A New Revenue Model For College Athletics
A Chicago-based engineer leads charge for sustainment of Olympic sports
(Photo Credit: Iowa Swim and Dive)
He probably didn’t know it at the time, but a man named Bump Elliott predicted the fragile financial future of college athletics almost five decades ago.
Elliott had played football in the Big Ten, at Purdue and Michigan in the 1940’s. He went on to coach, most distinguishably at Michigan where he won the Rose Bowl in 1964 before handing the reigns over to a man named Bo Schembechler in 1969.
From there, Elliott moved to Iowa City, IA where he started a two-decade career in athletic administration.
In 1971, Elliott, barely a year into his tenure at Iowa, gave an interview to the Des Moines Register newspaper. The subject? The escalating expenses of amateur sports.
There is a concern about rising costs and what we’ll do in the future. But, at the moment, we feel confident that our athletic program is sound…each small item and each large item is going to be scrutinized that much more. To be able to sustain our program as we have, it’s going to take a lot of work, and we’re going to be working with a close margin all the time. But I truly anticipate and expect to be able to carry our share of the load and not be a burden on any part of the university. We don’t want to cut out anything. We want to continue fielding teams in all sports…I don’t ever want to be in a position where we are operating a program that isn’t first class
Elliott died last year. If alive today, he would have lived to see his words unfold in real time at the university where he worked and built a legacy for so many years.
Ron Kaminski is a man of passions. But success is knowing how to convert passions into action. Kaminski is a dreamer, yes, but more importantly, a doer.
As a youth growing up in Downers Grove, IL, a suburb west of Chicago, a love for swimming turned into a spot on the University of Iowa swim team. Kaminski became a four-year letter winner.
An interest in structures and design morphed into a career in civil engineering. Possessing a keen eye for business, he started his own firm, HBK Engineering in 1998.
A believer in using platform as an engine for service, Kaminski is on the board of the Ann and Robert H. Lurie Children’s Hospital of Chicago, Chicago Commons and the Chicago History Museum.
Now, he is consumed with another passion, the driving force not personal pursuit of excellence but righting an injustice.
(Photo Credit: HBK Engineering)
“My wife asked me ‘I know you get passionate about stuff but what is driving this one?’” Kaminski said. “I thought about it and I said, ‘they did something wrong. And they hurt a lot of people. And they shouldn’t get away with it.”
Kaminski was with another Iowa alum and friend, Mark Kaufman, in August when his phone buzzed. And buzzed again.
“I thought it was an emergency at work,” Kaminski said. “I had a text from the CEO of USA Swimming.”
The reason for the cascade of messages—the University of Iowa had cut four sports, including the men’s and women’s swim and dive team.
Kaminski took the day to absorb the shock of the news.
“I swam for Iowa. I got an engineering degree at Iowa. I had a very fortunate run in a company I just sold this past summer and contribute so much to the (swim) program that’s why I’m still involved to this day,” Kaminski said. “So it’s this emotional ‘how can this happen’ kind of thing.”
But almost immediately, the curious, analytical, problem-solving side of his brain shifted into gear.
Why did this happen?
In an open letter addressed by Iowa Athletic Director Gary Barta and President Bruce Herrald, the school cited budget short falls due to the coronavirus pandemic:
The COVID-19 pandemic resulted in a financial exigency which threatens our continued ability to adequately support 24 intercollegiate athletics programs at the desired championship level. With the Big Ten Conference’s postponement of fall competition on Aug. 11, University of Iowa Athletics now projects lost revenue of approximately $100 million and an overall deficit between $60-75 million this fiscal year. A loss of this magnitude will take years to overcome.
Kaminski instantly questioned the numbers given in the letter. He sought out more data, specific to the swim program. He picked up the phone and called Herrald, whom he knew casually through Kaminski’s involvement in the school’s entrepreneurial program.
“I asked (Herrald) what was going on and he said, ‘well the pandemic and we’re going to save all these dollars’ and I’m thinking, ‘the numbers they are throwing around, it’s impossible.’ The numbers aren’t adding up,” Kaminski said.
Other conversations with university officials fueled more skepticism.
“The things that really bothered me were the conversations we had initially and they kept talking about ‘the cost of the team. The cost of the scholarships,’” Kaminski said. “I was still consumed with the idea that the team couldn’t cost that much.”
One morning Kaminski woke up with a revelation—he had it all wrong. The athletic department wasn’t writing tuition checks to the university to cover scholarship costs as he was first led to believe.
There was another explanation.
“It’s a paper transfer. It’s what we do between our divisions (in business),” Kaminski said.
