The $400M bowl business
The $400M bowl business
Three weeks of big hits and big bucks
By MICHAEL SMITH
Staff writer
Published December 03, 2007 : Page 01
Officials at the Chick-fil-A Bowl in Atlanta joke that the game’s title sponsor used to be “weather-plagued,” a reference to the sometimes rainy, snowy and muddy conditions that sullied the game when it was played in a half-empty Fulton County Stadium.
Little has survived from those days, including the name of the bowl, Peach, which was cast aside after the 2005 game for another million in sponsorship dollars from the title sponsor. The Chick-fil-A Bowl is now played in the plush, climate-controlled Georgia Dome, and the next edition of the game between teams from the ACC and SEC on New Year’s Eve will mark its 11th straight sellout.
Perhaps the biggest change in the last 20 years, though, has been the bottom line. The bowl no longer operates at a deficit as it sometimes did through the inglorious times of the 1980s.
Now the Chick-fil-A Bowl is flush with revenue, raking in $11.4 million in 2006 — a growth surge of more than 70 percent over five years — to make it one of the most lucrative non-Bowl Championship Series events among the postseason games.
In the span of just one year, the bowl’s revenue jumped 33 percent, from $8.57 million in 2005, thanks to new contracts with ESPN for TV rights and Chick-fil-A for the title sponsorship.
“Our desire was to create a great bowl,” said Steve Robinson, chief marketing officer at Chick-fil-A. “The question was, ‘How do we position ourselves to be the best non-BCS bowl out there? How do we get better teams?’ We wanted to know how much it was going to cost and what our role would be.”
At a time when bowls tend to come and go — four have folded since 2000 — some of the more established events such as the Chick-fil-A Bowl not only have found their footing, they’re generating revenue that keeps their conference partners happy and the bowl chiefs well-heeled.
Most bowl presidents/chairmen make more than $200,000 a year and some collect nearly $500,000 annually. The top two executives at the Fiesta Bowl were paid a total of $770,000, according to the bowl’s 2005 Form 990, the tax return used by nonprofit groups. The Outback Bowl spent over $1 million in salary and benefits for its top five executives, and its CEO, Jim McVay, makes $498,000 a year, putting him at the top of the salary chart.
While those figures indicate that the bowls are as healthy as ever, not everyone agrees with the way they have evolved into such money-making machines.
“The bowls aren’t bowls, they’re commercial enterprises,” said Charles Young, formerly the UCLA chancellor and University of Florida president, who in the early 1990s attempted to create a college football playoff. “The purpose of a bowl is to be a civic enterprise. The game used to help pay for a parade and other activities. The bowl chairmen were volunteers. Now the bowls are serving too many masters.”
But few stakeholders in college football are heard yearning for the old days. According to a SportsBusiness Journal study of 2005 and 2006 tax returns from the 22 bowls that file as nonprofits, revenue ranged from $1.3 million for the R&L Carriers New Orleans Bowl to more than $16 million for some of the BCS events.
And those figures don’t include the BCS TV rights and sponsorship revenue, which never hit the books for the bowls because Fox’s deal, including media rights, sponsorships and promotional rights, is with the BCS, not the individual bowls. Bowl officials say that revenue at the Orange, Sugar, Rose and Fiesta is well over $30 million a year.
Those numbers, plus projections for the bowls that don’t file as nonprofits, combine to make the bowl system a $400 million industry. Not bad for a collection of 32 football games that covers a three-week period.
“The whole model of doing business has changed,” said Keith Tribble, athletic director at the University of Central Florida and CEO of the Orange Bowl until 2006. During his 13 years at the Orange Bowl, he helped generate revenue growth from $8 million to more than $30 million.
“You really have to be aggressive with your marketing and sales, of both tickets and sponsorships,” Tribble said. “We ran it like a business, like a major corporation. That’s how we found the dollar value in it.”
Much of the pressure felt to generate revenue and higher payouts is transferred to the bowls from the schools and conferences, who look to football for the money to boost an athletic department’s many nonrevenue sports.
“There’s tremendous pressure,” Tribble said. “And it’s beginning to trickle down. It’s not just the BCS bowls or the top tier of bowls. It’s two or three levels below the BCS bowls. Everybody needs the revenue to stay competitive.”
