NCAA releases guidelines (not rules) recommending limits on football practices that allow contact, provision of independent medical care for players, and consistent treatment of brain-related injuries.
Yesterday, a federal judge heard opening arguments in one of several antitrust lawsuits challenging National Collegiate Athletic Association rules restricting the compensation intercollegiate athletes may receive for their sports participation. Some commentators herald these cases as a potential way to effectively resolve the problems inherent in commercialized college athletics.
In contrast, we believe that the potentially adverse consequences if these rules are invalidated make antitrust litigation a less attractive means of reforming college sports.
While the outcome of these cases could significantly change the way big-time college sports traditionally has operated, a free market solution mandated by antitrust law would inhibit universities from providing many athletes with a college education they would not otherwise receive, severely limit colleges’ ability to cross-subsidize women’s and men’s non-revenue sports with surplus funds from football and men’s basketball, and probably reduce the economic value of scholarships currently offered to many college football and basketball players, while providing greater economic benefits (including cash payments) to a relatively few star college football and basketball players.
More on the O'Bannon Case
A year after predicting that big-time college sports is invulnerable to legal challenges, Murray Sperber changes his mind. Read more.
As the trial gets under way, NCAA settles related lawsuit over video game images for $20 million. Read more.
As an alternative, we propose an open and transparent system of federal regulation combined with antitrust immunity for intercollegiate athletics reforms that are approved by a federal regulatory commission and voluntarily adopted by the NCAA.
Most sports sponsored by the NCAA and its 1,100 member universities -- particularly Division II and III sports, as well as Division I non-revenue sports -- are based on an idealized “amateur/education” model of intercollegiate athletics. The NCAA Constitution expressly states that the NCAA’s objective is to “retain a clear line of demarcation between intercollegiate athletics and professional sports” and that “[s]tudent-athletes shall be amateurs,” meaning “their participation should be motivated primarily by education and by the physical, mental and social benefits to be derived.” Intercollegiate athletes “should be protected from exploitation by professional and commercial enterprises,” and university athletic programs should be operated with “prudent management and fiscal practices.”
The enormous popularity of and public demand for Division I football and men’s basketball, particularly games played by ACC, Big Ten, Big 12, Pac 12, and SEC universities, have given rise to a “commercial/education” model for these college sports, which collectively generate very substantial revenues. For example, the NCAA men’s basketball television contracts will generate $10.8 billion over 14 years. The broadcast rights for the Division I FBS College Football Playoff that will begin this year has an estimated worth of $7.3 billion over 12 years.
The pervasive commercialization of “big-time” college football and basketball directly reflects marketplace realities. Fueled by new media technologies needing popular content to attract viewers and advertisers, sports is one of the few things that millions of people watch live. Universities’ use of big-time sports as an entertainment product and marketing tool is a rational response to marketplace realities in an increasingly competitive higher education environment.
However, university leaders have often allowed this rampant commercialization to trump, rather than serve, the broader goals of higher education. For example, financial resources are often misallocated from academics to athletics. Each year, relatively few Division I athletic departments (approximately 20-25) generate net revenues, and university subsidies to balance their budgets are prevalent. Too often, the educational aspects of intercollegiate athletics are marginalized. As former Ohio State football coach Woody Hayes stated: “The coach will squeeze every bit of football from each player that he can, but in return the coach must give that man every legitimate measure of help he needs to get ‘the rest’ of his education.... We feel that the man who plays college football and does not graduate has been cheated." This is particularly true for students from underprivileged backgrounds, disproportionately students of color.
In addition, commercialization economically exploits elite Division I football and men’s basketball players. Big-time football and basketball programs generate billions of dollars of annual revenues, and many coaches are paid multimillion-dollar salaries. But the value of the players’ athletic scholarships is less than the full cost of attendance at their respective universities, and because of the extensive time demands of playing football or basketball at this level of competition, their lifestyle during the season generally is less than that enjoyed by their classmates, alumni, and fans. Although they receive high-quality coaching and training, only about 1 percent of them will ever play professionally in the NFL or NBA. Virtually none will earn enough from playing professionally to achieve lifetime financial security.
These realities are inconsistent with the NCAA’s constitutional objectives. Big-time football and basketball are not played by “amateurs,” and the “clear line of demarcation between intercollegiate athletics and professional sports” is blurred. Ironically, big-time intercollegiate athletics is the commercial enterprise causing the academic and economic exploitation of student-athletes. Prudent management and fiscal practices also are lacking because so few Division I athletic program generate net revenues.
