clock menu more-arrow no yes

Filed under:

Josh Whitman is taking a massive gamble

New, 2 comments

And it better pay off.

Michael Hickey/Getty Images

On Monday, Illinois Athletics announced a project to upgrade the Men’s and Women’s Basketball practice facility.

The $30 million project adds to the large list of projects that Illinois is trying to complete as part of the $300 million fundraising goal for “With Illinois”, a $2.25 billion University-wide fundraising campaign.

This list doesn’t included the $18 million track and soccer stadium upgrade, of which $7 million has already been gifted. The new stadium will open in 2019.

All of these, of course, followed the major renovations to State Farm Center for $169.5 million.

On its own, each one of these projects make sense. Illinois is far behind its Big Ten peers in facility quality, and many of these programs have needed these upgrades for years.

Football really needs to step up its game. Ubben is another good step forward for Illinois. The track and field and soccer stadium is bad. The same can be said for baseball and softball. Without upgrades to these facilities, it will become tougher to recruit for all of these programs, and thus compete with conference rivals on the field and court.

Adding hockey....makes less sense. Even the wildly optimistic projections see the team losing money for the first few years of existence, while even projecting the University would get auxiliary revenue for non-Illinois Athletic events at a privately owned stadium. Spoiler alert: They won’t.

Adding a hockey teams isn’t 100% guaranteed. And maybe it would be best to put it on hold until the DIA is in a more stable situation, but Josh Whitman appears to be all in.

Still, there are some arguments that Hockey could be a revenue-generating sport in the long-term given the support for hockey in the state and the growing popularity of the college game. On it’s own, okay, let’s do the hockey.

But when you combine all these ambitious projects on a condensed timeline together, it becomes a very daunting task for Illinois. Raising funds with a lethargic donor base, where many of the dollars would need to cross over between projects is challenging.

Illinois also isn’t making money right now, and these projects will add more expenses with higher operations cost, unforeseen expenses in construction, and staffing for hockey.

But even still, the risk could be worth it.

But we have to talk about something that very few people including the DIA at Illinois want to talk about: Illinois Athletic’s debt.

Illinois is already over $200 Million in the hole

The school’s annual financial notes are bad, but from third parties, we can see that Illinois was projected to be $260 Million in debt in 2014.

And from that Bloomberg story, Illinois is one of leaders in debt in college athletics.

Bloomberg

(Sidenote: Jesus Christ, Cal.)

Carrying debt actually isn’t a bad thing for a college sports team, or any business really. I’d also speculate that this debt is very manageable for the DIA at this point in time, but right now we don’t know how much of the DIA’s revenue goes to debt service.

Further reading: Interesting twitter thread on the debt.

However, since we know that Illinois Athletics isn’t profitable at this time, it’s not a wild guess that this $260 million debt figure from 2014 is around the same amount today in 2018.

All these project at once could put Illinois in significant financial troubles unless revenue turns around.

Illinois Current Revenue Problems

Even with the huge advantage of being in the Big Ten Conference — and getting that sweet, sweet BTN money — Illinois Athletics isn’t currently profitable. Illinois lost $6.2 million in 2016. Illinois also lost $3.7 million during the 2015-16 season.

The main reason for this is obvious: The teams aren’t winning and Illinois is losing out on millions of dollars in revenue in unsold tickets.

Football attendance fell to its lowest point since 1970 with an average of under 40,000 fans coming through Memorial Stadium’s gates in 2017.

Illinois Basketball had its worst attendance (11,382 average) in 2016-17 since 1977-78. It did bounce back up in 2017-18 to an average of 12,614 in Brad Underwood’s first season, but that number is still below any attendance between 1978-79 and 2015-16 and well below the capacity of 15,500.

Illinois also is one of the few Big Ten schools to charge a student fee for athletics, but even that can’t make much of a difference with this many empty seats.

The answer to turn these problems around is simple: Win some damn games. And let’s be clear by what I mean by “winning”. Illinois needs to turn into a program that goes to bowl games consistently and isn’t routinely embarrassed against top Big Ten opponents. Men’s Basketball needs to at the very least finish in the top half of the Big Ten and make the NCAA Tournament every single year or at least come close.

If those programs can do that, the attendance numbers can rebound, but right now Illinois Football is looking at another tough year with a losing team and a realistic projection of wins to be 3 or 4. Basketball is bringing in some promising players, but only four returnees and having a projecting starting center transferring away leaves Illinois with an even weaker front court than last season, somehow. 2019 is going to be a big season for both teams.

The attendance numbers seem to be as low as they can possibly go, but if Illinois can’t get competitive again in their two main revenue sports in 2019, attendance, in fact, can fall further. Sadly, there is no floor when a team does as badly as Illinois for a decade.

That would be a huge damage to Illinois revenue and could further add to the debt.

But also...

Future revenue outlooks for college sports aren’t promising

College athletics programs have become more and more reliant on TV money over the past decade as contracts with ESPN, BTN, and other networks have skyrocketed. This has led to the surge of spending we have seen in programs across the Power Five conferences.

However, more people are cutting cable each year. Networks aren’t as profitable at they once were and many are starting to cut back on staff.

I talked about this issue last spring:

The main way that college athletics has grown revenue in the last decade has been through Cable TV contracts. ESPN signed a deal to air the College Football Playoff for 12 seasons at $470 million per year. March Madness rights are locked in until 2032 after CBS signed an 8 year extension to their 14 year deal agreed to in 2010; the deal is now for $1 billion a year. The Big Ten Network deal just keeps getting better and better for conference members as well.

