Pay You, Pay Me: Buy Out Clauses in Arkansan College Coaching Contracts

The below article originally published in the June issue of Arkansas Money & Politics 

When it comes to big-time college sports, Arkansas State University and the University of Arkansas rarely operate on a level playing field. The Razorback athletic department pulls in nearly seven times more total revenue than the ASU Red Wolves.

There is one place Arkansas’ largest sports programs stand on equal ground: each school’s head football coach has a contract demanding the same amount of money for cutting out early. If the Hogs’ Bret Bielema had decided to break his six-year contract last year — his first on the job — he would have owed the U of A $3 million*. Three million is also what the Red Wolves’ new coach Blake Anderson would pay to leave ASU during his first year. This symmetry is all the more striking because Bielema’s and Anderson’s salaries aren’t even close: Bielema makes $3.2 million a year, Anderson makes $700,000.

Conversely, if they leave at the behest of the schools, the coaches can look to pocket some walking-away money.

It’s all a matter of strategy and context, a common game played by universities across the country. Still, fans can be certain of one thing: in the world of coaches’ contracts, terms for parting ways matter every bit as much as the salary.

In the biggest conferences, a $3 million buyout provision isn’t all that large. In a conference as relatively small as ASU’s Sun Belt, though, this kind of number is almost certainly unprecedented — much like the situation in which ASU football finds itself on the whole.

“When you’ve gone through what we’ve gone through the last few years,” ASU athletic director Terry Mohajir said, “you learn a little bit.”

Since 2010, ASU has hired four different coaches. The first — Hugh Freeze — had a first-year buyout of $225,000. For his successors, that figure jumped to $700,000, then to $1.75 million, and now to $3 million. Where it ends, nobody knows.

Decades ago, things were simpler. Major college football coaches typically signed one-year contracts, which would roll over to the next year if they did a good job. Things started changing in the 1980s with the advent of bigger broadcast deals and the proliferation of cable sports programming. As multi-year contracts prevailed in the late 1980s and 1990s, “the institutions began looking for a commitment from the coach,” U of A athletic director Jeff Long said. At first, “it was really a one-way street and now it’s evolved into a two-way street on the contractual buyout terms.”

In business terms, the institution is looking for security after investing in a risky asset — the head football coach — that can either add or lose a great amount of revenue. Perversely, either one makes the coach more likely to leave. A chronically underwhelming coach is likely to be fired by the school, while star performers are lured away by institutions with more elite programs.

Buyout contracts therefore typically work in two ways. If a university fires the head coach “at its convenience,” legalese often translated to “too many games were lost,” the school usually gives the coach a ton of money to go away. Bielema, for instance, would be paid $12.8 million if he were fired in this context in his first three seasons. For Anderson, the number is $3 million if he’s let go in his first year. The University of Central Arkansas’ Steve Campbell would be paid $7,000 a month for the remainder of his contract ending Dec. 31, 2017, if he were fired; and the University of Arkansas at Pine Bluff’s Monte Coleman would get his annual base salary of $150,000 paid to him over 18 months.

In the 21st century, major college coaches’ salaries — and attendant buyouts — have grown hand-in-hand.

Continue reading Pay You, Pay Me: Buy Out Clauses in Arkansan College Coaching Contracts

Buy Out Clauses in State of Arkansas’ Division I Coaching Contracts

When it comes to big-time college sports, Arkansas State University and the University of Arkansas rarely operate on a level playing field. The Hogs attract more fans, play in a bigger conference, get more national exposure and make more money.  The UA’s athletic department pulls in nearly seven times more total revenue than Arkansas States’.

But there’s one place the state of Arkansas’ largest sports programs stand on equal ground. Each school’s head football coach has a contract demanding the same amount of money for cutting out early. If the Hogs’ Bret Bielema had decided to break his six-year contract last year – his first on the job – then he would have owed the UA $3 million. Three million is also the price the Red Wolves’ Blake Anderson would have to pay if he left ASU during his first year. This equality is all the more striking because Bielema and Anderson’s salaries aren’t even close to being in the same neighborhood: Bielema makes $3.2 million a year to Anderson’s $700,000.

How these schools got to this particular $3 million figure is part coincidence, part strategy, and all a matter of context. In the biggest conferences, a $3 million “buyout” provision isn’t all that high. Not with the likes of Louisville’s Bobby Petrino walking around with a $10 million buyout. In a conference as relatively small as the Sun Belt, though, a number like this is unprecedented – much like the situation in which ASU football finds itself on the whole. “When you’ve gone through what we’ve gone through the last few years,” ASU athletic director Terry Mohajir says,  “you learn a little bit.”

 

Since 2010, ASU has hired four separate head coaches. The first of those – Hugh Freeze – had a first-year buyout of $225, 000. For succeeding coaches, that figure jumped to $700,000 , then to $1.75 million, and now to $3 million. Where it ends, nobody knows.

Still, fans can be certain of one thing for sure: in the world of coaches’ contracts, terms for parting ways matter every bit as much as the salary figures themselves.

++++

 

Decades ago, things were simpler. Major college football coaches signed one-year contracts for amounts that didn’t always make them their state’s highest paid public employee. If they did a good job, the contract rolled over to the next year. But things started changing in the 1980s with the advent of bigger broadcast deals and the proliferation of cable sports programming. The best coaches started going to the richest schools which were also offering higher-paying, multi-year deals. But as multi-year contracts prevailed in the late 1980s and 1990s, “the institutions began looking for a commitment from the coach,” Arkansas athletic director Jeff Long said. At first, “it was really a one-way street and now it’s evolved into a two-way street on the contractual buyout terms.”

Look at it in business terms: The institution is looking for security after investing in a risky asset – the head coach – that can add or lose a great amount of revenue. Too much of one of the other – for all programs but the very top ones – make the coach more likely to leave. That departure not only means a loss in investments until that point, but likely a substantial cut future returns, too.

 

For more, read the rest of my article as it originally published in Arkansas Money & Politics Magazine.

It’s on Page 27 of this digital version