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Harnessing the Profit Motive to Transform Education

Posted on August 29th, 2012, by Leave a comment

The Institute for Economic Affairs (IEA) in London – one of the most prominent and influential think tanks in the world – recently released The Profit Motive in Education: Continuing the Revolution, a monograph consisting of eleven essays related to the role the private sector and profits in transforming the education ecosystem. The volume is edited and includes two essays by Professor James Stanfield, who assembled a diverse and impressive team of contributing authors with backgrounds that encompass the worlds of academe, government, private sector and public policy.  The volume is divided into three sections.

The first section contains two essays, one by Stanfield and the other by St. Lawrence University Professor Steven Horowitz, that introduce the reader to some key concepts and issues related to the profit motive in education. Both authors suggest that there remains a stubborn hostility and outright resentment towards private sector involvement in education. Critics of for-profit education generally contend that the private sector is willing to sacrifice educational quality and the interests of the student in order to generate a short-term profit, an argument that Stanfield suggests is largely unsubstantiated by economic theory, empirical evidence or sound reasoning. Horowitz elaborates that profits in the education sector can be expected to promote competition and innovation that lead to an increase in the quality of educational provision, better value for the customer, and a more efficient allocation of resources, a point that CCAP elaborated on it is 2010 study, For-Profit Higher Education: Growth, Innovation and Regulation.

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The second section, Lessons from the UK and Abroad, contains three essays from education entrepreneurs who describe their experiences starting a profit-seeking school, and two essays that discuss findings from research on private sector education. The three education entrepreneurs offer a glimpse into the challenging political and regulatory environment that they faced in launching a private school, with Toby Young describing the process as trying to navigate through a “bureaucratic labyrinth… [where] the ground keeps shifting beneath your feet.” In addition, they described how a competitive market challenged them to offer innovate educational programs that are in high demand and tout successful outcomes. Stanfield describes how the private sector and profit motive have opened the doors to affordable education for millions of previously disenfranchised poor in the developing world, a task that development agencies working with governments have failed to do.

The last article in the section is a contribution that I co-authored with Richard Vedder and Adam Lucchesi discussing our research on for-profit higher education in the U.S. In particular, we describe the remarkable growth of the sector over the past two decades, the volatile regulatory environment that it has faced. In addition, we offer a number of policy lessons for the UK, including a reduction of protectionist measures such as barriers to entry, differentiated regulations, and discriminatory subsidies in order to level the competitive playing field and make private investment and innovation more attractive, as well as calling for greater disclosure of information by schools regarding student outcomes in order to reduce the asymmetries that leave students and parents lacking important information needed to make informed decisions.

The third and final section, New Models of Education, features four essays describing alternative education market structures. Anders Hultin asks why there is no IKEA in education, suggesting that the success of the global brand to offer affordable, quality furniture could be applied to education if the market were more open to private investment. J.R. Shackleton makes the case for the privatization of business schools, noting that “[T]here is surely something of a paradox in the fact the mainstream business education…largely aimed at preparing young people…for work in a market economy…should be in the hands of institutions which do not fully engage with that economy and for which there is no profit objective to focus and discipline their collective efforts.” In the final two essays of the volume, Frederick Hess andTom Vander Ark describe how creative destruction needs to be fully unleashed in order to fundamentally transform how education is delivered, suggesting that current one-size-fits all model is inefficient, antiquated and failing to meet the needs of a diverse student population and that technological innovation hold the promise to overcoming all of these problems, but will only be realized when the private sector is embraced in education.

Adam Smith famously noted in his treatise The Wealth of Nations, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” Given this widely accepted proposition as a rigorous argument for the organizing of economic activity around markets, why then has modern society come to rely on the presumed benevolence of bureaucrats, politicians, school administrators and teachers in expecting its children to receive an education that will prepare them for the challenges of the future, rather than the private marketplace?

For many in society, profit and education are viewed as diabolical opposites, presumably as a matter of principle. For persons holding this perspective, it is often implicitly contended that the objective of the private sector is to maximize profits at all costs, including the detriment of educational quality, and it cannot therefore be trusted to look out for the best interests of students. Yet others, admittedly a minority, hold a more optimistic view of the profit motive in education as a means to improve educational outcomes. For persons residing in the latter camp, the profit motive drives competition and innovation that leads to efficient production and quality enhancements in the private sector, and they believe that the same market forces can be harnessed to improve the orlistat or alli efficiency and quality of education provision.

