Tag: Paying College Athletes

The Hypocrisy of College Sports Leaders and Pay for Play: Why Minor Leagues Aren’t a Substitute

On By Frank the TankIn Big East, Big Ten, College Basketball, College Football, Sports741 Comments

Let me upfront: I’m an unabashed free market capitalist. I’ve never been bothered by TV contracts, conference realignment, ticket prices, rising salaries for coaches and players, sponsorships and the multitude of other financial issues in pro and college sports that fans generally complain about at face value (but then turn around and feed that money monster by continuing to watch games). At the same time, I have long given up the delusional notion that college athletes (at least in football and basketball) are somehow still pure amateurs. We crossed the proverbial bridge of top college conferences being semipro leagues a loooooong time ago. Finally, I’ve generally supported how Big Ten commissioner Jim Delany has led the conference in exploiting new revenue opportunities and expansion (as long as we can forget that whole “Legends” and “Leaders” debacle).

So, I have no issue at all with money flowing through college sports and institutions profiting from high profile teams. Let’s stop pretending that it’s (a) not already happening at a rate on par with the pro leagues and (b) inherently a bad thing. What I have a massive problem with, though, is that this money isn’t flowing at all to the people that are generating all of this revenue. I’m a firm believer that people should be compensated in accordance with their free market value*, and in today’s world, college football and basketball players at the top level aren’t getting paid that way.

(* Note that I don’t look at over-compensation or under-compensation in absolute dollars in the way that much of the populist public likes to do. LeBron James, for instance, is a clear example of someone that is underpaid. If there weren’t the artificial restraints of the NBA salary cap and collective bargaining agreement, he would be making much more than his current $19.07 million salary. That doesn’t even take into account the fact that he’s the rare athlete that can single-handedly increase the value of a franchise by hundreds of millions of dollars and sellout all arenas that he plays in. Even though LeBron’s salary for a single game (much less an entire season) is more than what 99% of American households earn, he is still underpaid in comparison to what his true value is in the marketplace. In contrast, there are minimum wage earners that are making more than what the free market would dictate if that artificial floor weren’t in place, so they would arguably be overpaid.)

With the “pay for play” issue not going away in college athletics, Jim Delany stated that he would like to see football and basketball players be able to sign with leagues directly out of high school in the same way that baseball players do. From ESPN.com:

“Maybe in football and basketball, it would work better if more kids had a chance to go directly into the professional ranks,” Delany said. “If they’re not comfortable and want to monetize, let the minor leagues flourish. Train at IMG, get agents to invest in your body, get agents to invest in your likeness and establish it on your own. But don’t come here and say, ‘We want to be paid $25,000 or $50,000.’ Go to the D-League and get it, go to the NBA and get it, go to the NFL and get it. Don’t ask us what we’ve been doing.”

What Delany states isn’t necessarily wrong conceptually, but there are tons of issues from a practical standpoint and he’s ultimately being disingenuous and further exposing much of the hypocrisy of college sports:

(1) The Interests of the NFL and NBA Ultimately Rule – The power brokers in college sports can complain all that they want, but the NFL and NBA need to be convinced that it’s better for them to pay for and build minor league systems on the scale of Major League Baseball. I’ve seen plenty of arguments that the NFL and NBA could expand create such systems, yet it’s hard to see why it’s better than the current college model from their perspective. Unlike baseball, the NFL and especially NBA have long had a greater need for their athletes to come into the league as ready-made stars and that’s only exacerbated in this social media-driven world. Such star power simply isn’t incubated well in minor league settings at all (as seen in baseball and hockey). College football and basketball provide vehicles where sports fans are introduced to top players on a first name basis and can step in immediately at the next level.

Plus, lest we forget, the NBA tried the “direct from high school” route not too long ago and the results were pretty abysmal. Too many high school players were jumping into the draft that weren’t ready, which meant that (a) lottery slots that used to go to well-known college stars were being taken up by unknown (at least to the general public) speculative draft picks based on raw athleticism with little regard to skills and (b) on the flip side, other high school players that would have been aided by some college experience got drafted lower than expected or not at all and ruined their NCAA eligibility. The NBA wants nothing to do with going back to that model and, in fact, the owners would have pushed for a 2 years out of high school age minimum requirement (instead of the current 1-year standard) in the last collective bargaining agreement negotiations if there weren’t so many other fundamental salary and revenue-sharing issues to deal with. This gets to the next point…

(2) Players Need to be Protected From Themselves – On the one hand, it would be easy for a free marketer like me to try to apply real world concepts to the realm of sports to state that players and team general managers take risks with respect to the draft and then they need to live with the consequences. However, on the other other hand, that real world free market application fails because a draft is specifically not the free market. In fact, it is probably the most directly anticompetitive behavior that professional sports league participate in that they’re only able to get away with due to antitrust exemptions. American high school graduates aren’t free to negotiate directly with any team that they want to play for. Instead, a draft provides a finite number of spots in a predetermined order, which is the antithesis of a free market.

