THE ECONOMIST: Gigantic gridiron gyrations

Over 40+ years and thousands of projects, I have examined pandemics, natural disasters, oil market collapses, financial meltdowns, and all manner of mayhem. One enduring lesson is that nothing — and I do mean NOTHING — gets folks worked up as much as football. I should know better, but alas, I don’t!

Since the announcement that the University of Texas and the University of Oklahoma would be leaving the Big 12 Conference for the Southeastern Conference, speculation about what happens next has been rampant. Other universities in the Big 12 are obviously unhappy about the situation and have been trying to either stop it or change it, but that is unlikely.

Without Texas and OU, the Big 12 would likely drop from the “Power 5” conferences for athletics, and as a result the state would go from having five teams in Power 5 conferences (Texas A&M, Texas, Baylor, TCU, and Texas Tech) to having only two. While there are many possible options on the table (including alliances in which Baylor, TCU, and Tech compete with teams in other top-tier conferences and a potential, though improbable, merger of the Pac 12 and the Big 12), nothing has been resolved (or likely will be soon).

It’s not just sports; it’s also a huge economic issue (the magnet that pulls me in), both for the universities and their communities. As it stands, the remainder of the Big 12 conference is facing smaller television deals, lower attendance, and other negative consequences, resulting in reductions in athletic revenue, tourism, and local economic benefits.

To shed some light on a heated subject, we examined two representative scenarios. (See for details.) Scenario 1 assumes the Big 12 remains largely intact and potentially expands, with television revenues and attendance patterns similar to those in the American Athletic Conference (adjusted for specific characteristics of the individual schools). Scenario 2 assumes the Big 12 is not maintained and the schools must seek opportunities elsewhere, with ultimate performance mirroring the five most successful athletic programs in the Mountain West Conference (the next most successful league and TCU’s former home).

The Waco, Lubbock, and Fort Worth areas would face overall economic losses of an estimated $397.7 million in annual output and 5,322 jobs under Scenario 1 and $569.1 million in yearly production and 7,615 jobs under Scenario 2. Across the entire Big 12, the yearly losses total $938.9 million to $1.3 billion in output and 12,623-18,063 jobs.

College athletics is changing, and it is inevitable that schools will respond. If Texas joins the SEC, there will undoubtedly be benefits for the university and the Austin area. Nonetheless, the consequences for other universities and how those might be mitigated are notable concerns. Stay safe!