The Profit Motive in Education provides a unique glimpse into the potentially transformative power of private sector involvement in education, providing the reader with persuasive evidence supporting the claim that the profit motive can be harnessed to meet the needs of future generations that are not currently being met by the static education models of the past. Perhaps it is not from the benevolence of politicians, school administrators and teachers unions that we ought to expect our children to become better educated, but from the self-interest of entrepreneurs in a competitive education market.

This post originally appeared in CCAP’s “Higher Education and the Economy” blogspace for Forbes.com.

College Underemployment Hits China?

Posted on August 29th, 2012, by 1 Comment

The Wall Street Journal recently highlighted the apparently growing underemployment amongst college graduates in China. As the story put it:

slowing growth underscores a fundamental challenge to China’s economic development: the underemployment of huge numbers of graduates that Chinese colleges are churning out.

Experts say that many of the graduates lack skills such as critical thinking, foreign languages and basic office communications that businesses are looking for. Even small private enterprises that offer humble salaries find many graduates unsatisfactory…

At the same time, China has made only limited gains in remaking its economy so it relies more on services and innovation and less on construction and assembly-line manufacturing. That limits the markets for the lawyers, engineers and accountants that Chinese universities are producing.

However, as the story notes at the very end, this may be only a problem for China in the short-term as companies seeking educated workers for service jobs may turn to China. It’s possible but that still doesn’t mean that the present will be a bit unpleasant for some, particularly for those graduates highlighted in this story from last year.

The Cost of Higher Access: Harry Stille’s Data

Posted on August 13th, 2012, by 5 Comments

There are two persons of radically different political perspectives whose single-minded devotion to gathering and disseminating data on higher education set them apart from the rest of us: Tom Mortenson of Post Secondary Higher Education Opportunity, and Harry Stilles, of the Higher Education Research/Policy Center. Tom is a self-described “Minnesota socialist” dedicated to improving higher-education access, while Harry is a decidedly more conservative retired professor and legislator from South Carolina dedicated to increasing efficiency and improving quality. Higher education benefits from having both of them gather and publish data.

Today, I want to talk about some recent data published by Harry. Harry has come up with a way of measuring by state the degree of admissions selectivity. He looks at the percentage of students ranking in the top 10 percent of their high-school class, plus the SAT composite score for those at the 25th percentile in the distribution of such scores. He sums data across the many state colleges and universities in each state to get statewide average figures.

According to Harry’s reckoning, the most selective (highest admissions standard) states in the nation are Florida, Virginia, Delaware, Washington, Maryland, New Jersey, South Carolina, Iowa, Michigan, and Georgia. The least selective (lowest admissions standard) states are Alaska, Maine, West Virginia, Idaho, New Mexico, Utah, Rhode Island, North Dakota, Arkansas, and South Dakota.

Do differential admissions standards make a big difference in college academic performance? The answer, unequivocally, is “yes.” The 10 highest admission standards states listed above had an unweighted average sophomore-retention rate of 82.9 percent, meaning about 17 percent of entering freshmen did not go on to the sophomore year. Amongst the lowest admission standards state, the retention rate was only 71.5 percent, meaning 28.5 percent of entering freshmen never made it into the sophomore year—two-thirds greater a proportion.

The data hold if one looks at four-year graduation rates. For the high-admissions states, the mean is 37.3 percent, nearly double the 19.2 percent for the low-admissions states. Do the low-admissions states narrow the gap by students going five or six years to school? No. The six-year graduation rate for the high-admissions states averages 62.3 percent, compared with 43.1 percent for the low-admissions states. In short, most kids in the high-admissions states do graduate, while a majority in the low-admissions state do not, at least within six years.

In short, one can predict with some certainty what the impact of lowering standards in the name of greater educational access will be in terms of student prospects for tests. High-school rank and SAT test results are good predictors of success. States that say “we want to give everyone a chance for a bachelor’s degrees so we are going to admit nearly everyone who applies” might feel good about themselves—but they have far greater numbers of poor college students who then drop out of school without a diploma, but in many cases with college-loan debts and no degree allowing them access to good-paying jobs.

Harry estimates the costs to the taxpayers of dropouts and it is considerable—about $12-billion annually nationally by his calculation. Thus admitting students with little realistic prospect for success is pretty costly to taxpayers, as AT THE MARGIN the proportion of the less-good students admitted who graduate is doubtlessly quite small.

