Allowing NCAA Football Players to Profit from Their Name, Image, and Likeness Will Enhance Competition, Not Reduce It

Posted on Dec 26, 2019
Ian Hesterly Introduction

College sports is big business, and college football makes up the lion’s share of the revenue. The average Division I school’s football team makes more money than the school’s next 35 sports combined,[1] including men’s basketball. According to Forbes, the 25 most valuable college football programs generated $2.7 billion in revenue and $1.5 billion in profit, led by Texas A&M’s football program with $94 million in profit and $147 million in revenue per year.[2] A large portion of college football revenue comes from TV contracts. ESPN is currently in the middle of a 12-year, $7.3 billion TV deal for the rights to televise the four-team playoff at the end of the season.[3] Under that deal, ESPN is paying just under $203 million per game.

Schools use large portions of this money to pay ever-increasing amounts to their coaches. The highest-paid public employee in 31 states is a college football coach (college basketball coaches are the highest-paid public employees in 8 more states).[4] Reigning national champion Clemson pays coach Dabo Swinney over $9 million per year, with a $50 million buyout.[5] Eighty-three head coaches are paid over a million dollars per year. There are 21 assistant coaches that make over a million dollars per year.[6]

How much of the revenue pie do the players themselves get? None, other than the value of their scholarships. The NCAA does not allow players to get paid. Not by the school, not by the coaches, and not by the fans. The NCAA does not even allow players to sell their own autographs[7] or their own jerseys.[8] One estimate placed the value to the program of the average football player at Texas at $666,029 per year, a value far beyond that of the player’s scholarship.[9] Of course, many players are looking forward to the riches of the NFL. However, only 1.6% of college football players will make it to the NFL.[10] Once there, the average NFL player will earn $3 million over a three-year career.[11]  Multiplying those two numbers together, that means the expected professional earnings of a college football player is just $48,000 per year.[12] That is not much money for the risk that they take: injury;[13] hidden, lifelong health issues;[14] and even death.[15]  Players have sued alleging antitrust violations by the NCAA, and although the results of the lawsuits have been trending in favor of the players, these small wins are occurring at a very slow pace.[16]

Politicians Step In 

In light of this massive disparity between programs making hundreds of millions of dollars and the players being restricted from making any money off of their abilities, a consensus developed that this was unsustainable and players deserved the chance to make money. The question of how is still a tricky one. One option would be for the schools to pay football players directly. However, this would likely raise Title IX issues and schools would have to pay all athletes. Paying all athletes in all sports, even those that do not generate a profit, would be financially impossible for many programs. The idea that gained traction was to let all college athletes profit off of their names, images, or likenesses through third-party endorsements. California was the first to act when Governor Newsom signed the Fair Pay to Play Act (FPPA) on September 30, 2019.[17] The bill will not become effective until 2023, giving the NCAA and other states time to react and adjust. Since California acted, at least nine other states have proposed similar laws,[18] and it is an issue that has received attention in both the House[19] and the Senate.[20]

To say the NCAA has been dragging its feet on this issue would be putting it lightly. In June, the NCAA tried to stop the FPPA by threatening that its passage would result in all California schools being ineligible for championship competition.[21] However, after the FPPA was passed and in light of the other bills working their way through various state legislatures, the NCAA realized if it did not adapt, it would not survive for very long. In October, the NCAA’s working group assigned to study the issue unanimously voted to allow athletes to “benefit from the use of their name, image and likeness in a manner consistent with the collegiate model.”[22] The first part of that quote is very promising; the second part could end up being either irrelevant or a backdoor the NCAA uses to prevent real change—protecting “the collegiate model” has long been the justification the NCAA has used to excuse their draconian rules regarding player compensation from outside sources. However, in light of the momentum nationwide toward California’s FPPA model, I predict that the NCAA will get on board. The NCAA surpassed $1 billion in revenue in 2017—too much money for them to risk being legislated out of existence.[23] Thus, the NCAA will likely follow the FPPA model, as the money given to athletes will come from third parties and should have minimal impact on the NCAA’s pockets.

How will this affect the product?

The biggest contention over this issue is how the product—the football games themselves—will be affected. None other than former President Barack Obama worried that paying college athletes “would ruin the sense of college sports.”[24] This buys into the common concern that top teams would be involved in bidding wars for the best players and competitive balance would be destroyed. The truth is, there is already a lack of parity in college football. The top teams get the top recruits,[25] and as a result, the same teams have the most success.[26] There may not be a direct bidding war for players, but there is an indirect bidding war in the arms race[27] between programs as they pour money[28] into amenities to attract the best recruits. At the same time, it is somewhat of an open secret that some top players are already paid money under the table[29] (in basketball it probably doesn’t even qualify as a secret).[30]

