"I felt we made a mistake in building a baseball field. I thought that should have been the ice skating rink, because I think hockey in this state right now, not just hockey, but ice skating, if you come up to our office building at 6:00 in the morning, some mornings you can't get a parking spot because parents have taken their kids up here to skate...I think hockey will be a great addition to our intercollegiate program. [The Pegula gift] is a great, great gift. And I think very far-sighted and I'm really pleased with it." - Joe Paterno

Wednesday, November 28, 2012

NCAA Elevation: Hard Truths and Luck

A confession: I'm naturally skeptical when people start discussing the prospects of schools presently without NCAA hockey adding the sport, regardless of the supporting arguments. If you're a Penn Stater, how could you not be? I mean, for years, decades, we supposedly did everything right, and... nothing. If it wasn't money for the Ice Pavilion drying up and ruining the plan, it was World War II. Yes, we eventually met a billionaire who helped clear all of the hurdles, but the struggle preceding that should never be forgotten.

Because of that struggle, I tend to get frustrated with people who casually throw candidates for NCAA promotion out there. Sometimes it's Illinois (where you at, Jimmy John?), sometimes it's the west coast, sometimes it's... uhhh... Buffalo, sometimes it's Rhode Island (even ten years ago). Now it's Maryland and Rutgers, thanks to their brand new Big Ten memberships.

URI's Boss Ice Arena meets the facility standards of Atlantic Hockey, but a Big Ten team will likely have to spend $50 million or more to construct an adequate arena.

Big Ten hockey can be a double-edged sword in that the revenue (potentially, at least) is greater, but so is the cost of entry. It would be one thing for Rhode Island to find some money for Atlantic Hockey's maximum of 12 scholarships - or not, Connecticut didn't even offer that prior to announcing its departure for Hockey East - and go NCAA out of their current rink, the completely-adequate-for-that-purpose Brad Boss Ice Arena, which would become the third largest facility in the AHA. The Big Ten is a whole 'nother thing. Big Arenas, Big Budgets, Big Life, Big Stage, Big Ten. Remember: Penn State, in its flush-with-cash pre-scandal days, got an $88 million donation specifically for hockey, then examined the situation and decided that still wasn't enough. Terry Pegula later added $14 million to to that number, and the university sought somewhere around $10 million from other sources.

Breaking PSU's $112 million down, $89 million was for the Pegula Ice Arena. So if you can get the building somewhere else, that number drops to a more reasonable $23 million, mostly to endow scholarships and alleviate future budget issues (or more than that, if retrofitting an existing arena with an ice plant, or something else along those lines). And that number also includes a women's team, which may or may not be necessary based on Title IX requirements.

Just to get that hurdle out of the way, Rutgers is 51.4 percent male and a rough count says that men take up 320 of 670 (47.8 percent) of the Scarlet Knights' varsity roster spots - obviously, even adding a hockey team to the men keeps the number just under 50 percent. Maryland (53.0 percent male) uses 288 of 508 (56.7 percent) roster spots on men. While there's certainly much more involved with Title IX compliance, on the surface, it would seem that RU is in okay shape, while Maryland is in a less flexible spot.

Facility-wise, and at least superficially, both Rutgers and Maryland have work to do. RU would likely need an entirely new rink. Maryland at least stands a chance of adding ice to the ten-year-old Comcast Center (their 17,950-seat basketball arena), but as Penn State has seen first-hand, it's often easier to just build a new rink. Either approach, regardless, is a significant expense. It should be noted that it's possible to construct an adequate facility for less than $89 million - RIT's 4,500-seat Gene Polisseni Center, scheduled for a 2014 opening, has an estimated price tag of $35 million, while Notre Dame's 5,022-seat Compton Family Ice Arena cost around $50 million.

It's conceivable, then, that a start-up needing a major-conference rink could enter the game for something around $60 million. But is that how you want to get at Minnesota, Wisconsin and Michigan - by cutting corners right from the beginning? Penn State certainly didn't think that was a good idea.

In some ways, Brandon DeLibero's Rutgers program is a much more likely candidate for elevation than Maryland. But the hard reality is that it would be a very long road for either school.

The revenue potential with the new Big Ten additions is certainly vast, in both directions. While the conference is banking on lucrative access to television sets in the New York City and Washington-Baltimore markets, Maryland stands to make $100 million more in conference payouts by 2020 than it would have by remaining in the ACC. The ACC's television payout dwarfs that of the Big East, so while I couldn't find a breakdown specific to Rutgers, it's a safe assumption that RU stands to gain even more than Maryland.

