Mitch Daniels seems some what committed to the football program with this announcement...
- Thread starter JohnnyDoeBoiler
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How home kitchens and competitive collegiate athletics are comparable escapes me. If you are in any competitive industry, you had darn well better know what your competitors are up to and where things are headed. And if part of your business or organization generates the vast majority of your revenue, you had better pay very careful attention to it. Burke did neither, and now he is scrambling. This major screwup will go down as a major part of his legacy. Along with the maintenance costs of the palaces he has built for programs that are cost centers.
I get the anger over the things like baseball and softball fields but I think the hope was to create facilities for them with the hopes of them getting better to the point they are or very near self sufficient. If that is the case, you can allocate more resources to the football and basketball programs, which then allows more funds to be divided up down the road. The long term potential is high but also high risk of baseball and softball getting to that point is hard. Softball just hired a new coach and I believe has the program trending up and hopefully Schreiber can right his program. If not, both facilities can attract a high level coach. The same could be said with the volleyball program. I would almost bet they are cost neutral or possibly cost positive. They average nearly 2-3k per match which is pretty damn impressive!
It's called an analogy. Google it. Virtually everyone one of our "competition" invested in facilities in the past 3-6 years. Now we are. Whether you like it or not, Purdue will always use an asset for its useful life. We've reached the point where Mollenkopf needs updated. Could we have updated it two or three years ago? Sure? What difference does that make?
Hey Bulldog, We all know what an analogy is -- this isn't an IU board -- problem is, kitchen remodeling doesn't work, as analogy here, whereas Stutz's analogy to operating a business in a competitive industry does.
I bet MB had this planned over a year ago and this was supposed to be announced with an extension of Coach Hat's contract, but given the lack of progress this was fed to us to keep the pitchforks away for a while. I don't think this signals "commitment" to athletics as it a spend money on a big building project on campus. Could they have spend the same $$ on something truly stupid? Yes, but this will have less scrutiny than a new 60 million dollar pool complex. I truly feel this is a payoff to whoever gets the General Contractor's gig or related entity. Call me cynical, I own that. I don't trust politicians of any flavor.
My problem with all of this is that the leaders of a Big Ten school are supposed to have some foresight. They look like a bunch of ninnies running around now shouting about how they are committed to winning. The fact of the matter is that they have not been committed to football. And as a result, the football team and their brand is getting pounded by MAC schools on a regular basis. And it all transpires on national TV while 37 people sit in Morgan's new natatorium every other week. How about a little return on those huge investments, Morgan? Krannert should ask for his management diploma back.
I would suggest that they shut their traps and simply do it. Burke is the king of big talk and no results. Funny how you no longer hear about his key performance metric around finishing in the upper echelon of the Sports Directors Cup. Why? Because we finished 60th last year - we used to be in the 30s. Stanford, by the way, won the whole thing. And their academics are reasonably solid (tongue squarely in cheek!).
I would suggest that they shut their traps and simply do it. Burke is the king of big talk and no results. Funny how you no longer hear about his key performance metric around finishing in the upper echelon of the Sports Directors Cup. Why? Because we finished 60th last year - we used to be in the 30s. Stanford, by the way, won the whole thing. And their academics are reasonably solid (tongue squarely in cheek!).
Why doesn't it work? If you think Purdue will ever replace a facility before it has reached the end of its useful life, then you honestly picked the wrong school. Arkansas or Auburn may have been a better choice for your education.
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Thank you - I was beginning to experience some self doubt
Do you work in a "competitive industry"? How often do you write off a capital asset before it's been fully depreciated? Just curious.
I actually do work in a very competitive industry where 5 or 6 players battle for the same customers. Who said anything about writing off assets? You can continually update and improve existing facilities without writing them off.
I know exactly where my competitors are and even what they are planning. That is what I get paid to do.
I also work closely with my leadership team to continually assess which investment opportunities will have the greatest impact on our value proposition. We regularly survey our customers to determine the key drivers of their decision to select us or to retain us.
