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The way I look at it is that any loss on athletics is simply a marketing expense for the university as a whole. When you look at the Athletics dept deficits vs. the overall $2billion+ university budget, the expense is not as significant. As @Pudge pointed out, it's about brand building. As Susan has said, athletics is the front porch for our university.
Now, if students should directly shoulder (a portion of) that expense, I don't know. I suppose built into their tuition are marketing expenses, but I could be wrong.
$2 billion?
Cincy's like UConn's is around $1B.
Cincy though has a big research hospital which accounts for a huge part of the expenditures. As well, any research funding (which for Cincy is not that large outside of Biomed and the hospital) is not fungible. It's dedicated. They are at 362m research per year with 89m outside the hospital).
From looking at the breakdown of their budget, the academic side is operating on 495m a year.
I dont care how you brand, if you are slashing by 25% per student on your curriculum (i.e. the fungible side of the budget) you are reducing services. Bottom line. You can brand all you want, but if your product is shoddy, sooner or later it's going to bite you in the butt.