Buying Out Chow A Cheaper Solution

The best intel out of UH strongly suggests that Norm Chow will return for a third season in 2014. Facing an expected $3.3 million deficit for fiscal year 2013, it is widely believed that even if a coaching change is desired, the school simply lacks the resources to make a change.

That’s the type of near-term thinking that has created many of the problems the school currently faces.

UH cannot afford to keep Chow.

In the past three seasons, the Rainbow Warriors have won six, three, and either one or zero games. (UH played Army Nov. 30; MidWeek‘s production deadline was one day prior). Attendance has tanked, interest waned and fans are becoming the one thing sports franchises fear most: customers.

Fans tolerate poor returns on their entertainment dollar – for many it’s an element of pride to support a team even after others have abandoned hope. Customers have no allegiance and regardless of industry, demand a return on their investment. Right now UH isn’t producing a product worth buying and people are staying home.

According to the report announcing the deficit, $1.4 million of the projected shortfall was attributed to decreased ticket sales. A third year under Chow is not going to change that unless the team starts winning consistently. Based on past performance, that seems unlikely.

But ticket sales aren’t the only problem facing UH.

UH currently is negotiating a renewal of its television contract with Oceanic Cable. A similar discussion with KKEA, the school’s radio broadcast partner, is a year away. A ratings dive for either would cause both broadcasters to reconsider what they can offer the school, further compounding the problem.

Under its current deal with Oceanic, UH receives $2.3 million per year plus a bump for sales over a specified amount. In 2012, the agreement generated $2.45 million for the university. Its deal with KKEA is a profit-sharing agreement that can be even more volatile.

If Chow is terminated without cause, the University must pay him for all remaining years through year four plus $200,000 for year five. At $550,000 per annum, the buyout for the final three years of Chow’s contract would be $1.3 million. It’s a lot of money for sure, but the department hasn’t been shy about paying buyouts in the past.

Greg McMackin got $600,000, former AD Herman Frazier $300,000 and Fred VonAppen, whose 0-12 mark Chow is fighting to not equal, was ousted with a $260,000 pay check. Aaron Price, Chow’s second offensive coordinator in two years, was fired before the beginning of fall practice and still walked with the majority of his $125,000 salary. As athletics director Ben Jay told KHON in August, “Sometimes it’s better to settle and get it over with and move on.”

There is no guarantee a new coach would reverse the department’s competitive and financial shortcomings. But it would acknowledge a problem and signal to ticket buyers, boosters and corporate partners the school has a plan in place to increase the value to its stakeholders.

Determining how much better off UH would be with a new coach is impossible to predict. Ticket pricing options vary widely and there is no guarantee the next coach will be any better. But a small rise in ticket sales can generate sizable increases in annual income.

According to the department’s 2012 audit, 8,559 complimentary single game tickets were given away at a total cost to the university of $329,236, an average of $38.46 per seat. Using this rate, an increase of 3,000 tickets sold per game would generate an additional $807,660 per year for the university. That’s 62 percent of Chow’s entire buyout package in only one season. It is also the difference in ticket sales between this year and last. Not counting the opener versus USC where the 39,000 attendance mark is the sole statistical outlier, UH has averaged 28,759 tickets issued this year compared to 31,785 a year ago – an average drop in attendance of 3,026 paying customers.

To act is costly, to do nothing is even more expensive.
Twitter @SteveMurray84