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Volume 21 No. 1


The Penn State men’s hockey team has played before a sold-out crowd at the home of the Philadelphia Flyers this season and posted impressive numbers for games at the Pittsburgh Penguins’ arena. On Friday, the Nittany Lions will host Ohio University at Giant Center, the 10,500-seat home of the AHL Hershey (Pa.) Bears.

Not bad for a team playing its first NCAA Division I season after more than three decades as a club team.

“We wanted to take our product all around the state of Pennsylvania,” said Bill Downey, Penn State’s director of hockey operations. “The big cities and a market like Hershey are key to attracting interest, in recruiting and in the new brand of Penn State hockey.”

While waiting for the opening of the Pegula Ice Arena next season, the Nittany Lions have sold out nine of their 10 games at the on-campus, 1,350-seat Greenberg Ice Pavilion, which opened in 1981. Because the team has

The team looks to have little trouble selling out Pegula Ice Arena, which will open next season with a capacity of 6,500, 16 suites and 600 club seats.
Photo by: AP IMAGES
outgrown Greenberg, the arena of its club years, Penn State officials decided to be creative with some of the schedule.

Penn State defeated Vermont before a sold-out crowd of 19,529 on Jan. 19 at Wells Fargo Center in Philadelphia. The game was made possible by the cooperation of Comcast-Spectacor President and COO Peter Luukko, whose son, Nick, is a sophomore defenseman for Vermont.

The dearth of hockey created by the NHL lockout helped boost ticket sales, with more than 16,000 tickets sold before the league and NHL Players’ Association agreed in principle on a collective-bargaining agreement on Jan. 6. It also helped that Philadelphia is the largest base for Penn State students in the country.

The start of the NHL season then helped convert a large crowd into a capacity one. The Flyers and Penguins played a season-opening matinee that ended at 6 p.m., two hours before the Penn State-Vermont tilt.

“A bunch of NHL fans turned the day into a doubleheader and bought the rest of the tickets,” said Penn State associate athletic director Joe Battista, the former coach of the club team.

Penn State, which is playing as an independent this season before joining the Big Ten’s new hockey conference in 2013-14, participated in the Three Rivers Classic at Pittsburgh’s Consol Energy Center last month, drawing a total of more than 23,000 fans for games against Ohio State and Robert Morris. This coming Friday’s game in Hershey — which is expected to draw around 5,000 — is a natural, Downey said, because of the school’s large alumni population in the area and the nearby Penn State Milton S. Hershey Medical Center, Penn State College of Medicine, and Penn State Hershey Children’s Hospital.

Looking ahead, the team figures to have little trouble selling out its new Pegula Ice Arena, with a slated capacity of 6,500. Included within the arena will be 16 suites, 500 standing-room spaces, 600 club seats and a student section that hangs over the goal where the Lions will shoot twice. “It’s the steepest rake allowable by code,” Battista said. “That should be fun for the opposing goalie.”

The university owned and operated arena, which will have a “community” sheet of ice next door to the main rink, will be utilized year-round. In addition to the men’s and women’s Penn State teams, ice shows will be booked and community-level hockey and figure skating programs developed. The university hopes to host the Pennsylvania state high school hockey championships.

The arena was made possible by an $89 million gift by Terry Pegula — owner of the Buffalo Sabres and a Penn State graduate — and his wife, Kim. An additional $14 million was donated by the Pegulas for endowed scholarships supporting the college’s hockey players.

Dasherboard, on-ice and Zamboni advertising sales for the new arena have been strong. Greg Myford, Penn State’s associate athletic director for marketing and communications, said he expects all those sales points to be sold out prior to the start of the arena’s inaugural season. Deals for in-arena advertising have been signed with Toyota, Tim Hortons and Esmark, a Pennsylvania industrial company that is a top sponsor of the Penguins.

“We’re seeing some companies that have been with us a long time in other sports show great interest in hockey,” Myford said. “We’re also seeing businesses new to us but associated with hockey, like Tim Hortons, want to be our partners.”

Learfield Sports, the multimedia rights holder for Penn State’s athletics department, is leading the sales efforts.

More than $5 million has been raised in private gifts, halfway to a goal of $10 million by 2014. Considering that many Division I schools spend $1 million annually on their hockey programs, hockey could become a revenue-generator for Penn State. Football and basketball are the only sports at the school that currently make money, according to university officials.

“We want to break even at the start,” Battista said. “If we can continue to raise private funds, we could come out ahead.”

The new arena and the continued growth of the hockey program suggest many possibilities. Among those discussed: an NHL team (perhaps Pegula’s Sabres) having training camp on campus; NHL exhibition games; possibly even the Penn State hockey team playing an outdoor game at Beaver Stadium, which holds more than 107,000 fans for the school’s football games.

“There are people around here who’d like to see an outdoor game here tomorrow,” said Battista, laughing. “We’re going to wait four or five years, when we’re ready.”

