I've long been fascinated with college sports.
I grew up down south where college football is a religion.
I saw up close the power of Hoya basketball
when I went to Georgetown.
And now I've got a son set to play college lacrosse,
and that's giving me a whole new window into that world.
And as with everything, I see a business story.
Right now a first year lacrosse player
at a division three school like my son
and Trevor Lawrence,
Clemson's championship winning quarterback
and widely touted NFL star,
well, they have something in common.
Neither of them are allowed to be paid a dime
while they play sports at the college level.
And that may be about to change.
I think 2021 will be a pivotal year
for college sports for a lot of reasons.
We've been talking about
the potential tipping point in college sports.
This may be the time.
With the pandemic,
with the racial justice issues,
with the activity at the federal and state level,
with the activity at the Supreme Court,
that we say, this is no longer a sustainable model.
Schools are conspiring with competitors,
agreeing with competitors,
to pay no salaries to the workers
who are making the schools billions of dollars
on the theory that consumers want the schools
to pay their workers nothing.
After years of asking the question,
will paying college athletes destroy college athletics?
It looks like finally in 2021,
that question will be answered.
The tipping point is here.
College sports was built on the idea of amateurism.
More than a hundred years ago,
after the death of 18 students and injuries to 150 others,
the NCAA was formed as a nonprofit.
Its mission: to protect the lives of football players
by adding new rules to the sport.
The biggest being the advent of the forward pass.
One of the core tenets:
these were not professional athletes.
Amateurism is defined in the NCAA's 465 page manual
as being motivated primarily by education
and by the physical, mental, and social benefits
to be derived,
protected from exploitation by professional
and commercial enterprises.
In lieu of paying the players,
schools provide athletes with scholarships.
But today, between the college football championships-
Touchdown.
DeVonta Smith cannot be stopped.
And March Madness-
How about that?
The NCAA is a money-making machine,
with nearly $19 billion in revenue in 2019 alone.
And the students, they still don't get paid.
When and how did it get so out of control?
Like what was there a catalytic moment
or was this just a slow bleed as it were?
The explosion in revenues came from another
Supreme Court antitrust case called Board of Regents 37 ago.
Jeffrey Kessler is the co- lead counsel for the basketball
and football players who are suing the NCAA
for greater economic rights.
What happened in Board of Regents
is the Supreme Court ruled that the NCAA could not
restrict the broadcasts of college football
and had to allow the conferences
and the schools to compete with each other.
That led to an explosion in television revenues,
both in college football and then derivatively
in college basketball.
Rather than two networks broadcasting
a total of 14 college football games each week,
more than 15 networks carry nearly every college
football game on TV.
More games led to more ad revenue and events like-
LSU sits on the throne of college football.
The college football championship
brings in close to half a billion dollars
in revenue every year.
That revenue ends up influencing
how college sports is organized.
There was a great kind of realignment,
if you will, of a number of the major conferences.
This is Amy Privette Perko,
executive director of the Knight Commission,
an independent group that spearheads reform
in college athletics.
And that was really done to increase the footprint
of those conferences for the football TV market.
And what may work for the football TV market
may not be the best solution
for all the other sport programs.
While there are more
than 350 division one basketball schools,
they're only 130 in football,
also known as the football bowl subdivision, or FBS.
That's led to a great imbalance
in schools' athletic budgets.
FBS college football is the most powerful sport
in college sports from the standpoint of the finances
and shaping the entire landscape.
Because of the money in football,
you have athletic programs in division one
whose budgets are $5 million a year,
and they're competing in the same division in basketball
with universities that have athletic department budgets
of more than $200 million a year.
College football already rakes in money
hand over fist,
but the new playoff system is about to make it
more profitable than ever.
According to CNN, the 64 schools that compete
for a spot in that final game
brought in a combined $2.8 billion last season.
And with billions of dollars now coming
into NCAA programs, that money needs to be spent.
The phrase they use in economics
is rent seeking behavior.
