Virginia Tech AD Works to Get Out of the Red

BLACKSBURG - For the first time in more than a decade, the Virginia Tech athletic department operated in the red during the fiscal year ending in June of 2016.

Paying a couple of football coaching staffs during the transition from Justin Fuente to Frank Beamer, severance payments for three former basketball coaches and the rising cost of scholarships helped run the Hokies a $764,000 deficit.

It 's not something athletic director Whit Babcock wants to see often, but that's just the occasional cost of doing business in today's world of college athletics.

"With everything we've got going on and the momentum, we know we can't be in the red very often," Babcock said in a wide-ranging interview with the Roanoke Times this week. "But we're at a point right now of investing and transition, and we felt like it was well worth it."

As for the deficit, the shortfall was covered by surplus funds that were collected in previous years and were being held in reserve.

But the situation underscores the reason Virginia Tech decided to overhaul its fundraising approach for the first time in decades in the last year. The Hokies instituted required giving when purchasing certain football and basketball tickets and began the Drive for 25, a push to more than double Hokie Club membership to 25,000 in the upcoming years.

So far, so good on that front, the AD said.

Virginia Tech's Hokie Club membership has gone up from a little over 10,000 last spring to 13,394 as of Saturday according to the drive's official site. Annual fund giving to Tech's scholarship fund, meanwhile, went from $9.9 million to $16.3 million, Babcock said.

It hasn't happened without upsetting the status quo, however. The additional cost associated with purchasing tickets and seat restructuring has turned off some fans. Babcock said season ticket sales are about 2,000 behind last year's pace at this time. The Hokies sold approximately 36,000 of 40,000 available season tickets last year.

That churn was factored into the Hokies' projections, however, with Tech budgeting a 10 percent loss into next year's numbers just to be safe.

"Have there been some people with our new program that have just said I'm not going to play anymore and leave? Yes," Babcock said. "But we've also had, and I don't think this is a bad thing, people that had maybe six tickets between the 40s and have now dropped to four. It's not good that they've dropped the two tickets, but we've had a lot of donors that are very happy that inventory in the better sections is finally starting to open up."

It's a necessity for an evolving athletic department, however, Babcock said. Tech's athletic budget is projected to rise from $83 million in 2016 to $85 million in the next fiscal year, which would put Virginia Tech ninth among all ACC teams.

Additional costs are on the way, however. Tech, like every other ACC school, will have up-front costs in the range of $5-7 million for studio space, fiber optics and other requirements for the 2019 launch of the ACC's linear network. The goal, Babcock said, is to have that operational by the fall of 2018.

The eventual payoff should be worth it, especially for a league whose average revenue distribution per school of $23.8 million in 2015-16 was lowest among the Power Five conferences, in part because it doesn't yet have networks in place like the Big Ten, SEC and Pac-12.

Although the ACC has asked its athletic directors not to go public with any projections - which Babcock abided by - Florida State's athletic director Stan Wilcox reportedly told his school's board of trustees in February that a 2019-20 payout could be in the range of $8-10 million from the network, with future revenues increasing.

That all depends on distribution, and recent layoffs from the ACC's partner for the network, ESPN, led many to call into question if the channel remains full-steam ahead. Babcock said he was reassured at the ACC's recent spring meetings that it is.

"I know ESPN is interested in generating revenue," he said. "People are talking about what they're dropping and losing in subscribers, but the thing they've got to realize is this channel with the ACC is a revenue generator. So if you're in a business that's cutting costs, which they seem to be, and you want to generate revenue, you're not going to back off the projects that create revenue.

"Also, I don't know what TV is necessarily going to look like in two years, but I still believe that sports programming and content has value, because people consume it live, right? Whether you're going to be watching on the big screen, on your phone, Hulu, Sling TV. To me, there is still value because it gets consumed live, and there's nobody I'd rather be partnered with than the best in the country. So while we all pay attention to what's happening at ESPN, I think reports of their demise are greatly exaggerated."

On the field, less restructuring seems needed in the near future. In his three-plus years as an athletic director, Babcock's hired coaches in football (Fuente), men's basketball (Buzz Williams), women's basketball (Kenny Brooks) and wrestling (Tony Robie), with a baseball hire needed now that the school parted ways with Pat Mason last week.

Additionally, Babcock has restructured deals with Fuente and Williams after early success, extending their contracts.

"When you know you have the right ones, if you can try to lock them in for a while and have that security, I think it shows you have their back," Babcock said.

Building projects are ongoing, including a rebuild of the entire seating area at the baseball team's English Field at Union Park and a major renovation to the track team's Rector Field House, which also includes a hitting facility for the softball team. Padded seats are being put into a portion of Cassell Coliseum.

A $16 million project to turn the Bowman Room at the top of the Merryman Center into a nutrition center for all sports is on the horizon. Long term, Babcock is looking into a major renovation at Cassell Coliseum that would bring the concourses and more into this century (something that could cost $40-50 million and might potentially displace the team for a season, though that's far down the road), plus the possibility of cutting a club level into the East side of Lane Stadium.

That's why Babcock wants to improve Virginia Tech's fiscal situation. While the Hokies wait for the ACC network's launch and eventual payday, Babcock's primary focus is on tapping into revenue streams available to Tech right now. Contracts with IMG, Nike, Coca-Cola, Gatorade and others are locked in for a few years. That's why the Hokie Club is such a focus.

"To me, the area with no real ceiling is donors and fans, with 260,000 living alumni and equally as many rabid Hokie fans, I think that's our best opportunity," Babcock said.

"So that's why we've worked hard on the messaging about, 'Hey, it's not just about getting tickets through the Hokie Club.' If you care about the Hokies and our athletic department and our student-athletes, this is the No. 1 way to get involved. And that seems to be resonating with people, but we'll have to keep messaging it for a while."

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