The Nittany Lions’ hockey development has been a shot in the arm to the university at large, which continues to work its way back from the Jerry Sandusky scandal. It also helps the visibility of NCAA hockey.

“Having a high-profile school like Penn State make a significant investment in hockey is a major statement about the future of college hockey and hockey in the U.S.,” said Mike Snee, executive director of College Hockey Inc., which promotes the college game through grassroots and communications initiatives. “When you see the crowds Penn State is drawing, other schools that aren’t offering Division I hockey have to take notice about the impact the sport can have on a school and an athletic department.”

Average attendance at Neyland Stadium has dropped to its lowest point since 1979.
Editor’s note: This story is revised from the print edition.

From the window in Dave Hart’s corner office, the University of Tennessee athletic director can see Neyland Stadium above all else, a fortress along the Tennessee River that instantly identifies the Volunteers as a member of college football’s elite.

Its enormity is a testament to the sport’s incredible growth during the past two decades and the power of the Tennessee brand. It also effectively conceals an athletic department that built enormous debt while trying to maintain its place among the richest and most powerful football programs in the Southeastern Conference.


Now, after staggering to losing football seasons in four of the last five years and seeing attendance drop to levels last seen in the 1970s, the Vols find themselves mired in more than $200 million of debt, the most in the SEC, with reserves of just $1.95 million, the least in the conference.

The athletic department spends a startling $21 million a year on debt payments, $13.5 million of which comes from the school’s stressed $99.5 million athletic budget and the rest from donations.

It’s an ugly financial picture for one of the nation’s strongest football brands, the kind of financial hole that SEC football giants aren’t supposed to be in, brought about by expensive coaching buyouts and costly improvements to Neyland Stadium and other athletic facilities, just as the losing seasons set in.

“We’ve got to get football healthy,” Hart said from his office in the new $50 million Brenda Lawson Athletic Center, just weeks after hiring Butch Jones from Cincinnati to be the Vols’ fourth football coach in the last six years. “That’s our economic engine. When that program is successful, everybody wins.”

Hart speaks with an urgency about the task at hand. Formerly the No. 2 at Alabama and the longtime AD at Florida State, he took the job in Knoxville 18 months ago fully aware of the upside and the pitfalls of big-time college football. After replacing former AD Mike Hamilton, who resigned under pressure in June 2011, Hart began with a lengthy evaluation process that revealed mounting debt, much more than he had realized.

“Our financial position was probably the biggest surprise of the assessment,” said Hart, bucking the perception that Tennessee athletics is flush with cash. “We’ve got to be better stewards of our finances.”

Athletic Director Dave Hart was surprised by the debt he found when he evaluated the department after taking over in 2011.
Photo by: AP IMAGES
In his first year at Tennessee, as Hart began to fully understand the financial obstacles in his path, the athletic department posted a $3.98 million deficit, which reduced the reserves to a dangerously low level. So Hart put together the first steps of a plan that would help the Vols balance their annual budget and begin to climb out from under their crushing debt.

A cost-savings merger of the men’s and women’s programs was a logical step that will save $5 million this year, but it came at a cost. Seventeen jobs were eliminated. Tennessee used to be one of the few schools with completely separate departments for men and women.

Hart also negotiated with Chancellor Jimmy Cheek to at least temporarily halt an annual payment of $7 million from athletics to the university’s general fund that typically is made at the first of the fiscal year. Hart hopes to resume the annual transfer at some point, but preferably at the end of the fiscal year, not the beginning, so that athletics doesn’t start each year in a deficit.

Cheek pledged to keep that $7 million in the athletic department for the next three years to help the Vols get back on their feet.

“The bottom line is that, for SEC schools with extraordinary revenues, the profit margin is still very thin,” said Bill Carr, a former AD at Florida who now consults with athletic departments on strategy and searches. “Whether it’s Tennessee or any other school, if you’re not selling tickets at full bore and getting contributions to go with them, and that revenue tapers, it becomes very hard to put away the dollars you need. And then you have some undesired expenses like buyouts, and you can wind up in a negative position. The margin is razor thin for most schools.”

With those savings, Tennessee projects a balanced budget in 2012-13, which is a necessity for a program with just $1.95 million in reserves. Building reserves into the $50 million range or more is a priority, said Hart, who added that most SEC schools have reserves ranging from $50 million to $100 million.

Tennessee’s reserves have been depleted by $21 million in transfers back to the university over the last three years, and $11.4 million in buyouts to fired coaches in football, basketball and baseball, as well as administrators. Hamilton walked away in 2011 with a $1.335 million buyout.

None of that includes a $5 million buyout owed Derek Dooley, who was fired as Tennessee’s football coach in November, and $2 million to his assistants. That $7 million will have to be found in this year’s budget.