Purdue football is an unmitigated financial disaster right now. The football program experienced the largest decrease in attendance in the country last year. That has to be scary expensive. I am relatively certain it would have been much less expensive to continually invest in the facilities and keep attendance up.
I know exactly where my competitors are and even what they are planning. That is what I get paid to do.
I also work closely with my leadership team to continually assess which investment opportunities will have the greatest impact on our value proposition. We regularly survey our customers to determine the key drivers of their decision to select us or to retain us.
Purdue football is an unmitigated financial disaster right now. The football program experienced the largest decrease in attendance in the country last year. That has to be scary expensive. I am relatively certain it would have been much less expensive to continually invest in the facilities and keep attendance up.
Sounds like you've had MGMT 201 but not MGMT 610 or 611? Frequently there is economic justification for replacing a capital asset before it's fully depreciated -- such as when a new technology renders the original asset uncompetitive. In which case, the cost of the original is referred to as a "sunk cost" and you don't (or shouldn't) factor that sunk cost into the decision on whether to replace the original.
I have twenty plus years executive experience with two companies, both of which were the overwhelming share and revenue leaders in their industry. I'm currently the second ranking engineer at a $30 billion dollar company and participate in the capital authorization of millions of dollars of assets every year, ranging from laptops to roofs to advanced robotics to private jets. Every asset has a useful life. If we spend $2M on a facility roof and capitalize it over 15 years, you better not come to me in 12 years saying you need a new one. And if your logic is that our competitor just did the same thing, I'm going to tell you that's why they're #2 compared to us. It's a simple Return on Capital exercise. Writing off an uncompetitive asset can and does happen, but rarely and the best companies do it less than average companies.
Here's how this is going to play out: MSU, which recently upgraded their FB offices, is going to notice in 7-8 years that our offices are just as nice as theirs and UM just made their offices even nicer. Their AD will go to their BOT and say, "Michigan has amazing offices and our offices aren't even better than Purdue's, we need to upgrade". And they will. Then 15 years from now our AD will go to our BOT and tell them our offices have fallen behind and need upgrade like MSU's. What won't happen is our new AD going to the BOT in 6 years saying, "I know we just upgraded these offices and I know they're middle of the pack in the Big Ten, but I suspect MSU is getting ready to upgrade theirs so I need X million dollars to do ours first." You're argument is that is what we should be doing. My argument is that is completely opposite from what Purdue has ever done, and I believe will ever do. Purdue will always maximize the life of their capital assets and will react to our competition when appropriate. With the size of our FB stadium and the small number of overall sports, in a best case secnario, we will only be ranked around 10th in AD revenue. That's the reality and I don't understand why people don't get that.
The fact remains this investment is great news. It puts us up a couple weight classes for the time being. But we are a school that will buy the used car and drive it for 8 years versus our neighbor leasing a new one every 3.
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"If we spend $2M on a facility roof and capitalize it over 15 years, you better not come to me in 12 years saying you need a new one. And if your logic is that our competitor just did the same thing, I'm going to tell you that's why they're #2 compared to us. It's a simple Return on Capital exercise. Writing off an uncompetitive asset can and does happen, but rarely and the best companies do it less than average companies."
That's a silly example -- putting a new roof on a building, that doesn't need it, because your competitor did, is a poor analogy here -- even worse than your kitchen remodeling example.
"I know we just upgraded these offices and I know they're middle of the pack in the Big Ten, but I suspect MSU is getting ready to upgrade theirs so I need X million dollars to do ours first." You're argument is that is what we should be doing. My argument is that is completely opposite from what Purdue has ever done, and I believe will ever do. Purdue will always maximize the life of their capital assets and will react to our competition when appropriate."