Counting its chickens
Unlike the BCS bowls, the other bowls control their media rights and sponsorships, and it was mostly through those revenue lines that the Chick-fil-A Bowl increased its revenue so sharply in a short period of time.
It began after the 2005 event with a meeting between Robinson, Chick-fil-A’s top marketer, and Gary Stokan, the bowl’s president. When Robinson asked what needed to happen for the bowl to improve its status, Stokan asked him to reach for his checkbook.
Chick-fil-A’s new title sponsorship deal is worth $22 million over five years, boosting the bowl’s sponsorship revenue by $1.25 million in one year. Chick-fil-A also committed to a national ad buy on ESPN throughout the college football season, which helped the bowl gain leverage for its negotiations with the network on a new TV deal.
As a result, the Chick-fil-A Bowl’s TV revenue from ESPN nearly doubled, jumping from $1.3 million in 2005 to $2.58 million in 2006. The deal includes escalators that will push that figure higher this year and in the future of the five-year contract.
“We had to have the commitment from Chick-fil-A to get the TV deal done,” Stokan said.
The bowl also raised ticket prices by $5, increasing ticket revenue from $3.8 million to $4.2 million for its sell-out crowd of 75,406 last season.
With escalators built into the contracts with Chick-fil-A and ESPN, the bowl has guaranteed itself a certain revenue growth through 2010, the same time the BCS contract with Fox ends.
“We wanted higher picks in the ACC and the SEC and to do that, you need revenue,” said Stokan, who often refers to the three T’s of bowl revenue: tickets, TV and title.
The Chick-fil-A Bowl will pay its participating teams $5.7 million this year, up from $4.6 million two years ago. The ACC representative will take $3.3 million, while the SEC team receives $2.4 million. Those numbers are negotiated with each conference individually and the ACC’s payout is higher because the bowl picks the first non-BCS team from the ACC, compared with the fourth non-BCS team from the SEC.
The bowl also will donate more than $1 million to its charitable causes, paying for scholarships, funding academic tutors for Atlanta high schools and even sending $100,000 to the Hokie Spirit Memorial Fund after the tragic shooting at Virginia Tech. The Hokies played in the bowl last season.
Funding the mostly local charities has helped attract a lineup of sponsors that reads like a Who’s Who of businesses in Atlanta: Chick-fil-A, AT&T, Coca-Cola, Delta.
“The key is the corporate support of your local businesses. If they’re behind you, you’ve got a chance to have a great event,” said Pete Shimer, former chairman of the now-defunct Seattle Bowl, which unsuccessfully courted companies from the Northwest such as Microsoft, Boeing and Weyerhaeuser to sponsor the game before it folded after only two seasons.
Seeking key matchups
Creating a lineup of attractive teams, a lucrative TV deal and strong sponsorships is somewhat of a catch-22, Shimer said. A bowl needs a good matchup to lure a more lucrative TV contract, but networks are only going to pay more if the matchup warrants it, putting the onus on the bowl to acquire the highest pick possible from its conference partners. And acquiring a higher pick almost always comes down to the payout.
The Chick-fil-A Bowl’s revenue surge also enabled the bowl to bank $1.9 million in excess revenue after its 2006 game, contributing to a cash reserve designed to protect its future financial obligations.
The bowl’s $5.7 million guaranteed total payout to the ACC and SEC teams makes it among the most generous non-BCS bowls. The BCS bowls pay $17 million per team, while the Capital One Bowl in Orlando tops the non-BCS bowls with a total payout of $8.5 million. The Outback and Cotton bowls hand out a total of $6 million and then comes the Chick-fil-A. The range of payouts drops as low as $600,000 for both teams in the Papajohns.com Bowl.
“When you have a contract with a conference, you’re obligated contractually whether you sell out or not,” Stokan said. “If you have a down year businesswise, you have to have reserves to make the payout.”
Stokan said the bowl also wants to be financially prepared if the BCS ever expands to a fifth bowl or a “plus-one” game to decide the national champion. Chick-fil-A Bowl executives believe they can contend for a spot in the BCS. The only non-BCS bowl that reported more revenue is the Capital One Bowl in Orlando at $13.5 million.
“We’ve got to have the reserves so we can show the BCS that we can play in that stratosphere,” Stokan said. “If the day comes that the BCS does realign, we want to make sure we’re ready.”
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