As the 2015 college football season kicked off and Urban Meyer and his Ohio State Buckeyes set their sights on defending their national championship, the Wall Street Journal published an opinion piece by Monte Burke, the biographer of Nick Saban, suggesting that highly paid college football coaches deserve the compensation they receive.
Recent economic scholarship provides solid support to Burke’s position.
According to the “The Equity in Athletics Data Analysis Cutting Tool” that is published by the U.S. Department of Education, during the 2013-14 reporting year, the University of Alabama invested over $72.6 million public dollars in the 44 teams in its athletic department in the form of recruiting ($2.1 million), student-aid ($11.7 million), game-day operations ($14 million), team expenses ($24.8 million), and coaching salaries ($20 million).
Of this amount, the public investment in Saban himself was only about $200,000 or a mere .275 percent of the investment in athletics. That is just over one quarter of one percent of the total investment. The balance of Saban’s $7.2 salary was satisfied by private money. The public does not put any capital at risk with respect to over 97 percent of the coach’s compensation.
Alabama’s football program earned almost $95 million during the reporting period, a 31.9 percent return on the total $72.6 million public investment.
How do coaches like Saban and their athletic departments and conferences deliver such ROI?
Many assume that Saban’s recruiting of student-athletes who are more talented than Alabama’s opponents is the answer. But in a 2015 study entitled “Lock-in and Team Effects: Recruiting Success in College Football Athletics,” Trey Dronyk-Trosper and Brandli Stitzel found that upon controlling for team-specific effects, benefits of recruiting are largely eliminated.
Dronyk-Trosper and Stitzel found:
Without accounting for team specific effects, we continue to find evidence of the importance of recruiting…. However, upon controlling for team-specific fixed effects, the effect of recruiting turns insignificant. In essence, team specific unobservables account for much of each teams’ success. Such a finding, while surprising, provides for a new avenue for consideration in future research. These results would suggest that recruiting raw ability is less important than the utilization of the team’s facilities. In other words, success may be more akin to the discussion of the effects of nature versus nurture. In our case, these findings represent a push toward the importance of nurturing in the generation of team performance from recruits.
In college football, much of this nurturing is in the form of “technology” provided by coaches as that term is used by Stefan Syzmanski in Playbooks and Checkbooks: An Introduction to the Economics of Modern Sports. “Technology here means the way in which efforts are transformed into winning probabilities,” Syzmanski wrote.
By providing this invisible, transformational “technology” in the form of strategic and tactical on-field design (e.g., play design) as well as intangible “unobservables” like leadership, preparation, and commitment, Saban and coaches like him greatly increase the probability that a university’s public investment in intercollegiate athletics will be a winning investment.