CU facing revenue challenges

One aspect of  Thursday’s developments in Colorado’s move the Pac-12 Conference that might have gone overlooked and definitely went under reported is the fact that as things currently stand, CU is not scheduled to receive any conference distribution during its first year in the league (2011-2012 school year).

I reported it in my main story Thursday from San Francisco, but, in hindsight, probably didn’t give it the attention it deserved. So I’m writing a little more about the issue on my flight home.

It’s important to note that this shortfall isn’t a number to be added to the $6.9 million CU is losing this year in exit fees from the Big 12 Conference. The Pac-12 already has agreed to pick up the slack there and CU will pay that money back to its new league over time beginning in 2012 when it is receiving a full share of revenue.

Why isn’t CU receiving a full share in 2011? Well, when it announced it was joining the league, it did so with the plan of joining after the new media rights deal is in place in 2012. By joining in 2011, it is asking the current Pac-10 members to divide the final year of revenue under the current media rights deal by 11 instead of 10. That’s a hard sell, but not an impossible one.

Athletic director Mike Bohn and chancellor Phil DiStefano remain hopeful that Colorado will be given at least a partial share of revenue in the first year because CU is a fellow BCS school leaving another BCS conference after all. It’s not in the same boat as Utah, which is coming from a non-BCS conference and won’t receive a full share until 2014 (50 percent in 2012, 75 percent in 2013).

It’s also possible that the conference will be able to negotiate a slightly higher payout from its TV partners because it is providing two additional teams worth of content for the 2011-12 school year that weren’t factored in when the contracts were initially signed.

The conference will also see additional revenue from its first conference championship in football and CU should get a part of that.

So it’s important to consider that the current revenue distribution plan for 2011 hasn’t been finalized, but we know that CU won’t receive a full share in its first year in the league.

CU usually has received between $9 and $10 million in conference distributions from the Big 12 Conference in recent years and could reasonably expect about as much if it was receiving a full share in its first year in the Pac-12. So that is the base amount it will need to make up during the 2011-12 school year to keep its current budget numbers.

That’s probably going to be tough to do. So you can pretty much count on budgets being tight for at least another year. And it will be interesting to see how this affects the decision to retain or fire coach Dan Hawkins at the end of the season. Firing Hawkins would cost the school about $2 million in separation costs, not to mention the additional cost of hiring a new coach.

People don’t always consider that coaching searches usually cost between $50,000 and $100,000 and the school also pays the cost of moving the new coaching staff and families to town. Plus, the cost of doing business has gone up since Hawkins was hired in 2005 and even since he was given an extension in 2008.

So other than begging for more from the Pac-12, how does CU make more money?

Well, it gets to keep what it makes in nonconference play instead of putting it in a big pot to be divided by everyone at the end of the year. Now we have a much clearer picture of why Bohn opted to play at Ohio State in 2011 with no promise of a return game. He knew he was going to need the money and he knew that not requiring a return game would give him the ability to raise the asking price.

Don’t be surprised if he makes a similar move or two with the men’s basketball team in scheduling next year’s games. Perhaps a trip to Duke or North Carolina or Syracuse is in order for the right price. You obviously don’t make the same kind of money for nonconference basketball games as you do football games, but the travel costs aren’t nearly the same either and every little bit helps.

Finally, CU fans shouldn’t fret over this too much. It’s a problem to be sure, but it’s a short term problem that can be overcome with people across campus and within the CU system working together just as they did in making the move to the Pac-12 in the first place.

The switch in conferences is a move that benefits the entire school in numerous ways, but it is one that began with athletics and was driven by athletics, which is why the people I talked with believe the school will find ways to get the athletic department through what looks to be a very lean year.

One last item here. There has been a lot of whining from some quarters in the Pac-12 footprint about how existing members gave up so much to bring CU and Utah into the league. I don’t think anyone would really argue with that, but wasn’t it necessary to make the deal happen? Didn’t the league need two more schools to significantly boost its revenue? And not just any two schools, but two that fit academically and brought at least something to the table in terms of additional television households? And if it was necessary to make some sacrifices, do you really get to whine about it after the fact?

The bottom line is Colorado is also paying a price to make the move and get the Pac-12 moving into the future.

About kyle

Daily Camera college sports beat writer since 2004. Previous experience covering the University of New Mexico and Denver Nuggets. A Colorado native.
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