This is my colleague, Joe Nocera,
a Bloomberg opinion writer and author,
who's been delving into the inequalities
of college sports for more than a decade.
That means money has to go somewhere.
And with division one basketball
and football being the lion's share
of where the revenue comes from,
the money goes straight back into those programs.
Where's it going to go?
It goes to the administrators.
It goes to the conference commissioners.
It goes to the coaches.
It goes to the assistant coaches.
It goes to the weight coaches.
It goes to these fancy buildings.
It goes to a new football stadium.
Nick Saban makes north of
five and a half million dollars a year.
Very simply, is he worth it to the University of Alabama?
Nick Saban's the best financial investment
this University has ever made.
About 45 of the 50 states where either
the basketball coach or the football coach
is the highest paid state employee.
However, there is one place
that money does not go.
They all say, well,
we can't afford to pay the players.
Of course you can afford to pay the players.
You've just chosen not to.
For years,
the NCAA has made two main arguments.
The first-
Well, they are paid.
We're here to educate them and help them grow as people,
but we're not here to help them
in terms of their financial gain.
The second being that paying players
would take away from college sports quote,
spirit of amateurism,
and some people do agree with those sentiments,
even some of the players.
I think on the financial side,
what the influx of, you know,
monetary incentives has done
is it's just made that process a little bit harder, right?
This is Kendall Spencer,
former track star at the University of New Mexico,
Olympic hopeful and the first student to ever sit
on the NCAA division one board.
I reflect on just ideally what I would want
a student athlete to be thinking about
when they were choosing their institution was
you know, where can I go
to not only get this great athletic experience,
and you know, maybe I'm trying to make an Olympic team
or maybe I'm trying to make the professional leagues,
but beyond that, where can I go
where I get what I need academically?
So that no matter what happens, I'm going to be successful.
Kendall and others argue
that this is actually what the current model accomplishes
for the vast, vast majority of athletes.
They say that reforms shouldn't unduly punish
those true student athletes in the process
of reforming a system that's been undermined
by two big money sports.
So for some, a strong education really is the
best compensation they can get for playing college sports.
But the money is hard to ignore,
and the pandemic made it even harder.
Tonight, the NCAA president says
there will be no fall championships
except for the college football playoff.
The money was so important for the universities.
They were going to play football, come hell or high water.
It didn't really matter
if the athletes got COVID.
They were going to play.
They'd always said, you know,
they're students first and you know, athletes second.
And they're there for an education.
So here you had a situation where most of the rest
of the university, in many cases, was not even on campus.
We reached out to the NCAA
about the health risks posed to players,
but they didn't respond.
And critics say that the canceling of one sport
but the continuation of another solely
because of financial reasons
makes the NCAAs amateurism argument moot.
The mythology that D one basketball
and FBS football was just like
another extracurricular activity,
as if it were, you know, rowing, you know,
or this or the newspaper or the drama club,
when in fact, these have become gigantic businesses
that are completely independent
of the educational mission of these schools.
And in college sports,
there was not only the argument that if we pay the players,
it will destroy the sport.
This is Gabe Feldman.
He's a professor of Sports Law at Tulane University
and overall expert on all things NCAA.
There was this added layer
that if we pay the players,
that will mean that much of the benefit will flow
to a relatively small number of players,
and the other sports will be hurt.
So we'll end up with college football
and maybe some men's and women's basketball,
but rowing and swimming and diving and golf and lacrosse,
that'll all collapse
because schools are struggling to make money.
So if the pandemic laid bare the importance
of college football revenue,
and the NCAA stood firm on not paying players,
could there be a middle ground?
I think there were plenty
of people who bought that argument,
accepted that we will do damage to college sports as a whole
if we provide compensation
for football and basketball players.
And so name, image, and likeness rights
were seen as I think, a compromise,
as a workable solution that would provide benefits
for college athletes.
Compensation for name, image, and likeness,
or NIL, doesn't involve colleges paying players
but does allow athletes to benefit
from their accomplishments
as the schools, conferences, TV networks
and others already are.
Help me understand how NIL fits
into sort of the larger argument.
