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Tech ponders how to use its $22 million from Big 12 distribution

Record payout helps boost Tech budget to $65 million

Posted: June 14, 2013 - 6:58pm  |  Updated: June 15, 2013 - 12:40am
Hocutt
Hocutt
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Two weeks ago, at the end of its annual spring meetings, the Big 12 Conference announced it would distribute a record $198 million of revenue to the member schools.

That’s $22 million apiece for eight original members, Texas Tech being one, and $11 million apiece for newcomers TCU and West Virginia.

So how does Texas Tech’s $22 million get applied?

“All conference revenue is reinvested back into our athletic department annual budget,” Tech athletic director Kirby Hocutt said. “It goes into line items of recruiting, team travel, equipment, game operations ... .”

The revenue stream comes from first- and second-tier media rights agreements with ABC/ESPN and Fox Sports, bowl games and the NCAA men’s basketball tournament.

Last year, the payout per school was $19 million.

“It’s going to allow us to continue to invest into our programs to provide the resources and service all the needs to compete at a championship level,” Hocutt said. “There’s a certain percentage of the conference revenue that has been designated to the north end zone video board.

“At the same time, it’s going to allow us the opportunity to look down the road at our annual revenue budget. Is there an opportunity to continue our facility enhancements that Texas Tech has been a leader nationally in? Is there an opportunity to look at an earlier debt retirement plan that would be a tremendous benefit to the long-term financial health of Texas Tech athletics? What are our immediate needs as an athletic department that we need to consider?”

Money Tech media from its third-tier media contract with Fox Sports and Learfield Sports is separate from the $22 million league distribution. Hocutt said Tech generates more than $5 million annually in sponsorships, the majority coming from the Learfield agreement.

Tech’s athletic budget for the fiscal year that ends in August is $62 million and is projected to be $65 million for next year.

Its annual debt payments come to about $10 million, Hocutt said, mostly devoted to projects such as Jones AT&T Stadium expansions, the United Spirit Arena and the Football Training Facility.

The big payout from the TV deals don’t necessarily service the debt.

“We are very fortunate that our debt-repayment plan is tied to a certain percentage of our stadium suite and club-level sales and is tied to private gifts,” Hocutt said. “We’re currently in a position where our suites and our clubs are at capacity levels, which is above the amount we have dedicated to (debt) service. So while the conference revenue distribution is not tied directly to our debt service, we are fortunate as a department, at this point in time, that those (other) revenue streams are committed to debt service.”

Nationally, the combination of new TV contracts and grants-of-rights agreements has slowed the tide of realignment and conference expansion.

The revenue-sharing agreement Big 12 schools struck two years ago and the $22 million payouts put the Big 12 in the ballpark with other power conferences, at least on a per-school basis.

The SEC is distributing $20.7 million per member this year, according to published reports — $289.4 million divided by 14 schools. The Big Ten announced it will distribute $284 million to 12 programs — about $23.7 million each, though the shares are expected to be in the $25 million range for most, because late-comer Nebraska does not receive a full share.

At the end of the spring meetings in Irving, Big 12 commissioner Bob Bowlsby said the annual checks to league members could grow to $40 million per school by 2025.

That’s not the only reason for the league’s improved stability.

Big 12 members in October 2011 signed away their media rights to the league through 2025. In other words, if a school wanted to bolt the conference, its media revenue still would go to the Big 12.

The possibility that the Big 12 might go after schools such as Clemson and Florida State — a subject of speculation in recent years — has diminished with the steps the Atlantic Coast Conference has taken to block the exits.

The ACC signed a deal in May 2012 netting its members $17 million apiece annually through 2027 and announced two months ago that its members had granted their rights to the league through 2027.

The ACC also has drastically increased its exit fee — reportedly from about $12 million to $14 million two years ago to more than $50 million now. In September, ACC members voted 10-2 to make the exit fee three times the league’s annual operating budget.

Two months later, Maryland announced plans to join the Big Ten, to begin play in 2014. The ACC sued Maryland for the exit fee of $52.2 million.

“I think with the recent development and the grant of rights within the ACC ... the conversation around conference realignment has quieted,” Hocutt said. “I can only speak as to our league, and I know we are very pleased with the current alignment structure and league makeup of our conference.”

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How To Spend $22M

Buy a new chancellor. $22M would be too cheap.

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