So is it as simple as saving up the newfound riches from 2014 (when both schools officially join) until 2020, then having a nest egg as big as Penn State's? Well, not quite.
[Big Ten commissioner Jim] Delany found two desperate, cash-strapped members in Maryland, which had to drop seven sports last summer, and Rutgers, which spent more money than any public university in the country on athletics from a school budget that was $28 million in the red. Both schools jumped at the chance when offered a long-term financial bailout, and for the opportunity to be with what they consider better company.
Both schools have a financial mess of an athletic department right now, to the point where they had to shed part of their identities for the payday. And as mentioned in the quote, Maryland's situation is severe enough to force their chopping sports.
Men’s and women’s swimming; men’s tennis; women’s water polo; acrobatics and tumbling (formerly known as competitive cheer); and two men’s track programs, cross-country and indoor track and field, were eliminated. Those programs did not show enough progress toward raising eight years’ worth of total costs by June 30.

The announcement comes after Maryland President Wallace D. Loh accepted the recommendation of a 17-member panel last November that called for the school to eliminate eight athletic programs to offset a deficit that is projected to reach more than $4 million this fiscal year and could top $17 million by 2017.
Does that seem like a school that's even about to consider adding anything, let alone the notably expensive sport of hockey? Chris Peters of The United States of Hockey raises a counterpoint in the form of one prominent Terrapins booster.
What makes Maryland all the more intriguing, is the close relationship of Under Armour founder and Maryland alum Kevin Plank with the school’s athletic department. Now billionaires don’t just give away money, but Plank probably wouldn’t mind seeing a potential for a new revenue stream opening up for his alma mater’s athletic department.
The counterpoint to the counterpoint? Plank either allowed or could not prevent things from progressing to their current state, so...

Rutgers does seem like it scores a better on most counts than Maryland - including both the quality of their ACHA team and their conference exit fee of $10 million, compared to Maryland's $50 million. Still, RU has to overcome their current red ink, and...

The Bryce Jordan Center was PSU's last great near-miss with respect to NCAA hockey.

When Penn State joined the Big Ten in 1990, the university underwent a massive facilities upgrade to bring everything up to the conference's standard. The most visible and obvious example is the Bryce Jordan Center, which opened in 1996 and cost $78.2 million in 2012 dollars. Rutgers may have their very own Rec Hall in the form of the 8,000-seat Louis Brown Athletic Center, which is set to be the Big Ten's smallest basketball venue, and it's entirely possible that they'll want to upgrade too. Does that open the door for a multi-purpose arena which includes ice? I suppose, but as mentioned, that costs extra. The current sports will always take priority, so if Rutgers has to make a choice between an arena with ice and an ice-free arena with enhancements to their football stadium, they're going to choose the latter. When the BJC needed something cut, it was the ice.

So, to recap: high cost of entry, heavily struggling athletic departments, conference exit fees, priority on stabilization and getting existing sports teams up to snuff.

It's precisely for those reasons that I encourage people to forget about Maryland and Rutgers and look to schools already in the conference, particularly those examining or building new arenas. Illinois is looking to renovate Assembly Hall instead of building a new facility, a likely blow to their prospects of NCAA status. Indiana's trustees have already voted in favor of a new arena "when appropriate." Nebraska's Pinnacle Bank Arena, scheduled to open at the same time as the Pegula Ice Arena, will include the potential to serve as an ice facility (Huskers blog Corn Nation recently did an outstanding piece on this very issue relative to their school, with decidedly mixed opinions on the topic). Sure, there's always a chance that a school finds its own Pegula to make much of this discussion moot, but... really? That's what you're counting on?

If it was easy, everyone would do it. But it's a little less hard for the schools that have stable finances and are already in the Big Ten.

Three national championships. Nine Frozen Fours. Hockey state. Ryan Miller. Loses money.

In the event that a school - Rutgers or Maryland or anyone else - overcomes all of that, there's at least a chance of hockey serving a revenue producer, as USCHO's Todd Milewski points out in an excellent piece. Still, questions remain.