Even with the paper transfer, Kaminski is willing to concede the department’s argument that scholarships are an expense. But what about the incoming tuition for out-of-state athletes?
NCAA rules allow for a maximum of 9.9 scholarships on a men’s swimming team. That 9.9 number is split up amongst all members of the team. The 2020-21 Iowa men’s swim and dive roster lists 33 athletes, accounting for an average of 0.3 scholarships per athlete (assuming the program is fully-funded).
Women’s swim and dive is allowed 14 total scholarships. They also have 33 rostered members for 2020-21. Assuming full funding of the program, each athlete receives on average 0.42 scholarships.
According to the University of Iowa, out of state tuition in the 2020-21 school year is $31,793.
Combining both programs, it leaves a lot of tuition money not covered by athletic scholarships.
To verify his own calculations, Kaminski gained access to Iowa’s annual financial report as part of the Financial Reporting System required by all NCAA member institutions.
In the report, he learned about operating expenses and costs, grants and donations, information that could be used to conduct an unofficial P&L (profit and loss) statement.
Kaminski concluded the combined net cost of the men’s and women’s swim programs is about $1 million.
“When this all happened, and they were saying we are going to lose all this money, they were going to go broke,” Kaminski said. “What’s going on here?”
Kaminski approached his research using his own business as a comparison model.
HBK has 15 divisions, the Iowa Athletic Department has 24 teams. HBK had gone through excessive growth over the two decades since he founded the company, so had the Iowa athletic department. But unlike his business, where all divisions are generally equal under the company umbrella, college athletic departments have one unicorn sport.
“Our company, let’s say before it sold it was a 100 million dollar business. And they said, ‘well Ron, can you also run a one million dollar business?’ Sure, our business at one time was a one million dollar business but they’re completely different. You don’t run them the same, they have different complexities,” Kaminski said. “Football doesn’t look anything like the others. The future of college football seems like it’s on a path where it’s not attached to the university. You’re going like, ‘I don’t think that fits in a state university.’”
He decided the focus of the #SaveHawkeyeSports campaign should shift. Instead of demanding full reinstatement as a varsity sport under the Iowa Athletic Department, the teams should move in the direction of sustainable independence.
“We need to do a better job of quantifying and finding ways that these other sports should all be self-sustaining and not be the burden of the university it is being made out to be,” Kaminski said. “Maybe we got kicked out of a burning building and we are trying to run back into it.”
It’s one of the more famous photographs in Iowa football history.
Two burly Hawkeye players, each with an arm wrapped around the leg of a white-panted, black-and-gold jacketed, dark shade glass-wearing, joyfully-expressive football coach named Hayden Fry. The occasion for the lift-coach-on-your-shoulders moment?
Fry’s 200th career win in Kinnick Stadium in 1993.
One of the burly Hawkeyes in the photo is wearing jersey number 69. His name is Matt Purdy. Even without knowing the specific circumstances around the picture, anyone who sees the picture will sense those in the frame will forever be tied to that moment and the university.
“A Cedar Rapids news station came all the way to (my house) to interview me in my basement,” Purdy said. “It’s my most famous moment at Iowa.”
When Purdy’s son, Ryan, accepted a swimming scholarship offer from Iowa in 2019, expectations were for more memorable moments in Iowa City.
Purdy has sent so many emails now he can’t count. Trying to figure it all out, why the university did what it did, why his son’s program was cut.
One was sent to Hawkeye football coach Kirk Ferentz. In the email, Purdy said he lived in the Chicago area but if he’d be willing to see him, he’d be in his office in three hours. He got no response.
Another email was sent to Herrald. This one was especially long, a two page letter with video attachments of the story from the Cedar Rapids television station and another one of himself and Ryan.
That one did get a reply from the university president.
Thank you for your passion and meaningful support. However, we are in the midst of a financial crisis in Hawkeye athletics that requires the closure of these sports to cover the interest and principal on a significant loan
That was it.
“Me as a dad?” Purdy said. “I read that email as they just put a price tag on my son’s back. That’s disheartening to me.”
(Photo Credit: College Swimming)
Ryan is on scholarship at Iowa, receiving 30%. It covers to around $15k per year. The way Matt Purdy sees it, the university looks at Ryan as a $60,000 expense over four years.
What he doesn’t understand is what the university appears to be ignoring.
“Swimmers, tennis players, gymnastics, about 95 percent of athletes on those sports pay at least a portion of their tuition,” Purdy said. “What they forget is Ryan is paying $25,000 to swim.”
According to the University of Iowa, the in-state estimated cost of attendance for the 2020-21 school year is just shy of $25,000. The total number of athletes participating in women’s and men’s swim and dive, men’s gymnastics and men’s tennis is well over 100. If most of them are paying $20-25k a year, taking a conservative calculation, that would come to $2 million.
