They are not worried about losing, they are worried about not having the home game. People need to keep a couple of things in mind.
1. Football is not just paying for football. It is paying for 23 other sports. I make a lot more money than I need to survive. I do not make a lot more money than I need for me, my wife, and my three kids. A pay cut for me doesn't just effect me. Football is the same.
2. Iowa would not be replacing ISU with Arkansas State. Iowa would be replacing ISU with a B1G team, and therefore, likely playing a tough schedule overall.
I agree with #1, that is a great point. But #2, I don't understand. Iowa normally schedules multiple cupcakes (usually 3 - at least 1 FCS, agreed usually all at home) plus then ISU alternating home and away each year.
If they are worried about losing a home game, then they can schedule an Arkanasa state or Central Michigan or both they don't lose those home games because Iowa has away games against those schools. Plus if Iowa adds 2 more conference games, then that is 1-1 it would most likely be 1 home and 1 away, not 2 away. Then that is up to 5 home, 5 away games in conference, so those games will most likely be sell outs, true sell outs not an FCS opponent where they count tickets sold, not who is in the stadium). If Iowa is playing a 10 conference schedule then who is the other 2 games to get to 12?
As I stated above if they add both AS and CM that is 7 home games and 5 away games, same as a normal year right? If they choose ISU, then they alternate every other year so they lose one home game every other year.
Play ISU in IC 7 (home) - 5 (away), then next season play ISU in IC 6 (home) - 6 (away).
I don't see how that is so devastating to a program that makes as much money as Iowa does. Normally Iowa vs. ISU draw more people to the local economy than other games. A few years back they estimated that there were well over 100K possibly 120K people outside Kinnick tailgating for Iowa ISU, no other games do that.