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Good Thursday Morning. Here’s the rundown of this week’s Sports Business Playbook:

• 📰 This Week’s Topic: Texas A&M just paid a record breaking $76 million buyout as a part of firing head football coach Jimbo Fisher. The number is absurd, and its a perfect microcosm for today’s college athletics environment. How do they pay for it, why is it happening, and what does it mean for the future of college athletics?

• 🍸️ Impress Your Friends at Cocktail Party: Want to show off your sports knowledge in a public setting but don’t have time to read the deep dive? Hit the “Impress Your Friends at Cocktail Party” section at the bottom for a CliffsNotes of this week’s topic

• 🤯 “Whoa of the Week”:

• 💪 Weekly Reminders that Sports are Awesome:

Hey team,

Texas A&M made a somewhat shocking move over the weekend, firing head football coach Jimbo Fisher after a 51-10 victory over SEC West rival Mississippi State — who, in what may be the first ever instance of both teams’ coaches getting fired after a game, also axed their head coach.

The move by A&M raised eyebrows not because of whether Fisher deserved to get fired. He probably did. A&M was a pedestrian 45-25 under his tenure despite several top recruiting classes, a massive overhaul of the football facilities, and the administration giving him a blank plaque left intentionally blank for the national championship(s) he was expected to bring to the school.

The shock came because of how much money the school now owes Fisher due to his contract buyout clause — an eye watering, record breaking $76 million through 2031 when his contract was up.

This buyout has long been known — Texas A&M is a public institution, so the contracts of all employees, including the head football coach, are public information — and seen as a dissuading factor for getting rid of Fisher.

The massive number left many Aggies fans in gridiron purgatory, counting down the years until his buyout reached a more manageable number and they could get rid of this albatross.

Well, A&M’s leadership and a pool of very wealthy donors decided they couldn’t wait anymore.

The move signals a new era for Texas A&M, but it also highlights a runaway train of spending across college athletics where coaches have fully exerted leverage over the institutions (many of which are public and “not for profit”) that employ them, and it could pose problems for the amateurism model down the road.

The Anatomy of a Buyout

To put Fisher’s buyout figure in context, the $76 million number is over 350% more than the previous record, supplanting Auburn owing Gus Malzahn $21.7 million in 2020.

In fact, A&M breaks the record by March 2024, when they will have paid out roughly $26 million, before settling into a “reasonable” $7 million per year through 2031.

And don’t forget the $8 million pool for the buyouts of all of the assistant coaches plus the assumed ~$20 million needed to hire a new coach, pay a portion of his buyout from his old school, and then hire the new assistant coaches.

What also adds insult to injury here is that the standard “offset clause” used throughout college football is noticeably absent in Fisher and a number of other big name coaches’ contracts. The premise of these clauses is that if another school were to hire the coach during the payout period, the firing school would be able to either pay out a lower percentage or even forgo the remaining payments.

Because of the small number of top tier coaches (and that there is a select group of agents representing many of them), precedents can be set, and it’s often hard for the schools to negotiate against them if they want the coach to commit. The offset clause is one element that the schools have started to be more flexible on because of this dynamic.

And when there is no offset clause, the firing school is on the hook for every penny even if the coach gets another job.

Where is A&M getting all of this money?

Funding Dreams (and Golden Parachutes)

Texas A&M athletic director Ross Bjork has said that the initial lump sum payments of about $20 million to Fisher will be covered by Texas A&M Athletics — which generated $193 million in revenue in 2022 — and the 12th Man Foundation.

Your next question is hopefully “what’s the 12th Man Foundation?”

The 12th Man Foundation is a private, 501(c)3 fundraising organization that is the main source for most athletics donations — it reportedly has over $500 million in earmarked commitments for Texas A&M athletics. While “legally unaffiliated” with the university, their office is literally steps from A&M’s football stadium.

This model is widely used throughout college athletics because it gives the schools a wide berth to raise large swaths of money in a tax exempt fashion that can then be funneled into the schools’ athletic programs.

To be clear, these organizations do a lot of good. According to the 12th Man’s annual report in 2022, it costs the university between $50,000 - $80,000 per year to fund a single student athlete’s scholarship. Having generous donation systems enables these scholarships to be subsidized and eventually become endowed, which means that they effectively are paid for by the dividends/payouts from the school’s endowment and become self-sustaining. This enables student athletes in all sports to get scholarships.

For every star football player, there’s a women’s golfer who is getting to attend a great institution and get an education for free — and hopefully she gets some of that sweet, sweet NIL money on the side.

The gray area with these entities, though, is their ability to be used as war chests for funding the coaching carousel while enabling fat tax write-offs for the wealthy donors who donate the money for the golden parachute.

For the reasons above, big time boosters are some of the most powerful people in college athletics. They want to win, and they will often do whatever it takes to get there.

So if it’s determined that the coach needs to go and/or they need to go find the next “it” guy to help them win, it often means that the donors are writing a major, tax deductible check to subsidize much of it.

Try to help your school reach the promised land and get to owe less money to Uncle Sam? Sounds like a win-win.

Dead Money Walking

Jimbo Fisher and Texas A&M’s situation is not unique.

The lopsided contracts and “damn the torpedoes” spending habits are a part of a growing trend of universities picking up and dropping coaches like an overcaffeinated fantasy football manager.