At the same time, professionalization of big-time football and basketball programs is not socially optimal. Although commercialized college sports operate in a fundamentally different way from the amateur sports ideal -- because university athletics directors seek to maximize the commercial return on big-time sports -- they are not subject to the same economic forces as purely commercial enterprises like professional sports.
The “commercial/education” model is distinct from the “commercial/professional” model embodied by the NBA and NFL in several important respects. First, nonprofit universities use excess revenues generated by commercially successful football and men’s basketball programs to cross-subsidize women’s and men’s non-revenue sports rather than distributing these “profits” to owners or investors as professional leagues and clubs do.
Second, the commercial/education model features important social benefits not feasible for a “minor professional league,” including access to college educational opportunities for athletically gifted persons of all socioeconomic backgrounds, offering a very popular distinctive brand of sports entertainment, cross-subsidizing athletic participation opportunities for women, and potentially providing additional financial support for academic programs if university athletic departments exercise prudent fiscal management.
Third, maintaining this model will avoid the numerous collateral labor, tax, worker’s compensation, and other legal issues if intercollegiate athletics are professionalized by the unionization of college football and basketball players or they receive salaries for playing services greater than scholarships covering the full cost of university attendance through the operation of free market forces mandated by antitrust law. Refining this model to ensure student-athletes participating in commercialized sports receive the educational, physical, mental, and social benefits of intercollegiate athletics, which distinguishes them from professional sports, is a better alternative.
History demonstrates that economically self-interested NCAA internal reform will not effectively achieve these objectives. The former Congressman and NBA and college basketball player Tom McMillen correctly observes that “[t]here is just too much money involved in the multibillion-dollar industry that is college athletics to expect the participants to police themselves.” As evidenced by the current debate among Division I universities regarding full cost of attendance scholarships, universities’ economic interests inhibit the development of NCAA rules to remedy student-athlete exploitation and prevent subordination of academic values to the forces of commercialization.
Although external reform is necessary, micromanagement of intercollegiate athletics through contract and antitrust litigation is not the optimal solution. Courts will enforce the express terms of athletic scholarships, but will not otherwise use contract law to remedy any perceived unfairness in the relationship between a university and its athletes. Regardless of the outcome of the O’Bannon litigation, which challenges NCAA rules prohibiting college basketball and football players from being compensated for the use of their likenesses in video games and television broadcasts, and other pending antitrust cases, piecemeal antitrust analysis of individual NCAA rules will not broadly resolve systemic problems inherent in the production of intercollegiate athletics.
Although antitrust law prohibits unreasonable conduct, it does not require socially optimal policies (e.g., ensuring college football and basketball players receive educational and other non-economic benefits) and may inhibit the continuing cross-subsidization of women’s and non-revenue sports by refusing to recognize this practice as a procompetitive economic justification for NCAA rules that restrain competition in the production of college football and men’s basketball.
A Better Way
To better promote the educational values and economic sustainability of intercollegiate athletics, our proposed Congressional intercollegiate athletics reform legislation would have three mandatory substantive requirements: (1) at least a four-year athletic scholarship with limited university termination rights; (2) medical care or health insurance for all sports-related injuries and scholarship extensions for injuries; and (3) elimination of the NCAA requirement that Division I universities operate at least 14 intercollegiate sports. It would create an independent intercollegiate athletics oversight commission authorized to propose non-binding rules regulating intercollegiate athletics originating from Congress, of its own accord, or with any intercollegiate athletics stakeholder.
The commission would establish procedures providing transparency and access to all intercollegiate athletics stakeholders, including student-athletes and members of the public, akin to the Administrative Procedure Act’s notice and comment requirements for informal rule-making. NCAA, athletic conference, or university conduct taken in compliance with the commission’s rules would receive antitrust immunity, provided that any intercollegiate athletics stakeholder allegedly harmed by one of these entities’ conduct in compliance with the subject rule(s) may seek independent arbitral review to ensure the rule(s) have a reasoned basis consistent with the public interest.
In our recent Oregon Law Review article, “A Regulatory Solution to Better Promote the Educational Values and Economic Sustainability of Intercollegiate Athletics,” we suggest that the commission consider adopting rules creating financial incentives and funding to increase graduation rates for Division I football and men’s basketball players such as requiring universities to offer a graduation bonus (at least to those at-risk academically) and scholarship aid to those who leave school in good academic standing and later seek to complete their college education.
