How Competitive Market Forces Impact the Virginia Tech Football Program
Porter's 5 forces are just the beginning, as FBS football is an industry of seemingly endless complexity, filled with decentralized power bases that all exert leverage
Business school alums, and certainly anyone with an MBA, should be familiar with the 5 Forces Framework devised by Harvard Business School Professor Michael Porter back in 1979.
The framework aides strategists in evaluating competition within a given industry.
For those not familiar with the 5 Forces Framework, I highly recommend watching this 13-minute video in which Porter lays out the basic framework and its utility in forming and examining competitive strategy.
The five forces that Porter identifies apply to all industries, but other forces can impact specific industries.
Similar to the healthcare industry, where I first encountered Porter’s 5 forces, governance bodies and payors are competitive forces in major college football. Another unique force in college football comes from dependents - non-revenue sports - that compete for financial resources generated by the football program.
The football program is, in practice, the most financially profitable service line within the athletic department. At this service line level, success, a proxy measured in wins and championships, drives the financial performance of the athletic department and all its attendant partners and vendors.
And just to be clear, whenever I say college football, I’m talking about FBS, where teams compete at the highest level of college football and must abide by the 85-scholarship limit.
Michael Porter’s original 5 forces
To help convey just how unique (screwed up?) college football is, as an industry, I am going to separate Porter’s five original forces from three forces unique to college football.
Competition in the Industry - high
Virginia Tech is in the business of generating wins on the football field. So are more than 130 other teams nationwide, and four in the Commonwealth of Virginia. In both the national and the local markets, competition is incredibly intense. Games often come down to a handful of plays, an inch here or there. The financial implications on programs, athletic departments, and entire regions of the country is massive. Teams will do anything to get a leg up on the competition (see: Stalions, Connor).
Threat of New Entrants - low
The FBS ranks continue to grow, with a trickle of new schools rising to the highest level of the sport each year. Still, the power those teams exert is low. A case in point is James Madison. The Dukes went a 11-1 in 2023, and even hosted College Gameday. However, in its one game against an ACC foe, JMU beat a bad Virginia team 36-35. As a G5 team, the Dukes are not an immediate threat to Virginia Tech. In fact, if the barriers to enter FBS are high, then the barriers to enter the P5 are nearly impenetrable. And P5 membership is what separates national title contenders from everyone else.
Bargaining Power Suppliers (Players) - high
The power that players exert in the industry has risen with the advent of NIL and the relaxation of transfer rules. Yes, many top players previously received under the table payments, but now everyone is eligible. Have a good long snapper that you don’t want to lose - gotta pay him! And competition for high school recruits has increased exponentially in the last 20 years, with the internet and private scouting services ensuring that great players seldom fly under the radar.
Bargaining Power of Consumers (Fans) - medium
Fans are incredibly powerful in college football - more so than in any other revenue generating sport, college or pro. They are the source of almost all the sport’s revenue. There are no independently wealth team owners in college football. Rather, fans serve as investors. The money they donate - to the university, the athletic department, and NIL collectives - and put toward ticket purchases, as well as the time they spend watching games on television, produces a quantifiable return on investment: wins and championships. The only reason consumer bargaining power is medium is that all the leverage is indirect. Therefore, any major shifts in buying, viewing, or donating trends take a while to work their way through the system. Even if a major booster drops a $100 million check into a NIL collective’s coffers, it will still take time to figure out how to spend the money and to operationalize those plans. And all that is dependent on the talent of others.
Threat of Substitutes - low
There are lots of other sports that compete during the same fall to winter stretch in which college football games are played, but interest in college football continues to grow, year after year. The real threat is that prospective football players switch sports as children, perhaps due to concerns about the physical toll football can take on the body (and especially the mind). Any impact on the game from kids making this choice would impact Division III schools first, then work its way up the ladder. FBS is pretty well insulated.
Additional forces unique to college football
As I mentioned at the top, there are additional competitive forces in college football, beyond what many industries include. Healthcare comes closest, but the demands of Title IX make college football totally unique.
Bargaining Power of Payors - high
The University - in Virginia Tech’s case, see the impact of the Football Enhancement Fund, both before and after it was announced.
NIL Collectives - well run and financed collectives are worth their weight in gold. They are the college football equivalent to Super PACs (political action committees).
Television - The P5 will officially become the P4 at the end of the academic year. However. with each passing year, that will become an in-name-only deal. The SEC and Big Ten media rights deals are so much better than what the ACC and Big 12 have that they threaten the very foundation of modern college football.
Legislative and Sanctioning Power of Governance Bodies - medium
Federal Government - the big lever the feds could pull would be around labor law, namely passing legislation that explicitly would make players employees of the university, which would completely upend the current model.
State Government - if Ron DeSantis and Florida St. follow through on threats to sue the CFP and possibly ESPN, it could reveal very uncomfortable information, the knowledge of which would force a restructuring within the game. It could also provide a roadmap for future state intervention on behalf of a school.
NCAA - the major governing body of the sport is growing increasingly powerless to shape the competitive landscape. However, its rules do still impact conduct, and penalties can, at times, be very serious (Penn St., in the wake of the Jerry Sandusky revelations, comes to mind).
ACC - conferences are the least powerful of the governance bodies from a policing standpoint, but the most powerful in terms of financial impact because they negotiate media rights deals.
Bargaining Power of Dependents - medium
Non-revenue sports (Title IX) - unique to the American system of sport is the impact of Title IX, which mandates equal numbers of athletic scholarships for men and women. Football underwrites all non-revenue generating teams, which in most cases is every team except for men’s basketball (which usually breaks even, give or take). Beyond scholarships, there is travel and general day-to-day expenses, including for facilities, which ticket sales rarely cover. Thus, each football team is limited by the number of other intercollegiate sports offered by the university, and the degree to which the athletic department seeks to be competitive in those sports.
This is key. While the impact of non-revenue sports on the football team is generally consistent over time, priorities can change with new leadership regimes. At Virginia Tech, former Athletic Director Jim Weaver famously funded the football team at a high level while neglecting just about every other team at the school. That changed with the arrival of Whit Babcock. Now Virginia Tech is invested in winning championships in nearly every sport in which it competes. And that takes money, which could otherwise be reinvested in the football team.
The football coach as CEO
FBS coaches command astronomical salaries, often well above their professional counterparts, due to the size of the operation they manage. At the same time, never before have coaches yielded less power.
This inverse relationship between coaching power and salaries reflects the modern reality of running a football program.
More available money provides new routes to program improvement, but veto points abound. Indeed, they can originate from:
Fans
Media
Boosters
NIL Collectives
NCAA
University Administration
High School Coaches
Former Players
That is a lot of constituencies to nurture and keep aligned. It is in this space where Brent Pry’s star has shone brightest, especially after he stepped back from on-field defensive coaching.
Still, these veto points, behind which lie fiefdoms in their own right, do not operate in a vacuum. Failures in one arena can quickly lead to contagion, as Justin Fuente discovered.
Therefore, as you monitor the moves Virginia Tech makes in the coming week, publicly via the transfer portal (which has a behind the scenes NIL component), coaching and staff changes, and high school recruiting, keep in mind where the power lies and how that is likely to affect the interplay between the competitive forces that impact the program.