According to an ESPN analysis, major college programs had more than $533 million in “dead money” — owed to coaches who were fired without cause with time left on their contracts — in the 11-year period from Jan. 1, 2010, to Jan. 31, 2021. Note that this figure includes payments to coaches in football, men's and women's basketball coaches, and it also accounts for the buyouts of both head and assistant coaches.

Since the start of the 2022 season, there is approximately $146 million in dead money owed by Power 5 schools to fired head football coaches alone. The trend doesn’t seem to be slowing down either — there are landmines all over the college football landscape.

Big Wins, Big Impact

So, why are the schools agreeing to these heinous contracts?

It frankly comes down to the benefits of a successful sports program for the university and the perceived value that coaches have in helping the programs to get those levels of prominence.

The straightforward example is that success on the field or court translates into more sports-related revenue — i.e., ticket sales, sponsorships, donations, merchandise etc. — because the fans and donor base are fired up and engaged.

The most obvious example this year: Coach Prime.

According to University of Colorado and a USA Today study, Deion Sanders has already driven over $30 million in sports-related revenues, and that’s not counting the nearly $250 million in estimated media exposure he’s bringing to the program and school.

And, the impact doesn’t stop at athletics-related revenue.

There was an article last year describing the modern-day “Flutie Effect” in college sports, which shows the implied correlation between successful college athletics programs and their impact on applications and enrollment. Since Nick Saban’s first year at Alabama in 2007, for example, enrollment has risen from 25,000 to 40,000 and the out-of-state/international student rate is now 60% of the total student body (read: 200% higher tuition rates per student than in-state students).

Can you attribute all of that growth to Nick Saban rolling tide all over the SEC for nearly two decades? Of course not. But it’s obvious that it’s one of many key factors that bolsters brand awareness and is a selling point for prospective students.

And it shows with Colorado, too.

In addition to the athletics revenues cited above, there has been a 40% increase in out of state applications in the past year alone since Coach Prime arrived in Boulder. Should Colorado be able to sustain its success for more than a month next year, there could be some even larger gains.

So yeah, these schools will gladly spend like drunken sailors and accept unfavorable contract terms if it means they can both capture glory and create a financial windfall for their institutions.

It’s unlikely that the model stops any time soon, particularly with the conferences consolidating and the revenues for the top sports continuing to carry the day. And it’s frankly hard to blame the parties involved.

If you’re the coaches and their agents, why wouldn’t you try to extract as much value as possible from the schools? And if you’re an AD and its your job to win, why wouldn’t you take advantage of your wealthy donors and bring in the best talent (before getting fired by those same wealthy donors)?

They’re taking advantage of the current system as its set up — the old “don’t hate the player; hate the game” adage.

The bigger question, though, is if these increasingly absurd figures will start to catch the attention of lawmakers and/or litigators.

The coaches who are making $10+ million annually with a significant golden parachute should they underperform at their job of coaching “amateur student-athletes” is about as backwards of a system as you can find, and it certainly seems to discredit the notion that the schools and conferences can’t afford to pay the athletes some portion of the revenues driven by the school.

This paradigm contributes to the collective feeling of uneasiness for many about where college athletics is heading. The NCAA is facing three separate existential court cases right now that the target the very idea of amateurism, and many of the current systems like coaches compensation are being stretched to their absolute max.

At what point does the wheel break?

🍸️ Impress Your Friends at a Cocktail Party

Want to show off your sports knowledge in a public setting but don’t have time to read the deep dive? This section is the CliffsNotes of this week’s topic

• Opener: Texas A&M is paying now-fired football coach Jimbo Fisher a record $76 million contract buyout over the next 8 years

• Shot: This figure is 3.5x more than the previous high, and it’s a part of a growing trend of schools firing coaches but still footing the bill for them. There is over $146 million in “dead money” for college football coaches since 2022 alone.

• Chaser: The schools traditionally fund a lot of their athletics through private 501(c)3 organizations. This enables tax deductible donations by alumni and fans of the university that can be put to good use — i.e., scholarships — but it can also lead to a tax exempt golden parachute for a fired coach.

• Chaser: Why are the schools on this hamster wheel? Ultimately, it comes down to the significant financial impact of having great athletic programs. The schools can reap the benefits in sports related revenues — i.e., ticketing, merchandise, donations, merchandise, etc. — but it can also help grow the schools’ overall profile and brand awareness amongst prospective students, which can lead to higher application rates and potential out-of-state enrollment.

• Chaser: The escalating buyout figures both expose the underlying hypocrisy of the amateurism model and raise yet another concern about the future of college athletics. The system, not the people involved, are the problem. The key question is: who, or what, will it take to evoke change?

🤯 “Whoa” of the Week

Insane, mind-blowing things constantly happen in the sports business world. Here was my favorite of the past week.

1. We’ve gotten additional details on the NWSL’s new media deal, and it is an absolute beast. Huge win for one of the most rapidly ascending sports organizations in the world.

💪 Weekly Reminder that Sports are Awesome

This newsletter is, of course, mostly centered on the business side of sports and the things that happen off the field. That being said, it’s important to remember why we fell in love with sports in the first place, though.

This section is meant to highlight the amazing things that happened in sports this week that serve as that reminder.

1. DK Metcalf doing it for the kids

2. ESPN Deportes will never not be electric

3. This new camera angle has started to be featured in NFL games more this year, and it’s truly incredible

Thanks for reading! Let me know what feedback you have.

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Until next time, sports fans!

-Alex