We also suggest rules that would define a “full athletic scholarship” to include modest stipends beyond tuition, fees, books, supplies and room and board to allow poor athletes to have a lifestyle consistent with many of their non-athlete classmates, which would not compromise the “clear line of demarcation” between college and professional sports. In addition, financial self-sufficiency rules would give each Division I university the flexibility to determine which mix of sports to offer and invest in to achieve its individualized academic and intercollegiate athletics mission consistent with Title IX, should be considered.
This federal regulatory commission would have the necessary authority to establish rules that effectively prevent intercollegiate athletics from crossing the line between a commercial/ education model and a commercial/professional model for intercollegiate sports, enhance the academic integrity of intercollegiate athletics, promote more competitive balance in intercollegiate sports competition, and require university athletic departments to operate with fiscal responsibility. The “carrot” of antitrust immunity would provide the NCAA, athletic conferences, and their member institutions with a significant incentive to adopt and comply with its rules to achieve these objectives, which would be the product of a transparent process in which all stakeholders (including student-athletes) and members of the public would have a full opportunity to be heard by the independent commission.
Matthew Mitten is professor of law and director of the National Sports Law Institute at Marquette University. Stephen F. Ross is Lewis H. Vovakis Faculty Scholar, professor of law, and director of the Institute for Sports Law, Policy and Research at Pennsylvania State University.
The endless conversation about big-time football appears to be reaching a point of decision and change. While some would like to see big-time football disappear from the collegiate enterprise, this is not likely or desirable. We like our football, our constituents like our football, the nation tunes into our football, and for many universities, nothing is more visible or engaging about their operations than their football.
So we will have football. Success in the big-time has created a variety of conflicts between ideal models for amateur competition and real behavior that the current system finds increasingly difficult to manage. Much of the difficulty stems from the problem of money: too much of it. The money is not going away because we like our football, but we need a better model to manage the money and the game.
Part of the difficulty comes from trying to reconcile the notion of a college-based student activity with the exceptionally high profile and revenue of a previously unimaginably popular and commercial viable enterprise. Football at the top level of American’s institutions, exemplified by the five major athletic conferences, is a big business that depends for its success on the recruitment, retention, and development of superb athletes who must also function as students.
Among the many issues and controversies (academic, ethical, financial, and operation) that complicate our current operating arrangements, refined over many years, is the mismatch in the eyes of our constituents between the revenue scale of the football enterprise and the compensation provided football players (especially the celebrity players of the most successful teams). The current model limits compensation to direct payments for tuition and other college expenses and the indirect compensation by providing players with a high-cost platform for the development of their potential professional value and their possible future value from a professional contract.
Boxed in by our definition of amateur student-athlete, we have found it difficult to construct imaginative ways of reflecting market circumstances that affect the players. We sometimes think that without the strict amateur definition, the college football enterprise would collapse into an uninteresting minor league activity divorced from its academic sponsorship. This may well underestimate the potential creativity of the university, which has, in other contexts, developed mechanisms that could provide a useful model for the football dilemma.
Any model would need to (1) address the market issue of the value of football players within the five major conferences, (2) redefine the organic connection between college education and the student-athletes in the football enterprise, and (3) retain the connection between football and the rest of the college intercollegiate athletic enterprise.
Fortunately, universities have mechanisms for dealing with similar issues that might be adapted to meet the needs of the football enterprise. Think, for a minute, about the university medical center hospital. In many cases this is a separate not-for-profit enterprise, affiliated with the university. Its relationship with the parent university is contractual, and transactions that involve university and hospital are done not through university internal governance mechanisms but by contract that specifies how the hospital economy and the university economy will interact.
The agreements also specify how the academic activities of the university in medical education and research will engage the hospital and how the hospital activities related to patient care and other services will engage the university.
But the two enterprises are financially, legally and operationally separate organizations. They may well have interlocking boards of directors/trustees, but the labor and financial structure of the hospital is not the same nor is it constrained by the circumstances of the university, and the university’s labor and financial structure is not the same nor is it constrained by the circumstances of the hospital.
Adapting this notion to football, imagine that we spin off the football enterprise out of our university and athletic department into a private not-for-profit corporation affiliated with the university, let’s call it the University Football Corp, or UFC (and we could substitute the name of the University for each institution’s football not-for-profit). We license our name and trademarks to our UFC, we lease our football-related sports facilities to the UFC, we contract for various management services that the university may provide the UFC. The coach and other athletic personnel who operate the football activity will be employees of the not-for-profit UFC, and will not be constrained or managed by the university. The financial structure of the football enterprise will require that it be self-supporting. This should not be a problem for the football programs in the five major conferences since almost all of them do indeed make a profit, even if their universities’ intercollegiate sports programs over all lose money.
