Wednesday, June 19, 2024
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How historic House v. NCAA settlement will impact college athletics on and off the field for years to come

A major turning point in college athletics came to fruition Thursday when the NCAA Board of Governors and every Power Five conference agreed to settlement terms in the landmark House v. NCAA lawsuit. The resolution promises to change the college athletics enterprise forever by effectively ending its long-standing amateurism model. 

For the first time, schools will directly share a portion of revenue with athletes. Scholarship and roster rules are expected to change. Major athletic departments will help pick up a massive check in back damages. Most significantly, the case should help provide some legal protection for college athletics as it heads into the future of the NIL era. 

The proposal, now green lit by college athletics decision-makers, heads back to the plaintiffs for approval. Then, the full group will go in front of a judge to formalize the settlement and institute it. This process could take several weeks. 

Here’s how the inevitable settlement will impact athletic departments and the on-field product in the coming years.  

The Big Ten, SEC win again

The financial hit for athletic departments, especially among power conferences, will be exorbitant. The NCAA will take on a lion’s share of the cost via reserves, insurance and budget cuts, but the schools themselves are still on the hook. According to documents obtained by Yahoo Sports, power-conference schools are expected to fork up as much as $30 million per year over the next 10 years to cover revenue-sharing distribution, back damages and expanded scholarship costs. 

If you wonder why Texas and Oklahoma went to the SEC, while USC and UCLA defected to the Big Ten, the potential cost of litigation played a significant role. A massive new Big Ten television contract could essentially fully cover the cost of the new reality for the Trojans and Bruins. 

For other schools, it won’t be as simple. The ACC’s total ESPN television contract cleared $30 million annually per school only in the past few seasons. The ACC and Big 12 both distributed approximately $44 million per school overall. For comparison, the Big Ten TV contract alone could be worth more than $75 million per school annually. New money from the expanded College Football Playoff could provide some buffer, too, as Power Four schools jump from $5 million per school to at least $12 million per school under the new system. 

What will your school owe in back damages? 

The settlement comes out to nearly $2.8 billion in damages over the next 10 years. The NCAA will take on 40% of the total cost, with 60% coming from withheld distributions to Division I institutions. Out of that latter number, 40% will be paid by the legacy Power Five, 17% from the Group of Five and 22% from the Football Championship Subdivision, with other compensation coming from non-football conferences. The cost to legacy Power Five schools will be between $1 to $2 million over the next 10 years, based on a memo obtained by Yahoo Sports. Group of Five schools will lose approximately $400,000 annually, with FCS programs losing closer to $280,000. However, the settlement price is only one small piece of the much larger cost.

Where will the money come from? 

The entire system of college athletics was built on the idea of an unpaid labor force. With the highest cost in the sport eliminated, universities were free to spend nearly unlimited money on coaching and administrative salaries, facility upgrades and more. According to a USA Today analysis, programs wasted nearly $200 million on coaching buyouts alone during the 2023 season, an incomprehensible, and frankly offensive, amount of waste. 

Considering that the bulk of coaching salaries come from booster fundraising, it remains unlikely that high salaries will go away completely; however, programs will have to be much smarter about spending limited resources. The focus on facilities has lessened as name, image and likeness (NIL) payments take focus, and that should only increase now. 

Of course, some athletic departments may have to make difficult decisions to deal with budget shortfalls. Especially for those on the periphery of the Power Four, cutting sports or scholarships could be on the horizon. Stanford, which has the biggest athletic department in the nation, is set to receive approximately 30% of an ACC revenue share to start when it switches conferences this fall. 

Roster sizes, scholarships could change dramatically

The NCAA is considering removing the cap on guaranteed scholarships across sports. Instead of limiting compensation, the NCAA would attempt to protect competition by focusing on roster sizes. 

Right now, football teams can field 120 players but are limited to 85 scholarships. In a future system, rosters could shrink to 100 players, but all of them could be on scholarship. That’s not even counting supplemental income from revenue-sharing. There are already examples of programs using direct NIL payment to get around scholarship rules, like former five-star defensive back Cormani McClain transferring from Colorado to Florida

But while football is the big fish, other sports could truly reap the benefits. Baseball teams are limited to 11.7 scholarships on a 39-man roster. That could change, but the Title IX implications could also be significant as schools would then have to fund 27 additional scholarships for women’s sports. 

