Wednesday, November 16, 2011

The Economic Impact of the Penn State Scandal

Unless you have been living under a rock, you have been watching, likely with horror, as the Penn State scandal continues to blossom and accelerate.  The charges against former coach Jerry Sandusky are, of course, of the most appalling nature, and the scandal has already taken down four high-level Penn State staffers, including former President Graham Spainer and legendary coach Joe Paterno.

A CNNMoney article reviews a facet of the scandal that hasn't received quite as much attention - the potential economic impact of the scandal, which is extremely large and potentially long-lasting.  Penn State generated $72.7 million in revenue as a result of its football program, one of the highest levels in the nation, and that revenue is now very much at risk.  The school will even be undergoing a bond review by Moody's in the wake of the scandal, as there is a potential for major lawsuits and legal costs.

What the article doesn't touch on too much is the potential affect on those outside of the school, and it also leaves out some potential scholastic impacts.  How many students will not apply, or attend, Penn State, as a result of the scandal?  Will this affect Penn State's many satellite campuses? The school's image has been tarnished, and the answer to that question remains to be seen.

Of course, this crisis could also impact merchandisers of Penn State memorabilia and clothing, of which there are many.  Is Penn State merchandise now less likely to sell?  The answer is certainly yes - at least in the short-term.  It's the long-term impacts that are really questionable, and how Penn State handles the issue from here on in will have a big impact on the answer to these questions.

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