Time for Change
- The Gobbler
- 13 Replies
Let me preface this by saying if Fuente can somehow reverse this season's fortunes by winning 6 of the final 8 games, finishing 8-4 in the regular season, any case for his termination would be baseless.
I don't think he can pull that kind of turnaround off! It's far more likely that this team closes with somewhere between a 3-9 and 5-7 finish.
If that occurs, as expected, Whit Babcock is going to have to consider the trade off between the value of the Virginia Tech "Brand" both nationally and regionally, which is diminishing at an alarming rate, versus the cost of a $15 million buyout of Fuente's contract. That buyout actually decreases to $12.5 million on December 15, 2019, approximately 2 weeks after the conclusion of the season. In addition to the brand impact itself, Babcock must consider other potential revenue losses associated with retaining Fuente, namely those associated with declining attendance (ticket sales and game revenue), reduced athletic department donations, and reduced merchandising sales of VT apparel, gear, and other merchandised items connected to the VT brand and logo.
Those potential "losses" in revenues are significant in their own right, easily running into the millions of dollars annually, and as such, they offset to a degree the actual net cost of buying out Fuente's contract. Further, Virginia Tech does not need to come up with $12.5 million in cash to make one single lump sum payment. Buyouts are typically structured to be made over a multiple year period with a series of smaller annual single payments. Spread over a five year period, the annual cost to buyout Fuente would be around $2.5 to $3.0 million/year. That is not a "crippling" cost for VT to bear when other revenue impacts are considered.
But, there is another side to the equation. While a buyout may not necessarily cripple VT financially in and of itself, there is the affordability issue of having sufficient money to attract and maintain the ongoing annual cost of a new head coach in combination with the ongoing (at least 5 years) cost of carrying buyout payments simultaneously.
Fuente is paid approximately $4 million annually at present. If that represents "fair market value" for the VT coaching position going forward, then annual expenses for a head coach would rise from $4 million to $7 million under a buyout scenario...$4 million for the new coach plus $3 million in buyout payments. Again, I would argue that the $3 million will be offset by avoidance of other lost revenues, vis a vis, ticket sales, donations etc that would otherwise have accrued in maintaining a "losing" program under Fuente. Let's split the difference and assume the actual net annual loss in a buyout scenario is only $1.5 million rather than the full $3 million.
On that basis, the annual cost to terminate Fuente AND hire and maintain a new coach at market value is going to be around $5.5 million or $1.5 million more per year than at present (Fuente's current salary alone).
So, to effect a Fuente buyout AND maintain a break even point with the athletic budget, entails finding an annual source for either $1.5 million in new revenue or $1.5 million in less expenditures.
Revenues from the new ESPN/ACC Network alone flowing into athletic department coffers are expected to generate more than the $1.5 million in question. However, using those new monies to mitigate a Fuente buyout carries with it a significant "opportunity cost" if nothing else. The additional ACC Network revenue is expected to provide monies for new projects and programs across the athletic department. To siphon off a large portion of those funds to offset a buyout of Fuente means that many of those expected new projects would have to be curtailed at the detriment to growth and expansion of the overall athletics program. That is not a desirable outcome.Diverting any other new sources of revenue toward a contract buyout would carry much the same negative consequence in terms of opportunity cost.
So let's look instead at the "expenditure" side. Is there any scenario that allows VT to both hire a promising new head coach AND simultaneously reduce it's baseline $4 million expenditure in salary by anything close to the $1.5 million needed for a "break even" outcome?
Obviously we can eliminate any pipe dreams of a Bob Stoops or Urban Meyer. They would command far beyond even the $4 million baseline. Similarly, there is virtually no hope of attracting any other proven, sure fire winner from among the active Power 5 coaching pool for anything at or less than $4 million. The same can be said of whoever emerges as this year's crop of hot new coaches coming out of the Group of 6 Conferences. We would be competing with other schools for their services and most of those other schools can meet or exceed the $4 million offer mark. And as we have found out with the Fuente hire, identifying the "right" person from that pool of hot young coaches is a crap shoot at best. There are no guarantees!
Consider this though. There is a bright young Associate Head Coach at Oklahoma making $450,000 dollars/year. His name is Shane Beamer. He has tutored under Phil Fulmer at Tennessee, George O'Leary at Georgia Tech, Steve Spurrier at South Carolina, Kirby Smart at Georgia, Lincoln Riley at Oklahoma, and, of course, Frank Beamer at Virginia Tech. He is one of our own. He has been preparing his entire life to be the head coach right here in Blacksburg. He knows the state of Virginia. He knows the traditions and passions and values of Hokie Nation.
Many of us remember the skinny little kid trailing behind his dad carrying the cord for Beamer's headset. No doubt that 12 year old kid had dreams of one day being the one to WEAR that headset. If Babcock is smart he would cut his losses with Fuente and offer Shane Beamer $2.5 million/year to come home and take on the challenge of restoring Virginia Tech to it's rightful place in the college football world. That $2.5 million pay level generates the $1.5 million necessary to reach a break even point in getting rid of Fuente. I have no doubt Shane would accept $2.5 million
at least for the first few years until such time as he proved worthy of a significant raise.
