The NCAA Settlement Brings Lots Of Questions And Few Answers
The NCAA finally secured its long-awaited settlement that will change college sports forever. It will cost the organization an eye-watering $2.8 billion and allow colleges and universities to directly pay student athletes going forward. But it's not enough to solve the underlying structural problems in college sports and may instead make them worse.
Take the direct payments to student athletes. The agreement includes a cap, currently $20.5 million and expected to rise to $32.9 million by the 2034-35 school year. As a practical matter, that cap is really table stakes for any institution hoping to be competitive in D1 revenue sports like football or basketball. No one will be able to put together a competitive team with less, and it will tilt the playing field towards bigger, richer schools.
Compounding matters, the NIL payments that have broken the amateurism model haven't gone away. They're still permitted, above and beyond the direct payments from schools, and as a practical matter, top programs may be in the position of needing to marshal $40-50 million in total.
Even that won't be simple. The agreement also establishes the College Sports Commission, which is tasked with guaranteeing that NIL deals reflect 'fair market value,' using a formula developed by Deloitte.
How is this supposed to work? Isn't fair market value equal to whatever someone is willing to pay?
If it is, then the College Sports Commission risks becoming little more than a rubber stamp. If they try to argue that this isn't the case, lawsuits are guaranteed.
Similarly, do direct payments mean athletes are now employees? Not so fast.
That's another lawsuit waiting to happen, and it makes the matter of collective bargaining all the more urgent. A players union could be helpful, because it would make stronger contracts and rules possible. But would the NCAA even be able to recognize a union?
Setting aside these legal matters, the money is the heart of the problem. Two Big Ten universities reportedly may have already tapped private equity for the resources they need to compete, although the universities deny this is the case.
Private equity may be the right strategy for some institutions, but private equity is smart. They're not investing for kicks and will expect a significant return on their investment. All the while, smaller schools will struggle to put together the funds needed to be competitive. Leaders at those institutions need to think carefully about whether it makes sense for them to even be in D1 football or basketball. Perhaps a few Group of Five (G5) schools will be able to compete because they already have strong programs, but virtually none of them will be able to compete financially.
Some schools are considering adding more student fees to pay athletes. Is it right for all students to pay more for an education so a select few can earn thousands or even millions of dollars?
Other institutions will be tempted to put smaller, non-revenue Olympic sports on the chopping block. This could harm our nation's performance in the Olympics. And would it stop there?
If you're willing to cut women's tennis or your swim team, what about the philosophy department? How much are administrators willing to give up just to afford football and basketball?
Despite the resolution of the House case, college sports remain broken. Leaders need to step up and force meaningful and clear change, instead of waiting while lawyers and D.C. politicians run up the tab.
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