My argument isn't that Purdue needs to make every upgrade first. But when we do upgrade, the decision should be based on what's necessary to be competitive, and we shouldn't settle for an upgrade to mid pack or we'll be at the bottom, again, before the upgrade's done. You are right about one thing, what I propose is completely opposite from what Purdue has ever done, for good reason.
"With the size of our FB stadium and the small number of overall sports, in a best case scenario, we will only be ranked around 10th in AD revenue. That's the reality and I don't understand why people don't get that."
There was a time when Purdue had a 70K football stadium and regularly had the 3rd or 4th best attendance in the B1G. We now have a much smaller stadium and less revenue, as a result, because of 25 years of total mismanagement of our football program from ADs, the BOT, and the President's Office, by people who know little about how to properly analyze capital investment decisions, focusing on cost minimization rather than value creation.
Clearly, you think like Morgan Burke, and we've had enough of that. Get your MBA and you'll think differently.
I have a MBA, thanks for the suggestion though. The fact is my examples are based in the reality of who Purdue is and how Purdue operates. And I'm positive how we will operate in the future. It's not changing; either accept it or find something else to do on Saturday mornings.
I'm not happy at all about the current state of the football team. I, like most other rational fans, find the announcement that we are investing $60M to be a very positive thing. Less rational fans, many of whom a month ago were complaining that our BOT/MD/MB doesn't financially support our program, are now complaining that it's too little, too late. Oh well. Guess what, you'll think the next big investment was too late or too small too.
Purdue is always bringing up the tail end of the B1G in making the facilities investments necessary to be competitive in recruiting, and when we have upgraded, we never do anymore than it takes to get out of the basement, maybe mid-pack, as Berghoff stated. It's a loser's strategy because we end up spending as much money, if not more, than the first movers, but we never gain a competitive advantage, although granted, competitive advantages are temporary, by nature. But the fact they're temporary doesn't mean you can, or should, take a pass on them -- not if you expect to compete.
Your point seems to be that we must continue to play this game the way we have in the past because of who we are. I don't accept that. We are, as an Athletic Dept, largely who we are now because of many decades of mismanagement, probably at least 4. Other than that ridiculous women's softball stadium, the last time Purdue stepped out and set the pace for the B1G in facilities was probably the original Mackey project in the mid-late 60s. That project worked out pretty well.
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My point is based on the reality we will never, even if we sell out every FB and BB game, be much more than 8-10th in B1G revenue. That's who we are. That's how this AD is built and funded. So to aspire to have facilities that are competitive with the teams in the 5-7 ranked range (I.e. MSU, IA, UW) seems aspirational and aggressive. Will other schools respond to our facility upgrade and eventually upgrade too? Sure, but no school in that range is doing it more often than 8-12 years and for major capital outlays (like our $60m), the average for schools in the middle of the pack is probably longer. So we will get a bump that will diminish over 12-15 years and then we will respond again. That's just reality. Knowing we won't ever be UM, OSU, NU, or PSU, that seems like an acceptable goal to me.
We definitely should be able to compete in that 5-7 range -- we sure as heck did not too long ago -- but you're willing to accept that 8-10 is the best we can do?! And if you're shooting for 8-10, odds are you'll end up 12-14, because no one currently in 10-14 is foolish enough to aspire to be 8-10!
It's simple math. Not even MBA math. Our revenue based on our facility capacities is very limited compared to many of the B1G schools. I think 8-10 is frankly being generous. Keep in mind I'm only talking revenue.
If you didn't learn better than that ("logic") in getting your MBA, then you need to ask for your money back.
The number one variable component in our revenue stream is ticket sales. You do understand that right? If we sold out every FB game you realize we still wouldn't be higher than 8th in total AD revenue? Nebraska was 8th in revenue last year. We would have to increase our revenue by 32% to get to 8th. 7th was MSU and $10M more than Nebraska. If we sold out every game of football this year, it would be worth maybe $10m-$15m more in revenue assuming $50-60 tickets and 20,000 additional seats and 7 games. If we had $15M more in revenue we'd move up to 9th. But to get to 7th we need to find another $20M. Hopefully this is logical enough for you.
