The Expansion Project: Houston

No potential expansion candidate for the Big 12 has received more media attention over the past several weeks than the University of Houston (UH).  Considering how many are out there it does seem a little odd, until you remember that they are currently coached by Tom Herman, coming of a 12-1 record and beat down of Florida State, and open the season against Oklahoma.  Strike the PR opportunity while the iron is hot I say.

However, when you dive into the details of UH, you begin to see that there are two versions of the university, the one we hear about and the one that exists.  Let’s examine them both and determine the real value the University of Houston may hold for the Big 12.

Like many AAC candidates, Houston is some parts good and some parts bad when it comes to their brand.

On the positive side, with 40,000 students the University of Houston provide the school a lot of resources to tap into in regards to future growth.   It is far easier to supercharge students and alumni than it is the casual sports fan, so not starting in the hole is a benefit the university cannot afford to avoid.

The problem is, even with that large enrollment number, the Cougars struggle immensely with their rights and licensing.  Only Tulsa had a lower number within the AAC and they had ten times less students than the University of Houston.  The University of Cincinnati had more than twice the licensing on about the same enrollment.

This indicates that the Cougar’s fan base is either apathetic in supporting the athletic department or there are not a lot of opportunities for the university to market itself locally, which is possible considering the number of powerful universities in the state.  For now they score poorly when compared to other AAC competitors, and are around the middle of the FBS as a whole.  Not the worst, but clearly not doing what is needed to stand out.

Common thinking goes that Houston must be a perfect geographic fit for the Big 12 due to its location within the State of Texas.  However the university scores very poorly, which will likely come as a shock to all of us as we constantly forget just how large the state of Texas actually is.  The distance from El Paso to Beaumont is nearly the same distance as Dallas to Sioux Falls, South Dakota.   If Texas was moved to the east coast it would stretch from St Louis to the Atlantic and Detroit to the southernmost beach of South Carolina.  It’s big, ya’ll.

Due to this, the University of Houston’s campus is 625 miles from the geographic center of the Big 12, which is, amazingly, towards the high end for the Big 12 schools, but definitely not the furthest.  For some perspective, West Virginia is 847 miles away from the Big 12’s center.   Speaking of which, UH is 1,350 miles from Morgantown, which makes it the farthest of any AAC school.   While it is often assumed to be close to the Big 12, due to its location in Texas, it is still quite a distance away from nearly every school not in Texas and won’t do much to decrease travel over all.  All of this indicates that it needs to bring something else to the table, like a market.

As evident in its name, the University of Houston is located smack dab within the middle of the tenth largest media market in the nation.  The city of Houston has 2.3 million television homes, ranking just behind Atlanta, and is the second largest in Texas, behind DFW at 2.6 million homes.  This is obviously a major market and will continue to be one for quite some time.   The issue here is that it isn’t really a new market for the Big 12.  Without UH, the Big 12 will still be on television in Houston, just like they were still on TV after A&M left.  With expansion a conference network of some sort will likely need to be developed for extra inventory.  The Big 12 doesn’t need Houston to get carriage in Texas, so it is overlapping in a major way.

One argument I’m sent all the time is that the University of Houston pulls their market better than any Big 12 team, which just isn’t the case unless you cherry pick the numbers.  Has UH done well in that market before?  Of course, especially in the AAC championship game.  But that was a game in a year.   I can find a great game for any team, even Wake Forest, if all I need is one.  This kind of misses the larger point though, media contracts are not about a single market, they are about national ratings.

I have not utilized ratings for these expansion candidates because it ebbs and flows with success, but considering this argument is so prevalent and the success so significant for the Cougars viewership last year that it at least deserves some debunking.  Looking at last year’s home games Houston averaged 392,000 viewers in their game against Vandy.  This was similar to TCU’s rating against Stephen F Austin, who doesn’t play in the SEC, but way below other Big 12 or AAC match ups, including Oklahoma/Tulsa or Oklahoma State/UTSA.  When we look at conference play, which tends to be much more consistent, Houston averaged 500,000 people, a slight improvement that was driven by one game.   The match up at home against Navy to determine who played for the AAC championship drew 3,000,000 people.

To put that in perspective though, Baylor averaged more than that over all of their conference games last year.  And, the year prior, the University of Houston averaged 373,000 viewers per game and a year prior to that they averaged 404,000 viewers and the year prior to that they averaged 346,800.   So I think the argument that the University of Houston pulls the Houston market is a bit farfetched. They do well when it is a major game, but, then again, so does everyone else – winning draws eyeballs.   Since 2012 they’ve averaged about 350,000 people per game nationally, which is a fraction of the Houston market and doesn’t even factor in that the Big 12 doesn’t need the Houston market, it needs a national market.   Granted those numbers would improve playing Big 12 talent, but if they don’t improve in new markets it isn’t helping the Big 12’s media deal to elevate a sixth Texas school into the Power Five.

If there is a positive to Houston’s market however, besides its size, it is recruiting.   Playing games in Houston can’t hurt recruiting, but with four in-state teams in the Big 12 they will dominate the airwaves anyway.   However, recruiting isn’t about ratings, it is about coaching staffs.

The Big 12 is getting clobbered in Houston right now because they’ve taken it for granted and Texas is down. With the introduction of A&M to the SEC, Alabama and LSU have assigned three or more coaches to the Houston area, treating like they do Atlanta.  The Texas centric schools of the Big 12, including Oklahoma and Oklahoma State, have never really had to do that prior.   Now they do.   Playing in Houston yearly will have less of an impact on recruiting than canvasing the town with recruiters and winning.  Canvasing heavily and playing often would increase recruiting, but would it help Houston more than the Big 12 schools?  Too hard to call on that one.

