At $5.5 million a season, he was underpaid. At nearly $7 million a year, Alabama head coach Nick Saban is still a tremendous bargain in a world that does not abide by conventional financial rules and guidelines.
Let’s address that point out of the gate. This is not the world we operate in, nor should his compensation be viewed as such. This is a lucrative business built on an unusual business model involving a sport with more money than it knows what to do with.
Thus all reasonable attempts to compute his “value” can get complicated, and it usually does. This is not about how much more Saban makes than the average Alabama professor (spoiler: a lot more). This is the best football CEO in the country realizing his immense value.
It’s why Texas would have loved to see Saban switch zip codes following Mack Brown’s departure. And despite the Internet’s best attempt to orchestrate a Saban-Texas romantic dinner for two, the UA system Board of Trustees compensation committee officially approved their coach’s latest contract on Tuesday.
It pays to have leverage, certainly; and it did here.
After receiving a bump in pay in April of 2013, Saban’s contract was reworked just a shade over a year later. The details, as outlined by Al.com, are noteworthy and yet somehow not all that surprising. Even for a man that is accustomed to taking home a fortune each year.
For starters, Saban’s contract was extended two years. The 62-year-old’s deal will now run through January 22, 2022 rather than 2020. His salary will also receive a dramatic bump throughout this time, increasing from $5.5 million to $6.9 million a year.
His yearly compensation will now be broken up into two parts: $6.5 million will come in annual payments while another $400,000 will be paid in a completion bonus. This isn’t related to wins or SEC Championships, it’s basically a “thanks for being there.”
When we complete something, we can only hope for a flurry of thumbs ups, Facebook likes and a swarm of positive emails. When Saban does the same—assuming he does it at Alabama—he will essentially be given what equates to a four-bedroom, three-bath home.
His bonuses will remain intact, providing him the possibility to earn as much as $700,000 more per season if he hits all of his triggers. And if somehow Saban falls behind on the SEC payment totem pole, he could be due as much as the market is willing to give.
If his pay becomes less than the average of the three best-compensated coaches in the country (or he falls out of the top five), the university will increase his salary to the higher of the two averages. You know, just in case.
It is unlikely this will ever happen, of course, but there’s a clause in place in case teams like Auburn, Texas A&M or LSU exhaust their team-colored piggy banks.
Essentially, this locks Saban up for the remainder of his career. It won’t stop the NFL rumors from poisoning your Twitter feed, but this is feeling more and more like a final destination rather than a big chunk of his resume.
In a statement released by the school, Saban had the following to say on his new deal:
We are honored by the commitment the University of Alabama has made to us with this new contract. It is certainly a mutual agreement in terms of our commitment to the University of Alabama. We will continue to work hard to keep our football program among the nation's elite. My passion has always been to develop young men to their full potential as student-athletes. We've had great success in that area at Alabama and I'm appreciative of all the support and the resources we receive from the administration in order to make that happen.
Altogether, if the deal is completed, Saban will take home more than $55 million with his new contract. It is an unfathomable amount of money regardless of profession, although it seems slightly more unfathomable given what he does for a living.
And yet, given what he’s meant for the university—and the revenue he’s generated during his tenure—this conversation over whether he deserves this marvelous sum of money should be brief. Alabama could pay its current head coach $10 million plus, and it still would be a favorable relationship for the school. How about $12 million?
Where do we sign?
In November of last year, I wrote a similar piece on Saban, touting college football’s then highest-paid coach at a different salary underpaid.
It explored all the financial riches that have blossomed under Saban’s watch, a whopping $143.4 million in athletic revenue in 2012-13 alone. It also touched on the fact that revenue at the school was up 112 percent since 2006, a staggering number that would floor most economics professors.
It hit on the facility upgrades that have been made possible with the meteoric rise of the program, like the waterfall in the locker room and a weight room the size of a missile silo. Both are products of winning games and wooing 5-star recruits, and both should help further this assembly line in place.
Other figures have come out since then, like Forbes’ assessment of the nation’s most valuable teams. Alabama is moving up this list like a freight train, jumping from sixth to third on the list, behind only Texas and Notre Dame. More startling than the $110 million figure given by the program is the fact that it jumped 15 percent last year alone.
The plan is quite simple, and it's more obvious when you dive into the books. Make more, spend more and continue on this path until it's no longer functional for all parties involved.
Given Alabama's profit and spending over the past decade, this strategy has worked thanks in large part to the head coach.
Alabama is in a position where it can (and should) pay nearly $7 million for its football coach because the risk associated with doing so is minimal. More so than the risk is the steady stream of calculable revenue that is now pouring into the school, a stream still trending upward.
Then there are the matters that won’t have a direct correlation with the program—things like enrollment and marketing opportunities gained. You can't simply connect the dots when it comes to these items and the success of the football program, although the influence is undeniable.
Alabama isn't just paying a head coach. It's paying the "best financial investment this university has ever made," a statement that was made by Alabama chancellor Dr. Robert Witt on 60 Minutes last year.
A larger salary won’t equate to more, at least in terms of on-field success. In fact, it will be difficult for Saban to approach the success his teams have experienced in the past five years over the remainder of his deal.
That’s not a knock on the current state of the program or where it's headed; it's simply a realistic approach of how dominant this team has been and how difficult such success will be to duplicate.
Even with that outlook, the $55 million Alabama is investing in its coach is a no-brainer. While the wins, trophies and immense football accolades are an integral part of all this, it is only a portion of the process.
This is, in its purest form, a business. And for the foreseeable future—as long as Saban is capitalizing on his yearly completion bonus—business should continue to thrive.