College Football Playoff Expansion Proposal Does Not Address Revenue, Distribution

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The College Football Playoff Working Group (a four-person subgroup of the CFP management committee) recently proposed increasing the number of College Football Playoff participants from four teams to 12. The desire to give more schools the chance to participate in the College Football Playoff is driving the expansion discussion, given that 71% of playoff spots have gone to just four schools (Alabama, Clemson, Ohio State and Oklahoma) since the current format was introduced in 2014. But it would be naïve to ignore the financial upside of playoff expansion. A USA Today report suggested a 12-team event could grow CFP revenues to more than $2 billion. We reached out to CFP executive director Bill Hancock to gain a better understanding of how the economics behind a 12-team playoff would work.

Our Take: To be clear, at this point a 12-team playoff is nothing more than the working group’s recommendation. “It’s the first step in a long process,” Hancock said. The full management committee will discuss the proposal before the end of this week “and if they coalesce around it, or any other proposal, they’ll forward their recommendation on to the board of managers, who [are scheduled to] meet next week,” he added. That does not mean a decision is imminent. If the board believes the proposal has merit, it is likely to authorize further research and discussion during the summer to determine the feasibility of the plan. The CFP executive director did say it is possible college football could ultimately decide to stick with the current format. “The CFP could stay at four teams. Until the presidents and chancellors decide, this will remain just a proposal.”

“A lot of things are still to be worked out,” Hancock said; including a timeframe by which college football could pivot to a 12-team playoff. The CFP has 5 years remaining on its current agreements. But it sounds plausible change could occur sooner than the 2026-27 season. “It certainly won’t start this year or next year if [the proposal] does go through. But we don’t know when it might,” he added.

The working group, however, was not tasked with addressing revenue distribution, so the subject was absent from their proposal (and thus has not been discussed by the management committee). As it currently stands, though, Power 5 schools split roughly 80% of CFP revenues (in 2019-2020 the SEC, Big Ten, ACC, Big 12 and Pac-12 each received $66 million). It would be reasonable to suggest that percentage would decline if the new playoff format is going to ensure greater participation from schools outside those conferences. But the rationale behind the Power 5 keeping such a large percentage in the first place was that those were the conferences bringing in the revenue. It’s hard to make the argument that the non-Power 5 schools are driving the revenue increase and thus should be entitled to a larger percentage of the proceeds. Hancock said the rationale “may or may not be the same next time.”

While he felt it was premature to speculate on distribution percentages, Hancock did mention a couple of other elements within the existing CFP payout system that he would like see—and believes we will see—continue. “Distributing a certain share [of revenue] to the conferences for teams participating has been a tenet of both the BCS and CFP, and I haven’t heard any talk about changing that,” he said. The conferences currently get $6 million for each team that appears in a semifinal game and $4 million for each team that participates in a non-CFP bowl game. “I’m [also] sure teams will continue to be reimbursed for their expenses,” he said (currently: $2.43 million per game).

In 2019-2020, the CFP distributed more than $475 million in revenue. It’s not clear exactly how much that figure would rise should college football move to a 12-team format (again, it wasn’t addressed in the proposal). But with at least five additional CFP games (there are never more than six in the current New Year’s Six system; there can be as few as four depending on which games are hosting semifinals), it’s believed the increase would be significant. For what it’s worth, two media consultants we spoke to suggested the $2 billion/year number floated by USA Today seems rich.

The CFP management committee won’t begin to discuss potential revenues—and how to divvy them up—until it settles on expanding the playoff format. While reasonable to wonder how the collective will decide on a new model without all of the pertinent financial information, Hancock reminds the primary goal is to “increase participation;” not grow revenues. “And everybody believes that there will be more money to be distributed,” he said. “It’s not important to know how much. This is really about whether the format is best [for the sport] or not.”

Beyond expanding participation, there also appears to be benefits derived from expanding to 12 teams, above and beyond the associated revenue growth. The six bowl games that would host the quarterfinal and semifinal matchups and each of the Power 5 conference championship games, which would become pseudo play-in games in the new format (six slots will go to conference champions; the other 6 will be at-large berths), should all see increased fan interest (think: ticket sales). Of course, that assumes the Power 5 conferences continue to determine their champion with a game.

It has not yet been decided which six bowl games will host quarterfinal and semifinal games annually. Hancock said, “We are happy with the current six bowl games (Rose, Fiesta, Sugar, Cotton, Peach and Orange), but the working group’s charge did not include deciding which bowl games might be a part of CFP in the future. So the matter hasn’t been discussed.”

Under the proposed format, the four first-round games would be held on the campuses of the 5-8 seeds (the top four teams would get byes). While ideal from a competition standpoint, a school like Alabama makes upwards of $5 million for a home game (they took in $36.8 million in ticket sales across eight home games in 2019). Hancock doesn’t see that as a potential holdup, saying he suspects “those teams will be delighted to have a bye. And the revenue policies for the first round haven’t been recommended [yet]; we don’t know whether there will even be a first round. The model could be like a typical NCAA championship event, where the revenue goes to the NCAA to be shared nationally, and the NCAA reimburses the expenses and a small honorarium. It will all be determined if the proposal is adopted.”

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