The moral of the story is that there are no free lunches. Lofty aspirations, like “everyone should have a chance at college,” come at a cost, not only to taxpayers and to society, but also to individuals who sometimes directly suffer significantly from the unintended consequences of some well-intended policy discussions.

Charles Murray is dubious about “everyone going to college” on intellectual capacity grounds. Jackson Toby is dubious about open admissions in terms of its impact on academic quality and declining high-school standards. I have been dubious on the grounds of labor market imbalances and high costs. Harry Stille’s data provide further support for those whose raise a caution light if not a stop sign with regards to the “College for Everyone” movement.

This post originally appeared on the “Innovations” blog of The Chronicle of Higher Education on August 7, 2012.

A Little Thought for Friday

Posted on August 10th, 2012, by Leave a comment

I thought this comment from Marybeth Gasman a few weeks back was a fairly thoughtful bit of self-inspection on the part of faculty and the role they play in fa

cilitating (or not) higher ed reform:

But….the critics have one thing right. Faculty members are often rigid and adverse to new trends (accountability, new technologies in the classroom, etc). We get comfortable in our ways and think we know best. Often this approach impedes progress. However, tenure is not the root of this problem. Instead, I think the problem is our sense that we are experts and above being held accountable for student learning. This has to stop. Tenure protects our ideas and voice, but we still need to make sure that those students we teach are learning and if asked how we know, we need to have an answer.

They Just Don’t Get It

Posted on August 10th, 2012, by 3 Comments

Sen. Tom Harkin has issued his final report on for-profit higher education, a book-length indictment of one-tenth of American higher education, the for-profit sector. Obviously I have not had an opportunity yet to read the full report (I’ve been traveling for the past week or so), but from news reports alone, I see huge problems with it, much of it related to either an ignorance or contempt for how the capitalistic system of free enterprise does a very good job of delivering the goods—lots of them—in America. It is market-incentivized ingenuity and enterprise that leads millions every decade to migrate here to enjoy the fruits of the labor of American capitalism.

To be sure, the report concedes that for-profit education is here to stay, and even acknowledges that several providers (e.g., Strayer Education) have done a relatively good job, and others are at least making some positive moves (including Apollo, the owner of the University of Phoenix, the market leader). But the report appears far more negative than positive, while essentially ignoring problems with marginally performing public institutions that, unlike the for-profits, receive direct taxpayer subsidies.

A central point of the Harkin report is that at a big sample of for-profit institutions, over 40 cents of each dollar collected goes for marketing expense or profits, meaning a somewhat lower proportion goes for instruction than at a typical not-for-profit university. The inference is that students and learning are neglected.

This is a meaningless comparison on lots of grounds. Let us take profits. First, the 19-cent profit margin reported is pre-tax—unlike other colleges, the for-profits pay income taxes, some of which subsidize their competitors. Second, the not-for-profits have vast expenditures for constructing buildings, etc., not counted in operating expenses. Profits are a market-based assessment of the cost of the use of capital resources by private entrepreneurs. Given the risks associated with doing business (some of it imposed by Senator Harkin himself), the profit margin for the for-profits appears to be roughly in line with other parts of America’s capitalistic system. In a real sense, the for-profit higher-education sector uses honest accounting rules, the traditional sector dishonest ones, often not properly accounting for depreciation of capital or, especially at state schools, honestly assessing pension liabilities. In a sense, Harkin is comparing apples to oranges.

It is true that for-profits spend more on marketing expenses. There is a vast literature on the economics of advertising that argues ads serve a legitimate and important informational function, leading to more informed consumer choices. Moreover, some expenses in this category involve  schools’ marketing their students in job markets, something woefully neglected and underfunded by many traditional universities. The for-profits have learned that happy customers who get good jobs are good word-of-mouth advertising, so they devote more resources to this function than other schools, to the benefit of both the students and the institutions.

It is true that many of the for-profits have high drop-out rates, but are they really any worse than some of our public universities, like the University of Texas at San Antonio or Chicago State University, schools with thousands of students but very low graduation rates? Should we impose some sort of  selective admission standards on all schools wanting government handouts? I suspect that if one compiled a list of all institutions where the six-year graduation rate was below, say, 40 percent, a larger number of students would  attend public as opposed to for-profit institutions. The attack on the for-profits is an attack based on ideology, a dislike of capitalism, more than on a comprehensive and objective concern for students. The clearly one-sided nature of Harkin’s criticism may be one reason that his report was not issued by all the Democrats on the Senate education committee—my guess is some did not want to be associated with this unbalanced attack.

