Jim Harbaugh Comes Back To Michigan, For Peanuts
With one of the most publicized head coaching searches ever coming to a conclusion on Tuesday, many pundits questioned if the University of Michigan may have overpaid for the services of Jim Harbaugh and his staff.
Quite the opposite is true. With several high-profile professional jobs becoming available (Chicago, New York and Oakland), Michigan had to pony up. As it turns out, Harbaugh has accepted a lower figure than originally reported (about $5 million versus $8 million).
Jim Harbaugh told Hackett he did NOT want to be the highest paid coach in CFB, or even the Big Ten. More concerned with pay for assistants.
— John U. Bacon (@Johnubacon) December 30, 2014
If Michigan had to pay $10 million a year for Harbaugh, they would have for one simple reason: The University of Michigan, including the athletic department, is a business. A business whose top brand had begun to decline. When business or revenues begin to decline, the trend has to be reversed.
The Michigan Athletic Department's 2014-2015 budget was slated at $151 million with expenses of $145.9 million, producing a $5.1 million surplus. The projected surplus is designated to fund scholarship programs, student athlete enrichment opportunities and facility projects on the Stephen M. Ross Athletic campus. Coupled with new skyboxes for Michigan Stadium, the University had little choice but to bring in the most qualified candidate available.
The fact that the best candidate available was a Michigan Man was just icing on the cake.
Risk/Reward For The Wolverines
When any business makes a new hire or changes their business model, the powers that be carefully evaluate the risk/reward of the decision. For Michigan, the rewards outdistance the risks.
So what is at risk for the University if they did not make this high-profile hire? The most lucrative public apparel deal in the country with Adidas at $8.2 million, which surpasses Oregon's contractual arrangement with Nike.
That contract was signed in 2007 and when it expires with Harbaugh at the helm, the disparity between Michigan and the No. 2 school in the Big 10 -- Nebraska, also with Adidas, at $4 million -- could very well be widened.
That money is pocket change when compared to the revenue the University will receive from its share of television rights from Big 10 sports coverage. It is projected that Michigan will receive $44.5 million in the 2017-2018 season though the league's distributions plan, $14 million more than this year.
With deals for Walt Disney Co (ESPN) and CBS negotiated before television rights skyrocketed, these numbers may only be increasing in the years to come.
Not included in all of these calculations will be revenue received for the amount of Michigan apparel that will be sold.
#MichiganFootball coach Jim Harbaugh will make $5M/year over 7 years. Salaries for the University's top 10 execs totaled $5.43M in '14
— Benzinga.com (@Benzinga) December 30, 2014
Hearken Back To History
This is not the first time the University of Michigan has made a blockbuster move. Back in 1927, when the stadium was built at a cost of $950,000, it had an original capacity of 72,000. The legendary Fielding H. Yost envisioned more.
At his urging, the construction of the stadium included footings in the foundation that could support a crowd of 150,000. These were lofty expectations as the entire population of Ann Arbor, Michigan, at that time was less than 30,000. Now nearly 100 years later, Yost was a bit high on his projections. Over the last 39 years, every game has drawn at least 100,000 fans.
The capacity of the stadium always ends in a 1 (109,001), a tribute to Yost. By having that one extra seat, there will always be room for the spirit of Yost to have a seat to sit in at the Big House.
Now only time will tell if Harbaugh was also the right move.
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