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Penn State Football: Breaking Down Franklin’s Contract

by on January 27, 2014 12:00 AM

It will be awhile before we know if the departure of Bill O’Brien makes sense for Penn State football.

But it certainly has already made Penn State some dollars.

Switching from O’Brien to James Franklin as its head football coach will put Penn State about $3.75 million to the good for 2014 – with about $1 million extra in the till for next year as well.

It’s all part of new (to PSU) math. Penn State gets $6.7 million from the Houston Texans in a buyout of O’Brien’s contract and then pays $1.5 million to Vanderbilt for Franklin’s buyout. Penn State nets $5.2 million on that trade.

However, Penn State will have to pay Franklin $4,194,000 between now and year’s end, assuming that his start date was Jan. 10 and that he receives a $300,000 bonus if he is employed by PSU on Dec. 31, 2014. 

That still leaves $1.006 million left over from the Texans’ check to pay Franklin through March 30, 2015. So, until then, Penn State is using Houston owner Bob McNair’s Franklins to pay Franklin. That’s 428 more free days of dominating the state.

Penn State athletics can use the money. It must pay an NCAA $12 million fine annually for five years. Plus, it must forfeit about $13 million in Big Ten bowl revenues over a four-year period. In total that’s $73 million. In one fell coaching swoop, from a cash flow standpoint Penn State made a decent-sized dent in that debt. 

How much is that worth to Penn State’s 31-varsity sport program? The net gain of $5.2 million is more than what Penn State grosses for a sold-out home football game in Beaver Stadium. And it is 2.33 times what Penn State’s men’s and women’s basketball netted combined in 2012-13, according to university numbers submitted to the U.S. Dept. of Education (as mandated by Title IX).

MORE DETAILS ABOUT FRANKLIN’S CONTRACT

Here are more details about Franklin’s six-year contract, which runs through 2019:

SALARY – Franklin will be paid an overall amount of $4 million a year, with a $100,000 increase each year. He’ll also get $300,000 at the end of every year for staying at Penn State. That effectively makes this year’s compensation amount $4.3 million. As such, Franklin makes $11,233 per day. His contract covers the calendar year – Jan. 1 through Dec. 31.

SALARY BREAKDOWN -- Franklin’s base salary is $1.3 million, with an additional $2.2 million from radio/TV (such as the weekly in-season radio show) and appearances and $350,000 from Nike. Franklin gets $1.2 million more annually for radio/TV/appearances than did O’Brien, who earned $1 million a year and signed about a million signatures on the Coaches Caravan. (I guess Franklin is going to be blowing up a lot of balloons for the $1.2 mil difference.)

About that radio and TV money: The bulk of it comes from Penn State Sports Properties (PSSP) – which is not owned by Penn State. In that sense, it is like the official Penn State Bookstore. It is not run by Penn State; rather, Barnes and Noble has operated it for years, on a contract basis.

PSSP is a property of Learfield Sports, which is the multimedia rights holder for the Penn State’s athletics department, one of over 50 such clients for Learfield. PSSP provides a one-stop shopping experience for businesses and corporations seeking to market through a relationship with Penn State. PSSP offers the following avenues for advertising, marketing and promotion: radio, television, venue signage, event and game day marketing, hospitality, print and GoPSUsports.com.

Nike will pay Franklin $500,000 per year for six years, with no annual increases. O’Brien was getting $350,000 a year. Penn State’s terms with Nike have not been made public, but as a guide it may be helpful to use the corporate giant’s recent deal with Ohio State – which gets about $4.2 million per year under the terms of its contract renewal.

As reported by OSU’s student newspaper, The Lantern, in December, Nike and Ohio State struck a new deal for 11 years and $46 million. Nike will make the bulk of the payments to the Ohio State athletic department, which supports 39 varsity teams. (Penn State has 31.) The deal covers three main areas, according to The Lantern: A standard licensing agreement, an equipment supply agreement and an appearance and consultation agreement.

BILL O’BRIEN – O’Brien’s contract was written to be in line with Penn State’s fiscal year – July 1 through June 30. For FY 2013-14, O’Brien’s base salary was $1,932,779. Then, starting July 1, 2014, he was slated to take a $796,000, or 41%, pay cut on his base salary.

O’Brien was smart. He got his money upfront. Thanks to a front-loaded July 1, 2013 bonus of $935,000 and a $983,000 raise, O’Brien was on track to make $4,232,779 from July 1, 2013 to June 30, 2014. That’s within $67,000 of what Franklin will make – probably not a coincidence.

As it was, given a sharp drop over the year’s final six months, O’Brien was slated to make $2,884,947 in the 2014 calendar year – over $1.4 million less than Franklin.

