Interesting read from Fortune Magazine. A little dated though.

Copyright 1999 Time Inc.
Fortune

December 20, 1999

SECTION: FEATURES/TEXAS LONGHORNS; Pg. 160

LENGTH: 4639 words

HEADLINE: How One College Program Runs The Business;
INSIDE LONGHORN INC.

BYLINE: Roy S. Johnson, Research Associate Mary Danehy

BODY:

Tom Hicks was beside himself. He couldn't sit in one
place. And
he couldn't stand. He couldn't even bear to watch at
times, but
the buoyant CEO and chairman of Hicks Muse Tate & Furst,
the
giant buyout firm, also couldn't afford to turn away,
because
this deal could go either way. I'm not talking about the
company's pending $ 200 million bet on an Internet outfit
called
Teligent. That's pocket change to a business managing more
than
$ 11 billion in assets. This was really big. This was
Saturday
afternoons in the fall. This was perky cheerleaders flying
through the air, and high-stepping marching bands. This
was
college football. This was Texas.

On this autumn Saturday afternoon in Austin, the
University of
Texas Longhorns led powerful Nebraska with only a few
minutes on
the clock at Darrell K Royal-Texas Memorial Stadium, the
team's
newly renovated home. A win would be huge. The
Cornhuskers,
perennial national title contenders, were big-bully
conference
rivals and ranked third in the nation, while the young
Longhorns
were like clumsy calves still finding their legs under
second-year coach Mack Brown. Hicks is a proud and
generous alum
(Texas Exes, they're called), and he's deep into this Hook
'em
Horns thing. Two years ago he flew athletic director
DeLoss
Dodds to North Carolina on his private plane to woo Brown
to
Austin personally, and he regularly counsels the coach on
management matters. He also advised Dodds about pricing,
financing, and amenities when Texas built 66 posh private
suites
at the stadium before last season. In October he hosted a
charity golf tournament in Dallas during the raucous
Texas-Oklahoma weekend to benefit the school's sports
programs.
He owns the Texas Rangers baseball team and the NHL Dallas
Stars, but Tom Hicks loves the Texas Longhorns.

So it's understandable that he was a bit on edge at the
Nebraska
game, hosting a couple of dozen friends, relatives, and
business
associates in one of the glitzy new suites high above the
field
at the Nebraska game. Wearing a Longhorn burnt-orange
shirt and
surrounded by enough ice-cream bars and shrimp to satisfy
an
offensive line, Hicks was anxious and animated. "Hey," he
yelled,
"ain't this something?"

It sure is. The University of Texas athletic program is at
a
pretty intriguing place in college sports. With a surging
young
football team at its core, it is one of the most
successful
college athletic programs in the country, and I'm not just
talking about wins and losses. This is a
multimillion-dollar
enterprise that operates more like a solid business than a
renegade campus outfit. College sports has been a
big-ticket
dance for some time now, and this program is much like
others at
the top-tier universities, but there are a couple of
exceptions:
The folks making the moves in Austin function more like
CEOs than
like traditional athletic directors and coaches, and
they're
making it work.

To determine how they do it, I went back to school this
fall and
asked to take a close look at the books. What I found was
an
operation that balances the athletic department's
educational
responsibilities with fiscal discipline at a time when the
costs
of running a big-time athletic program are surging and
most
college athletic programs are in the red. I found a place
where
football pays the bills. That was no surprise, but this
was:
Among the beneficiaries of big-time football is a women's
sports
program that could be a model for gender equity.

In fact, at the University of Texas, the football
Longhorns are
Grade A cash cows. Athletics officials credit the team
with
generating a staggering 80% of the department's $ 45.3
million
from revenues in 1999. That's $ 36 million from tickets,
individual donations, rights fees, sponsorships, hot dogs,
beer,
and other sources.

