Priceonomics

In press releases and media appearances, Stanford University prefers that you refer to the head coach of its football team as the Bradford M. Freeman Director of Football. To some in college football, that seems a tad pretentious, the football equivalent of British aristocrats drinking tea with their pinkies up. What’s wrong with just calling him coach? 

But pretension has nothing to do with Stanford’s coach having a fancy title. Although Stanford recently became the first college to ever fundraise more than $1 billion in a single year, the football program is hard up for cash. Stanford isn’t giving its coaches fancy titles, it’s selling off naming rights. 

Nerds can play football...

Until the 2009-2010 football season, Stanford had gone eight years without a winning season and hadn’t been a dominant power since the 1930s. Fans and commentators usually focused on Stanford’s high academic standards as the culprit. According to Stanford’s own Athletic Director, only about 400 out of the 3,500 players who join Division I teams every year have a chance at getting by Stanford’s admissions department. How could Stanford compete with the elite when the majority of the nation’s best recruits were ineligible to attend?

When Stanford hired Jim Harbaugh - now the coach of the San Francisco 49ers - as head coach, Harbaugh turned questions about competing in spite of high academic standards on their head. “I'm very comfortable and happy we have the highest [academic] standard in the country,” he told Stanford Magazine. “We're screaming that from the rooftops.” Representing an elite academic institution would be a strength by ensuring that the most intelligent recruits all wanted to commit to Stanford. Discussing Stanford’s academic reputation and Silicon Valley connection, current coach David Shaw noted, “We'll go after the young men that all those things are appealing to."

Ensuring that every player as talented at acing AP courses as sprinting the 40 yard dash committed to Stanford required a rigorous, nationwide recruiting effort. Shaw notes:

“We needed to be a national recruiter. Now, we go from coast-to-coast, and at any given time, we have seven coaches in seven different states. Sometimes, the next day, those guys will be in seven different states.”

And that elite recruiting effort, like every aspect of an elite program, called for a high level of investment.

… But they need money

Trying to build an elite college football program at Stanford is a bit like moving a NFL team to Burlington, Vermont. Elite teams like the University of Texas, Ohio State, and Michigan have student bodies of 40,000 plus students and can command the loyalty of entire states or regions. Stanford enrolls under 20,000 students (7,000 undergraduates) and can’t command the loyalty of the Bay Area. Stanford Stadium seats 50,000 fans to Michigan’s 100,000. 

As a result, Stanford brings in much less revenue than schools with comparable records. A Wall Street Journal article notes that Stanford’s $9.7 million in football ticket sales in 2012 compares poorly with the $27 million average of the four teams ranked higher than Stanford at the time. Stanford’s merchandise sales are similarly bleak. 

Lower revenues had a clear impact on Stanford’s football fortunes. Head coach David Shaw reflected that “for years, there would be two to three coaches who left each year because of the cost of living in northern California and Stanford not paying” as highly as other programs. 

A few years before its rise, Stanford decided to invest in its football program. Stanford tore down its stadium after the 2005 season and replaced it with a venue whose beauty this alumnus can vouch for. As Forbes wrote, coaches now receive salaries nearly on par with their peers at football powerhouses and recruiting spending rose 63% since 2006. 

This takes us back to head coach David Shaw’s fancy title as “Director of Football.” To play with the elite, and pay like the elite, Stanford needed a different playbook than the major public universities that topped the standings every year. The WSJ writes:

The normal revenues Stanford receives from football are so low, in fact, that its 36 varsity sports teams depend on something no other school has, or would dare rely so heavily on: an athletics-only endowment worth between $450 million and $500 million that pays out at 5.5% each year, people familiar with the matter said.

Stanford needed alumni to cover the difference, and they rose to the occasion. Since Jim Harbaugh took over as coach and led Stanford onto the national stage, donations for Stanford athletics increased “53.4% and new gifts and pledges have increased by 215%.” One alumnus (the son of a wealthy Saudi businessman) pledged $500,000 because he had such fond memories of rushing the field when Stanford beat its rival Cal in 2007. Stanford benefactor John Arrillaga built coach Harbaugh a $50,000 private bathroom next to his office. Few universities endow coaching positions, but Stanford’s head coach and top assistant coach positions, as well as every scholarship for its football players, are endowed to thank donors. The head coaching position is endowed in the name of a former Stanford football player and current private equity founder who pledged $1.6 million in 1989.

A number of factors led to Stanford becoming one of the most successful college football programs of all time when it clinched a Rose Bowl berth last Saturday. Media focuses on the leadership of the head coaches and star players, a new strategy of smashmouth football, and the training regimen that made it possible. But there is another group that played a role behind the scenes: the decision-makers in the athletic department that green-lighted a surge of spending on the football program, the fundraisers who made it sustainable, and the rich alumnus who decided to finance it all.

This post was written by Alex Mayyasi. Follow him on Twitter here or Google PlusTo get occasional notifications when we write blog posts, sign up for our email list.


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