How the SEC Became the Richest Conference in College Sports

If any team has a reason to hold a grudge tonight as the Alabama Crimson Tide and the Notre Dame Fighting Irish battle for college football’s national championship, it’s probably the Georgia Bulldogs. Georgia came within 5 yards of upsetting the Tide in the Southeastern Conference (SEC) championship and earning a shot at the national title. It was a tough win for ’Bama to pull out and a tougher loss for Georgia to accept — Bulldogs quarterback Aaron Murray has said the loss will likely haunt him forever.

But nine days after the game, University of Georgia president Michael Adams already decided whom he’d be rooting for in the title game. “The pain is still there, but I’ll be pulling for Alabama,” Adams says. “I’m an SEC person.”

That’s a common sentiment in the South, where chants of “S-E-C!” often ring out in the stadiums of some of the country’s most successful sports programs. But for the people in control of the Southeastern Conference — the university presidents, athletic directors and conference leadership — supporting the SEC is about much more than Southern pride. It’s about protecting what has quickly grown into a billion-dollar enterprise that still has plenty of room left to grow.

Back in 2004, when the SEC’s clout was so small that an undefeated Auburn Tigers team was left out of the national championship in favor of Oklahoma and Southern California, the athletic departments of the 12 SEC schools pulled in about $620 million, according to data collected by the Department of Education. By 2011 that number had ballooned to almost $1.1 billion, and the SEC had reached parity with the Big Ten to become one of the most valuable athletic conferences in college sports.

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The fuel driving this economic engine has been winning of an unprecedented nature. If Alabama defeats Notre Dame on Monday, the SEC will claim its seventh consecutive national championship in football and its eighth in 10 years. The victories have catapulted what was once a regional brand with passionate local fan bases all the way into the national spotlight, and the schools are reaping the benefits. “I don’t think there’s any doubt that everybody [in the SEC] today is better funded, better recruited, better coached, better supported than we were a decade ago,” Adams says. “It shows in the final [Bowl Championship Series] rankings where six of the top 10 schools were SEC schools.”

Monetizing a Passionate Fan Base

The money that flows into college athletics comes from a myriad of sources, and SEC schools have been able to capitalize on most of them. With many of its schools located in small towns hundreds of miles from professional sports teams, the conference has led all of college football in ticket sales since 1998, with average attendance topping 75,000 per game in 2011. Half of the top 10 earners in merchandise and licensing revenue in 2011 came from the SEC, according to the Collegiate Licensing Company. Athletic boosters, a big component of a major college-sports budget, are especially prominent in the South, with six SEC athletic departments receiving more than $25 million in contributions and donations in 2011, according to data gathered by ESPN. “It’s probably the best conference in the country right now in terms of potential for making money,” says Dan Fulks, a research consultant for the NCAA.

While SEC fans are big game attendees, they’re even bigger TV viewers. This year’s SEC Championship between Alabama and Georgia earned 16.2 million viewers, triple the next most watched championship game, according to data provided by Nielsen. Last year the November matchup between undefeated Alabama and LSU teams drew more than 20 million viewers, the most since 1989 for a regular-season college-football game on CBS. And despite the ongoing carousel of SEC teams in the national championship, the game has continued to pull in consistently huge viewership, with many predicting that this year’s Alabama–Notre Dame matchup could set a ratings record. “There’s a lot of interest in us whether you’re for us or against us,” says conference commissioner Mike Slive. “One of the reasons we’re a significant television attraction is that our fans are interested not only in the game in which their institution is competing, but they’re also interested in other SEC games.”

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Such impressive ratings are the reason the conference is well positioned in its current TV contract renegotiations with CBS and ESPN. Slive says the SEC set the bar for college athletics TV deals in 2008 when it negotiated contracts with the two networks worth over $3 billion in total over 15 years. Now he’s getting an early opportunity to demand even more cash because newcomers Missouri and Texas A&M have vastly expanded the conference’s media market. Experts predict that the new SEC deal will be the biggest one ever in college sports.

