The College Sports Gold Rush: A Coming Crash and Investment Opportunities in Athletic Program Diversification

The modern era of college athletics has been a gold rush, fueled by TV deals, booster donations, and the relentless rise of football and basketball revenues. Yet beneath the glittering numbers lies a fragile financial structure. Ohio State University's recent financial report offers a stark microcosm: despite $255 million in revenue in FY2024, the department posted a $37.7 million operating deficit, driven by soaring coaching salaries and declining ticket sales. This raises a critical question: Can the current model of college athletics—built on a few high-revenue sports—sustain itself, or is a crash inevitable? And more importantly, where should investors look for safe harbors in this storm?

Ohio State: A Microcosm of the Problem

Ohio State's FY2024 results highlight the precariousness of relying on football for financial health. Football revenue alone totaled $111.6 million, but expenses for the program were $78.6 million—meaning it only contributed a $33 million net profit. Meanwhile, 34 other sports teams ran at a collective loss of $37.7 million. The athletics department projects a rebound in FY2025 to $300 million in revenue, buoyed by a new TV deal and eight home football games. But this optimism assumes no further declines in ticket sales or external shocks—a risky bet in an era of rising costs and shifting regulations.

The vulnerabilities are clear. Ohio State's severance payments for coaches (like the $9.2 million paid in FY2024) and rising salaries for football staff—up 19% since 2023—highlight how structural costs are outpacing revenue growth. And while the department claims reserves can cover the deficit, such short-term fixes mask a long-term problem: over 60% of Power Five programs lack meaningful reserve funds, leaving them vulnerable to revenue dips.

The Broader Vulnerabilities: A System Built to Spend, Not Save

The Ohio State story isn't unique. The NCAA's financial ecosystem is fractured:
- Revenue Gaps: The top 10 programs (e.g., Alabama, Texas) generate 99.6x more revenue than smaller schools like the University of New Orleans ($251 million vs. $2.5 million in FY2022).
- Expense Bloat: Football coach salaries have risen 87% since 2010, outpacing revenue growth.
- Non-Profit Paradox: Athletic departments must spend nearly all revenue to avoid IRS scrutiny, creating a "spend now or lose it" culture.

Regulatory shifts are adding pressure. The House v. NCAA settlement, which allows athlete compensation and NIL deals, could further strain budgets. For instance, Ohio State's projected $22 million annual athlete payout (starting in 2025-26) will squeeze margins even further.

The Coming Crash?

The writing is on the wall. Consider these red flags:
1. Overexposure to Football: Ohio State's deficit would vanish if football revenue stayed flat, but ticket sales dropped 25% in FY2024 due to fewer home games.
2. Liquidity Risks: Only 41% of Power Five schools maintain reserve funds. A single bad year—like a losing season or pandemic—could force cuts to low-revenue sports.
3. NIL and Equity Costs: Smaller schools, already struggling, may face existential threats as NIL deals and athlete compensation drain funds.

The dip in FY2024 (to $255M) vs. the projected rebound to $300M in FY2/25 highlights the volatility tied to football performance and external factors.

The Silver Lining: Diversification as a Hedge

The solution lies in institutions that diversify their sports portfolios and prioritize financial resilience. Here's where to look:

1. Universities with Balanced Revenue Streams

Schools like the University of Texas at Austin and University of Florida are expanding beyond football through:
- Media Deals: Texas A&M's $300M+ TV deals with ESPN and Fox.
- Diversified Sports: Florida's focus on soccer, volleyball, and golf—sports with lower costs but growing fan bases.

2. Institutions with Strong Reserves

Rice University and Southern Methodist University (SMU) stand out. Both maintain robust endowments and reserve funds, while investing in niche sports like rowing and equestrian. SMU's Garry Weber End Zone Complex (a $120M facility) balances luxury seating with team facilities, ensuring revenue from premium events while supporting all sports.

3. Adaptive Financial Models

North Carolina State University and University of Michigan are pioneers in data-driven cost management. They use analytics to optimize budgets—e.g., shifting spending from overpaid assistant coaches to youth development programs.

Investment Thesis: Bet on the Buffers

Investors should target schools with:
- Diversified revenue: At least 30% of revenue from non-football/basketball sources.
- Reserve funds: Institutions like the University of Georgia, which has a 6-month rainy-day fund.
- Expense discipline: Schools like Florida, which cap coaching salaries at 10% of total revenue.

Top Picks:
1. Texas A&M: Leverages its massive endowment and tech partnerships for sustainable growth.
2. University of Florida: Balances SEC football with strong women's sports and corporate sponsorships.
3. Rice University: Small but lean, with a focus on low-cost, high-profile sports like rowing.

Conclusion: The New Rules of College Athletics

The era of unchecked spending is ending. Investors must favor institutions that treat athletics as a business—not a charity. Ohio State's struggles are a warning: reliance on a single revenue stream is a recipe for disaster. The future belongs to schools that diversify, save, and innovate. Those that do will thrive as the gold rush turns to gold standard—profitable, sustainable, and unshaken by the storm.

Texas A&M's broader revenue base (45% non-football) vs. Ohio State's 78% football dependency illustrates the risk/reward tradeoff.