This is fantastic in the short term for college athletics, but in the long term, it may be a poison pill.

ESPN peaked at 100 million subscribers in 2011. That has now fallen by 12 million subscribers due to cord cutting. Cable subscribers now pay $8 a month to have ESPN and ESPN2 on their TVs. If they lose another 12 million subscribers, ESPN will lose $96 million a month. As cord cutting becomes the norm as most entertainment has gone to streaming services, ESPN and other networks that broadcast college athletics can be in for a world of hurt.

If current trends continue, it will be tough to imagine another $470 million dollar contract for the CFB Playoff, or see March Madness pay out $1 billion a year. But even if these contracts stay the same, expenses will keep rising. Schools will lose more money each year as the uncontrolled spending of the recruiting arms race keeps rising, but revenue doesn’t keep up.

When this bubble bursts, what will the fallout be?

If these current deals do go down (current Big Ten deal end in 2022), Illinois could see an further drop in revenue for a department that is already losing money each year.

Already over $200 million in debt and building all these new facilities, and adding hockey and at least one additional women’s sport, with a very uncertain TV contract future which funds a great deal of Illinois revenues...

That’s risky to say the least.

New tax laws and fundraising

You may have read everything before and still not be worried because “these facilities will be paid for by private donations.” And yes, that’s the goal stated by the DIA. They plan on raising $300 million by 2022, and Josh Whitman is a very inspirational AD with a strong future vision that has played well with donors, but I’m skeptical about Illinois reaching this figure.

Starting in 2018, donations to college athletic departments which used to be 80% tax deductible, no longer will be. In essence, a $100 million gift really cost $20 million after taxes, but as of this year, it’s the full hundred.

Even with this change, Illinois had received some large donations to help fund these projects, but there is only so much money out there, and with these donations costing 80 percent more than they used to, how much is there really out there for the Illini?

There is also the issue of crossover donations for hockey hurting Illinois. Instead of donating to the football project or the Ubben upgrades, someone could choose to spend their money for hockey. Now Illinois needs to find more money for football and basketball.

Whitman could be a fundraising wizard and get the money. However, strong skepticism is warranted, especially with the changing tax laws.

Whitman is betting his future on Lovie Smith and Brad Underwood

It comes down to this, unless Illinois becomes more competitive and entertaining in men’s basketball and football to bring in more fans, Whitman’s ambitious plan can lead Illinois down a very bad path.

Expenses are going to go up if all these projects are completed, even if the majority of funding comes from donors. A new ice hockey team especially will be a negative revenue source in its hypothetical infancy. Without a revenue bump from higher ticket sales — or, worst-case scenario, even a further drop in revenue from smaller TV contract and lower attendance — the $200 million plus in debt will grow.

For this not to happen, Illinois Football and Basketball need to show results. Both are currently looking at difficult upcoming seasons near the bottom fo the Big Ten without a good chance at any postseason play.

Lovie Smith will be entering year four of his five-year contract in 2019. If the team doesn’t look to be improving by at least getting to six wins and a bowl, he will probably be fired after the 2019 season. A coach can’t recruit with only one year on his contract, and I don’t see this as a situation where Illinois would be looking to extend Lovie — if they do, say goodbye to any hopes of ticket sales — and Illinois will be starting over again with a new coach and a lot of uncertainty.

Brad Underwood has had difficulty filling out his roster. He inherited a team with only five returning scholarship players, two open scholarships, and lack of front-court dept. After a year where the team went 4-14 in conference, those numbers now stand at four returning players, three current open scholarships, and possibly even worse front-court depth, after a litany of transfers, including three of his five signings from the class of 2017.

So 2018-19 will be a year where its unlikely that Illinois makes an NCAA run, which would be the sixth straight season without making the big dance. If that number extends to seven in 2019-20..... would fans even want to go to an Illinois basketball game anymore?

Still, Whitman may be absolutely right.

Josh Whitman believes this won’t happen. He has strongly stood behind both Lovie Smith and Brad Underwood, and believes the programs are on the right track to success. He is gambling his future on it.

Both programs can certainly turn it around in 2019. Stranger things have happened. Both have made some promising strides in many ways, despite the missteps. There are potential futures under both these coaches where Illinois starts winning and the fans start filling up the seats.

The facility upgrades could help raise the ceilings of all programs involved. Illinois Hockey can bring in a new exciting and growing sport to the lineup and increase Illinois’ national reach. Even if Lovie Smith isn’t the long-term answer at Illinois, the football program could be in a more stable place with new facilities for a new coach to work with.

This could all turn out well for Illinois and this article will appear on @OldTakesExposed on Twitter.

It may work, but boy, it better. Because if it doesn’t the debt will pile up, and revenues won’t be able to keep up. Whitman losing his job would be the least of Illini fans’ worries if this goes belly up.

At the end of last season’s disappointing football campaign, Whitman attempted to inspire hope in supporters of Illinois Football with a metaphor about how in some races with thousands of people, you can start three or four minutes back of getting to the starting line.

“To carry that race analogy through, some programs start five seconds behind that start line. Some programs start 30 seconds behind that start line. Other programs start three minutes behind that start line... Our challenge the last two years has been getting back to that start line.”

Well, Illinois better start running that fucking race.