Athletic departments as a whole aren't profitable because the ridiculous amounts of profits earned by basketball and football can't subsidize the losses incurred by supporting the other sports.
But really, I think the issue here is that you're arguing at cross purposes. There's a strong argument to be made that the whole idea of the state running a profit-making sports team through its universities is flawed and borderline immoral. And I tend to agree.
But that says nothing about the economics of the situation, or the "fairness" of paying the coaching staff a market wage, or even the fact that these absurd salaries are, in fact, driven by a very liquid and efficient market.
http://budget.universityofcalifornia.edu/files/2011/11/2012-...
Of the 119 FBS football teams, 68 (57.1 percent) finished the year in the black.
Of the 119 FBS schools playing men's basketball, 67 teams made a profit. One of those same 119 schools made money in women's basketball in 2008.
FBS football teams recorded a median net profit of $1.95 million. Men's basketball at the same schools produced a median profit of $518,000. No other sport at the FBS schools, measured by median values, showed a program in the black.
so yeah, profit centers.
I'm going to sound like an economist that refuses to pick up a $20 bill (if it's real, somebody else would've picked it up), but there's, for example, profit opportunity in on-campus food catering. So a bunch of private contractors sign up with university to operate their own facility, hire their own staff, and give the university a cut of the earnings or licensing fee.
Why has no for-profit corporation stepped up to build up a stadium, hire coaches and players, license the university name and then enjoy the profits?
Do you have a source on that? I couldn't figure out a way to research it myself, but it seems illogical that the cost of financing the facilities would not hit he P&L of the athletics association.
Why has no for-profit corporation stepped up to build up a stadium, hire coaches and players, license the university name and then enjoy the profits?
The same reason many Universities still own on campus housing in most cases. Likely because Universities will not let them. Also, it is likely that the NCAA would oppose it.
It seems that most universities believe there is some value in it for students considering that many schools are happy to run athletic departments at a net loss. The Ivy League for example has a strong tradition of fostering athletic competition and those schools often have larger athletic departments than most large state universities.
http://www.news.cornell.edu/stories/2004/09/surprise-winning...