The athletic department operates much like a
self-contained
corporation, separate and apart from the rest of the
university.
It has its core business (football); various auxiliary
operations
(other men's and women's teams); numerous revenue streams;
traditional corporate functions such as finance,
marketing,
public relations, and HR (you know it as recruiting); and
even
sophisticated satellite offices--dozens of alumni chapters
nationwide, through which athletics targets some 400,000
Texas
Exes for private gifts. Got shareholders? You bet. More
than
80,000 of them meet in the stadium in Austin on Saturdays
in the
fall, and they grade every move Mack Brown makes. Think
chasing
quarterly expectations is brutal? Try putting the success
of your
company in the hands of a bunch of 18- to 22-year-olds.
Hate
talking to analysts? Try answering Buck from Muleshoe,
Texas, on
a weekly call-in talk show after losing a 23-point lead in
the
fourth quarter.

Of course, the whole thing is complicated by the fact that
while
a major-college athletic program must be managed with the
diligence of a public company, athletic directors don't
have the
luxury of shutting down unprofitable businesses--at most
schools
that would be every sport save football and men's
basketball. And
those well-paid football coaches, quite simply, must win.
"If we
were a business, we wouldn't have any sport but football,
and we
would generate a heck of a profit," says Dodds, who is
among the
nation's most respected athletic directors. "But we're not
about
that. We take the money we generate from football and use
it to
provide opportunities for other kids. Then we try to
balance what
we want to accomplish inside the institution with what
folks
outside the institution want us to do. It's a hard thing
to do."

For more than a quarter-century, one of the most difficult
challenges for college sports has been finding a place for
women.
You've probably heard of Title IX, the historic clause in
the
Education Amendments Act of 1972 that turned college
sports on
its ear by requiring athletic programs to offer equality
for
women in participation, scholarship allocation,
recruitment
spending, and coaching resources. The requirement forced
athletic
departments to essentially double their operations, which
helped
spark the overall growth in college sports. So whatever
you think
about the emphasis on college football, hey, it pays for
women's
soccer, okay?

The Texas athletic department's budget is among the
largest in
the nation--$ 41.2 million for fiscal 1999, which ended in
August. Only four universities had fatter sports wallets
that
year: Wisconsin ($ 41.4 million), Tennessee ($ 45
million),
Michigan ($ 47.6 million), and Ohio State, No. 1 by far
with a
whopping $ 64.9 million athletics budget. (If you think
those who
spend the most win, forget it: OSU is the only school of
the
group not ranked in the latest Top 25 AP football poll.)

How does UT get to its number? For starters, ticket sales
and
game guarantees (payments to UT by a host school when the
Longhorns play on the road) generated $ 10.1 million in
revenue
last year. That category was exceeded only by private
gifts,
which totaled an impressive $ 21 million. Other
significant
income categories included suite-lease revenue ($ 3.2
million),
television money ($ 3.9 million), payment for the team's
Cotton
Bowl appearance ($ 866,842), optional student fees ($
570,000),
sponsorships and advertising ($ 400,000), licensing
revenue
($ 300,000), and concessions ($ 750,000). All told, the
department
generated $ 45.4 million in 1999.

The athletic department's expenses totaled $ 50.1 million.
That
included scholarships valued at $ 2.8 million for 226 men
and 186
women, administrative costs ($ 1.4 million) for about 230
employees, and equipment purchases ($ 2.4 million). The
costs of
running individual teams ranged from $ 7.5 million for
football to
$ 370,000 for tennis.

What caused the shortfall? The final bills for a two-year,
$ 93
million capital improvement effort. Remarkably, the
athletic
department completed the project without a penny from the
university's academic funds. It raised more than $ 31
million in
private donations in just over two years. The department
also
took out $ 48 million in bonds (serviced now by lease and
ticket
revenues). The bill was closed with $ 14 million from the
university's Parking and Traffic division to fund a
parking
garage. So what can you get for $ 93 million? Take a
stroll down
East Campus Drive near the stadium, and you'll pass the
spiffy
new $ 28 million Mike A. Myers Stadium and Soccer Field.
One block
over is maybe the nicest football practice facility in the
country, the newly renovated Denius Athletic Fields ($ 2.5
million). It was subsidized by 82-year-old World War II
veteran
Frank A. Denius, a longtime fan who has attended practices
most
every day for as long as anyone can remember.