Now to Elijah Cummings, representative from Maryland, who issued a report (again from himself, not even all the Democrats on his committee), attacking high executive compensation at for-profit schools. It is true that the CEO’s of organizations like Apollo, Strayer, DeVry and Bridgepoint make very good money, often far more than the heads of large state or private universities. But they also take bigger risks, deserve combat pay for facing opposition from the likes of Tom Harkin, etc. Moreover, their pay is not out of line with what heads of comparable-sized for-profit companies in other sectors make.

Less time should be focused on dumping on 10 percent of higher education, and more on the truly big problems Congress is ignoring. For starters, how has the now-mammoth  federal involvement in financing student higher education affected costs, student performance, low-income student college participation and labor-market success of graduates?  Why should the federal government allow accreditation reports of schools receiving federal funds to remain hidden from public scrutiny? Should federal tax exemptions be granted for building sky boxes or funding sport “scholarships” to fuel an athletic arms race that has brought corruption and scandal to higher education? The list goes on and on. Stop trashing the 10 percent—focus on the 100 percent. Are there fly-by-night operators in the for-profit sector? Yes, and they should not receive federal subsidies. But that could be said about some traditional schools as well.

This post originally appeared on the “Innovations” blog of The Chronicle of Higher Education on August 2, 2012.

2012 Forbes/CCAP College Rankings Released

Posted on August 2nd, 2012, by 1 Comment

Perhaps the single thing that the Center of College Affordability and Productivity (CCAP) does each year that garners the most public attention is prepare for Forbes its rankings of U.S. colleges and universities. It is a formidable task, th

is year involving 19 persons. We pride ourselves that are rankings are based primarily on outcomes/satisfaction based criteria, not input/reputation criteria used by some other ranking services. A majority of the weight in the rankings derives from measures of student satisfaction (such as student evaluations of courses and professors done through RateMyProfessor.com) or post-graduate success (as measured by such things as being listed in Who’s Who in America or making an extensive list of corporate, political and nonprofit sector leaders). We also are very conscious of costs, and piling up a huge debt load while going to school has a distinctly negative impact in our rankings. Our full methodology is available elsewhere on this web site.

While much attention goes to seeing who the very top schools are (this year the top five are Princeton, Williams College, Stanford, Chicago and Yale), schools ranking in the top 100 (of 650 ranked) are all very good schools, not only being in the 15 percent of those ranked by us, but almost certainly in the top 10 percent of all institutions. The top 100 list is dominated by private schools –88 of 100. Of the 12 public institutions, three are national military academies –West Point is a top 10 school and has been for years with us. In the top 25, only West Point is a public institution. A large majority (63 percent) of the top 100 schools are liberal arts colleges or institutions not conferring doctorate degrees, despite a modestly controversial (within CCAP) methodological change this year that tilted things a bit more favorably towards larger institutions. I still believe that, as a generalization, for many students the best undergraduate experience in America is found in a small, liberal arts environment.

Excellence in higher education is not evenly disbursed across the vast landscape of America. There are concentrations of superior performance and areas where literally a person is hundreds of miles from the nearest school of distinction (much of the area comprising the western prairie and Rocky Mountain states fits that description). 45 of the 100 top schools are in just four states –Massachusetts (with 13), New York (12), California (11) and Pennsylvania (9).

Let us compare three areas with similar populations. Let us look at the six New England States (Maine, Vermont, New Hampshire, Rhode Island, Connecticut, and Massachusetts) plus New York and Pennsylvania, which have a population of 46.7 million, with the five East North Central States (Illinois, Indiana, Ohio, Michigan and Wisconsin) with it near identical population (46.5 million) and with the five Gulf Coast states (Florida, Alabama, Mississippi, Louisiana and Texas) with its considerably larger population of 57.1 million. These three regions have over 150 million persons, almost half the U.S. population.

