Today’s guest columnist is Andrew Zimbalist, professor of economics at Smith College.
The longstanding “amateur” model of college sports in the United States is broken. What is going to replace it?
The conventional model was broken well before athlete name, image and likeness income became acceptable, educational benefits became uncapped or the pandemic blew a gaping hole in college athletic department budgets. The issues were clear. Budgets were deeply in deficit (even in FBS, where the median program lost more than $18 million a year); coaches and administrators made off like bandits with the loot generated largely by black football and men’s basketball players; the vast majority of athletes were not receiving the quality education that they were promised; medical coverage was inadequate; and Title IX was not being fully or properly implemented at 90% of U.S. colleges and universities. Today, mid-pandemic with NIL income unleashed, educational benefits uncapped, NCAA enforcement in retreat, and sports betting poised to pounce, the model and its functioning are in profound crisis.
What is to be done?
There are two fundamental paths of reform: (a) toward marketization and professionalism or (b) toward educationally centered athletics. The first path was embodied in the Alston case that SCOTUS decided in June. The plaintiffs argued that the NCAA functions as a cartel that artificially and injuriously colludes to preclude the development of a labor market for college athletes and to prevent them from receiving fair compensation given their revenue contribution to the school. In December 2019, the trial courts found partially in favor of the plaintiffs, ruling that the NCAA’s limits on athlete compensation unreasonably restrain trade. The matter first was appealed to the Ninth U.S. Circuit Court of Appeals and then to the U.S. Supreme Court. Although the eventual scope of the SCOTUS decision was narrowed, it opened up avenues for creeping pay-for-play to flourish.
In the course of explaining its ruling that educationally tethered benefits could not be capped, SCOTUS dismissed the NCAA’s longstanding argument that it had broad latitude to carry out its amateurism policies as it saw fit. The Alston Supreme Court decision makes it clear that the NCAA is still subject to the Sherman Act, and that any of its restraints of trade will have to pass muster under the rule of reason.
Reaffirming the NCAA’s vulnerability, two days after the SCOTUS ruling, U.S. District Judge Claudia Wilken denied the NCAA and Power Five conferences’ motions to dismiss in two lawsuits (House and Oliver) brought against them by two current players and one former one, on behalf of purported classes of Division I athletes. The cases seek back pay for potential NIL income not received and future pay asserting the right for NIL income to include television revenue.
It has been reported that litigating the O’Bannon and Alston suits has cost the NCAA upwards of $200 million. Not only do these suits challenge NCAA authority, but they are pushing the association toward insolvency. It cannot afford ongoing litigations. Accordingly, the NCAA, while it lobbies Congress for a national NIL bill with extensive guardrails, is taking a hyper-defensive posture—telling schools in states without active NIL legislation they can implement their own NIL policies without jeopardizing their athletes’ eligibility, as long as NILs are not used by third parties as inducements to attend or stay in a particular school or as backdoor pay-for-play. But the NCAA has no effective enforcement structure to regulate NIL activity.
A similar conundrum prevails around educationally tethered benefits. While SCOTUS ruled that the NCAA cannot limit such benefits, its decision did reiterate the District Court ruling by Wilken that the NCAA can impose reasonable restraints to safeguard its basic product of amateur sports. Thus, the NCAA can set a “no-Lamborghini” policy; that is, the association can prohibit schools from offering excessive benefits under the guise of being educationally tethered. Perhaps one can make a persuasive argument that student athletes need a vehicle to drive to classes, but they certainly do not need a $200,000 sports car.
Another potential problem area is student internships: Can a school offer a prospective student athlete a $50,000 summer internship with a professor? There will be other benefits that raise questions of whether they are educationally related. The SCOTUS decision seems to say that the NCAA would have the right to control this, and that if the NCAA is uncertain about the limits of its control then it can go to Judge Wilken for clarification. But there may be too many such arrangements of suspicious provenance or beyond fair market value for the NCAA to get timely and clear judgments from the District Court. The association’s default policy so far seems to be to avoid litigation and to let the arrangements go forward unchallenged. Such a policy seems likely to persist until national legislation sets guardrails on NIL and educationally tethered benefits.
While there are many specific areas open to interpretation, one that deserves attention is the purchase of Loss of Value (LOV) Insurance for athletes. Star players seek LOV so that if they suffer a career-impeding injury in college, they can be partially covered by such insurance for income they might have earned as a professional. The NCAA has permitted schools to pay premiums to star athletes to purchase LOV insurance in recent years, using funds from the NCAA’s Student Assistance Funds or Student Athletic Opportunity Fund. If LOV insurance is considered to be educationally tethered, as the NCAA claimed in oral arguments before the Supreme Court (because the insurance induces star athletes to stay in college), then schools now would be unlimited in how extensive a policy they could purchase from their own revenues to induce a prospective student to attend. A comprehensive policy could pay out several million dollars annually. But if all it takes to be deemed educationally tethered is inducing an athlete to stay in college, then just about any benefit could qualify.
As the NIL market for individual or group licensing expands into potentially hundreds of millions of dollars, athletic departments will receive less revenue from third parties. Coaches and administrators should prepare to have their sails trimmed, and all but the top 20 or 30 departments will finally realize that they are unable to compete with those at the top of the pyramid. The world of college sports, already bifurcated between the top half of the Power Five schools and everyone else, will further fracture.
While righting the wrongs of athlete exploitation by relaxing various NCAA constraints is desirable, there is a preferable alternative to budding marketization. It is to reinforce the educationally centered, extracurricular model of college athletics. Over 98% of college football and men’s basketball players will never play a single game in the NFL or NBA. If they don’t receive a real education, it will have a much bigger impact on their lives than earning some NIL money while in college. If adequate health care is not provided, it too will have a bigger impact.
College athletics is based on the notion that sport provides an extracurricular activity to balance the largely sedentary and cerebral experience of a college student, and to enhance the primary educational purpose of college. College athletes are intended to be first and foremost students. As students, they should be able to organize, to articulate and fight for their interests, but they don’t need to be recognized as employees and covered by the National Labor Relations Act to do this.
Turning college sports over to the marketplace is the wrong way to go. Antitrust law may protect the consumers of college sports, but it won’t protect education. Congress, ensconced in political rigor mortis though it is, must rise to the occasion and offer a public policy solution that protects the educational role of higher education.
Zimbalist is author of the new book Whither College Sports: Amateurism, Athlete Safety and Academic Integrity.