SBJ/June 13-19, 2011/In Depth

Channeling the power of Texas athletics

DeLoss Dodds continues to get deals done, with the upcoming Longhorn Network perhaps the biggest addition to the trophy case

Editor's note: This story is revised from the print edition.

DeLoss Dodds sat around a table with friends and business partners a few weeks ago, dining on steak and sipping wine at Plaza III in Kansas City.

The occasion was the Big 12 spring meetings, where the conference discussed, among other things, its new round-robin scheduling, a recently negotiated TV deal with Fox that more than quadrupled the conference’s media revenue, and a newfound harmony between the schools.

“What a difference a year makes,” said the understated Dodds, the University of Texas athletic director who will oversee a record $153.5 million budget in 2011-12.

UNIVERSITY OF TEXAS
DeLoss Dodds will oversee a record $153.5 million budget in 2011-12.

At the spring meetings in 2010, the Big 12 was about to crumble and with it would have gone Dodds’ dream of creating a university channel. Now, the conference is as healthy as ever, thanks largely to Texas’ decision to stay rather than to leap to the Pac-10, and ESPN will launch the groundbreaking Longhorn Network in August.

Dodds is the SportsBusiness Journal/Daily 2011 Athletic Director of the Year because he not only took a leadership role in preserving the Big 12, a conference he helped found in 1994, but also because of the new channel, which will generate $300 million in rights fees from ESPN over the next 20 years.

One couldn’t have happened without the other. If Texas had left the Big 12 for an expanded Pac-10, which is pooling the media rights of its schools to create a conference channel, Texas wouldn’t have had the rights to start a university channel. The Big 12 permits its schools to retain the rights to games not picked up by the conference’s network partners, and those rights are the basis for the Longhorn Network.

“A year ago, we thought the world was about to fall apart in the Big 12,” said University of Texas President Bill Powers. “Now the conference is stronger than ever. That wouldn’t have been possible without the vision and hard work by DeLoss. … Who knew 10 years ago that any of this would be possible, but DeLoss always kept a flexibility with our rights so that we could be in this position one day. He’s always a step ahead.”

While Colorado and Nebraska jumped from what they thought was a sinking ship in the Big 12, while behind-the-scenes meetings between schools and other leagues created a sense of distrust among conference brethren, while Big 12 members lamented how they had fallen behind in the revenue game, Dodds saw something worth keeping.

He’d never say it, but the Longhorn Network is the ultimate legacy for the man who has spent 30 years building Texas into the premier brand in collegiate athletics, and it further cements his place as one of the most influential figures in college sports.

“Texas is a powerful, powerful place,” said Bill Battle, founder of Collegiate Licensing Co., and a longtime Texas partner. “And DeLoss is largely responsible for where Texas is.”

Straight shooter

Dodds might be a native of Kansas, but he neatly fits the mold of the strong, silent type from Texas. Powers, UT’s president, said he has seldom, maybe never, seen Dodds accept a trophy for a championship that Texas won, but if there’s a problem, Dodds will be at the podium.

“He has amazing patience,” Powers said. “He took over a rebuilding effort and he didn’t try to do it quickly. He did it brick by brick over a long period of time.”

GETTY IMAGES
All eyes were on Dodds and University of Texas President Bill Powers when they announced a year ago that the school would remain in the Big 12 Conference.

What stands out to most of Dodds’ contemporaries are the negotiations. Dodds doesn’t rant and rave to get what he wants, but business partners call him a relentless negotiator who almost always prevails. Of course, having the power of the Texas brand behind him is the ultimate trump card. Part of the reason ESPN was willing to pay so much for the rights to the upcoming network was simply to be in business with Texas.

“Part of the reason we went down this path is to get closer to Texas,” said Burke Magnus, ESPN’s senior vice president of college sports programming. “No matter what kinds of crazy things might happen on the college landscape, we’re going to be partners with Texas, we’re going to be with the major player among the individual institutions.”

During the talks to create the Longhorn Network, ESPN trumped Fox with its $300 million bid. But that was just the beginning. Ensuing negotiations still had to clear several other hurdles, such as who would claim the digital rights to all of the Longhorns’ live events. Both ESPN and IMG College wanted the digital rights, even though they typically go to the multimedia rights holder — IMG College in this case.

But ESPN took the multiplatform approach with the Longhorn Network that it would take in starting any new channel. It needed the digital rights so that it could have an online and mobile home for these games under the same Longhorn Network branding.

In this unique three-way negotiation, Dodds was both a diplomat and a rights seller, working with IMG College and ESPN to settle issues as they arose.

Ultimately, Dodds made the call on the digital rights: They’re the experts and we’re doing this, Dodds said with a finality that put digital in the hands of ESPN.

“DeLoss showed an understanding of our business that a lot of ADs might have had a problem with,” Magnus said. “If he couldn’t comprehend the vision and how this could go beyond being a TV network, we could have easily gotten bogged down and maybe this thing doesn’t happen. But it was his ability to grasp some pretty sophisticated concepts that helped push it over the goal line.”

