The new twelve-team College Football Playoff (CFP) has colleges seeing dollar signs. But will the increased revenue prove sustainable, and will the best team now win? All top teams should land playoff spots, and if no team with a good chance of winning gets excluded, the best team should be determined on the field. However, an economic approach illustrates the limits of this thinking.
Most sports fans realize that the best team does not always win. Both upsets and rematches demonstrate this. Economists would assign a win probability to each team in a game. Two evenly matched teams would have a .5 probability each, essentially a coin flip. The better team can be assigned a higher win probability.
Once you view outcomes as probabilities, you quickly realize the best team will not always win. Suppose Georgia is indeed this year’s best team with an 8-in-10 chance of beating every other playoff team. Because the Bulldogs must win three games to claim the title, they would be expected to win just over half the time.
The twelve-team CFP may be very exciting, like March Madness, but the winner may not be the best team. The TV rights for the 11 games of this year’s CFP will bring a reported $1.3 billion, versus $400 million for three games last year. Each added game brings around $100 million in revenue.
The games must attract audiences to sustain this. Last year’s three playoff games averaged 23.6 million viewers. Several factors suggest the additional eight games will not draw similar audiences. Last year’s Washington-Texas semifinal drew 18 million viewers despite going down to the final play. The other New Year’s Six bowls, roughly paralleling the 12-team field, averaged 13.5 million viewers. Last year’s participants were large universities with great football traditions; a 12-team CFP will necessarily include some schools with fewer fans.
Last year’s title game ratings were up 45 percent from Georgia’s 65-7 beatdown of TCU. Blowouts threaten the audience needed to earn the $100 million in TV revenue. The FCS playoffs provide evidence about blowout potential. Twenty-four teams make the FCS playoffs, with five rounds (the top eight teams receive first-round byes). As a criterion for blowouts, I’ll use a 21-point final margin plus a 21-point margin after three quarters. Such games will likely suffer significant audience attrition.
By this standard, seven of last year’s FCS playoff games were blowouts, almost equaling the eight one-score games. The blowouts were not limited to overmatched auto-bid teams getting whipped in early rounds. South Dakota State won its semi-final game 59-0.
Injuries and the emotional and physical toll of games against other top teams will test teams’ depth. Blowouts could ensue when a team runs out of energy. Upsets could also produce subsequent blowouts. An upset by the Group of Five representative would validate their inclusion but might well yield a second-round blowout.
A good economic decision must consider all secondary, indirect, and long-term consequences. The expanded CFP may produce changes that eventually reduce revenue. Marquee late-season matchups serving as de facto playoff games – like Ohio State vs. Michigan and Alabama vs. Georgia last year – attract enormous interest. The loss of title elimination will reduce the TV audience and perhaps attendance. The remaining bowl games will also no longer feature top ten teams.
Colleges’ tying of tickets to donations makes regular season attendance declines problematic. Full stadiums and tough tickets induce donations, while cheap tickets on the secondary market will undermine donations.
On the other hand, more games will now take on playoff significance, increasing interest in and revenue from these contests. But earning one of the final playoff spots now leaves a team farther from a title and thus means less.
Ultimately, the impact of these factors will depend on fan preferences. Still, any reduced regular-season revenues must count against the CFP’s added revenue. Time will tell if CFP expansion improves college football. For my part, I am (still) super-excited that the season is finally here!
Daniel Sutter is the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University and host of *Econversations* on TrojanVision. The opinions expressed in this column are the author’s and do not necessarily reflect the views of Troy University.