Given the predicament we find ourselves in and the options available, as my good buddy Donald Trump would say, "what in the hell do you have to lose"?
Your thoughts?
I don't think he can pull that kind of turnaround off! It's far more likely that this team closes with somewhere between a 3-9 and 5-7 finish.
If that occurs, as expected, Whit Babcock is going to have to consider the trade off between the value of the Virginia Tech "Brand" both nationally and regionally, which is diminishing at an alarming rate, versus the cost of a $15 million buyout of Fuente's contract. That buyout actually decreases to $12.5 million on December 15, 2019, approximately 2 weeks after the conclusion of the season. In addition to the brand impact itself, Babcock must consider other potential revenue losses associated with retaining Fuente, namely those associated with declining attendance (ticket sales and game revenue), reduced athletic department donations, and reduced merchandising sales of VT apparel, gear, and other merchandised items connected to the VT brand and logo.
Those potential "losses" in revenues are significant in their own right, easily running into the millions of dollars annually, and as such, they offset to a degree the actual net cost of buying out Fuente's contract. Further, Virginia Tech does not need to come up with $12.5 million in cash to make one single lump sum payment. Buyouts are typically structured to be made over a multiple year period with a series of smaller annual single payments. Spread over a five year period, the annual cost to buyout Fuente would be around $2.5 to $3.0 million/year. That is not a "crippling" cost for VT to bear when other revenue impacts are considered.
But, there is another side to the equation. While a buyout may not necessarily cripple VT financially in and of itself, there is the affordability issue of having sufficient money to attract and maintain the ongoing annual cost of a new head coach in combination with the ongoing (at least 5 years) cost of carrying buyout payments simultaneously.
Fuente is paid approximately $4 million annually at present. If that represents "fair market value" for the VT coaching position going forward, then annual expenses for a head coach would rise from $4 million to $7 million under a buyout scenario...$4 million for the new coach plus $3 million in buyout payments. Again, I would argue that the $3 million will be offset by avoidance of other lost revenues, vis a vis, ticket sales, donations etc that would otherwise have accrued in maintaining a "losing" program under Fuente. Let's split the difference and assume the actual net annual loss in a buyout scenario is only $1.5 million rather than the full $3 million.
On that basis, the annual cost to terminate Fuente AND hire and maintain a new coach at market value is going to be around $5.5 million or $1.5 million more per year than at present (Fuente's current salary alone).
So, to effect a Fuente buyout AND maintain a break even point with the athletic budget, entails finding an annual source for either $1.5 million in new revenue or $1.5 million in less expenditures.
Revenues from the new ESPN/ACC Network alone flowing into athletic department coffers are expected to generate more than the $1.5 million in question. However, using those new monies to mitigate a Fuente buyout carries with it a significant "opportunity cost" if nothing else. The additional ACC Network revenue is expected to provide monies for new projects and programs across the athletic department. To siphon off a large portion of those funds to offset a buyout of Fuente means that many of those expected new projects would have to be curtailed at the detriment to growth and expansion of the overall athletics program. That is not a desirable outcome.Diverting any other new sources of revenue toward a contract buyout would carry much the same negative consequence in terms of opportunity cost.
So let's look instead at the "expenditure" side. Is there any scenario that allows VT to both hire a promising new head coach AND simultaneously reduce it's baseline $4 million expenditure in salary by anything close to the $1.5 million needed for a "break even" outcome?
Obviously we can eliminate any pipe dreams of a Bob Stoops or Urban Meyer. They would command far beyond even the $4 million baseline. Similarly, there is virtually no hope of attracting any other proven, sure fire winner from among the active Power 5 coaching pool for anything at or less than $4 million. The same can be said of whoever emerges as this year's crop of hot new coaches coming out of the Group of 6 Conferences. We would be competing with other schools for their services and most of those other schools can meet or exceed the $4 million offer mark. And as we have found out with the Fuente hire, identifying the "right" person from that pool of hot young coaches is a crap shoot at best. There are no guarantees!
Consider this though. There is a bright young Associate Head Coach at Oklahoma making $450,000 dollars/year. His name is Shane Beamer. He has tutored under Phil Fulmer at Tennessee, George O'Leary at Georgia Tech, Steve Spurrier at South Carolina, Kirby Smart at Georgia, Lincoln Riley at Oklahoma, and, of course, Frank Beamer at Virginia Tech. He is one of our own. He has been preparing his entire life to be the head coach right here in Blacksburg. He knows the state of Virginia. He knows the traditions and passions and values of Hokie Nation.
Many of us remember the skinny little kid trailing behind his dad carrying the cord for Beamer's headset. No doubt that 12 year old kid had dreams of one day being the one to WEAR that headset. If Babcock is smart he would cut his losses with Fuente and offer Shane Beamer $2.5 million/year to come home and take on the challenge of restoring Virginia Tech to it's rightful place in the college football world. That $2.5 million pay level generates the $1.5 million necessary to reach a break even point in getting rid of Fuente. I have no doubt Shane would accept $2.5 million
at least for the first few years until such time as he proved worthy of a significant raise.
Given the predicament we find ourselves in and the options available, as my good buddy Donald Trump would say, "what in the hell do you have to lose"?
Your thoughts?