In light of all of these details, my hypothesis is that the new laws allowing players to profit from third-party endorsements will not drastically change college football. I do not believe it will harm the competitive balance, and may even increase it. I believe this is the case for four reasons:

  1. The scarcest resource for a college athlete isn’t money—it’s playing time. Regardless of how much money a booster (essentially a superfan who has donated money to the athletic department) offers a top recruit to come to a school, no school will be able to stockpile five-star recruits with dreams of playing in the NFL if it turns out they will spend their whole career on the bench.
  2. Small schools with mediocre athletic programs still have wealthy alumni. By allowing them the chance to endorse top players, the number of schools that are attractive, viable options for athletes increases.
  3. Many fans suspect the top teams are already paying under the table for recruits. When Heisman Trophy winner Cam Newton’s dad tried to shop Cam to a school he didn’t attend for $180,000,[31] the obvious question was how much money boosters at the school he ended up playing for (Auburn) paid to get him. The top of college football is high-stakes and high-pressure. The incentive to cheat a little bit is absolutely there. The incentive for lower-tier programs is not. By legalizing third-party endorsements, boosters of unsuccessful schools who were not tempted to cheat for marginal success will now feel free to open up their checkbooks.
  4. Boosters do not have unlimited pools of money. As passionate as Alabama fans can be,[32] they cannot afford to pay an entire football team for very long. The big money will be thrown only at the best players, and—as mentioned above—the best players will have more viable options than ever before.

It is clear that change is coming for the NCAA, whether they want it or not.  The change will be driven by legislatures, rather than courts.  The NCAA’s legal arguments in favor of “amateurism” were already failing in the courts;[33] they will hold even less sway in legislatures looking to pass a popular law in favor of players at the expense of the unpopular NCAA.  Any legislators worried about the effect these laws could have on the final product should recognize that allowing open competition for players will only improve the sport, especially when compared to the black-market system currently in effect.

 

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[1] Cork Gaines & Mike Nudelman, The Average College Football Team Makes More Money Than the Next 35 College Sports Combined, Bus. Insider (Oct. 5, 2017), https://www.businessinsider.com/college-sports-football-revenue-2017-10.

[2] Chris Smith, College Football’s Most Valuable Teams: Reigning Champion Clemson Tigers Claw Into Top 25, Forbes (Sep. 12, 2019), https://www.forbes.com/sites/chrissmith/2019/09/12/college-football-most-valuable-clemson-texas-am.

[3] Frank Pallotta, ESPN’s $7.3 Billion College Football Playoff Gamble Pays Off, CNN (Jan. 23, 2015), https://money.cnn.com/2015/01/12/media/espn-college-football-playoff-pays-off.

[4] Who’s The Highest-Paid Person In Your State?, ESPN (Mar. 20, 2018), http://www.espn.com/espn/feature/story/_/id/22454170/highest-paid-state-employees-include-ncaa-coaches-nick-saban-john-calipari-dabo-swinney-bill-self-bob-huggins.

[5] Steve Berkowitz et al., College Football Head Coach Salaries, USA Today (2019), https://sports.usatoday.com/ncaa/salaries.

[6] Steve Berkowitz et al., College Football Assistant Coach Salaries, USA Today (2019), https://sports.usatoday.com/ncaa/salaries/football/assistant.

[7] Half-Game Penalty for Johnny Manziel, ESPN (Aug. 28, 2013), https://www.espn.com/college-football/story/_/id/9609389/johnny-manziel-texas-aggies-suspended-1st-half-season-opener-rice-owls.

[8] NCAA Upholds A.J. Green’s Suspension, ESPN (Sep. 17, 2010), https://www.espn.com/college-football/news/story?id=5585220.

[9] Cork Gaines & Mike Nudelman, Why the NCAA May Eventually be Forced to Pay Some Student Athletes, in One Chart, Bus. Insider (Nov. 24, 2017), https://www.businessinsider.com/college-football-player-value-2017-11.

[10] Estimated probability of Competing in Professional Athletics, NCAA (2019), http://www.ncaa.org/about/resources/research/estimated-probability-competing-professional-athletics.

[11] Stan Jastrzebski, NFL Players are Having Trouble Making Their Million Dollar Salaries Last into Retirement, Bus. Insider (Sep. 5, 2017), https://www.businessinsider.com/nfl-players-having-trouble-making-salaries-last-into-retirement-2017-9.

[12] $3 million average NFL earnings*1.6% chance of making it to the NFL=$48,000 expected professional earnings.

[13] Mark Viera, Rutgers Player is Paralyzed Below the Neck, N.Y. Times (Oct. 17, 2010), https://www.nytimes.com/2010/10/18/sports/ncaafootball/18rutgers.html.

[14] Concussion Legacy Found., CTE in Former College Football Players (2018), https://concussionfoundation.org/CTE-resources/cte-college-football.