I assumed additional revenue from concessions, parking, etc. in my $10-15M number and did not account for ticket sales sharing, which obviously would make that number somewhat smaller.
Lets not start a hate letter chain, but how do the Mollenkopf / Ross-Ade facilities compare to Indiana's facilities. If Purdue is not comparable to other Major program facilities, those differences will be used a tool to out recruit Purdue. Competition is rough... at all levels.
Seriously, questioning my intelligence is one thing but accusing me of being related to Burke, them's fightin' words.
.Amazing, you think just like Morgan Burke -- managing the status quo (i.e., failure), rather than thinking about what should be possible. Do you realize the revenue numbers you're citing are not reported with any consistency across schools -- some include only ticket sales, others include football specific contributions, apparel royalties, etc. The bottom line is that we should be able to match Iowa, for example, in football revenue generated -- we have in the past and we could, again, in the future, with leadership that focuses on building a fan base for the long term, recognizing that sometimes you have to spend money to make money. For example, for years we had some of the most expensive student football tickets in the B1G. Why? Because we were more concerned with milking the students for all we could, rather than focusing on getting them in the stadium and making more of them into lifelong fans. So now, yes, Morgan has finally figured out he's been charging way too much for student tickets, just like he's figured out he needs to pay coaches B1G-level salaries and that recruits demand B1G-level facilities. But it will take a long time, now, to turn this battleship, but it can be turned; so don't quote the current miserable revenue results as evidence for why we can't do any better.
Seriously, questioning my intelligence is one thing but accusing me of being related to Burke, them's fightin' words.
I'm not questioning your intelligence. I'm questioning whether you learned anything when you got your MBA -- there's a difference. I apologize for suggesting that you're related to Burke -- but you do think like him.
I've never said we can't do better. I've simply said there's a realistic limit on how much revenue this AD can generate. And you've shown zero data or facts to support your claim we should be in top tier of revenue. I don't deny we could never reach Iowa levels of revenue, I just tried to explain as simply as I can that for us to even gain $20M in additional revenue would take an incredible increase in game day attendance and STILL only get us to 9th in the B1G. Again, I think being 9th in revenue and competing with those guys in the 5-8th group on quality of facilities and support is a great aspirational and even realistic goal. You seem to think we should be better than that and yet provide zero specifics. Are you expanding Ross Ade? Increasing ticket prices? Increasing JPC fees? You think we should be at a level $30-35M more than we are now (that would put us above MSU and around 6th). Show us your MBA math how you get there. Remember, I went to a crappy MBA school so dumb it down for me.
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BB: I think that is a point that I would like to make. The financial assumptions you made are that the Game day revenues and licensing is static. Stadium experience, TV revenues, apparel licensing, concession and merchant sponsorships are all dynamic revenue streams that are subject to demand changes. So far the TV revenue has been "shared equally" somewhat. Any intelligent negotiator will try to manipulate the "shares" depending on audience demand. So if Purdue continues to suck at football while no one watches, you can bet the revenues "share" will drop. If Purdue Football product improves, you can bet the demand for the games will improve and so will the TV cash flow.
That is the way I see it.
These have been planned for quite some time. It is not a recent push.
This is from an article in April:
Asked if the upcoming renovation of Ross-Ade Stadium's South End Zone and Mollenkopf Athletic Center is on the same scope as the recently completed Mackey Arena Project, Morgan Burke didn't hesitate.
"Oh yeah, and then some," Purdue's athletic director said. "It's big."
By the end of the year, Burke will present a master plan to the board of trustees outlining a series of projects that will enhance both facilities.
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While the first project will deal with upgrading Mollenkopf, Burke wouldn't rule out introducing technology components planned for the stadium before the south end zone is completed.
http://www.indystar.com/story/sport...-football-facilities-moving-forward/25640271/
