House v. NCAA

  This is my last blog before taking a well-deserved vacation. Not that I won’t be following sports. To the contrary, I will be going to college campuses and seeing games in venues I have wanted to visit. It is going to involve a lot of travel and I may need a vacation afterwards just to get some rest. Just kidding there. It’s going to be fun and I fully intend to report about my travels.

Meanwhile, the current landscape of sports is in flux. Not necessarily MLB, the NFL, NHL or NBA, although they may be greatly impacted by what came from a single court case against the NCAA. For the settlement reached in this historic litigation will forever change what college athletics looks like at all levels.

House v NCAA arose from the NCAA rules which “prohibit student-athletes from receiving anything of value in exchange for commercial use” regarding names, images and likeness (NIL), as well as prohibiting conferences and member schools to share the money made from broadcast partners  and any other contracts where the student-athlete’s NIL is used for the benefit of the school. Those were the two main areas of focus of the lawsuit; other monetary issues concerning NIL were also addressed in the complaint. 

The defendants—the NCAA and the Power 5 conferences forged a united front to try to defeat the lawsuit. Yet they had to settle the matter or risk losing more money and more ground in a quickly escalating battle that was going to be worth more and more to the student-athletes and imperil the status of college sports, an already highly monetized entity. 

With the advent of NIL and the uneven calculus which already threatened chaos for the rich, subsidized by the television and streaming markets along with the more traditional big boosters, the defendants had to make a decision to save themselves further damage while weaponizing the settlement as a way to get Congressional oversight heading forward. 

Make no mistake. This is a monumental decision. Everybody wants a piece of the pie. The money is that big. It is reminiscent of how the MLBPA was formed, for free agency threatened to ruin the National Pastime. It is still a highly imperfect marriage, but there is a level of control which allows for large salaries while providing a salary cap to penalize overspending. In that sense, the other three major sports have followed baseball’s lead and have thrived. 

What is not known is how this settlement will actually be distributed. Former athletes from June 15, 2016 to November 3, 2023, the filing date of the lawsuit will receive $2.8 billion minus plaintiffs’ attorneys fees, as determined by the judge. The NCAA will be responsible for $1.1 billion, the Power 5 conferences ponying up about $1.65 billion, with the remaining 27 Division I conferences on the hook for $990 million. The FCS schools are none-too-happy about supporting their richer brethren, when they were not part of the litigation. 

The formulas and how to determine a fair market value for NIL will be subject to changes and be under great scrutiny. While the fair market value is initially determined, it will be subject to recurring, routine evaluation. 

While college sports involve big money generated from football and basketball, there remains a lot of red ink on their ledgers. Which, without cost cutting measures might grow even larger in staggering amounts while at simultaneously having to increase staffing to handle the new issue. 

Venture capital may be a wave of the future in terms of providing athletic departments with the necessary cash to meet their obligations, which includes paying the athletes in the affected class and prospective ones for their NIL. So, too, will corporations see a benefit here to invest—which might require more Congressional intervention to ensure that donors/sponsors receive beneficial tax breaks. 

Moreover, unionization may still be on the horizon. That will not sit well with the bigger or smaller schools. 

And what about reflecting on Title IX implications? That could create even more difficulty in trying not to violate U.S. and state Constitutional issues. 

Payments won’t commence until 2025. So money can be accumulated and set aside. 

In theory that sounds plausible. In reality, there is a whole class present day athletes who want their fair share of NIL money they believe is due them.

Was college sports economics broken? Absolutely. 

This is akin to the doctors employed by hospitals wanting to be much more appropriately compensated for their efforts and reputations. College athletes, perhaps off of high school rankings, as well as performance as collegiate athletes, want to preserve their individual images and capitalize on their worth. The ones who weren’t as fortunate should receive due compensation for what the present athletes will be getting for their images. 

I would love to see what Caitlin Clark receives for remuneration in comparison with her boyfriend, who played on he Iowa Men’s basketball team. Both fall within the aggrieved class. 

Do championship teams such as Georgia football or Kansas basketball warrant more capital to be distributed to their players because they reached the pinnacle and played the most games? Will this create a disparity with also rans and hurt the other 27 Division I conferences, making the already uneven playing field even more skewed? Or could this actually reconfigure things, bringing the big boys to more parity when they must make such large investments in NIL and staff?

What is certain is that this will be relitigated and legislated until most, if not all, are satisfied. Which includes the affected parties. Because the NCAA and the Power 5 conferences are not going to give up too much without still generating sizable profits. 

It’s going to involve a collective meeting of the minds between college administrators, athletic departments and other interested parties, including the athletes who have a seat at the table and a stake in the money. If such can be achieved. If not, the whole institution may crumble. Even if propped up by media money for the foreseeable future.

It would be foolish for me to speculate on how this plays out—compensating the past inequities and looking ahead even a few years out. The defendants might find that the agreement they have now won’t be suitable in 3 or 4 years hence. If they fight over conference allegiances, ergo dollars in their pockets, they will fight to the bitter end. 

Remember House v NCAA. It’s what made college sports different. 

See you in a couple of weeks. I will have plenty to report on at that time.