Earlier this month, Moody’s Investors Service issued a report that warned universities of the potential negative impact of collegiate sports programs. While many students rely on sports as a means to pursue higher education, from a financial standpoint, college-level sports teams might be detrimental to higher education institutions. According to Inside Higher Ed, “Back in June, Moody’s downgraded the NCAA’s credit outlook to a negative, citing a major lawsuit angling for athletes to be paid.” Now, the full report, titled “Eye on the Ball: Big-Time Sports Pose Growing Risks for Universities,” elaborates on that negative rating.
Moody’s report outlines both the benefits and risks that universities will experience by investing in athletic programs. “Universities pursue high-profile sports programs for the opportunity to increase brand recognition, student demand, and donor support. However, that upside comes with financial and reputational risks that require careful oversight. As the commercial success of big-time college sports has grown, so too have the potential benefits and risks to universities,” Moody’s report explains.
One of the benefits the report lists is the way that high-profile sports boost a university’s brand by providing visibility. Similarly, athletics help universities grow their media revenue; Moody’s explains how television rights contracts have grown exponentially in recent years.
Conversely, high-profile athletics contribute to a budgetary strain on colleges, as 90% of athletic programs aren’t self-sustaining. As college-level sports become more popular, university “brands” might be bolstered, but it also means that they will receive more public scrutiny. Moody’s explains how “scandals cause reputational impact that is magnified by media attention and unwanted national focus.” Moody’s also lists debt capacity and the uncertainty of future costs as risks associated with high-profile sports investment.
Moody’s CEO Raymond McDaniel has explained in the past that the company has “a culture that provokes debate and encourages disagreement among a wide range of people with diverse points of view.” This is certainly true of a hot button topic like college-level athletics. While high-profile college sports continue to gain popularity with the public and help with university branding, the financial risk associated with them also continues to grow.