At some point during a negotiation, Texas’ business partners have seen that look from Dodds that conveys a clear message: This is how it’s going to be. Tom Stultz, senior vice president and managing director at IMG College, has worked with Dodds over the last decade and knows when it’s coming.

“DeLoss has this uncanny ability to cut all of the B.S. and get right to the point,” Stultz said. “It’s almost a game to see when DeLoss is going to do it, but at some point he’s going to lean over and ask you a very direct question that gets right to the heart of the matter. It’s his way of saying, ‘Hey, shoot straight with me.’”

He once reminded Host Communications (which eventually became part of IMG), “Last time I checked, you didn’t own any football teams.”

“He told me one time that he wasn’t going to renew with us because we couldn’t pay him enough,” said Jim Host, the founder of Host Communications, who began managing the Longhorns’ rights in the 1980s. “But he also knew that I’d die trying.”

Dodds doesn’t deny that he wants a business partner “who gets up just as nervous as I get up in the morning. I want them to get up a little scared,” he said.

Remembering his roots

Dodds’ close-to-the-vest approach was grooved in his hometown of Riley, Kan., population 700. Dodds was one of 11 in his graduating class.

His father, a school principal, died of cancer when DeLoss was only 8 years old. His mother, an elementary school teacher, raised five children: four girls and DeLoss, who was the middle child. Each of the children went to college.

“I saw my mother get up every morning, go to work and raise five kids,” Dodds said. “She was an amazing woman.”

DeLoss’ childhood days were pretty well scripted. He was on his bicycle by 7 each morning to deliver newspapers. From sunup to sundown, he wore out that bicycle, riding all over Riley and even the next town over looking for a game — football, basketball, baseball, whatever was in season.

SHANA WITTENWYLER
Dodds accepts his Sports Business Award for Athletic Director of the Year at last month’s ceremony in New York City.

“It was the kind of place where you ate lunch at one person’s house and then had dinner at somebody else’s house,” Dodds said. “We had a group that grew up together and we ran in packs. In a community like that, everybody was your parent, everybody watched out for you. Most people who grow up like that stay pretty grounded. It’s helped me stay grounded.”

Donnie Duncan, the former Oklahoma AD and Big 12 administrator, has known Dodds for 25 years and “he’s still the same guy, every day. You can tell he carries the values he grew up with and he’s the type of guy who doesn’t forget where he came from or who he is. He doesn’t play games and that really makes DeLoss a strong leader.”

Dodds always saw himself following in his parents’ footsteps as an educator, either as a principal or a coach. Known as the “Riley Flash,” Dodds enjoyed a decorated track career at Kansas State and stayed on to pursue his graduate degree and become a coach and AD.

He later worked for then-commissioner Chuck Neinas at the old Big Eight offices, where he learned the business of college sports.

“I’ve watched a lot of successful coaches and a lot of successful businessmen,” Dodds said. “What they do is figure out the most important thing and then hammer away on that thing. That’s all I try to do, figure out what’s important and get it fixed.”

John Fainter, an Austin attorney and close Dodds friend, said he has seldom seen the AD get too high or too low over any decision. It’s just not Dodds’ style to run around high-fiving coaches or pumping his fist. The most emotion he shows usually is a “Hook ’em Horns” sign with his right hand.

“He’s not a big backslapper,” Fainter said. “He’s more like a cool, steady hand who steers the athletic department. As someone who has two degrees from UT and loves this university, I feel very comfortable that DeLoss has his hand on the tiller.”

Like a lot of athletic directors, Dodds was brought in to be an instrument for change. He took a department that ran in the red and had it making money in three years. He expanded a budget that was a little more than $4 million in 1981 to $153.5 million in 2012, higher than any athletic department budget in college sports.

Working at the University of Texas:
"This place makes you better. It's done that for me, it's done that for [football coach] Mack Brown. Any of us could go someplace else and we wouldn't be as good as we are here. When you look at this university, 400,000 living alums, the size of this state, the passion here for football and all of athletics, the quality of coaches, all of it makes this a great place to be."

One thing he'd change about collegiate athletics:
"I'd want a football playoff, but I've had no success with it. Other than that, I'd say initial eligibility standards. We're hurting some kids by letting them into college when they don't have much of a chance of making it. To be fair to the kids and the universities, the standards need to be better."

Paying student athletes:
"Eighty percent of athletic departments are already taking money from the academic side and it would take a lot more if you're going to start covering the full cost of going to college, about $800,000 to $1.5 million for most schools. This is not a good time [economically] to be thinking about something like that."

First job:
"I worked in a grocery store in Riley, Kan. I was a butcher through high school and I also delivered groceries and delivered newspapers."

Pet peeve:
"People who aren't on time."

— Michael Smith

In the last five years, Texas athletics has turned a profit of between $1.5 million and $6.8 million. Each year athletics shares a portion with the academic side, a practice that will continue with the money from ESPN on the channel.

