MICHEL MARTIN, HOST:
At colleges and universities across the U.S., football coaches are often among the highest-paid people. Does that make economic sense? Darian Woods and Adrian Ma from Planet Money's the Indicator checked in with some folks in a position to know what makes coaches so valuable.
DARIAN WOODS, BYLINE: Greg Byrne is the University of Alabama's athletic director, so he's the one that hires the coaches. And, you know, we actually spoke to him mid-game.
GREG BYRNE: We're up 2 to 1 on Missouri in the bottom of the sixth.
ADRIAN MA, BYLINE: Last year, Greg hired football coach Kalen DeBoer for an annual salary of almost $11 million. And he said, look, the football team turns a very healthy profit, but then they have a lot of other sports that don't make money.
BYRNE: And so it's an economic model where football is the engine that pulls the train to not only offer great opportunities for your student athletes, it's a way to get people involved and engage with your university.
WOODS: Greg argues that a top coach also means a better football team, which means more ticket sales and also more buzz that can boost enrollment.
MA: OK, so case closed. It makes economic sense for colleges to pay top dollar for football and basketball coaches.
WOODS: Not so fast, Adrian. Andrew Zimbalist is a sports economist at Smith College.
ANDREW ZIMBALIST: Unquestionably, there are individual cases of it. But the general phenomenon is, no, they don't benefit.
MA: He's looked at what happens when a new coach is brought in with a high salary.
ZIMBALIST: You know, if you're paying some coach $7 million and there's not a $7 million spike in revenue, then it's not paying off for you.
WOODS: In fact, Andrew finds that at the top leagues, athletic departments are each losing an average of $20 million or more a year. But what about increasing the school's brand?
ZIMBALIST: Basically, that evidence is not robust.
MA: So in general, if building up a top athletic department in a college does not make economic sense, why is it so widespread?
ZIMBALIST: The explanation is that it's an artificial market. It's not a normal business commercial market.
WOODS: Andrew says we shouldn't think of the market for football coaches as free markets, like the market for - I don't know - sandwiches or living room furniture. And he has five reasons. First, college sports has a bunch of tax benefits. Secondly, these programs are publicly owned, meaning they don't have private shareholders demanding they turn a profit each year. Third, there are often large subsidies from the university and state governments. Fourth, the students often subsidize sports through their college tuition. And finally, until recently, college athletes didn't get paid. And so there was more funding available for the coaches' salaries.
ZIMBALIST: You don't have any of the normal discipline that happens in a typical commercial market, and for that reason, even though college coaches are being paid, it can be argued, a market salary, it's a very artificial and jiggered market. The few college presidents historically who have stood up and said this is unacceptable, they've gotten their wings clipped.
WOODS: And a 2009 survey of university presidents with major football programs found that 85% felt that football and basketball coaches' salaries were excessive, but they felt they couldn't control them.
MA: Greg says students do not subsidize Alabama's football coach because the football program pays for itself. And maybe Alabama is a special case where it does pay off, but not every college can be a superstar school.
WOODS: Darian Woods.
MA: Adrian Ma, NPR News. Transcript provided by NPR, Copyright NPR.
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