episode was produced by Cooper Katz McKim and Corey Bridges. It was engineered by Sina Lafredo. It was fact-checked by Sierra Juarez. Cake & Cannon edits the show, and the indicators of production of NPR.