Students who perform as football players will be employed by the UFC not-for-profit to perform football duties, but requirements for a football player employee will include an age limit between 18 and 24, eligibility limits, enrollment in the university, maintenance of academic good standing, and progress toward a degree. This is not unusual for other student employees of the university.
The football employee will receive a two-part compensation. The first part will be equivalent to the full cost of attendance at the university, to match the requirement that the football player be a student. This amount will be paid by the UFC not-for-profit to the university that will award the financial aid as it would for any student. The second part will be variable and will depend on the market value of the football player to the UFC not-for-profit. This second amount can vary by season and the market for college-age football players, and might well follow norms and procedures established in the National Football League.
This model bears a close resemblance to what we do for medical students, for faculty physicians, and for other university people who have duties and obligations associated with an independent hospital affiliated with the university.
Where is the NCAA in this model? Like hospitals, the UFC not-for-profit will be regulated by an external agency, in this case the NCAA, that will establish the game rules as it does now, and specify the academic eligibility requirements for football players to be considered students, but the NCAA will not regulate payments to players. These will be managed by each institution’s UFC, but probably in accord with rules established by the five major conferences. The NCAA may well require these organizations to have transparent and independently audited financial records so that the public is clear about the way in which the athlete who is also a student is being paid and managed and clear about the financial arrangements between each UFC and its parent university.
Football players must be students in good standing and making appropriate progress toward a degree and can only have four years of eligibility, but they can test their value in the commercial sports marketplace at any time and choose to leave for professional work.
Once hired for professional play, of course, they will no longer be eligible to participate in the university-related not-for-profit UFC.
Athletes within the UFC can also contract for commercial endorsements and other sports-related (but not sports competition) activities and earn stipends or fees, but they must do so through the UFC not-for-profit so that the organization can identify conflicts of interest or commitment. Similarly, employees of the UFC (coaches, athletic directors, and others) can earn outside income related to sports but must report this income and receive approval for outside commitments from their institution’s UFC (again to prevent conflicts of interest and commitment). Alumni and other fans can contribute to the football enterprise, either to support players or to subsidize athletic facilities, but again, always through the institutional UFC to ensure transparency.
The UFC not-for-profit will create various funds and arrangements for player health and safety and compensation for injuries or other insurance-related functions. Whether it decides that it is better to hire the football players as employees or deal with their football participation as independent contractors will be an issue to be resolved as the market for football players indicates. Either solution would work, although of course the players are likely to emulate the professional marketplace and create a union to represent their interests. In some universities this would mirror the union representation of other student employees. Players can have agents, lawyers or other advisers to help them negotiate the contracts that govern their college-related football participation, although not the academic requirements that define them as students. The five major conferences may well establish salary caps and other financial constraints proved useful in the professional marketplace.
Because each UFC football enterprise is affiliated and ultimately controlled by its parent university, if indirectly through its board appointments, and because it is required to manage its enterprise through contracts with the university that are publicly available, the university can reap the benefits of big-time football without the constraints of trying to fit the football juggernaut into the university’s normal academic infrastructure. However, the university can require that the football UFC provide a significant payment to the university for the use of its name and other marks, a payment that will serve to subsidize the university athletic program for other sports as happens currently.
Finally, because this arrangement puts the academic scholarships for football players who must be students inside the university (but paid by the UFC not-for-profit), the current commitment to women’s sports driven by Title IX requirements to keep scholarships reasonably equivalent will remain.
Any university can create this model and participate, although they will need conference support, television revenue, and other characteristics of big-time programs to succeed. Such an opportunity may well help institutions decide that they want good football but not big-time football.
While endless details will need to be worked out, as were required to create the arrangements that govern independent not-for-profit hospitals affiliated with major research universities, the model offers an approach to the growing difficulty of managing big-time football within the current university context.
John Lombardi is president emeritus of the University of Florida and served most recently as president of the Louisiana State University System. He is the author of the forthcoming How Universities Work (Johns Hopkins University Press).
It is fashionable to talk of “bubbles” these days -- unsustainable, somewhat speculative ventures nearing the bursting point: the dot-com stock market bubble in 2000, the housing crisis bubble of a few years ago, and maybe a college tuition bubble today. Broadly defining “bubble,” maybe we are nearing one in major-college intercollegiate sports.