Beyond the 66 suites at Royal-Memorial stadium, UT added
nearly
7,000 new seats, renovated major sections on both sides of
the
76-year-old facility, and lowered the field three feet.
Why lower
the field, you ask? I did too. Better sightlines, of
course. The
stadium renovations cost $ 55 million--$ 3.2 million to
lower the
field alone! The department also spruced up its main
offices, now
known as the Moncrief-Neuhaus Complex. (If you've got an
extra
million, you can get your name slapped on just about
anything.)
The place is Four Seasons plush. There's an impressive
academic
support center stocked with computers, a hangar-sized
weight room
that could inspire a couch potato, and an over-the-top
football
locker room any NFL team would envy--custom-carved
benches,
original art, and lockers the size of small Manhattan
apartments.
Mack Brown's spacious office, with a picture window
overlooking
the stadium field, is trimmed in warm cherrywood and
decorated
with mementos and collectibles, including a case of
watches
commemorating universities and bowl games where he has
coached
during his 24-year career. Photos from the Longhorn
archives line
the hallways, and display cases in the lobby house the
school's
three national championship trophies (1963, '69, and '70)
and the
1977 Heisman Trophy, won by the man who is still the most
powerful and exciting running back in college football
history,
former Longhorn Earl Campbell. Check out the intricate,
hand-carved leather saddles in the cavernous players'
lounge.
Yep, you can sit on the saddles and watch games.

If it all seems impossibly lavish, there are reasons. The
stadium
upgrade generates new revenue, and the school had to build
new
facilities for its women's programs under requirements
outlined
in Title IX. But perhaps the most vital reason is
recruiting. "We
had to stay sexy and attractive to the kids," says Ed
Goble, UT's
vice president of business affairs. "You've got to provide
an
enhanced experience on campus to compete for the best
kids."

CEO and COO would be more appropriate titles for Dodds and
Brown,
the UT athletic director and head football coach. Dodds, a
62-year-old former track coach, got into sports
administration
because he liked working with coaches. Today he has an
associate
athletic director who handles those duties. Dodds is too
busy
closing new sponsorship deals, negotiating Big 12
Conference
television and radio contracts, glad-handing with
boosters,
serving on NCAA committees, and promoting his
self-described
"passion"--a college football championship tournament.
Dodds
believes critics of a post-season tournament for college
football--the only major sport without a legitimate
championship
tournament--are, after years of debate, softening. If it
were to
happen, it would have to be approved within the next 18
months,
says Dodds, a "window" before negotiations for the next
round of
network television contracts kick into gear. Dodds thinks
a
college football championship would generate about $ 2
million for
each of the 120 or so schools playing Division I-A
football. "I
think that over a seven-year period a football playoff is
worth
several billion," he says.

In the grand scheme of the college sports industry, $ 2
million
may not seem like much, but Dodds knows well that success
comes
with a price. After last season, when Brown took the
Longhorns to
a post-season bowl for the first time since 1990, Dodds
ripped up
the coach's original contract and signed him to a new
ten-year
deal worth $ 1 million annually. He added an annuity,
largely
funded by private donors, that will give Brown $ 1 million
annually at age 60 should he remain another four years.

By the way, Brown does earn more than the university
president,
Dr. Larry R. Faulkner, whose salary is $ 319,400. So does
basketball coach Rick Barnes, who earns $ 750,000. But if
you're
looking for the sort of acrimony between sports and
academics
that tears so many schools apart, you won't find much of
it here.
"I have a lot of respect for Dodds, his inventiveness, and
his
way of keeping the organization attuned to opportunities,"
says
Faulkner. "I've certainly paid attention to that."

