For quite some time, there has been a debate regarding whether or not we should begin paying college athletes. Not only do many of them work hard for the sole benefit of eventually going pro, but their performance tends to bring the school quite a bit of money. When we recently discussed college football teams generating high numbers of futures bets, we mentioned that Urban Meyer had trademarked his own name for the purpose of putting it on team merchandise. While his coaching is certainly a major factor in the team’s success, the team itself is responsible for a great deal of the merchandise sales generated by the Ohio State Buckeyes.
We’d like to discuss the current debate regarding the notion of paying college athletes, as well as the arguments for why it is or is not the right thing to do. We are not taking a formal position on this issue, as whether or not college athletes get paid does not affect our handicapping consulting services one way or the other. Nonetheless, this is an intriguing topic that comes up every once in a while, and we hope that it will provide you with some food for thought.
History of the Debate on Paying College Athletes
The issue of paying college athletes has been going on for quite some time, but it was brought to the forefront in 2009 due to O’Bannon v. NCAA. The lawsuit focused on the fact that many universities had reaped major profits by not paying college athletes. Issues raised by O’Bannon v. NCAA included the use of player likenesses in video games, as well as the profits made by photos, DVD sales, and other merchandise. The lawsuit was detailed by PBS’s Frontline in 2011, after which the issue was picked up for debate by many other major news outlets.
Many felt as if players had been wronged by the NCAA’s use of their likenesses. The issue was big enough to transcend any one particular sport. While the lawsuit was filed by former UCLA Bruins power forward Ed O’Bannon, he received support from the likes of former Arizona State Sun Devils quarterback Sam Keller. Not only did Keller file his own suit against the NCAA, but he also included video game publisher Electronic Arts due to the use of player likenesses in their popular EA Sports brand.
Not only did several news outlets begin publishing the story of these lawsuits in the wake of the Frontline coverage, but even mainstream comedy writers decided to take a few jabs. The 2011 season of South Park included an episode entitled “Crack Baby Athletic Association,” which takes aim at both the NCAA and EA Sports. A very pointed scene has Cartman dressing as a plantation owner and implying that a university owner’s reference to “student athletes” is simply a clever euphemism for “slaves.” The boys are then ripped off by EA Sports, portrayed to be a greedy, profit-driven enterprise with little in the way of scruples.
According IGN’s review of the episode, South Park missed the mark in a few ways. Not only was their satire very on the nose, but they also ignored some of the key aspects of the debate on paying student athletes. One of the major issues pointed out by IGN is that many student athletes are paid under the table. They also argue that not enough attention is given to the fact that college athletes tend to receive massive scholarship and preferential treatment.
In fact, even before the Frontline story was punished, there was an issue with student athletes receiving improper funds. There were five Ohio State Buckeyes reprimanded in 2010 after they sold a bunch of championship rings, as well as jerseys and other awards. In this case, Ohio State was not paying college athletes under the table. But the Buckeyes still demonstrated that being a student athlete has its perks. Many schools have rules that student athletes should not use their persona to receive funds or discounted services, but there is not telling how many athletes have pulled the same stunt as the five sanctioned Buckeyes without getting caught.
Current Regulations on Paying College Athletes
Now that we’ve covered some past events regarding the debate on paying college athletes, let’s talk about some more recent happenings. First of all, we should mention that both of the lawsuits we have referenced were decided just last year. Sam Keller’s suit was settled by the NCAA to the tune of $20 million, while EA Sports put up $40 million in their own settlement. But at the time the Keller case was settled, the O’Bannon case was still pending, and the NCAA was left in suspense.
The suspense would not last for long. The same year that Keller’s suit was settled, the O’Bannon case was decided. The judge ruled that the NCAA was in violation of antitrust laws by not paying college athletes while still profiting from their likenesses. The NCAA decided to appeal the previous decision. While the case has been in court for the bulk of this year, a further decision has not yet been reached. The NCAA is hoping that the appellate court will consider NCAA v. Board of Regents of the University of Oklahoma, which states: “To preserve the character and quality of the ‘product,’ athletes must not be paid.” In other words, paying college athletes would hurt the integrity of college athletics as a whole.
Before the appeal was made, O’Bannon v. NCAA had allowed colleges to put up to $5000 into a trust each year, which would be made available to student athletes at the end of their college careers. This means that a four-year student could graduate with $20,000 in their trust. Adding that to their athletic scholarships, they might be considered well-compensated for their talents. Unfortunately for such athletes, the pending appellate decision has necessitated a ruling by the 9th US Circuit Court of Appeals that all payments are to be put on hold until a final decision on the appeal has been reached.
The debate on paying college athletes has grown to the point that President Barack Obama felt the need to comment on it earlier this year. Back in March, he actually spoke out against paying college athletes, saying that it “would ruin the sense of college sports.” This is not unlike the decision in NCAA v. Board of Regents of the University of Oklahoma. He does believe that the students should be cared for better, but he worries that monetary compensation would create bidding wars. This could create a sense of competitive imbalance between schools.
