“I’m as mad as hell and I’m not going to take this anymore!”
Actor Peter Finch’s character Howard Beale speaks that line in the movie “Network,” as he exhorts his television viewers to “get up out of your chairs, open the window, stick your head out, and yell” that famous line. It’s one of the most quoted lines of movie history and Finch won an Academy Award for his role in that film.
Posthumously, I might add, as the movie premiered in November of 1976 and Finch died of a heart attack on Jan. 14, 1977. At the 1977 Academy Awards, Finch became the first person to be awarded an acting Oscar after their death.
But the exhortation in the movie was preceded by a speech that outlined the reason for it. That there were problems in the world, and although he couldn’t tell you how to fix them, what he did need you to do was get mad. Because you were a valuable human being who deserved better, and getting mad was the first step in things getting better.
Which is why I’m going to delve into a topic that has been of great local importance this past week.
Last Tuesday the Penn State Board of Trustees voted to approve $630 million in funding for a Beaver Stadium renovation project slated to be completed in August of 2027.
Now, I’m on record on this website as supporting a completely brand new stadium. Except, I’m not one of the decision-makers and that wasn’t the decision they made, so we have to live with it, right? Winterizing, maintenance and wider concourses all sound like reasonable fixes. Obviously, something needs to be done with the stadium, doesn’t it? And anything is better than nothing.
So, why should we get mad? Why not just be content with this decision and move forward?
Well, I have a couple of interesting concerns.
The reason they chose the renovation option they did is because, according to their analysis, it’s the option that makes financial sense. The other two options, one a basic repair of the stadium, and the other a complete replacement of the stadium, result in deficits for the athletic department over a 30-year period.
Here’s the chart they published to encapsulate their decision:
I’ve created a lot of marketing materials in my life and the one mantra I’ve always been told is to be consistent. If you are using bullet-point lists, keep the items in the lists consistent as you expand the lists. Apparently Penn State’s athletic department did not get that memo because the bullet-points in the graphic above are all mixed-up. So, let’s clean that up and see what we have.
| REPAIR OPTION | RENOVATE OPTION | REPLACE OPTION |
| $140M Cost/ ($655M Deficit) | $700M Cost/ $44M Profit | $2B+ Cost/ ($1.3B Deficit) |
| Deferred maintenance and necessary improvements | Includes Deferred maintenance and necessary improvements | Not Applicable |
| Better circulation | Better circulation | Improved circulation |
| Invited Club | Invited Club | Invited Club |
| TV/multimedia rights/contracts | TV/multimedia rights/contracts | TV/multimedia rights/contracts |
| Big Ten conference revenues | Big Ten conference revenues | Big Ten conference revenues |
| Enhanced ticket revenues | Enhanced ticket revenues | |
| New naming rights (individual and corporate) | New naming rights (individual and corporate) | |
| New premium seating (suites, boxes) | New premium seating (suites, boxes) | |
| New concessions contract | New concessions contract | |
| Additional philanthropy and naming | Additional philanthropy | |
| Additional special event revenues | Additional special event revenues | |
| Disciplined fiscal management/budgeting |
One thing that sticks out on this chart is that spending $700 million is exactly the sweet spot where you go from a loss to a profit before going back to a loss. In these types of charts I would expect a progression from small profit to smaller profit to loss. Spend $140 million and lose $655 million. But spend $700 million and make $44 million. Hmmmm.
Being a numbers person I always wonder about the data in the spreadsheets from whence these charts came. Another lesson I learned early in life is that, regarding math, I should always show my work. And although it’s certainly conceivable that the $700 million option is the only sweet spot that turns a profit, it would be nice to know the assumptions behind that thinking, because otherwise it looks a little, well, questionable.
Another thing that sticks out for me is once the bullet points are matched up, the only differences between the renovate and replace options are:
- The renovate option has “better” circulation versus “improved” circulation for the new stadium. I’m not sure what that difference is, especially since the repair option also has better circulation, and I would expect the new stadium option would result in much, much better circulation.