This means a “college or pro” choice isn’t exactly that simple. What Delany is suggesting is that a top high school prospect should be put into an “all or nothing” decision when he’s 17 or 18-years old: either he strikes it big in the pros or he completely loses out on a college scholarship, with very little in between. There are very few professions where this is the case. A software programming prodigy can try going to a startup firm out of high school, but if that startup fails, he or she can still go get a computer science degree or work at another company. That’s not how it works in football and basketball where you have one shot if you’re lucky. How many of you here would have had the emotional and fiscal maturity to make that type of decision at that age? Furthermore, how many of you would be able to make a mature decision if you were born into an impoverished environment with no access to a college education otherwise (like a disproportionate number of top football and basketball players)? What if you had family members that were leaning on you for financial support? What if you hired an agent that invariably overinflates your draft value (which played into your decision to enter to the draft)? When I see comments from fans to the effect, “These are decisions that these guys need to live with and they can do something other than sports if they don’t get drafted,” I believe they’re failing to see the context in which such decisions are made along with, in most cases, making that judgment from comparatively more comfortable catbird seats (whether it’s being older or living in a middle or upper class environment where the fallout from making a mistake in life is relatively mild by comparison).

The upshot (and once again, we saw this with the period of high school players going directly to the NBA) is that there are a whole lot more people that submit themselves to the draft prematurely (with devastating consequences) than there are guys that are truly ready. It would be one thing if only the Lebron-type talents would enter into the draft (in which case, allowing high school players into the draft would work), but we’ve seen firsthand that this simply doesn’t happen in the real world*. There are too many high school prospects that get bad information about their draft stock or are pressured into making money immediately to their detriment. That leads to the next issue…

(* Similarly, if NBA and NFL general managers would only draft LeBron-type talents, then having high school players going directly to the pros would work efficiently. As noted earlier, though, the problem is that those GMs then have to rely their draft analysis almost solely on raw athleticism, which leads to a much higher bust rate and a poorer quality product to watch on the field or court for fans.)

(3) The NCAA Needs to Provide a Safety Net for Players – If the NCAA sincerely believes that high school players need to be able to go directly to the draft, then the organization can’t turn around and punish such players (AKA taking away their college eligibility) for utilizing all of the tools and resources at their disposal to make a fully informed decision that will impact them for the rest of their lives. Jim Delany mentions players hiring agents and training firms like IMG, which is all well and good, but then the NCAA will take away their eligibility once they receive any agent benefits. A solid and reputable agent (not a guy off the street or, even worse, an emotionally invested family member) can probably give a player the most realistic analysis of anyone about draft position and long-term earning potential, yet the NCAA (via its rules regarding agents) is forcing athletes to make an all-or-nothing decision on eligibility before he can even receive that analysis. That’s not exactly equitable, particularly when the athletes are the ones in a much more vulnerable position compared to the NCAA and its members.

As a result, colleges ought to reevaluate its eligibility rules completely if it’s being sincere. Players ought to be able to hire agents freely, submit to drafts and play again in college if they fail to get drafted (or even choose to go to college if they get drafted in a lower position than what they wanted). Colleges turning their backs on these players would be wrong even if there weren’t billions of dollars at stake, which ties to the next point…

(4) Delany’s Money Flow is Backwards – Let’s look at the budgets of two sports teams:

BUDGET A: $124,419,412

BUDGET B: $500,000

If you were to plop down those figures in front of anyone that has the basic skill of knowing which number is higher, one would logically assume that the team with Budget A has a lot more money to pay players than the Budget B team. Well, Budget A represents the expenses of the Ohio State athletic department in 2012. Meanwhile, Budget B represents what used to be the annual operating cost of each individual team in the defunct NFL Europe, which was the minor league system that the NFL had run until 2007. A major difference on top of this disparity is that Ohio State brought in $142,043,057 in revenue (a profit of over $17.6 million). Meanwhile, NFL Europe was shut down since it was still losing money at the bare bones cost of $500,000 per team (which translated into a grand total of $3 million in costs for the entire 6-team league in 2007). To put this into context, the NFL minimum salary under the current collective bargaining agreement is $405,000. The last 8 bench players on the Bears’ depth chart make more than what was spent on the entire NFL Europe operation… and the NFL still lost money on it!