Competitive imbalance is also at the heart of another court decision made this year. Just last month, a landmark ruling made in March of 2014 was thrown out by the National Labor Relations Board. The ruling had given the Northwestern University football team the right to unionize, making them the first union of college athletes in history. It was decided, however, that unionizing the Northwestern Wildcats while many teams still lacked that right would create a sense of competitive unfairness. This would be especially true if schools began paying college athletes, since the standards on a unionized team would likely differ from the standards on another team. The decision to overthrow unionization was unanimous, so don’t count on another reversal any time soon.
Why Paying College Athletes is Right
While student athletes might receive a great deal in the way of scholarships and other benefits, there are many who feel that these perks are still not enough to fully compensate their efforts. One article by the Bloomberg View concedes that the benefits of being a student athlete are substantial, but still comes down on the side of the debate that suggests paying college athletes is the right way to go. To quote the article in question: “It’s possible to imagine a rational worker accepting a zero money wage because the fringe benefits are so great, but the circumstances would have to be extraordinary. Few teenagers are cognitively prepared to judge whether that extraordinary circumstance has arrived.”
A chart published by Business Insider shows the revenues generated by the University of Texas versus the expenses of scholarships granted to the Texas Longhorns. Since the University of Texas is the most profitable college sports organization, these numbers are not necessarily the fairest benchmark for this debate. Nevertheless, the chart shows that their revenues are not only substantially higher than their expenses, but they have increased by a much greater margin. In other words, they wouldn’t lose too much by paying college athletes.
There was also a longer article by Business Insider which proposed not paying college athletes, but rather allowing them to reap the sorts of benefits that have previously been deemed improper. We mentioned the Ohio State Buckeyes who were sanctioned for selling merchandise, but they also had a deal with a tattoo artist that was considered a violation of conduct. According to BI, this sort of thing should be allowed. If we aren’t paying student athletes, then we can at least allow them to find ways of making a profit on their own. Lots of non-athletes are rewarded for making connections every day. Is it really so much worth for student athletes to make profitable connections with people who respect their skills on the field or on the court?
The other major argument against paying college athletes is that it will ruin the sanctity of college athletics. A guest post on Forbes examines this argument, stating that this does not necessarily have to be the case. While this article notes many dangers associated with paying college athletes, they believe that paying college athletes will drive participation and allow more students to take advantage of the educational benefits offered by college sports. This plan is not very fleshed out, but it seems as if the best option would be to impose stricter sanctions against academic fraud. In this manner, students will not be paid for blowing off their education. Instead, those seeking payment and excellent athletic opportunities will come out the other end as well-educated members of society.
There are many factors influencing the argument in favor of paying college athletes, but the primary point to be made is simply that it seems fair. College athletics create a steady revenue stream for the NCAA and many schools. If they’re going to profit off of player likenesses, then the players should see at least a fraction of those revenues.
Why Paying College Athletes is Wrong
First of all, we should establish what we’re really discussing here. In case you missed it when we referenced it earlier, EA Sports has already paid out $60 million. Due to this payout, players whose likenesses have been used in their video games will receive up to $7200 each. This means that, when we discuss the notion of paying college athletes, there is actually a need to divorce this debate from the issue of likeness rights. Because unless EA Sports continues to commit the same transgressions, that side of the issue has already been taken care of.
As has been stated multiple times, student athletes already reap great benefits from their work. They receive scholarships, recognition, and a chance at going pro. Those with enough exposure in college have a shot at doing well in the draft, after which they stand to make a much greater profit than the $5000 per year originally granted by the O’Bannon v. NCAA decision. In addition, many are paid under the table. But more importantly, it is unfair to assume that all colleges can afford to pay their players a salary. In fact, only 20 Division I athletic departments make enough of a profit to leave room for salary expenses after all other capital expenses have been accounted for. The rest of the 350 total Division I athletic departments are not making that kind of cheddar.
Sports Illustrated writer Seth Davis received a bit of backlash for an article stating that most college football players are overpaid. But he wasn’t just saying that their skills do not match up to those of most NFL players. He was actually addressing the above issue of college expenses. Most universities pay a lot to keep talented student athletes on board, and they aren’t all making as much money as the University of Texas.
Another major argument against paying college athletes is that it would be unjust to only pay those who draw the most attention to the school. Charles Barkley commented on this very issue, calling the notion of paying college athletes “ridiculous” due to the unfairness it would cause if only one or two teams were paid. “You can’t discriminate,” said Barkley. “You have to pay the soccer team, the lacrosse team, you have to pay the girls teams—that’s why I don’t think you can pay players.”
Following this argument to its logical conclusion point, one might also say that you’d have to pay the theater kids and the musicians who represent the school at shows and competitions. They all work hard to represent their school, without expecting the university to write them a compensatory check. Much as with the issues presented by Obama in terms of bidding wars, trying to pay athletes fairly would make things overly complicated. It would also drain schools of funding that they do not necessarily have at their disposal, despite the common assumption that they are just bottomless wells of cash. Paying student athletes would not just compromise the integrity of student athletics, but potentially the quality of education as well. That just isn’t worth it for a couple thousand bucks a year.