Saturday, January 06, 2007

$4 Million per, right on target

Yea, I was taken by surprise at the open wallet Alabama apparently has regarding the hiring of Nick Saban.

However, I disagree that he is not worth it. Let me explain.

After doing a little quick research, I found the compensation to be right in line with what a similar business would pay a similar position.

First, college athletics is a business, right now at least. Therefore we must look at the revenue it generates and evaluate compensation relative to what is earned. In thinking about a comparable company, I looked to the NFL. Unfortunately, schools like Alabama are closer to resembling the NFL than their "true" counterpart, like say, Vanderbilt! My choice, Green Bay Packers of the NFL.

I chose the Packers based only on the ability to get info since they are a public company. Plus, the Packers are very parallel to Alabama, as it relates to nationwide fandom.

Packers head Coach Mike McCarthy earns a total compensation of around $5M per year. The Packers total revenue is around $200M per year, but $80M of that comes from the powerful NFL national TV contracts. Therefore, comparing apples to apples, let's use the $120M revenue budget

The Tide's revenue "should be" around $90 - $100M per year. If you take the same percentage from the Packers example (about 4-5%) then Saban's compensation is right in line.

This was a very rudimentary research project, but I think it does illustrate that the Saban deal is not as undeserved as some people are saying.

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