The Vols incur another expense that costs them $1.6 million a year in city and county taxes. It’s called the “amusement tax,” and it charges the school 5 percent on each ticket sold in football, men’s basketball and women’s basketball, in addition to the 9.25 percent state sales tax. The amusement tax, according to Tennessee athletics Chief Financial Officer Bill Myers, doesn’t pertain to concerts — just the Vols’ major sporting events. Cities and counties that are home to other Tennessee schools and the NFL Titans don’t impose such a tax, he said.

“There’s a perception that we’re sitting on a ton of money,” Myers said, “and that’s just not the case.”

The school is lobbying to have the decades-old tax repealed.

The financial cavalry is on the way, though, in the form of additional TV revenue from the SEC’s contracts with ESPN and CBS. Those deals average $205 million a year for the league and they are expected to jump to about $300 million annually when they are updated. The conference is renegotiating the contracts to account for the growth to 14 teams with the addition of Missouri and Texas A&M.

Hart said SEC athletic directors have not been told exactly how much new revenue that will mean, but projections are $5 million to $10 million a year for each school. Nowhere in the SEC will that be more welcome than at Tennessee.

“We need to stabilize,” Hart said.

He also must make sure the Vols don’t follow any of the patterns that put them in such a financial mess. While college football was booming throughout the 1990s and 2000s, Tennessee was one of the schools leading the charge.

Peyton Manning, a 1998 national title and a burning rivalry with Florida had Big Orange fans feverish for their team and turning out in record numbers on fall Saturdays. Multiple expansion projects increased Neyland Stadium’s capacity to nearly 105,000 as Tennessee fought Michigan and Penn State for attendance supremacy.

Much of the department’s debt came from a series of expansions to Neyland, followed by a series of improvements in the last seven years that actually reduced capacity and created more premium spaces. Built in three phases between 2006 and 2010, those changes cost more than $130 million. The athletic department continues to investigate ways to upgrade Neyland, whether it’s more premium spaces or more chair-back seats, measures aimed at improving the fan experience and driving more revenue, while reducing capacity. Tennessee also brought in IMG Learfield Ticket Solutions to help with sales beginning in 2011.

Facility improvements for basketball, softball and soccer added to the debt, which doesn’t have a state-mandated cap.

These days, however, Tennessee football has lapsed into irrelevance. Only a season-finale win over hapless Kentucky enabled the Vols to avoid a winless 2012 SEC season.

While no one in orange would ever call Neyland Stadium a giant albatross around the neck of the athletic department — that would be sacrilege here in the mountains of east Tennessee — it simply isn’t doing its job as one of the program’s chief sources of revenue.

Attendance dropped to an average of 89,965 in 2012, the lowest since 1979. A couple of late-season games against Troy and Kentucky reportedly drew about 60,000 actual fans in the stands, even though the announced attendance — or tickets sold — was a little more than 81,000.

“We’ve been smart about our projections,” Hart said, adding that the decline in 2012 football ticket revenue won’t significantly hurt the Vols’ efforts to balance the budget in 2012-13.

But he knows that Tennessee can’t stay on its current financial path.

“What you’re seeing is the cost of keeping up with the competition,” Carr said. “You’re trying to keep up and then you wind up paying coaches not to coach. That can add up in a hurry.”

IMG College will be the new multimedia rights holder at West Virginia University, one of the last remaining major schools that marketed and managed its rights in-house.

IMG College won the bid over as many as nine contenders for WVU’s multimedia rights.
Terms of the deal were not available. The agency, which owns the rights to more than 80 universities across the country, is working through the final stages of contract talks with West Virginia Athletic Director Oliver Luck, who initiated the idea of outsourcing the rights early last year. A formal announcement on the deal is expected in the coming weeks.

IMG College will manage the Mountaineers’ third-tier TV, radio rights, corporate sponsorship, signage sales and other inventory.

Virginia-based Rockbridge Sports Group has been consulting with the school and helped manage the bid process. IMG College won the bid over as many as nine contenders, including Learfield Sports, Nelligan Sports, CBS Collegiate Sports Properties, Fox Sports Net, Front Row Marketing, Legends Sales and Marketing, XOS Digital and West Virginia Radio Corp.

Of schools in the five major conferences, Michigan State is believed to be the last to manage its rights in-house.

The agreement with West Virginia was one of two major wins for IMG College this month. It also reached an agreement on a long-term deal with Virginia Tech as part of an 11-year extension that will run through the 2023-24 season.

A key component to the extension is an investment by IMG College into new LED equipment and graphic wraps in Lane Stadium, Virginia Tech’s football stadium. Those enhancements will provide IMG College with new inventory that it will sell to corporate supporters.

IMG College also will add a new video board and other wraps that will go around pillars in the concourses around the perimeter of the stadium, providing more advertising and sponsorship inventory.

In Cassell Coliseum, the Hokies’ basketball arena, IMG College plans to install new end-zone video displays and portal signage.