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Revenues

As all organizations will eventually benefit from a playoff format, letís eliminate a major obstacle - greed. Both revenue allocation and revenue sharing must be discussed.

Revenue allocation explains how funds generated by processes of a particular sport as a whole are distributed among that sportís individual participants; where the individual participants may, but not usually, receive identical portions. Once monies have been allocated, there may be a need for some participants to divide their proceeds among members of a particular alliance, such as a conference or league. Equal share of total revenue among the members of any alliance is not necessarily fair due to the fact that the worst program or department has little to no incentive to become the finest. Is it fair when the least prepared, whom most likely put in less effort, receive the same gain as the best? Thus, revenue sharing describes fair dispersion among members whose returns vary per organization per year. Letís look first at revenue allocation.

Revenue Allocation:

In the old system and current BCS, it has basically been all or nothing concerning the allocation of monies, where smaller programs collect little or nothing. The bowls have shown to make rich schools richer. Schools in the (6) major conferences - ACC, Big 10, Big 12, Big East, Pac 10, and SEC - received approximately 94% of the total $144.6 Million paid out by 23 bowls after the 1999 season. Ten years earlier in 1989, the same teams from above also received an identical 94% of bowl revenues. Additionally, there is further disparity among the disparity. Take 1998 Kansas State for example. After a heartbreaking overtime loss in the extra game of the Big 12 Championship, KSU was dropped from a slot in the BCS title game and a $12 Million payout to an insignificant bowl and payout of less than $1 Million. Now, with the following allocation configuration, those teams in the postseason but not in the National Championship game will still receive a significant payout; and the teams not in the postseason altogether would receive a comparatively representative portion.

Only schools that have Division IA football programs would be eligible to receive any funds generated from a Div. IA playoff. These funds, after NCAA expenses, would be distributed in a manner to be described.

[We will call the after-expense monies to be allocated, revenues]

With the Top 12 and Next 16 formats, there are more postseason games. However, most important is the knowledge that all games with a playoff structure would hold an optimum amount of interest. The schools that participate in either the Top 12 or Next 16 tournaments would receive approximately 63% of the total revenue. Those schools not partaking in the postseason would receive approximately 37%. For each tournament, monetary payouts will be determined by the last round of participation.

Allocation Table:

Where:    1.0 share = 1.0% of revenues
                 f = 5 for the runner-up and 6 for the winner

 

Next

16      

Top

12  
1 2 3 4 ROUND 1 2 3 4
8 4 2 2 TEAMS / ROUND 4 4 2 1+1
1.0 1.5 2.0 2.5 SHARES per TEAM / RD 2.25 3 4 f
8 6 4 5 TOTAL SHARES / RD 9 12 8 11

Total shares allocated to the 28 teams of both tournaments = 63.0

Regarding the percentage each tournament is allotted from this total of 63 shares, the Top 12 shall acquire 63%, and the Next 16 secures 37% (sum the total shares per round in the table above).

                                    Top 12:           .63 times 63 shares = 40 shares

                                    Next 16:          .37 times 63 shares = 23 shares

            Of 114 Div. I teams, 86 will not make either tournament.

            37 shares remain for 86 teams.

            Ranked teams #29 - #56 shall receive 37% of the remaining 37 shares; and

            Ranked teams #57 - #114 shall receive 63% of the remaining 37 shares.

                                                                        .37 times 37 shares = 14 shares

                                                                        .63 times 37 shares = 23 shares

            #29 - #56    14 shares / 28 teams = 0.5 shares per team

          #57 - #114: 23 shares / 58 teams = ~ 0.4 shares per team

In summary of this particular and fair distribution for a college football postseason, the top 28 teams (top quarter, 28 divided by 114 equals 25%) receive anywhere from 1.0 to 6.0 shares each; teams of rank #29 - 56 (second quarter) each will receive a 1/2 share (0.5); and the bottom half of all ranked teams (#57 - 114) shall receive approximately 0.4 shares each.

 As a note, many schools have been criticized for undisciplined spending on bowl trips. With the current system, bowls pay the participating schools; who first take out their expenses, then share whatís left, if anything. Under a playoff system, the NCAA could put reasonable limits on university travel expenses, thereby further increasing total revenues to be allocated.