The states in the Northeast have 43 schools in the top 100, while those in the more populous Gulf States have merely three (Rice, the University of Florida, and Southwestern in Texas) The Midwestern states mentioned have 11 schools (led by Chicago, Notre Dame, and Northwestern), closer to an average figure, and a bit above the average for the 42 states outside. Similarly, California with a population of over 37 million is slightly underrepresented relative to the national average, but comfortably overrepresented for the states other than the eight northeastern states with high concentrations of excellence. Note that two of the top 10 schools (Stanford and Pomona) are in the Golden State. Arguably the greatest concentration of undergraduate excellence in America is in Claremont California, where four schools are in the top 55 on our lists.

Another point: the best school for students is determined by a whole variety of personal considerations, including academic abilities, geographical preferences, family finances, academic interests, maybe even the availability of recreational facilities or proximity to a girl or boy friend. The rankings are one tool to be used in college selection. One issue important to nearly everyone is finances, and we encourage you to look at the “best buy” listings that we compiled, available on the Forbes web site, that relates quality to costs –sort of a “bang for the buck” measure. On this list, public institutions are far more prevalent than on the rankings list, but there are some very high ranking private schools, such as College of the Ozarks, Berea College, and Cooper Union.

These rankings are compiled by amassing and utilizing literally tens of thousands of pieces of information –data. A small amount of human error is almost inevitable, despite double and triple checking of everything. One thing we cannot check is inaccurate data given to us, especially by the U.S. Department of Education and its IPEDS data base. Unfortunately, that has happened this year with respect to Haverford College, a very fine school in Pennsylvania (full disclosure: I seriously considered going there). The IPEDS data base incorrectly gave the Haverford graduation rate, and the impact of that error was material. However, we have a policy that after the rankings are published, we will not change them for one year, simply because if we tried to correct for every small error we would have a confusing and constantly changing ranking, destroying their credibility. The error in this case was not the fault of CCAP, and we are expressing our regret to Haverford and publicly stating that they are, indeed, a very, very good school (even the ranking listed calculated using faulty graduation rate data puts it in the top dozen liberal arts colleges in America). We believe the published rankings convey the essential truth that Haverford is one of America’s top liberal arts colleges, even though it understates that truth a bit.

Colleges denigrate rankings –except when they do well, when they publicize them vigorously. Us rankers could be put out of business or marginalized if the colleges would do what they are loathed to do –give good, precise, consumer information on life on their campuses. The U.S. government could help things along by publishing, by college, the earnings of alumni, data that they uniquely have in IRS databases. But the public be damned, by both the colleges and governments, so we are trying to do our bit to fill the knowledge gap. Enjoy the rankings –we enjoyed preparing them.

Final word: this was an enormous team effort. Especially critical were two persons, Jonathan Robe and Christopher Matgouranis, a very fine law school student who took time off to help us. Among the others, the first among equals are Daniel Garrett, a technical whiz, and our chief Whiz Kid (student helper), Christopher Denhart. Everyone did a fine job.

UNC Looks into Academic Misconduct in College Athletics

Posted on July 31st, 2012, by 1 Comment

A special faculty committee at the University of North Carolina-Chapel Hill has called for an independent commission to review academic-misconduct at the school on the part of the athletics program, the buy generic cialis online

/2223477/unc-chapel-hill-faculty-calls.html”>News & Observer of the Raleigh-Durham, NC area reports. The recommendation comes after a university investigation revealed that 54 courses in the African and Afro-American Studies department had little or no instruction involved in which most of the enrolled students were athletes. The blame for these “no show” classes has fallen primarily on two individuals, Julius Nyang’oro, former chairman of the department who was forced into retirement in the Fall of 2011 and Deborah Crowder who was department manager and retired in 2009. The classes in question were mostly independent study classes offered during summer sessions during which students appear to have done little or no work in exchange for credit towards graduation.

The committee decries what they refer to as a “campus with two cultures” – academic and athletic. For example, according to the News & Observer, the academic support program for athletes is supposed to be run by the College of Arts and Sciences at UNC, but the athletic department provides the funding. The report issued by the special committee attests to a situation where the university does not do enough to ensure athletes get the education they need out of the system. Instead, the athletic department has too much control over the athletes to the detriment of their studies. The committee sees troubling trends in which athletes are steered towards courses that have little bearing on the student’s declared major but are intended to ensure their continued eligibility to compete at sports.