Call me crazy, but when Jim Delany states that the players should be going to minor leagues to get paid, he seems to have the money flow backwards. When the NFL itself isn’t willing to spend to fund an entire minor league system that costs less than the salaries of 8 bench players making the league minimum, you can see pretty clearly that the money isn’t there. The NBA D-League is run on a similarly shoestring budget. In contrast, the colleges are the ones seeing a massive revenue flow off of these young players, so it’s disingenuous of university leaders and conference commissioners to attempt to make the claim that the minors are where they ought to receive salaries. Texas A&M itself stated that it garnered $37 million worth of media exposure in connection with Johnny Manziel’s Heisman campaign last year, so one can imagine the financial impact of a national championship (or even better, the Heisman Trophy/National Championship combo that Cam Newton delivered to Auburn in 2010 – see Charles Barkley’s comments about how $200,000 that may or may not have been paid to Cam by boosters was a bargain) for a school.

So, sure, if colleges are willing to take reduced or no revenue for football and basketball in the same way that they are for baseball (where even the most elite programs make a fraction of their football and basketball counterparts), then I could see this argument from Delany sticking. However, let’s not be naive to think that there is a vastly different playing field for football and basketball in reality.

Now, I realize that there are Title IX, employment and other issues that come into play in the event that colleges start paying athletes. It’s not as easy to institute as most supporters of the concept would like it to be. However, that doesn’t mean that we should allow colleges (even if we love them as our alma maters) to get away with such blatant hypocrisy toward money. It’s time to ditch the faux amateurism and either go all in on college sports being a massive money-making enterprise or take a Division III approach.  If that means paying every athlete (from members of the football team down to the women’s water polo team) in order to comply with Title IX, then that’s a heck of a lot better than not paying anyone. Once again, I have no issue with the money flowing through college sports at all. The only thing that I want to see is that it flows down to the people that we’re actually cheering for as fans.

(Image from USA Today)

Power Conference Breakaway: Can It Benefit Student-Athletes?

On By Frank the TankIn Big Ten, College Basketball, College Football, Sports871 Comments

(Note: as conference realignment has slowed down, I’m going to shift back toward looking at some of the broader issues in the business of college sports, such as the impact of television rights, tensions between the power conferences and the NCAA, and the new playoff system. I’ll also likely get into some related pro sports angles with how the NFL, NBA, NHL and Major League Baseball are dealing with domestic franchises along with looking internationally for new markets and fans. Obviously, if conference realignment heats up again, I’ll cover it thoroughly here. For those that still need a conference realignment fix, I had a Big Ten-focused realignment Q&A last week with Off Tackle Empire and will have a different Big 12/Texas-focused one with Burnt Orange Nation in the near future.)

The notion of the power conferences splitting away from the non-power leagues to form either a new association separate from the NCAA or a different division (hereinafter called the “Super FBS”) has been percolating over the past few years. For various reasons, the talk has been intensifying lately with the settling of the conference realignment landscape and increased calls for greater compensation for student athletes beyond their respective scholarships (with the Ed O’Bannon lawsuit against the NCAA as a backdrop)*. There is already a de facto split between the 5 power FBS conferences (Big Ten, Big 12, Pac-12, SEC and ACC) and the rest of Division I schools in terms of TV and postseason football revenue, so it seems natural to many observers that a split along those lines would make sense.

(* In the interest of full disclosure, I’m personally a strong supporter of paying college athletes. While the cost of a college scholarship is substantial, the power conference athletic departments are still receiving outsized revenue gains off of the backs of football and men’s basketball players and they ought to be compensated accordingly. Now, I understand why colleges want to fight those types of payments to the death and there are major Title IX implications, as it’s likely that payments would have to be made across the board to all non-revenue sport athletes on top of the revenue generators. It’s easy to point to the quarterback whose jersey is getting sold nationwide and say that it isn’t fair that he hasn’t been compensated fully, yet should a water polo player at the same school be receiving the same type of payment? There’s no easy answer to this. From my vantage point, the inequity of the quarterback not getting fully compensated for the revenue that he’s bringing in for a school is much greater than the thought that non-revenue athletes would have to get paid, too, but I know others may disagree.)