NIL, for the benefit of those watching,
are the rights to exploit
an athlete's name, image, and likeness,
and the payment for those rights
doesn't really come from the schools.
And that's one of the reasons these schools should
not be upset about NIL.
It doesn't come out of their pocket.
It's like, it's like, you're making the players happy,
and you don't have to pay anything.
No institutional involvement,
no direct or even indirect money from the colleges.
Originally the NIL debate
focused around avatars in EA Sports video games.
In EA NCAA Basketball 09,
an unnamed UCLA player looked exactly like
and played the same position as Ed O'Bannon,
a former UCLA basketball player.
This led to O'Bannon v. NCAA,
an antitrust class action lawsuit
filed against the NCAA that challenged their use
of its athletes likeness for commercial purposes.
I don't think we can overlook the impact
that Ed O'Bannon has had on this.
When he filed his lawsuit to try to get compensation
for former and current college athletes,
he lost the case, at least as it pertained to NIL,
but I think he showed a path forward.
And I think he helped start to convince people
that it's possible to both save and protect college sports
and maybe even strengthen college sports,
while also providing more rights for college athletes.
While the Supreme Court ultimately
declined to hear the O'Bannon case,
the focus for NIL has now shifted away
from video games and towards social media.
It's hard to ignore that this is no longer just
about the traditional endorsement.
This is no longer just about the star athlete
getting the deal with the apparel company.
And the opportunities that has provided
for young people in this innovation economy.
When an athlete comes on campus,
and they have more than a million followers,
why can't they then monetize their popularity?
If you are a musician,
you could record something,
and you can get, Hey, everyone else at the school
is allowed to take advantage
if you have those opportunities
except the athletes who want to play NCAA sports.
Katie Ledecky, probably the most famous swimmer
in the country right now,
actually had to resign from competing any longer
on the Stanford swimming team
because the loss of her potential revenues
got to a point where, in consultation with her family,
she just said, she couldn't give it up any longer.
There should be some requirements for transparency,
and institutions should not be involved
in setting up these deals.
And there should be no use of the institutional mark.
Because again, this is about allowing the individuals
as athletes to be able to benefit from their name,
image, and likeness, not that of the university.
One thing NIL and directly paying the players
have in common is the NCAA has fought against both
for decades.
So why do you think they resisted so much?
Because that's the system?
They resisted because that's the way
it's always been.
They do worry about the disparity between
the quarterback getting a car ad
and the center getting nothing.
The reality is,
and that's what our antitrust laws establish,
is competition leads generally to more fan interest,
more revenues, and a fair allocation of the revenues
to the people who actually generate them.
And over the past few years,
the fight for NIL has gotten messy.
With no action by the NCAA and no national standard,
individual states chose to step in.
In September, 2019,
California initiated the Fair Pay to Play Act.
That allowed athletes to be paid
for their name, image and likeness.
Other states like Florida followed suit.
And on top of all that,
the Supreme Court has heard oral arguments
in the pivotal NCAA versus Alston case,
with judges making arguments
in both directions and some staying above the fray.
It's a tough case for me.
This is not an ordinary product.
So I worry a lot about judges getting into the business
of deciding how amateur sport should be run.
One of the things that it's hard for
I think an outsider to totally comprehend is
you've got California, you've got Florida,
you've got the Supreme Court, you've got the NCAA.
When you cut through it,
where does this really kind of come down to?
Like who ultimately is going to be sort
of the decider here?
There is a legitimate reason why you want one set
of NIL rules, right?
Because otherwise you really get
into the thing where 50 states have 50 different rules.
And it's a, it's a mess.
We are dealing with a situation I've compared
to the NCAA is now juggling fiery knives.
And the knives that are up in the air
are an amateurism antitrust decision.
There's activity at the state level, the federal level,
the Supreme Court level.
There are lawsuits still being filed.
There's the NIL legislation.
There's the public pressure.
And there's frankly not even agreement
within the NCAA about what the right path forward is.