The football coach actually gets to "coach" about as much
as Bill
Gates gets to play videogames these days. His nine
assistants
structure and manage practices and deal with most routine
player
matters. Brown, like any top-level executive, is expected
to be
the company's outside guy. He's your COO with a whistle.
Most of
his hours are filled with media obligations (about two
dozen
television and radio stations and newspapers cover the
Longhorns), fundraising (for the entire university as well
as the
athletic department), and trying to keep his own
management team
in place. (After last season, seven of his assistant
coaches were
offered head coaching jobs elsewhere; Brown kept them all,
adding
$ 250,000 to the department's payroll. Additionally, five
coaches
were granted annuities worth $ 50,000 to $ 60,000 at age
60 if they
hang on with Brown for four more years.)

On occasion, Brown also telephones one of the many
corporate
executives who are big UT boosters, guys like Hicks and
San
Antonio car dealer Red McCombs, another alum and the owner
of the
NFL's Minnesota Vikings. Brown looks to Hicks for
time-management
advice and insights on coping with pressure. With McCombs
he
talks talent and tries to absorb some of the owner's
upbeat
attitude. ("Hey, you're talking to one of only two owners
who're
going to the Super Bowl," McCombs told Brown after an
early-season Longhorn loss. At the time, the Vikings were
1-2).
"One of the things that's common in both of them is that
they're
high energy," says Brown. "They have the ability to dream,
they
have a lot of imagination, and they don't get down very
much." In
some areas, though, Brown is on his own. "The difference
between
their business and ours is that they can hire and fire who
they
want to," the coach said one October afternoon while
lounging on
one of the plush leather couches in his office. "In my
business,
we put our paychecks in the mouths of 18- to 22-year-olds
we
can't fire. It's like that ugly-baby theory--we can't get
rid of
them. So we have to hug them and teach them better.
Another
thing--CEOs don't have to deal with mothers. The major
difference
for us is the kids."

Brown's kids were whooping it up with 80,000-plus Longhorn
faithful on that October afternoon when the pop of the
final gun
signaled the end of the Nebraska game. Final score: Texas
24,
Nebraska 20. The victory was a turning point for the young
Longhorns that propelled them to their finest season in
years.
Going into their last regular-season game against Texas
A&M, the
Longhorns have their best record (9-2) since winning ten
games in
1995--albeit one that ended in an atmosphere of tragedy. A
week
before the game 12 students were killed and 28 injured on
the A&M
campus while building a huge bonfire structure for a
pregame
rally. As FORTUNE went to press the game was scheduled to
be
played.

This year the Longhorns have been ranked as high as sixth
in the
AP Top 25, their highest perch since 1996. Their reward? A
possible trip to the Tostitos Fiesta Bowl in January, a
prestigious bowl game despite its name. Each team in the
game
receives $ 1.5 million. To put it another way, the
Nebraska
victory paid off for the Longhorns like an Internet IPO.
So
while Dodds appeared calm amid the post-game celebrations,
he
was actually more relieved than anything. "If you don't
win,
you're not doing your job," he said. "And you don't
survive."

There have been times of real doubt in recent years at UT
athletics as the program struggled to find its way back to
football prominence in the '90s. But perhaps the most
significant crisis occurred in 1992, when seven female
athletes
filed a lawsuit against the university charging that it
had
failed to comply with Title IX. When the suit was filed,
about
37% of UT's varsity athletes were women, and female
athletes
received about $ 1 million in scholarships, well short of
the
$ 2.8 million awarded to male varsity athletes. Some
executives
inside the department wanted to fight the charges. Recalls
Jody
Conradt, UT's women's athletic director and head coach of
women's basketball: "Some folks said, 'Let's have a final
war
right here on the University of Texas campus, and let's
just see
who's right!' Thankfully, DeLoss and others said, 'That's
not
the way. We need to sit down and come up with a solution.
" Just
three days after negotiations began, the university
settled,
essentially agreeing to all demands. Today, 43% of the
department's scholarship dollars are spent for female
athletes,
who represent 43.7% of UT's athletes.