Michigan State (a very historic program) and Ohio State lose over one million dollars per year on men's hockey. Michigan turns about half a million in profit, but doesn't have to worry about supporting a women's NCAA program. Wisconsin also makes money on men's hockey, but loses money when counting the women. We don't yet know about Penn State. That leaves Minnesota, an outlier in just about every way when it comes to hockey. Will the formation of the Big Ten and the resulting BTN broadcasts enhance anyone's hockey-specific numbers or add anything to the pot? Honestly, I have my doubts. Even a more optimistic outlook must acknowledge that it's a giant unknown right now. It's often said that hockey can be a revenue sport, but it only seems to play out that way for the Gophers, North Dakota, and maybe Boston University and a select few others. For Big Football State U. to add the sport and expect it to turn a profit or even pay for itself is unrealistic in my opinion.

From purely a dollars and cents, risk-conscious standpoint, major-conference hockey really doesn't look like something worth pursuing unless someone shows up with a high eight- or nine-figure donation to get things rolling, address the facility expense (which exists and is significant in a vast majority of cases) endow scholarships (among the largest year-to-year expenses) and protect against future shortfalls. And the donor should probably be a big hockey fan and stand firm on the donation's purpose, because with a check that large, non-hockey people are going to try to get a bite at the apple.

Ultimately, my point is this: Penn State was lucky. Damn lucky. To expect that luck to magically reproduce itself at campuses all across the country simply because college hockey's conference structure is more amenable to adding teams is foolish.

6 comments:

  1. Losing a million or two a year on hockey might not be a bad deal if it's something the alums, students and public are excited about. The school will make it up in other ways - donations, "good will," merch, applications, etc. Illinois and Nebraska could make that work.

    Rutgers and Maryland don't seem like good candidates. Maryland generally appears to have more fan support in their market, but it's all about basketball (and soccer and lacrosse, to a much smaller extent). They really struggle to attract fans to football. I don't think fans in the DC area would flock to support Terps hockey enough to make it a good BigTen program. Then again, if the Under Armour guy gave a lot of money and they played their games at the MCI Center, maybe. But that seems like a stretch.

    Navy seems like the most likely candidate of those considering it now. As far as I can tell, it wouldn't cost them anything in scholarships since every student there is already on a full ride. It would just cost them whatever it takes to get D1 quality coaching and to upgrade their facilities. They're probably only aspiring to the AHA so it wouldn't have to be a huge facility, I wouldn't think, and they could share it with the community. Another ice rink in the DC/Baltimore/Annapolis region would find plenty of users. And there are lots of wealthy USNA alums they may be able to tap.

    I don't know much about URI, but certainly hockey fans in Rhode Island are familiar with college hockey (Brown, Providence, etc) so it seems like a logical move for them if they can get the start-up funding. They're not doing much of anything in football (mediocre I-AA teams don't inspire a lot of passion. Maybe they'd even drop it in favor of hockey) or making a huge splash in basketball so this is a chance to have a sport that fans actually care about and put URI "on the map" as it has for UNH and Maine.

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  2. I think in the B1G a lot will be determined in the next few years when the BTN televises games. If they get successful ratings, then a few more dominoes could fall. If not, then huge donations will likely be required to start programs.

    Speaking of arenas...I was at Delaware last year for our road game against them. Their arena seems large enough for the type of conference they'd likely be able to join. Perhaps they can get something going.

    Given the success of professional hockey in PA, maybe some Philly schools would be interested. I could see a bus league with Philly, Delaware, Navy and maybe Baltimore schools. Don't know how much ice Philly has outside of the Flyers' arena (it changes names so often, I give up). Baltimore has a nice old arena that would work for college hockey. I assume it's still there. Don't know who would play there anymore.

    If Robert Morris can manage, why can't Pitt? They are in the ACC, which doesn't have hockey. So they'd be free to join any hockey only conference and wouldn't necessarily need a huge arena. They could also play in the CEC -- their football team plays off campus.

    Anyway, just rambling, wishing out loud that this sport would take off. Or maybe I should watch what I hope for. Tickets are still reasonably priced.

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  3. Going to sort of try to hit both of you at the same time, we'll see how that goes.

    With Atlantic Hockey, the barrier to entry is so much lower. The rinks, typically, are only a couple thousand seats, so a school like Delaware (which I would love to see, but I believe they just cut track a couple years ago, so they may be in a financial mess too), URI or Navy would be ready to go right now in that department. The conference only allows 12 scholarships (the limit is 18 everywhere else), and other than Air Force can be primarily done by bus. When a rumor hits with someone joining AHA like the recent one with URI, St. Anselm and Navy, I'm willing to give it a lot more credibility than the Big Ten school of the month.