You have recruiting advantages, you know,
based on what your NIL is in California versus
what your NIL is in Maryland.
The most logical place for this to be sorted out
is Congress.
I want to save college sports,
but I don't necessarily think
that kids shouldn't get any share of the money that is
increasingly making people in this industry millionaires.
That's Senator Chris Murphy from Connecticut,
a diehard UCONN fan, and one of the most outspoken members
of Congress when it comes to NIL.
And that's why I've introduced
legislation that would create a federal right to make money
off of your name, image, and likeness.
And that's why I'm supportive of broader efforts that would,
you know, create some federal expectations
around broader revenue sharing with student athletes.
Senator Murphy isn't the only
member of Congress taking on NIL.
His co-sponsor in the House is Representative
Lori Trahan of Massachusetts,
who herself is a former D one volleyball player
at Georgetown.
Go Hoyas.
Another bill in Congress,
the College Athletes Bill of Rights,
was introduced by Cory Booker and Richard Blumenthal,
both Democrats from New Jersey and Connecticut,
respectively.
It seeks, quote, fair and equitable compensation
for college athletes.
We reached out to the NCAA for comment,
and they directed us to a statement reading:
the board of directors remains fully committed
to providing student athletes
with appropriate opportunities within the collegiate model
by modernizing division one rules related to name, image
and likeness and transfer eligibility
at the first practical opportunity.
If we're going to make a good case for Congress,
they need to understand that all the universities
within the NCAA want to see the same outcome
because timing is critical here
because we're frankly at a point where the first state law
will go into effect in July,
and we're leading toward chaos.
That's not going to be good
for athletes or the universities.
And so what do you worry about
kind of getting in the way?
What are the obstacles here to getting this done?
This industry is incredibly powerful.
I think that, you know,
the power five schools are not going to be interested
in changing the status quo.
And I think that's largely because the power now exists
in individual school athletic programs
and individual conferences, not in the NCAA.
And he's right.
The power in decision making
for allocating revenue has shifted from the NCAA
to what's called the power five,
or the five most prestigious athletic conferences
in America.
And one of the things that a lot of sports fans,
college sports fans, for example,
don't really understand is that the NCAA does not control
the college football playoff.
And the $500 million a year generated by the college
football playoff is handled independently of the NCAA.
The FBS institutions receive that funding.
This fits into sort of some even bigger
questions it feels like around how colleges operate,
how they spend their money.
It's long overdue to have a conversation
about recalibrating revenue and costs in college sports.
Also recalibrating the governance structure
in division one sports,
and the Knight Commission has been looking
into these issues for a very long time
and continues to do so.
There's significant opportunities here
because the growth in the media revenues
is not going to go away.
We've seen over time,
it continues to increase in college sports.
Some of the challenges really are a result of its success
and media revenues,
but we haven't met the moment
of the challenges by changing the system,
by changing the incentives,
to really ensure that those revenues
are going to the right places
and going to support a healthy system across all sports,
not just football and basketball.
While much has made of how much money
pours into and swirls around
big time college football and basketball,
Senator Murphy and other proponents of NIL reform
say the biggest beneficiaries may not be the star athletes,
like Trevor Lawrence and Zion Williamson,
who would simply be getting a down payment
on a future fortune.
The real winners may be athletes
at top tier college programs,
like the fabled UCONN Women's Basketball team,
some of who may ultimately eke out a living playing
professional basketball,
but whose best chance of being compensated
for their talents may come in college.
Managing a vaccine rollout
and an ensuing economic recovery
will likely push Senator Murphy's bill
and other legislation until later in the year.
In the meantime, we'll get a look at how athletes
may or may not benefit from state legislation.
The NCAA may opt to take this issue up again,
and the Supreme Court will likely issue its ruling
by the summer.
2021 may bring some semblance of change,
or it could bring an entirely new business model
to college sports,
one that actually includes the athletes.
Thanks so much for watching.
Would love to hear what you think
about this and other episodes about the business of sports.
I'll be in the comment section.
Can't wait to hear what you think.