[15] Patrick Hruby, 'Junction Boys Syndrome': How College Football Fatalities Became Normalized, Guardian (Aug. 19, 2018), https://www.theguardian.com/sport/2018/aug/19/college-football-deaths-offseason-workouts.

[16] Marc Tracy, The N.C.A.A. Lost in Court, but Athletes Didn’t Win, Either, N.Y. Times (Mar. 11, 2019), https://www.nytimes.com/2019/03/11/sports/ncaa-court-ruling-antitrust.html.

[17] S.B. -206, 2019-2020 Reg. Sess. (Cal. 2019), Collegiate Athletics: Student Athlete Compensation and Representation, CALIFORNIA LEGISLATIVE INFORMATION, https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200SB206.

[18] Charlotte Carroll, Tracking NCAA Fair Play Legislation Across the Country, Sports Illustrated (Oct. 2, 2019), https://www.si.com/college/2019/10/02/tracking-ncaa-fair-play-image-likeness-laws.

[19] Dan Murphy, Congressman to Propose Federal Legislation for Paying College Athletes, ESPN (Oct. 2, 2019), https://www.espn.com/college-sports/story/_/id/27751454/congressman-propose-federal-legislation-paying-college-athletes.

[20] Sen. Mitt Romney Raises Concerns with NCAA Proposal, ESPN (Oct. 30, 2019), https://www.espn.com/college-sports/story/_/id/27967379/sen-mitt-romney-raises-concerns-ncaa-proposal.

[21] Steve Berkowitz, NCAA Says California Schools Could be Banned From Championships If Bill isn't Dropped, USA Today (Jun. 24, 2019), https://www.usatoday.com/story/sports/2019/06/24/ncaa-california-schools-could-banned-championships-over-bill/1542632001/.

[22] Board of Governors Starts Process to Enhance Name, Image and Likeness Opportunities, NCAA (Oct. 29, 2019), http://www.ncaa.org/about/resources/media-center/news/board-governors-starts-process-enhance-name-image-and-likeness-opportunities (emphasis added).

[23] Scooby Axson, NCAA Reports $1.1 Billion in Revenues, Sports Illustrated (Mar. 7, 2018), https://www.si.com/college-basketball/2018/03/07/ncaa-1-billion-revenue.

[24] Joseph Lawler, Paying Athletes 'Would Ruin the Sense of College Sports,' Obama Cautions, Washington Examiner (Mar. 22, 2015), https://www.washingtonexaminer.com/paying-athletes-would-ruin-the-sense-of-college-sports-obama-cautions.

[25] Neil Paine, Which College Football Teams Do the Most with the Least Talent? (And Vice Versa), FiveThirtyEight (Aug. 24, 2017), https://fivethirtyeight.com/features/which-college-football-teams-do-the-most-with-the-least-talent-and-vice-versa/.

[26] Chris Hummer, Five Years of CFB Playoff Results Show Parity is a Myth, 247 Sports (Dec. 3, 2018), https://247sports.com/Article/College-Football-Playoff-results-show-parity-is-a-myth-Alabama-Clemson-Oklahoma-125803117/.

[27] Zack Willis, College Football: LSU and the 6 Other Schools with the Best Locker Rooms, Sportscasting (Aug. 10, 2019), https://www.sportscasting.com/college-football-lsu-other-schools-with-best-locker-rooms.

[28] Drew Nantais, LSU Showcases Insane New Football Facility After $28 Million Renovation, Sporting News (Jul. 22, 2019), https://www.sportingnews.com/us/ncaa-football/news/lsu-showcases-insane-new-football-facility-after-28-million-renovation/1m9r8ntste1s713dge0mq80nat.

[29] Darin Gantt, Arian Foster Admits Getting Money in College, NBC Sports (Sep. 20, 2013), https://profootballtalk.nbcsports.com/2013/09/20/arian-foster-admits-getting-money-in-college.

[30] Pat Forde & Pete Thamel, Exclusive: Federal Documents Detail Sweeping Potential NCAA Violations Involving High-Profile Players, Schools, Yahoo Sports (Feb. 23, 2018), https://sports.yahoo.com/exclusive-federal-documents-detail-sweeping-potential-ncaa-violations-involving-high-profile-players-schools-103338484.html.

[31] Mark Schlabach & Chris Low, Bell: Texts Set Cam Newton Payments, ESPN (Nov. 17, 2010), https://www.espn.com/college-football/news/story?id=5818428.

[32] Josh Bean, Harvey Updyke Summoned to Court for Failing to Pay for Toomer’s Poisoning, AL.com (Aug. 14, 2019), https://www.al.com/auburnfootball/2019/08/harvey-updyke-summoned-to-court-for-failing-to-pay-for-toomers-poisoning.html.

[33] See supra note 16.