- The renovate option has “Additional philanthropy and naming” versus just “Additional philanthropy” for the new stadium. This even though both options have “New naming rights”, and I would expect the new stadium would have many more naming opportunities than the renovate option.
- The renovate option includes “Disciplined fiscal management/budgeting.” Well, perhaps that’s the problem with the replace option. Maybe if they included disciplined fiscal management/budgeting with the new stadium, it too would turn a profit!
The last thing that sticks out on the chart is that the renovate option costs $700 million and the replace option costs $2 billion. The renovate option turns a small profit over a 30-year fund balance, whereas the replace option loses $1.3 billion over that same 30 years. And $1.3 billion is conveniently the difference between the costs of $700 million and $2 billion.
Meaning, according to Penn State’s “rigorous analysis,” a new stadium won’t provide any additional revenue opportunities over just replacing one-quarter of the stadium over that 30-year period. No additional naming revenue, seating revenue, special event revenue, and on and on. They’re saying that a new state-of-the-art facility, designed and built expressly with multiple purposes in mind, and using cost-saving technology, won’t somehow result in significantly less difference between the renovate and replace options versus renovating 25% of the stadium. That sounds a bit odd. Again, perhaps we should see the work.
However, all of this leads to another concern.
Penn State’s leadership seems somewhat nonchalant about the funding for this. Sara Thorndike, Penn State senior vice president for finance and business/treasurer, was quoted as saying, “We feel very confident that athletics has the funding with a stadium of our size and our caliber of programs to fund this, I’m not concerned.”
They say they have considered every expense they might incur, including revenue sharing for players, as well as all potential income streams including “new revenues that are coming in to athletics even outside of the stadium.” Well, $700 million still sounds like a lot of money.
And, as Trustee Barry Fenchak has pointed out, if Penn State were to accept the full project debt load, it would give Penn State’s athletic department the largest debt-to-income ratio, 434%, of any college in the nation.
But as we all know from our personal lives, taking on debt is only a problem if you don’t have the income to support it.
Which is why it was interesting when an article on The Athletic last week disclosed that, according to the Big Ten’s 2022-23 fiscal year tax filing, Penn State received around $60.5 million from the conference that year. The Big Ten’s new media rights deal started in mid-2023, and it was speculated that that Big Ten will eventually distribute $100 million a year to each member under this deal.
If the base distribution from the Big Ten before the new media deal went into effect is $60.5 million, and in 2030 in the last year of the deal it will be $100 million, then escalating at $5.5 million a year will get us to that $100 million a year in 2030.
Given that Big Ten media rights have only ever increased, and given the continued popularity of college football, it’s reasonably safe to expect that the next Big Ten media rights deal will only be larger. And the same with the one after that, and the one after that. Continuing through the 30-year life of the cost of any of the above stadium options.
So, while we’re doing math, let’s assume that the $5.5 million increase keeps coming year after year for those 30 years. Heck, it would be easy to assume that those annual increases could easily be larger in future media deals, but, we’re being conservative here, so let’s just leave it at $5.5 million a year. $5.5 million a year times 30 years means that in the year 2053, Penn State will receive an additional $165 million in addition to the $60.5 million they’re getting now.
And if you add up all those 30 years of incrementally larger annual payouts from the Big Ten, the total is $2,557,500,000. Over $2.5 billion.
Granted, any debt – including for a new replacement stadium – comes with a cost to that debt. But if a new stadium costs $2 billion, and Penn State will generate plenty of new revenue from the aforementioned naming, premium seating, special events, etc., plus the increases in revenue across the board from other sources the athletic department has, then it seems a little puzzling how a brand new stadium could create a $1.3 billion loss over 30 years. As I’ve repeated, maybe we need to see the work.
Which brings me to this…
One of the primary mantras of non-profit organizations is to be a good steward of their donor’s money. Now, depending on how you define “good steward,” there is a bit of wiggle-room in that statement. And a primary mantra of educational non-profit organizations is to take care of their students – and in this case, their student-athletes. So, let’s take a closer look at what the Penn State athletic department has been doing with our money.