As evident in the University of Houston’s licensing discussion, the athletic department is one of the financially weakest around.  Considering the
pitch we just discussed that it controls the Houston market, it is shocking just how much they don’t benefit from it.

Out of 120 some schools, Houston ranked 88th in financial strength.   That made them the lowest ranking school in the AAC.  A few schools just above them are Marshall, Old Dominion, and New Mexico.   It really isn’t a good story to tell.

The bulk of this is due to the fact that around half of their revenue came from subsidies and there really wasn’t that much revenue to begin with.  Not worrying about subsidies for a moment, their revenue would rate them dead last in the Big 12 by around $30 million.  It is staggering how much they simply don’t earn.   They’ve improved a bit recently, but not enough to get them anywhere near the Big 12’s levels, not even near the Big 12’s lowest numbers. Hell, Tom Herman’s contract is about 7% of UH’s total revenue and 15% once you remove subsidies.

In order for UH to earn the same as the rest of the Big 12, membership would need to bring them between $45 and $65 million more per year, depending on if they would shed subsidies or not.  It simply isn’t enough to move conferences, they need to do business differently.

A lot of this comes from having a low amount of contributions and ticket sales drastically lower than the Big 12 member schools.   To keep up school subsidies are increasing yearly.  While contributions can fluctuate greatly even within major programs, ticket sales have a lot more structure to analyze.

As you can see from the following chart the Cougars aren’t flocking to the seats like most colleges, they’re in the bottom third of the FBS and rank nowhere near the Power Five or Big 12’s averages.  On a 13-1 season, when you’d imagine fans would be in full force, Houston averaged 33,000 in attendance on average.  By comparison, on a 3-9 season, Iowa State had 56,000 in attendance per game.

Like the financial strength ranking, the University of Houston ranks in the bottom of the AAC, ahead of only SMU, Tulsa, and Tulane; all schools who are much smaller than the Cougars.  Even at maximum capacity, TDECU Stadium, which is brand new, only holds 40,000.  That puts it on par with Baylor and TCU, who are closer to 45,000, but their athletic departments already make twice what the University of Houston brings in.   Ticket prices would need to jump dramatically to raise revenue.

The rest of the numbers all follow this trend line so I don’t need to beat this one to death, but at the end of the day while Houston had a good season in football last year, they don’t have the financial and fan base support currently to measure up with the Big 12 and score more poorly than many other expansion candidates.

Like the University of Cincinnati, or Louisville, or Memphis, etc, Houston struggles with the image of being a commuter, metro school.  And, like all of them, only playing athletics at a high level consistently for numerous years will help shake that, much like no one thinks about Miami being a metro school makes a difference, until they are losing.

Academically the University of Houston is improving.  It isn’t going to be bringing a lot of academic clout to the Big 12, but still has a respectable amount of R&D spending.  Ranking 89^th, the UH has about $233M in research expenditures a year, comparable to the University of Missouri.

Let’s get to the elephant in the room though, Texas Politics.  This is the one piece of the puzzle that could either work for or against the Cougars, depending on what the rest of the Big 12 wants.   Pretty soon after the Big 12 announced it was exploring expansion, the University of Texas came out in support of the Cougars nearly immediately and Texas Tech followed suit.  There are only so many reasons this would have happened and none of them are because the University of Houston was the best piece on the board.

If the Big 12 expands it will have more inventory than it currently sells, which means member controlled rights will grow.  This puts a conference network conversation back on the table, something that does not make sense at ten.  The most high profile school pushing for this was Oklahoma, who, along with Oklahoma State, recruit heavily in Texas, specifically Dallas and Houston, and all I’ve heard is that none of the non-Texas schools want more than four Texas schools in the conference.

So, possibility number one is that Texas is saying, “You want us to turn LHN into a Big 12 Network?   Then it requires adding Houston”.  Now either the rest of the Big 12 has to accept another school in Texas or come up with a different solution than getting rid of LHN, which Texas is rather fond of having.

Possibility number two is that University of Texas is trying to appease UH due to the Longhorns prepping to build an extremely large research hub in Houston.  Even with Texas and Texas Tech in their corner, UH needs six more votes, nothing the Texas governor can do about that.  However, they can make life hard on the other state universities if they vote against them.  This immediate approval could be nothing more than making it appear the two state schools are in the Cougar’s corner, even if Houston lacks the votes to get in from the rest of the conference.

Either way, the politics in Texas have always played a large role in what happens within the Big 12, from its founding, to A&M leaving, to now.   I doubt we’ve heard the last of it, get ready for a rodeo ride as this progresses.

At the moment it appears that the University of Houston’s lead in the public discourse is due to three main factors; being located within the Big 12’s footprint, Texas politics, and their football record last year.

This is where we seem to be getting a tale of two cities however.   The public discourse is all positive and glowing, but the numbers are nearly complete opposites of the articles.

Looking at how the athletic department performs from top to bottom and what the Big 12 needs in turn, it would appear that there are definitely other candidates who are much better fits than the University of Houston.  It currently ranks not only far below the Power Five Average, but also lower than both the AAC and FBS averages and does so in multiple categories.   Just because it is in Texas doesn’t actually mean it is close to many of the Big 12 schools and just because it had a good year in football last year doesn’t mean the athletic department is financially strong.

The University of Houston is a good school on an upward trajectory and is in a great area to have success in football, but there are a lot of concerns that are readily apparent that question whether they are ready compete directly with the Power Five day in and day out.

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