How Louisville Makes Twice as Much Money From Basketball as Rival Kentucky

There's nothing quite like a matchup between in-state rivals, especially when it's Louisville and Kentucky on the basketball court. No. 8 seed Kentucky goes into tonight's NCAA tournament game a 4.5-point underdog to No. 4 seed Louisville, but Kentucky won when the teams met earlier this season. The outcome on the court is really anyone's guess ... but I can tell you the outcome of this season in each athletic department's respective bank account is a different story.

It might shock you to learn that Louisville basketball banked nearly twice as much revenue as Kentucky basketball last season. With $42.4 million in revenue, Louisville basketball generated more net revenue than any other basketball program in the country, with Syracuse a distance second at $26 million. Kentucky ranked fifth at $23.2 million.

Why the big difference?

Some believe it's because Louisville is able to sell alcohol in its arena. Under the athletic department's concession contract, it receives 50% of sales, which amounted to just under half a million dollars in 2011, and that was for all concession items. So probably not the beer.

So, where is Louisville making its money?

The fans. Donations to Louisville basketball last year came in at a whopping $21.5 million. That's more than most programs made from all basketball-related revenue sources last year. In fact, only Syracuse, Duke, Arizona, and Kentucky had net revenue greater than $21.5 million last year.

Louisville plays home games in the KFC Yum! (NYSE: YUM  ) Center, which features 72 luxury suites. Those suites are rented for a price ranging from $85,000 to $92,000 each. That's more than $6 million simply in rent, and only 12% goes to the arena. Tack onto that the price of tickets, the donation required to purchase the tickets, food and drinks, and the number starts skyrocketing quickly. Other seats in the arena command donations ranging from $250-$2,500, with the exception of seven student sections and four sections with no donation requirement.

How much does Kentucky make from suites? Zero. Rupp Arena doesn't have suites.

Kentucky isn't alone in missing out on this revenue. Duke, UNC, and Kansas also lack suites but would likely benefit greatly from their addition. All of the schools have discussed the addition of suites, but none have fully committed to any plans. Rupp Arena, where Kentucky plays, will undergo a renovation to be completed in 2017, but suites are still a point of discussion.

If you're wondering why Syracuse is still so far behind Louisville given the Carrier Dome does have suites, it's a simple function of supply and demand. The Carrier Dome has approximately 13,000 more seats than KFC Yum! Center, and accordingly was at just 64.08% capacity last year while Louisville averaged 97.65% of capacity (even though Syracuse averaged approximately 1,000 more fans per game). The Carrier Dome has 40 suites, but the lease fees ($50,000-$83,900) top out below the price of Louisville's cheapest suite. Donations for other seats in the arena max out at $725, less than a third of Louisville's $2,500 max.

Looking at the situation from a purely financial perspective, Kentucky would be wise to add suites during the Rupp Arena renovation. Coupling suites with higher conference distributions bound to come from the SEC Network, Kentucky could catch up to Louisville. Louisville is about to starting cashing bigger checks as well, however. Although Kentucky's total athletic department revenue ($95.7 million) currently falls just barely short of Louisville ($96.2 million), Louisville's move to the ACC has it poised to become one of the highest revenue generators in college athletics.

According to last year's Form 990 filed by the American Athletic Conference, Louisville received $11.6 million from the conference. Next season, Louisville will be in the ACC, which should average at least $17 million a year from its television contract with ESPN for each school. The additional $5.4 million in revenue would have moved Louisville up from 18th-highest revenue in college athletics last year to 14th behind schools like Texas, Alabama, and Ohio State ... and potentially further ahead of Kentucky, which came in 25th last year.

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