Luckily this is not a difficult task, just a slightly time-consuming one. The NCAA requires its member institutions to provide financial information every year. Some universities, like Penn State, will also post this information online. Penn State has every report from 2011 to present filed online here.
But, these reports run to 90 pages. And if you need just certain data, or data from years Penn State doesn’t post online, the Knight-Newhouse College Athletics Database, a joint project of the Knight Commission on Intercollegiate Athletics and the S.I. Newhouse School of Public Communications at Syracuse University, provides this data in condensed form on their website here.
In the table below is data from three fiscal years: 2004-05, 2010-11, and 2022-23. They were chosen because 2004-05 is as far back as the Knight-Newhouse data goes, the 2010-11 year was the last before the scandal hit Penn State, and 2022-23 is the most current year available.
The table shows total athletic department revenues and expenses for each year – in millions of dollars – and then several subcategories with the percentage in revenue their dollar amount represents.
After reviewing this chart for a bit, you might notice several things.
Between 2011 and 2023 annual revenue increased from $116 million to $202 million. An increase of $86 million a year – which sounds great. Except, where did it go? Well, coaching salaries increased from $14 million to $38.6 million – an increase of 24.6 million – more than doubling. And support staff and admin compensation increased from $11.5 million to $39.3 million – an increase of $27.8 million – more than tripling.
Of the $86 million in new annual revenue between 2011 and 2023, $52.4 million of it went to employee compensation. Over 60% of all the new revenue generated in the last decade-plus has gone into compensation for athletic department employees.
And during that time, has our fan ticketing experience gotten better? Has our venue arrival experience gotten better? Has our gameday experience gotten better? Have the things that affect us, the fans, improved? I would contend they have not, and in some ways they’ve gotten worse.
There is, of course, one way in which Penn State athletics has gotten phenomenally better for fans – besides the addition of men’s and women’s hockey teams. On April 17, 2009, Penn State hired Cael Sanderson as its head wrestling coach, and since then Penn State has won 11 NCAA Division I team titles and 39 individual national titles.
Wrestling fandom aside, it’s clear who got taken care of financially in the recent past, so, how have the student-athletes fared? The people who really matter in this athletic equation. Athletic student aid has stayed relatively flat over that time as a percent of revenue. It was 13.3% of revenue in 2005, dropped down to 10.6% in 2011, and has crept back up to 11.6% last year. As far as scholarships go, the student-athletes have at least maintained their piece of the proverbial pie.
But as far as facilities go, which affect both the student-athletes as well as we fans, things don’t look so good. Facilities were given 28.2% of revenue in 2005, 26.2% in 2011, but it has dropped down to 18.8% of revenue in 2023. In 2023, if facilities had been allocated the 26.2% of revenue that they were in 2011, that would have translated into an additional $15 million going into facilities that year. Had that been done during the last 10 years, that $140 million cost of repairing Beaver Stadium is probably close to non-existent.
Which comes full circle to the “I’m as mad as hell and I’m not going to take this anymore” thought. It appears that ticket sales and contributions are making up a smaller and smaller portion of the revenue pie. Those are the dollars that we fans contribute directly to the athletic department. And expenditures on the facilities that both the student-athletes and we fans are exposed to are also becoming a smaller and smaller portion of the pie.
While Big Ten revenue is getting larger and larger. And the salaries of coaches and admins have gotten larger and larger. Meaning that, if you were in charge of this athletic department budget, and wanted to keep the current pie distribution percentages, then the way to do it would be to spend as little as possible on facility upgrades and other fan-centric items, and prepare for the new model of revenue sharing with the student-athletes that is coming.
Oh, and whenever possible, ask the fans to donate, donate, donate. Maybe that’s why we’re getting a renovation rather than a new stadium. Do you feel like a valuable human being who deserves better? Are you mad?