If you ask alumni of the University of Oxford, Moscow State University, the University of Tokyo, or even the nearby University of Toronto, to describe their most successful intercollegiate sports team, you likely will get blank stares. While amateur, intramural sports activities occur at campuses around the world, the U.S. is unique in having hugely popular, high-revenue collegiate teams. While Great Britain has both top and secondary-level football (soccer) teams, as is the case in American baseball, in the high-revenue American sports of football and basketball, there are overtly professional teams as well as ostensibly amateur college teams comprising so-called “student athletes.”
Yet this model is undergoing a good deal of strain:
The financial viability of major college sports importantly derives from “paying” the best “student-athletes” a small fraction of what they would earn in a competitive market; the cartel enforcing low payments to athletes, the National Collegiate Athletic Association, is facing the possibility of losing a potentially extremely costly lawsuit.
At many schools, an athletics arms race is forcing students to pay largely hidden fees to sustain costly sports programs, and there is evidence of a growing disconnect between the desires of older alumni and other sport supporters for good teams and the tastes and preferences of the students being increasingly asked to pay the bills.
To sustain noncompetitive labor market practices, the NCAA imposes draconian and Byzantine rules on member schools, but incentives are huge to break those rules, leading to repeated scandals creating an aura of corruption hurting not only collegiate sports but higher education generally.
A moral crisis is increasingly apparent: relatively innocent young persons (talented athletes) have income many would say is rightly theirs taken from them by their mentors (coaches) for their own personal use, leading to coaches often earning as much as 10 times as much as the university presidents who run the educational aspects of the institution.
Graduation rates of athletes, especially members of minority groups, in the top revenue-producing sports are scandalously low, even below the deplorably low rates of the general student population. Student status for some athletes is increasingly more nominal than real.
In a competitive labor market, workers usually earn on average roughly what they add to their firm’s revenues. Professional football, baseball and basketball players, for example, sometimes receive salaries reaching several million dollars annually. Top-flight college football and basketball teams generate revenues rivaling those of professional teams, but the workers receive scholarships worth at most $50,000 annually, and that’s only at the most expensive institutions. Very good football and basketball players are very lucrative at top sports schools, so coaches able to recruit them receive a large portion of the millions of dollars that ordinarily would go to the athletes. It is not too far-fetched to say that middle-aged adults are exploiting the children under their guidance.
The NCAA enforces this practice. The NCAA forces players to sign a contract in effect abrogating their labor bargaining rights. Even income earned from, say, t-shirts featuring the name and number of the athlete revert to the colleges. A lawsuit challenging this practice filed by the former UCLA basketball player Ed O’Bannon is moving forward, with very high-powered lawyers representing O’Bannon and other athletes.
If the lawsuit is certified as a class action as early as next month, the stakes become huge, and in one plausible scenario the NCAA could be forced into bankruptcy. More likely would be an out-of-court settlement costing the NCAA and maybe major conferences many millions of dollars. The long-term impact would likely move some of the income received by coaches to players, perhaps also crowding out non-revenue sports funded from football or basketball profits, etc.
Even the NCAA’s own data suggest that only 22 major programs break even or make a profit. In the second-tier athletic conferences, such as the 13-university Mid-American Conference (MAC), schools typically need $10-20 million annually to balance their athletic budget, increasingly met by student fees that can approach $1,000 a year. A survey of students at MAC member colleges directed by David Ridpath suggests that most students are unaware of the extent of the fees, and unhappy when informed of them, given their general low level of interest in collegiate sports and the increasing financial strains of attending college.
The spectacularly tawdry sex scandal at Penn State that led to the imprisonment of the former coach Jerry Sandusky is the worst example of immorality run amok, but dozens of colleges have been found guilty of violating the NCAA’s rules -- giving money to athletes, making illegal recruiting visits, etc. It is not uncommon to read “Ohio State admits to rules violations,” or “Miami faces NCAA sanctions.”
Increasingly, the public perception of universities as intellectual oases, centers of learning and moral probity, is being tarnished by intercollegiate sports.
What to do? Why haven’t university presidents, who nominally run the NCAA, done anything? First, they are afraid of losing their jobs if they anger their fanatic fans (and sometimes their boards). Second, they love the funds from television contracts and other sports commercialization of their schools -- money may trump principle. I know several ex-university presidents strongly promoting reform, but few actively serving ones.
Still, as costs rise faster than revenues, as scandals persist and grow ever more spectacular, and as multimillion-dollar coaches become ever more arrogant and plutocratic, change will likely come, probably ultimately for the good of college sports, higher education, and the nation.
Richard Vedder directs the Center for College Affordability and Productivity, teaches economics at Ohio University, and is an adjunct scholar at the American Enterprise Institute.