Didn’t they think of all that lost tuition money when they made the cuts?
“Those are things I don’t get,” Purdy said. “And quite frankly, in the email (Herrald) misspelled ‘principle.’ You would think there would be a more distinguished response.”
Purdy and other alums rallied around this task—if money was the reason given for the cuts, then they would just have to find a way to give them what they want.
In the span of a few weeks they raised $3 million. A petition received 25,000 signatures.
Purdy said he received a direct message inside one of his social media accounts where someone told him he plans to renounce a seven-figure life insurance death benefit targeted to the university. Other major donors have threatened to pull out.
“It keeps mounting and mounting,” Purdy said. “We hope the the university eventually gets its paper and pencil out and says, ‘cutting these four sports on paper saves us four million but we’ve lost ten million in donations over time.’ We are hoping they will look at this and say this isn’t worth it at all.”
Time is not on Purdy’s side—Ryan Purdy announced earlier this month he had accepted a scholarship offer to Arizona. Ryan Purdy is a rising star in the backstroke and individual medley but can’t reach his competitive goals while just training inside the school’s Nanatorium.
“Iowa said it is going to honor the scholarships of these student-athletes which is great but at the same time, my son has aspirations of being a conference champion, getting into the national championships and scoring points, maybe going to the Olympic Trials,” Purdy said. “So he’s leaving, but he chose to stay (for 2020-21).
“It’s all hard and none of it is easy.”
Just recently, Ron Kaminski’s firm hired a recent college graduate.
The recruit has all the resume bonafides—Ivy League graduate in mechanical engineering (Yale), excelled in a sport (football, all-conference) and can tap into the wide-ranging alumni network that comes with being a former Ivy League athlete.
It got Kaminski thinking more what #SaveHawkeyeSports is about, which is leveraging the deep affinity people have with the university.
“I was thinking, why can’t we do the same thing? Why isn’t that part of our core? I think what happened is when the money started pouring in 10 years ago, that stuff didn’t become important,” Kaminski said. “They are not quantifying all the incredible success that all of these athletes have in all of these sports.”
Here is Kaminski’s pitch to the university: remove the cut sports (men’s and women’s swim and dive, men’s tennis and men’s gymnastics) from the university expense ledger. Make them independent operations where they raise their own money and become self-sufficient.
Teams remain Hawkeyes representing the University of Iowa. But they no longer need the athletic department to keep them afloat.
“They need to be run like independent small businesses where they can run revenue streams and develop strategic partnerships,” Kaminski said. “We are not jumping up an down and saying, ‘whoa is me.’ We are bringing a fiscally sound model that will make hundreds of alumni happy to get engaged from a donor perspective.”
Kaminski compares the model common to that of non-profits, where on many he serves in a leadership capacity.
In that industry, organizations use the intellectual capital of advisory boards to assist in driving decision-making.
“Anything that their organization needs, we are there for them. You need help with logistics? We will help you with that. You need help with understanding what the new NCAA compliance rules are and how we can be more aggressive in recruiting? We can lay that all out for you,” Kaminski said. “By bolstering up some of the revenue streams, combined with a very active advisory council, free to the university, these are things the alumni would be all over.
“Not all the athletes that come out of these sports are rabid super fans of football or basketball. They are fans of athletics and what it’s done for them in terms of health and wellness and competition and building a structure for student-athletes. They don’t need 50-yard seats at the football game. That’s not their thing.”
The cut sports would harness alumni networks, the best the university has to offer—the John Pappajohn Entrepreneurial Center, for instance—and move from the UI athletic department into another department inside the university.
One idea discussed is Recreational Services, currently housed in the Division of Student Life. The Nanatorium is operated by Recreational Services, and is an untapped revenue source according to Kaminski.
Kaminski confirmed Wednesday he and members of the #SaveHawkeyeSports group are engaged in conversations requesting assistance from an internal group affiliated with the university. The internal group would help implement the model with the goal of reinstating the cut sports.
“(I am) very optimistic we will have an internal group working with us to build a model,” Kaminski said via txt message Wednesday.
Another reason for aligning with a group inside the university is those associated with #SaveHawkeyeSports prefer to remain involved in an advisory role. An internal group can help develop proof of the concept, essential to making its use widespread and potentially work for other sports.
“I’m running a company. I’m a civil engineer. This is not my dream to solve this. In my business if its positive and its right you just have to keep hammering it,” Kaminski said. “Let’s build a model that is a national game changer. Let’s have the University of Iowa have that recognition like we founded the butterfly, let’s found the model that takes us forward.”