NATIONALLY – Franklin’s compensation package appears to place him 10th nationally among all major college football coaches, according to USA Today. At an estimated $3 million salary from Vanderbilt (as a private school, Vandy does not have to release any such figures), Franklin ranked around No. 27 nationally. Nick Saban of Alabama is first, at $5.55 million per year, and Arkansas (and former Wisconsin) coach Bret Bielema ranks second, at $5.158 million.

THE BIG TEN – Franklin ranks third or fourth. Michigan State’s Mark Dantonio received a raise to start the year that put him around the $4 million mark and, said his athletic director, in the top-quarter of the conference’s top coaches. The leaders: Urban Meyer, Ohio State ($4.608 million); Brady Hoke, Michigan ($4.154 million), Dantonio; Franklin; and Kirk Ferentz, Iowa ($3.985 million).

PENN STATE – Franklin is the highest-paid Penn State employee. By far. University president Rod Erickson makes $600,000. Athletic director Dave Joyner makes $396,000 – the lowest salary among all A.D.’s in the Big Ten (save for Northwestern; as a private institution it does not have to release its salaries), according to USA Today. Under right-to-know laws, Penn State must release the salaries of its top 25 employees. For 2011-2012, former president Graham Spanier was in that group, at $700,000.

But Spanier and the late Joe Paterno ($596,000) aside, the list featured only medical staff from the Milton S. Hershey Medical Center. Using that list, the most recent one made available by Penn State, Franklin will make more than the top five people – combined ($4.162 million). That includes the chair of the neurosurgery department, staff surgeons in pediatric surgery, neurosurgery and orthopedics, as well as the executive director of the Medical Center.

THE BUYOUT -- USA Today on Friday night broke the news of the $1.5 million Penn State paid Vanderbilt, following the newspaper’s query to Penn State. That figure was not included on Jan. 11 when Penn State released other details of the deal.

To voluntarily opt out of his contract, Franklin must pay Penn State the following amounts: $5 million (2014), $5 million (2015), $2.5 million (2016), $2 million (2017), $1 million (2018) and $1 million (2019).

That’s bass ackwards, according to a prominent sports lawyer with expertise in coaching contracts and who has dealt with Penn State in the past. If Franklin has success at Penn State, he will be a bigger target a few years down the road. And, at that time, his buyout will be much smaller.

“The buyout provision in Franklin’s contract utterly fails to protect Penn State,” says the attorney. “First, it is far too low. As shown by O’Brien, a $5 million buyout will not deter an NFL team for a minute if they want to hire him. Second, this is a phony figure anyway. Given the talent available right now and -- unlike O’Brien -- Franklin’s lack of senior NFL experience, he is not a credible NFL target for a couple of years anyway. If he has success in his first few years at Penn State, then it gets even easier to leave.

“The costs to Penn State of having yet another coach move on in two years are immeasurable. An eight-figure buyout is the minimum necessary to adequately protect Penn State’s interests.”

The attorney said a Penn State demand for a $10 million buyout clause would have been reasonable. And $15 million per year for the duration of the contract actually would have some teeth to it.

“However, one possible explanation for a much lower buyout clause -- other than that Franklin doesn’t really mean his comments about staying at Penn State -- is that a huge buyout might be imprudent for Franklin in light of the significant uncertainty about his superiors,” the attorney said. “That would mean he doesn’t want to be locked in at Penn State if he has an intolerable situation with a new president and A.D."

“The key on the buyout, in my view, will be the first contract extension negotiated after Penn State has a permanent president, with either Joyner -- because he has been selected to continue on by the new president -- or a new AD.

INCENTIVES – There are 10 different performance incentives in Franklin’s Penn State contract, ranging from $100,000 for being named Big Ten Coach of the Year to $800,000 for winning the national championship. Because of the NCAA sanctions, all but two are unattainable for the next two years – or until the NCAA bowl ban and/or the Big Ten championship game ban are lifted. There’s a maximum of $1 million on bonuses.

It should be noted, however, an entire category of performance incentives is not included Franklin's contract:

There are zero bonuses for academic achievement by Penn State’s football team.

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Mike Poorman has covered Penn State football since 1979. He is a senior lecturer in Penn State's College of Communications and teaches a pair of classes in the John Curley Center for Sports Journalism: “Sports Writing” and “Introduction to the Sports Industry.” He created and taught for several years the Center’s course on “Joe Paterno, Communications and The Media.” Follow him on Twitter at http://twitter.com/PSUPoorman. His views and opinions do not necessarily reflect those of Penn State University.
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