Warren K. Zola had an excellent commentary in the Chronicle of Higher Education that outlined several potential proposals that a Super FBS division could implement that would serve both the commercial reality of college sports and improving student-athlete welfare:

  • Have athletics scholarships cover the full cost of attendance and not be capped at tuition and fees, room and board, and required books. A stipend, in the neighborhood of $3,000 per student, according to a recent study, would help reduce the growing underground compensation system for elite athletes.

  • Embrace the Olympic amateur model by lifting the restriction on college athletes’ commercial opportunities. This shift would offer any student the opportunity to secure endorsement deals or receive payment for the use of his or her name and image.

  • Create an education fund that provides continuing financial assistance to college athletes, allowing them to complete their degrees even after their athletics eligibility, and corresponding scholarship, has expired.

  • Provide full health insurance for all athletes and cover all deductibles for injuries related to participation in an intercollegiate sport. Offer full disability insurance to elite athletes, protecting them against catastrophic injuries that could derail their professional careers.

  • Allow athletes to hire agents to protect their rights, including providing assistance in evaluating scholarship offers from institutions, negotiating commercial opportunities, and navigating the transition from college to professional sports.

I believe that all of these suggestions are on the mark. The reference to the “underground compensation system” is astute and one of the largest issues that I have with the current NCAA model of anachronistic recruiting regulations on the books with haphazard and inconsistent enforcement of those terrible rules on top of them. NCAA recruiting rules are sort of like campaign finance regulations in Washington – everyone publicly votes for them on one day and then privately tries to find loopholes around them the next day. I’m much more of a full disclosure-type of person as opposed to attempting to put the brakes on market-based transactions, where I believe colleges and universities would have better control over the “underground” market if they acknowledge that it exists and provide a viable alternative that allows for athletes to take advantage of their talent to get stipends directly from schools and commercial endorsements.

The last bullet about allowing athletes to hire agents is an interesting one. There have been many prominent power brokers over the years, such as Worldwide Wes for basketball*, that have effectively taken that role, so I believe that there’s some benefit to formalizing that type of relationship. The NCAA’s agent contact rules are just as backwards with spotty enforcement as the organizations recruiting rules, so having a reactionary stance of zero tolerance simply isn’t realistic in today’s world. It’s better to get those relationships out in the open and snuff out as much under-the-table action as possible.

(* If you haven’t read it already, this GQ piece on Worldwide Wes from a few years ago is one of the most fascinating profiles that you’ll ever see of a behind-the-scenes sports figure.)

So, I see a lot of potential benefits to separating the power conferences away from the non-power conferences simply from the student-athlete perspective. Of course, the increased control and, in turn, revenue that the power conferences would see from a breakaway would be the real reason why they’d want to do it. That isn’t necessarily a bad thing in and of itself, but it also makes it difficult to draw up clear criteria as to why a school or conference would be in “regular” FBS while another one is in Super FBS. For instance, would it really benefit the 5 power conferences very much if, say, the AAC and Mountain West Conference are willing to pay student stipends, thereby qualifying for Super FBS? It would seem that the power conferences would only want to split off into a new division if they could ensure that they’re the only ones in it or else it would defeat the purpose of that split*.

(* Speaking of power conference revenue, one byproduct of the Ed O’Bannon case is that the specific terms and payment schedule of the Pac-12’s new contract with ESPN and Fox have been disclosed. Nothing is too surprising, although it’s interesting to see some of the items that we have speculated on confirmed, such as the rights fees escalating approximately 5% per year. The term sheet is here.)

Now, there’s the more nuclear option of the 5 power conferences simply breaking away completely from the NCAA that would serve as a clean revenue-based split, although I find that to be an option that guys such as Jim Delany and Mike Slive would prefer to keep in their back pockets than one that would ever be implemented. While I generally believe that many non-power conference fans overstate their influence with politicians (i.e. mistakenly thinking that they’ll step in to help them with the playoff system or taxing power school revenue), a full-scale break-off would be one of those events that could definitely spur an untenable political backlash. It might be a move that the power conferences would secretly like in the back of their respective heads, but there are too many political landmines (particularly at the state-by-state level) to realistically engage in that scenario.

The upshot is that nothing is really easy or clear here. Power conferences definitely want more autonomy, but the process of making sure that they’re truly their own group without perceived “interlopers” might be more difficult to achieve than any changes about compensating student-athletes. All of Zola’s suggestions could still be implemented in theory without creating a Super FBS Division – it’s just that the power schools and maybe a couple of the non-power conferences are probably the only ones that could afford to put them into place.

(Follow Frank the Tank’s Slant on Twitter @frankthetank111 and Facebook)

(Image from Real Clear Sports)