    One thing that all of this realignment has done is make a clear distinction between those with money and those without it. In the future, I could see the "new" WCHA adopting a lower scholarship limit. They'll probably have to do something, because they're taking on a very wide footprint with the Alaska schools (and they may add Huntsville too) and they won't be on TV. Someone like MSU-Moorhead (remember that one? haha...) might be able to do something in that environment. But the other side of that, with the money conferences, is that if the sport grows like people hope it will, it's just going to cost more and more to stay competitive.

    I think smaller schools might have an easier time getting in, but even they seem to overestimate the revenue potential - remember the wave of new DI schools after DII was eliminated, like Findlay, Wayne State, Iona, Fairfield? Others did well, like UAH before the other schools dropping out killed their league.

    BTN...we'll see. I linked a whole post I made about it for the full version of this... nobody can argue that it's been wildly successful, that's for sure. But it's because of football, and to a lesser extent basketball. The real question is how many MORE households, eyeballs, ads sold or digital subscribers will hockey bring? Undoubtedly a few, but I don't think it's suddenly going to be this tipping point where my cable finally adds BTN, nor will hockey's traditionally pathetic ratings suddenly improve. I do think a Big Ten school is more likely than a large school in other all-sports conferences, although I actually think that the NCHC may end up driving hockey growth more than the Big Ten because of it being a hockey-only league and because the Big Ten doesn't accept one-sport members. The NCHC basically runs from Ohio to Colorado, is trying to make TV money, and in theory, could take on any non-Big Ten school.

    Pitt's an interesting school for the reasons you mention, as is any urban school with a large arena nearby, because that's such a huge part of the expense. I actually did look at something like the Izod Center for Rutgers, but it's an hour away, didn't realize it was that far. Even schools that have that benefit of that (see Omaha) still try for their own arena at some point though.

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  4. What do you think the potential for Maryland to use the Verizon Center, home of the Capitols, for hockey? Georgetown already uses the facility for basketball (as it also hosts the Wizards), so there's precedent there for NCAA usage. I get that Georgetown basketball is a national brand, but hockey is pretty popular in DC. Thoughts?

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  5. I'm curious to see if we will have a chicken-egg situation with college hockey soon. It such a small, niche sport right now with just a handful of programs making any real profit. However, if a few more big name schools start making the jump, there's the chance that interest begins to build, increasing the chances for schools to make hockey a real profit-turning sport.

    Unfortunately, it's going to take a few lucky teams who can take the risk and make the jump to help get the ball rolling. Penn State is the first, and will be certainly be scrutinized closely by a number of schools to see how feasible is it to make this sort of jump.

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  6. Good read Kyle.

    Michigan State doesn't always lose money though. There is an attendance level that MSU has to reach (on average) to break even, but the Spartans were always capable of doing that under Ron Mason. Unfortunately, the economy tanked, and Hockey was seen as the "extra" sport especially since no one would give up football tickets, and Tom Izzo could probably run for Governor of Michigan - even Michigan fans respect him that much.

    But, MSU hockey is capable of supporting itself. I forget what the exact average attendance is needed (I think it's around 6,000). My problem is the university did squat to advertise the sport with Rick Comley. They are doing a much better job of it with Coach Anastos, but they are still taking a hit at the gate, since they are offering up free tickets from time to time.

    My guess is - their hope is - they won't need to do this forever, and once things get rolling again, they'll be able to charge for all the seats.

    The University also dropped season ticket prices to $15 for a bench seat. It used to be $20. But in the scheme of college athletics - losing $1 million really isn't that bad. Especially when the program - along with the attendance - was down.

    In addition, the causual Michigan State hockey fan doesn't really get fired up for Ferris State, Lake Superior, Northern Michigan, etc... Even if those teams were good. The casual fan does get fired up for Michigan, because - it's Michigan. They also get fired up to see Minnesota at Munn, or Wisconsin, and Ohio State. I bet the stands are full this weekend - just because Ohio State is a name Michigan State fans know - even if their hockey program isn't a historical power. Penn State will have the same force with the casual hockey fan at Big 10 schools. Big 10 fans know Penn State - even if you aren't a power in hockey right away. They will come.

    But as you point out so well, finances will drive the future of this sport (along with Title IX). Schools are going to need a big donor to help teams make the club-varsity leap. Penn State was fortunate. But I also believe it will succeed there. I'm still looking forward to the series at the end of January.

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