The decision for athletics and the university’s academic side to split the revenue from the Longhorn Network for the first five years came down while Dodds and Powers were playing golf recently. Powers hooked one out of bounds on the 11th hole, and while he and Dodds walked in search of the ball, Powers said: “I’ve been thinking about this network and I think we’ve got to have at least half of the money for the academic side.Dodds offered no pushback, saying, “It’s all your money. I’m just proud that we can help.”

“The most important thing is that this campus has complete faith in DeLoss,” Powers said.

As Dodds surveyed the Longhorns’ budgets from the past 30 years, he noted that it had tripled every 10 years. Even at $153.5 million in fiscal 2012, the budget will grow by leaps as the ESPN revenue escalates in coming years.

Thinking about the trend of tripling revenue, Dodds laughed and said, “I don’t want to be here 10 years from now. Tripling that will be hard to do.”

He has never really said how much longer he wants to continue as AD at Texas. At 73 years old, Dodds is just starting a new four-year contract, which will give him plenty of time to shepherd the new TV network past its launch and into its early years.

Past that, he doesn’t know, or at least, not surprisingly, he won’t say. A master negotiator never shows his hand.

“DeLoss will be around as long as he wants,” Powers said. “Certainly as long as I’m around.”

Texas athletics five-year budget trend

  2005-06 2006-07 2007-08 2008-09 2009-10
BEGINNING BALANCE $5,669,140 $10,348,199 $19,876,950 $23,133,380 $29,493,529
INCOME AND TRANSFERS IN          
Ticket sales, LASP*, building use fees $35,971,116 $46,447,080 $46,523,349 $55,394,209 $56,741,661
Game guarantees $568,075 $604,500 $318,000 $500,000 $460,000
Contributions $26,507,774 $27,190,731 $35,057,421 $37,291,370 $37,110,293
NCAA, conference distributions $12,570,536 $10,700,651 $11,346,333 $14,325,151 $14,751,503
Television, radio rights $47,505 $191,690 $216,662 $338,171
Concessions, novelty sales $3,823,337 $3,591,350 $3,297,649 $3,892,527 $3,697,206
Royalties, advertising, sponsorships** $9,744,815 $9,367,724 $16,639,170 $18,164,827 $22,065,642
Sports camps $4,962,403 $4,763,508 $4,521,214 $4,523,133 $4,791,827
Endowment, investment income $2,095,611 $1,362,792 $1,052,742 $1,656,008 $1,406,944
Other income $1,822,666 $979,815 $1,412,041 $2,806,144 $2,192,108
TOTAL INCOME AND TRANSFERS $98,066,333 $105,055,656 $120,359,609 $138,770,031 $143,555,355
EXPENSES AND TRANSFERS OUT          
Athletic student aid $6,617,234 $7,475,102 $6,993,766 $7,891,315 $8,444,494
Game guarantees $1,255,844 $1,556,573 $2,599,256 $2,412,295 $2,091,580
Coaches' salaries, benefits $14,106,647 $15,821,280 $17,810,365 $19,701,681 $22,395,654
Administrative salaries, benefits $20,029,369 $20,923,646 $22,704,143 $24,631,000 $25,119,486
Recruiting $933,925 $1,156,826 $1,291,852 $1,322,464 $1,257,768
Team travel $6,041,839 $5,620,965 $6,991,985 $7,624,343 $7,695,570
Equipment, uniforms, supplies $2,493,605 $2,335,620 $2,462,036 $2,694,512 $2,788,833
Games and event expenses $11,409,554 $15,050,939 $16,230,166 $18,500,104 $18,885,378
Fund raising, development $5,143,589 $5,753,905 $6,867,642 $8,393,475 $7,536,591
Sports camps $2,437,435 $2,179,671 $2,179,202 $2,465,121 $1,923,209
Facilities expense $6,630,030 $5,872,029 $6,346,398 $7,301,299 $6,789,518
Debt service $7,138,713 $7,922,035 $10,013,768 $14,716,297 $16,484,214
Spirit group expense $1,365,002 $898,960 $1,072,151 $1,331,067 $1,264,522
Medical expense $1,362,007 $1,695,680 $1,644,712 $1,678,082 $1,853,181
Membership dues, fees $236,280 $249,268 $246,886 $338,195 $360,339
Direct support to institution $1,615,423 $1,659,873 $3,862,327 $3,932,480 $3,760,275
Capital outlay $3,008,211 $6,465,879 $6,106,814 $4,758,454 $6,249,655
Other expenses $1,562,567 $948,234 $1,679,710 $2,717,698 $1,786,422
TOTAL EXPENSES AND TRANSFERS OUT $93,387,274 $103,586,485 $117,103,179 $132,409,882 $136,686,189
FISCAL YEAR NET INCOME $4,679,059 $1,469,171 $3,256,430 $6,360,149 $6,869,166
ENDING BALANCE $10,348,199 $11,817,370 $23,133,380 $29,493,529 $36,362,695

* Longhorn All Sports Package
** Texas athletics took over management of the university's entire trademark and licensing operation in 2007-08.
Source: University of Texas

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