Texas A&M president R. Bowen Loftin readily admits that one of the main reasons his school bolted from the Big 12 after 15 years was money. In the SEC, revenue from bowl appearances and TV contracts are split evenly, while Big 12 payouts were based on the number of television appearances a team made until 2011. “We wanted to enhance the economic value to Texas A&M,” Loftin says. “As TV contracts are renegotiated, as other revenue streams come online, we believe we’ll see a rapid growth of revenue to all the schools in the SEC.” Already, he says licensing revenue has increased 26% year-over-year, and donations to the athletics department have risen sharply.

Trapped in an Arms Race

Now flush with cash, SEC schools find that spending heavily is the only way to stay competitive. “If you’re going to compete in the Southeastern Conference, that means you have to have very competitive facilities, playing venues, workout spaces, coaches’ offices, indoor training facilities,” Adams says. “There clearly has been somewhat of an arms race the last 10 or 15 years.”

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Nowhere is the monetary competition clearer than in the salaries of coaches, which have shot up more than 70% across all major Football Bowl Subdivision colleges since 2006, according to USA Today. Alabama’s Nick Saban is now the nation’s highest-paid coach at almost $5.5 million per year, while SEC schools LSU, Auburn and South Carolina were also part of a small handful of institutions that paid their coaches more than $3 million in 2012.

“The money drives what’s available to pay these coaches,” says University of Florida president Bernie Machen, whose Florida Gators pay football head coach Will Muschamp about $2.5 million per year. “It’s basically a market-driven phenomenon that we’re sort of stuck in.”

Facilities have also seen rapid improvements in recent years. A 2010 expansion brought Alabama’s football-stadium capacity above 100,000, and LSU is planning an expansion that will bring its stadium near that number in 2014. The money flows into other sports programs as well, including an upgraded $4 million gymnastics practice facility at Florida, a $7 million dormitory for the Kentucky basketball team and a $35 million baseball stadium at South Carolina. Those investments are also paying dividends, with SEC teams claiming national titles in eight sports besides football in 2012.

But the gridiron remains the economic engine powering Southern athletics. “Football provides 75% of our budget here at Auburn,” says athletic director Jay Jacobs. “Without the revenue from football, we wouldn’t be able to operate very many sports.”

There are drawbacks to participating in a conference that’s so competitive physically and financially. Expensive buyouts of underperforming coaches have become common in the SEC, with six of the league’s 14 schools spending a total of $26.5 million to pay coaches to leave in the past two years, according to USA Today. Tennessee’s athletic department posted a $4 million deficit for the fiscal year back in August, largely because of expensive buyouts of former football, basketball and baseball coaches. And despite a cleaner record than in years past, SEC football programs have still been subject to penalties in four cases of major infractions against NCAA rules since the championship streak began in 2007. “There is the issue of bigger and better and more, but I think institutions have to be very cognizant of what their limits are and what their resources can demand,” Slive says.

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This year, the SEC has not shown its signature imperviousness during postseason play. Northwestern defeated Mississippi State for its first bowl victory in over 60 years, LSU was foiled by Clemson, and Florida’s surprising loss to Louisville was the biggest upset in BCS bowl history. A Notre Dame victory over Alabama could do a lot to undermine the image of otherworldly dominance the SEC has spent years building. So the Crimson Tide plays not only to earn a third championship in four years but also to preserve a brand that has become the gold standard for one of America’s most popular sports. Even Jacobs, the athletic director at bitter in-state rival Auburn, acknowledges that a ’Bama win would benefit the conference as a whole. Winning begets money, which begets more winning. With a frenzied regional fan base, a national audience that’s yet to change the channel and two new teams that extend the conference’s reach into the Midwest, the SEC may just be getting warmed up financially.

“Some people sit back and rest on their laurels when they’re successful, but they’ve been investing back into their product,” says Tom Regan, a professor in the department of sport-and-entertainment management at the University of South Carolina. “That’s good business.”