 

Revenue Sharing:

There are many concerns regarding how revenues are shared on both the collegiate level as well as in professional sports, among other circumstances and environments. In Major League baseball, for example, some teams spend $90 Million on player contracts and make a profit while other teams may spend $40 Million and actually lose money. In regard to college football, some individual teams are required to share their payouts with other members of an appropriate conference. This and other scenarios are relevant in the need to develop a fair and consistent method of sharing revenues.

For conceptual purposes, letís first begin with an example more closely relating to professional sports. This example shall introduce and clarify the steps and formulae involved; then, we will move to an example especially pertinent to college football.

Example:  Professional Sports League Revenues Sharing Across Franchises

Revenues, which are rounded to the nearest $Million, are defined as monies  available prior to any variable spending such as player contracts.

            Listed is a sample of 12 teams and their varying pre-disbursement funds:

Team

 


Initial Gross $

1

 

 

90

2

 

 

40

3

 

 

35

4

 

 

75

5

 

 

80

6

 

 

60

7

 

 

63

8

 

 

88

9

 

 

55

10

 

 

65

11

 

 

108

12

 

 

63

Definitions:

                         Rn       equals REVENUE for a PARTICULAR TEAM

                         N        represents the NUMBER of TEAMS

                         T         is TOTAL REVENUE of ALL TEAMS

                         B         stands for the BASE REVENUE TOTAL of ALL TEAMS

                         E         is EXCESS REVENUE ABOVE BASE TOTAL of ALL TEAMS

                         D         equals the REMAINING REVENUE per EACH TEAM

                         C         represents the BASE per EACH individual TEAM

                         V         stands for EQUAL AVERAGE per TEAM of TOTAL REVENUES

                         I           equals TOTAL of INDIVIDUAL TEAM ADDITIONAL amounts

                         F          is the FINAL REVENUE EXCESS

                          An       represents INDIVIDUAL TEAM ADDITIONAL REVENUE

                         Zn       equals INDIVIDUAL TEAMís FINAL REVENUE AMOUNT

Steps to determine fair distribution: (emphasis on major and minor influences)

            1.                    T = R1 + R2 + R3 + ... + Rn

            2.                    V = T / N

            3.                    B = T (.63)

            4.                    C = B / N

            5.                    An = (Rn - C) (.37)

            6.                    I = A1 + A2 + A3 + ... + An

            7.                    E = T - B

            8.                    F = E - I

            9.                    D = F / N

Formula:

Zn         C + D + An

       which reduces to:

Zn       [[ T - (.63) (.37) T ] - I + N (.37) Rn] / N

 

From the above, we arrive at the Final Distribution Table:

            where:                        C = 43
                                              D = 16, rounded
                                              T = 822
                                              V = 68.5, equal average between all teams

Teams Pre-disburse $ Final $ % of Average
1 90 76 110
2 40 59 86
3 35 58 86
4 75 71 103
5 80 73 106
6 60 64 94
7 63 66 96
8 88 76 110
9 55 63 91
10 65 67 97
11 108 83 121
12 63 66 96

As you can see, individual organizations that perform are rewarded with above average funds and organizations that fall below standard receive below average funds. However, the differences between individual entities regarding final disbursement is proportional to the differences between levels of success or gain; as opposed to being skewed to opposite ends of the spectrum as before revenue sharing, or as opposed to how equal sharing appoints all exactly in the middle of the spectrum. In other words, fair dispersion between members!

Now, letís apply these principles to college football. The following illustration displays how schools of the Big 12 Conference would share the revenues acquired from individual programs after a postseason of the Top 12 and Next 16 has concluded.

Example:

            Total proceeds to be allocated among all Div. IA teams equals $500 Million.  
            All numbers represent increments in $Millions.

  Final Distribution Table:

            where:                        C = 4.71  
                                              D = 1.29
                                              T = 89.75
                                              V = ~ 7.5

Teams $ Allocated Tournament Last rd. / rank Final $ % of Avg.
UNL 30 Top 12 winner of 4th 15.36 205
KSU 11.25 Top 12 1st 8.42 112
KU 5 Next 16 1st 6.1 81
CU 5 Next 16 1st 6.1 81
MU 2.5 none 29-56 6.0 80
ISU 2 none 57-114 6.0 80
           
UT 15 Top 12 2nd 9.81 131
T,A&M 10 Next 16 3rd 7.96 106
BU 2.5 none 29-56 6.0 80
OU 2.5 none 29-56 6.0 80
OSU 2 none 57-114 6.0 80
T.Tech 2 none 57-114 6.0 80

 

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