Dodds believes that if the esteemed founders of college
sports
had not spurned female athletes from the start, then the
industry
would not have endured the turmoil that ruling ignited.
"Somebody, somewhere, made a big mistake," he says.
"Somebody,
somewhere, decided women didn't need to be in sports, and
I don't
know why we weren't smart enough to fix it sooner."

The person most credited with nudging--some say
shoving--Texas in
the right direction on gender equity is Donna Lopiano, a
longtime
activist for equity for women in sports and now head of
the
Women's Sports Foundation. She became women's athletic
director
at the University of Texas in 1975, the first woman in the
country to hold an AD title at a major university. Like
many
advocates for gender equity, she felt the university was
dragging
toward Title IX compliance, but as a university official
she
could not openly encourage students to challenge the
university.
Instead she handed out Title IX manuals and complaint
forms from
boxes she stashed behind her desk like candy at Halloween.
"Must
have done it hundreds of times, for 17 years," she says,
laughing
at the memory. "I had boxes of manuals and more boxes to
replace
them. I couldn't believe it when somebody finally did it."
By
"it," she means filed suit.

"It took someone to be abrasive, pushy, and all the other
adjectives her friends use for Donna," says Conradt.
"Donna
scares people. It wouldn't have happened any other way. No
question, she's the most significant individual for what
we've
been able to achieve in women's athletics."

Today women's athletics at UT has its own corporate
structure
and hierarchy. It shares resources with the men in many
areas,
but it has its own management team, led by Conradt, who,
like
Dodds, reports to university vice president Pat Ohlendorf.
Only
a handful of Division I programs are similarly structured.
"I
think young women need to see women as bosses," Conradt
says.
"If the [men's and women's] departments merged, how would
women
get the chance to run any of the areas? This way we have
role
models for student athletes."

The women still have a long way to go before reaching
parity in
one critical area--fundraising. Last year gifts received
by
women's sports totaled only $ 250,000. But the women are
not
without their boosters, Red McCombs being the biggest. Two
events
led McCombs to an epiphany regarding women's sports. One
came
during what he described as a "good ol' Bubba" meeting
about
fundraising a few years back. When he asked the lone woman
in the
room to name the most generous donors for women's
athletics, he
recalls, "She looked at me like I was crazy and said, 'Mr.
McCombs, there are none.'"

Soon afterward, McCombs' young granddaughter told him that
she
could not find a girls' softball team to join. He realized
that
wasn't going to change as long as the woman in the good
ol' Bubba
meeting was right. So four years ago he wrote a check for
$ 3
million to the UT women's athletic program, the largest
single
gift to women's collegiate sports anyone can recall.
Earlier this
year the Red and Charline McCombs Softball Stadium opened
on UT's
campus.

Title IX clearly stoked the growth in college sports
programs a
quarter-century ago, but where will the money come from to
sustain future growth? There's at least some concern that
college
sports is already locked squarely in corporate America's
cross
hairs as the next sports-marketing frontier. For years
only the
likes of Nike, Reebok, and other sports brands had major
deals
with college teams. Now high-tech companies like eBay and
Nextel
are lining up alongside soft-drink, financial-services,
and
entertainment companies to sell their products and
services to
your kids. Companies once worried about being called crass
for
slapping logos on college campuses. Today there is no
shame. Take
the annual Texas-Oklahoma game, the meeting of two of the
most
celebrated rivals in college football history. For two
years now
it has been called the Dr Pepper Red River Shootout, also
sponsored by Southwestern Bell, Mercedes-Benz, Bank of
America,
Miller Brewing, and the Texas Land & Cattle Co., a local
restaurant chain. It's worth in excess of $ 100,000 to
each
school. Be very afraid.