These finding lend credence to a fact that all professors, instructors and teaching assistants are aware of: that athletes are a special breed of student. They are permitted to miss more class than an average student without penalty. It is certainly true that in order to excel at sports, athletes require large amounts of time dedicated to practice and physical fitness, but a balance must be struck between academics and athletics. It would be naïve to think that this problem is limited to Chapel Hill. Even if studies have not been done, it is clear on any campus where athletics plays an important role that athletes receive “special” treatment that allows them to travel and to compete. For a large majority of athletes, however, these allowances do not actually benefit them in the long run. These students miss class and learning opportunities and in doing so, are cheated out of the education they are supposed to be receiving. I do not advocate on any level the removal of athletics from a college campus. Sport has a very important part in the lives of many students, but a balance must be struck with academic pursuits.

CCAP in the News

Posted on July 27th, 2012, by Leave a comment

Richard Vedder has an op-ed in the Kearney (Nebraska) Hub on college costs and the role of

administrative spending as a cost driver, particularly in the State of Nebraska:

The share of college spending on administration has been growing for decades. Jay Greene, Brian Kisida and Jonathan Mills, in their recent report, “Administrative Bloat at American Universities,” noted that from 1993 to 2007, administrative staff, after adjusting for enrollment growth, grew by 39 percent, compared to only 18 percent for faculty.

Similarly, over that period inflation-adjusted per-student spending on administration rose by 61 percent while such spending on instruction rose by only 39 percent.

It is little wonder that Benjamin Ginsberg observed in his book, “The Fall of the Faculty,” that “as colleges and universities had more to spend they chose not to spend it on expanding their instructional resources … (but) chose, instead, to enhance their administrative and staff resources.”

Research we did for the Platte Institute indicates the problem of administrative bloat is particularly acute at the University of Nebraska, where there are 12.98 administrative and professional staff for every 100 students. That rate is about 24 percent greater than the national average.

You can read the whole piece here.

* * *

Times Higher Education in the UK ran their story on the recent kerfuffle at the University of Virginia over the firing and subsequent reinstatement of the University’s President. The story extensively quotes Richard Vedder:

“To me, this is a beautiful example of the ambiguity over governance,” says Richard Vedder, director of the Center for College Affordability and Productivity, an independent, not-for-profit research centre in Washington DC. “Who runs universities? Who are the bosses?”

This issue is exercising the US academy not only because of the University of Virginia controversy. There have been disputes in Texas, Iowa, Oregon, Louisiana, North Carolina and elsewhere as governing boards have clashed with both university leaders and academics.

The entire story is available here.

* * *

In the aftermath of the NCAA’s announcement of penalties assessed on Penn State in the wake of the Jerry Sandusky scandal, CBS Sports reported on CCAP Facult Fellow Dave Ridpath’s initial reaction to the penalties:

As far as the penalties—I am not a fan of the process or how the NCAA did, but simply put: Penn State deserves everything they get and it is far from over. I cannot fault the penalties and I know the collateral damage is immense and innocents will suffer. But we all played a part in this culture being omnipotent and everyone must suffer a bit. If I were Emmert I would not have done it this way but I might have done an investigation to see if NCAA rules were violated etc. like Baylor.

Still it is hard to argue with the end result as PSU needs to be knocked down a few notches. We heard the crap of victory with honor for so long now knowing this nothing is too harsh. While I wish it were done another way or just left to the courts, Department of Education and lawsuits, it is hard to argue with the result.

Penn State football will never be the same and it shouldn’t be. I just hope others listen too.

The rest is here.

* * *

Richard Vedder appeared on Chicago Public Media, WBEZ 91.5, to discuss with Northwestern University President Morton Schapiro the value of a liberal arts college degree. You can listen to the full segment here.

Fill Those Seats!

Posted on July 26th, 2012, by Leave a comment

Tom Van Riper reported on a rather interesting higher ed story in the latest edition of Forbes. The story focuses on Bernie Mullin, who runs the Aspire Group. As Van Riper reports:

Mullin has found a handy niche helping 20 unive

rsities repopulate stadiums and arenas for baseball, football, basketball, and softball, among others. Taking 10% of ticket sales, plus costs (more for small-conference schools) or a management fee tied to increased box office, Aspire should gross $500,000 or so on more than $5 million in revenue this year.

