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Inside the Texas Longhorns' Financial Machine

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The Texas Longhorns are one of the nation's most successful college sports organizations. The history of the Texas Longhorns illustrates how today's college sports programs have become financial machines. It offers lessons not just to the layman interested in sports, but to students of finance and investing as well, in how to manage finances properly. Whether you are interested in the economics of college sports or just want to know how football teams make money, the Texas Longhorns make a compelling case study.

How the Longhorns Rank in Revenue

Nationally, the Longhorns lead in annual sports program revenue. Revenue from college athletics programs has been on a strong upwards trajectory in recent years. The result is that college sports franchises like the Longhorns, of the University Of Texas, have seen their revenues reach well over $100 million.

Nationally, the top five college programs by revenues feature the Longhorns and other strong performers like Michigan:

University of Texas - $214 million
Texas A & M - $212 million
Ohio State - $185 million
Michigan - $185 million
Alabama - $174 million

The Economics of College Sports

A large part of the Longhorns' revenue comes in the form of royalties and licensing fees from participation in football tournaments. Even though the University Of Texas has strong men's and women's basketball teams as well, its football program is by far its biggest brand.

For example, the football program at University Of Texas has averaged around $120.5 million revenue for the last several years. However, the men's basketball team is averaging around $16.5 million, while the women's basketball team has drawn $1.8 million on average.

While sports programs bring in significant revenue for top sports colleges like the University of Texas, there are significant expenses as well. These include stadiums and spending on other sports facilities. On the positive side, however, having a big sports program can greatly enhance the brand and national standing of a college.

Additional Revenue Sources

Besides royalties, the Texas Longhorns have other sources of revenue all related to the star power of their brand. These include a network TV deal, ticketing, and a $10 million a year apparel deal with Nike.

Another important source of revenue for the sports program is in the form of alumni donations and other contributions. The Longhorns, like other big name college athletics programs, are popular with the school's alumni. This translates into a huge fundraising advantage. In 2017, for example, the Longhorns received over $56 million in donations from alumni.

Longhorns' Recruiting Power

The Texas Longhorns have been able to consistently attract star high school athletes over the years. Their recruiting advantage has seen them draw a good number of the ESPN 300, a group comprising ESPN's top-rated high school athletes each year.

In recruiting ESPN 300 athletes, the Longhorns have gone toe to toe with other football giants Clemson, Georgia and Ohio State. Those other universities have not been hesitant to spend big as well, in a bid to be the best destination for the nation's young footballers.

Do Strong Finances Help Sports Performances

For the Longhorns, recent financial success has not been necessarily a result of outstanding performances on the football field. For example, the team had a bad losing streak from 2014 to 2016 that led to the ouster of Longhorns coach Charlie Strong. This was despite strong ticket sales and other measures of financial success.

Since taking the job as head coach, however, new coach Tom Herman has fared better on the football pitch than his predecessor did. Since 2017, he has led the Longhorns to a winning record and has returned the team to a Big 12 Championship contender. With the combination of strong finances and sports acumen, the Longhorns should now be able to succeed more regularly on the football field.