For now, corporate deals remain only a minor revenue
source for
most big colleges. But as TV money and ticket prices peak,
and
donors get short arms and can't reach their wallets (after
a
couple of dog seasons, you'll see what I mean), it could
become
the most vital source of future growth. Texas' new deal
with
Nike, for instance, provides UT athletics with up to $ 1.8
million
in Nike gear, along with $ 850,000 in cash annually for
the next
nine years. That's equal to the largest sponsorship deal
in
college sports, and more than twice the value of the
department's
previous contract with Reebok.

While Dodds is mindful of the need to maintain some
boundaries
against unbridled commercialism, he's more concerned that
some
major college programs may be forced out of big-time
football
altogether because they can't keep up with escalating
costs.
Sometimes the scale of all this makes Dodds wistful. "What
I'd
like to do is maybe start over with this whole thing," he
says,
"because it's gotten to the point where you don't control
it, you
manage it, and it's a challenge."

Nevertheless: Texas is banking on being a leader in
e-commerce
for college sports. Sales through its nascent Website are
almost
nil. But with nearly a half-million Texas Exes out
here--and
Longhorn football on a roll--the upside is vast. Hook 'em,
iHorns?

On that Saturday afternoon in the fall when the Longhorns
grew
up against Nebraska, an elderly fan in dark glasses sat
quietly
on the front row of a luxury box at the stadium named in
his
honor. Darrell Royal is still greeted as "Coach Royal"
around
Austin. He's in awe of his surroundings, amazed that the
program
he helped build has become a multimillion-dollar
operation. He
never had to raise funds as a coach, never had to do
anything
but coach--and, well, fix the place up a bit. "When I
first got
here in 1954, there was a broken-down old shack in the end
zone," he says. "Caretaker lived there. It took a few
years, but
we finally got it torn down." He laughed at another
recollection: He couldn't understand why fans refused to
sit in
an upper section of the stadium until he ventured up and
realized that there were no bathrooms up there.

Coach Royal doesn't much bother Dodds with advice anymore,
though
he did mention one thing a while back: "I told him,
'Nothing
makes Texans as happy as winning, and it's happy folks
that
give.'" Like any good executive, Dodds listened well.

BOX STORY:

University of Texas Athletics Dept. Revenue 1998-99
$ 45.4 million

FOOTBALL revenue
$ 36.1 million

Donations $ 17.5 million
Tickets $ 10.1
TV (Big 12 and NCAA) $ 3.9
Marketing/advertising $ 1.4
Stadium suites $ 0.8
Concessions $ 0.8
Student fees $ 0.4
Other income $ 1.2

NONFOOTBALL revenue
$ 9.3 million

Basketball $ 6.0
Baseball $ 1.4
Other sports $ 1.9

SOURCE: UNIV. OF TEXAS

BOX STORY:

BIG SPENDERS

Budget College Athletics budget AP Top 25
rank in millions football rank

1 Ohio State $ 64.9 -
2 Michigan $ 47.6 10
3 Tennessee $ 45.0 6
4 Wisconsin $ 41.4 4
5 Texas $ 41.2 7
6 Florida $ 39.4 5
7 Kentucky $ 36.5 -
8 Nebraska $ 36.0 3
9 Alabama $ 33.4 8
10 Auburn $ 33.2 -
11 UCLA $ 33.0 -
12 LSU $ 32.0 -
13 Florida State $ 31.0 1
14 Notre Dame $ 30.4 -
15 South Carolina $ 30.1 -
16 Iowa $ 30.0 -
17 Illinois $ 28.3 -
18 Texas A&M $ 27.6 24
19 Clemson $ 27.1 -
20 USC $ 26.7 -
21 Georgia $ 26.5 16
22 Arizona State $ 26.5 -
23 Oklahoma $ 25.3 -
24 Arizona $ 25.0 -
25 Arkansas $ 24.2 17
26 West Virginia $ 23.0 -
27 Kansas $ 22.7 -
28 Georgia Tech $ 21.6 20
29 Virginia Tech $ 20.1 2

As of Nov. 21, 1999.
FORTUNE TABLE/SOURCE UNIV. OF TEXAS