The increased scholarship obligations will be yet another major cost for universities. Not every program will be able to handle them, which will create yet another gap. 

Revenue-sharing is coming

The NCAA and college football have fought hard against direct pay-to-play payments from universities to players over the years, but that effort ends with this case. As a condition of the settlement, athletic departments can begin directly sharing revenue from television contracts and ticket sales with athletes. 

On the program level, the settlement would create a system in which approximately $20 million is distributed to players. That amount represents an estimated 22% of annual revenue for Power Four schools, but it will hit many programs disparately. UCLA’s 2022-23 operating revenue, for example, was approximately $105 million, per Sportico. Ohio State’s, conversely, was nearly $280 million. 

The cost could also prove overwhelming to the Group of Five. For example, Louisiana-Monroe reported a total athletic budget of only $19.4 million. While ULM, and programs like it, will not be required to pay athletes, it will only increase the divides between the haves and have-nots. 

But how revenue-sharing will work is undecided

While the settlement opens the door for revenue-sharing, it does not set any terms for the practice. Those details will be ironed out over the next several months. The details could radically impact how effective the practice is over the next several years. 

Now, the vast majority of NIL collectives pay money to football and men’s basketball players. For example, Washington basketball transfer Great Osobor reportedly landed a $2 million NIL deal, which would take up nearly 10% of a university’s entire revenue-sharing budget. With factors like Title IX taken into account, the NCAA will have to set ground rules on how money is divided. 

Potentially, the NCAA could decide that all athletes at a school or in a specific sport should receive the same payment instead of negotiating and offering individualized contracts under the cap. That would seemingly keep the door ajar for collectives as a supplemental form of income. 

In some ways, NCAA president Charlie Baker tried to prepare for this moment. Last year, he proposed a revenue-sharing model in which schools could opt into a new legal classification of college football, similar to how the Power Five was granted “autonomy status” to make rules. Football Bowl Subdivision competition would look exactly the same, but behind the scenes, certain schools could have status to make rules for themselves. 

Under Baker’s proposal, programs that opted in would directly pay a certain amount of their players through a trust, with a minimum of $30,000 per year for half of their athletes. Membership in the top division would require opting into these payments and fielding a certain number of sports. Baker’s proposal could set guidelines for how the NCAA hopes to approach revenue-sharing heading forward. 

Role of collectives remains up in the air

The first few years of the NIL era have been strange and put exorbitant pressure on fans to essentially crowdsource big-time football programs through collectives. With revenue-sharing entering the picture, the pressure on collectives to provide a primary income for revenue sport athletes on campus will decrease, a huge win for fans. 

The NCAA is optimistic that the settlement will reinforce NIL guardrails, which have been gutted after numerous court losses. That could lead to collective operations moving in house. Several schools have already hired specific staffers and liaisons to deal with NIL in anticipation of the shift. 

However, collectives could fight the change and claim they exist for legitimate endorsement purposes, which could soon lead to more court cases. The NCAA has lost almost every court case it has fought on NIL grounds. 

Amazingly, other sports have slowly started taking the lead from college athletics. The Las Vegas Convention and Visitors Authority signed every player on the WNBA’s Las Vegas Aces to a $100,000 per year sponsorship, which could potentially double salaries. The biggest complication? The WNBA can collectively bargain to create rules against payouts like that, whereas college athletics can’t. There’s essentially still no legal recourse for outside pay-for-play. 

More questions to be answered

Unfortunately, it’s unlikely that the settlement will fix everything. Employment status remains up in the air, along with collective bargaining. The NCAA is still seeking an antitrust exemption from Congress, like pro sports have, which would allow it to more easily make rules for players without legal recourse. Even reinstating enforcement power for the NCAA on NIL issues would not signal the end of NCAA complications; working through collectives and transfer rules are among the countless other issues that remain. 

However, House v. NCAA will still be a historic settlement addressing some of the biggest underlying questions of college football. Most significantly, it permanently alters the relationship between athletes and universities by finalizing direct payment for athletic participation. College sports will never be the same. 

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