What actually struck me about this story was that Mullin’s business extends even to the perennial sports powerhouses (he’s done ticket price consulting work for even Ohio State, for example). In fact, the Forbes story opens with Mullin’s relationship with Arizona State University, who required his professional assistance to make up for the nearly 40% decline in ticket sales for the ASU athletic department from 2007-08 to 2010-11. Other competitors of Mullin’s group have landed deals to sell tickets for Penn State, Duke and Tennessee. The reason for this new business for ticket sellers and consultants is, as ASU associate athletic director, Steve Hank, said, “A lot of these places have seats available at kickoff… That used to be unheard of.” Indeed, FBS football schools in total actually saw a minor decline in attendance from 2010 to 2011 (surely partly a result of the sluggish economy). If the big guys are hurting a bit and have to put in extra effort to sell their tickets, I wonder what that really means for the little guys.

However, as Van Riper is careful to note, this does not mean that “[c]ollege sports attendance is hardly in crisis.” Given the massive amounts of cash top schools spend for athletic success (according to USA Today, “Division I public schools spent nearly $6.7 billion on athletics in 2011″), it would make sense that the schools would be particularly keen on maximizing their revenues from these enterprises. Nevertheless, it still strikes me as at least a tad excessive that college and universities would take these extra steps to pad ventures which have, in many regards, only an indirect relationship to their academic missions.

NCAA Penalties Give Penn State the Opportunity to Start Over

Posted on July 23rd, 2012, by Leave a comment

This morning NCAA President Mark Emmert handed down massive penalties against Penn State in the wake of

the Jerry Sandusky scandal. The punishment includes a $60 million fine against the university, loss of a substantial number of scholarships, post-season ineligibility for four years, a five year probation period and the vacating of all wins from the 1998 – 2011 seasons. While much has been made about their avoidance of the “death penalty” or suspension of the entire football program from competing for one or more seasons, the sentence given Penn State is certainly large, and I, for one, praise the NCAA for the punishment handed down. It was not too harsh, but it also was well thought out and fit the crime. It also punished those who were most culpable at the University of allowing Sandusky to commit his horrible crimes as a way of protecting their hallowed football program.

Perhaps the most startling of the sanctions is the nullification of 112 wins over the last decade of Penn State football. This, along with the removal of the statue outside of Beaver Stadium in State College, demonstrates the tatters in which the reputation of late, legendary football coach Joe Paterno now lies. Once the winningest coach in FBS (Division I) college football history with 409, the NCAA’s action drops Paterno’s total to 298, or fifth all-time, according to ESPN. Analysts often scoff at the idea of vacating wins, since the game cannot be replayed, but in this case it really means something. Records in sports are revered and taking someone’s record away is a big deal. The NCAA is sending a very clear message here: Penn State, you had your priorities WAY out of line. It would have been better for them to have gone winless all those years than to be complicit in the atrocities that were being perpetrated on their campus.

Also particularly significant is the $60 million fine, which is roughly equivalent to the income brought in by the Penn State football program in one year. The money is going to go into a fund for “external programs preventing child sexual abuse or assisting victims and may not be used to fund such programs at the university,” as Emmert put it in his announcement of the sanctions. In doing this, Penn State is required to attempt to make some sort of amends for their negligence as an institution in policing its employees. By putting such a significant amount of money towards combating sexual abuse, hopefully Penn State will be able to help prevent future tragedies and assist victims in coming to terms with their experience and to move on with their lives.

The penalties that look to the future of the Penn State football program: the post-season ban, the loss of scholarships and the probation, will hopefully help the University move on from this tragedy and to re-examine its mission and hope it goes about that mission. Penn State has already made some moves in that direction with a hiring of a new football coach and a new president, as well as the removal of the Joe Paterno statue on Sunday morning. While there are certainly those who feel like the school has escaped fair punishment, the actions set down by the NCAA today mark the opportunity for Penn State to re-evaluate its priorities and to move forward. There are many alumni, faculty, and even sportspeople at Penn State who are completely innocent of any complicity in the Jerry Sandusky case. What must happen in the case of Penn State is a complete break from the culture of the past, where football reigned supreme and all other considerations, including the health and safety of young people, took a backseat. With a change of personnel, a four-year post-season ban (i.e., a “stop-and-think” period) and probation, Penn State has been given the opportunity to rebuild its program and its image in a more appropriate way. Let the NCAA sanctions be a reminder to us all that football is just a sport. Major universities across the country must evaluate their priorities and remember that their athletics programs are meant to be part of the college experience, not its entirety.