Movers and SHAKERS
Show Me the Money: Should College Athletes Play for Pay?
(Note: companies that could be impacted by the content of this article are listed at the base of the story [desktop version]. This article uses third-party references to provide a bullish, bearish, and balanced point of view; sources are listed after the Balanced section.)
On September 30th, California Governor Gavin Newsom signed into law Senate Bill 206, the so-called “Fair Pay to Play Act.” The law allows college athletes to receive compensation for use of their name, image, or likeness; to hire agents; and to be paid for endorsements. The law goes into effect January 1, 2023. This bill is against current NCAA rules, which ban players from receiving any compensation aside from scholarships. Under existing NCAA rules, athletes cannot execute any endorsement deals or accept payment for use of their images. Notably, however, SB 206 would still prohibit schools from paying athletes. Since Governor Newsom’s signing, lawmakers in 11 other states, as well as at least one US Congressman, have proposed similar legislation.
Everyone but the Student Athlete Is Making Money. College sports is a multi-million-dollar business, with everyone seemingly getting a cut except for the athletes who play the games. The NCAA generated over $1 billion of revenue and some $27 million of profit in 2018. In fact, NCAA president Mark Emmert was credited with nearly $3.9 million in total compensation during the 2017 calendar year, three other NCAA executives were credited with more than $1 million in total compensation for the 2017 calendar year, and eight more were credited with more than $500,000. College coaches’ compensation has soared well into the seven figures for football and basketball coaches. The apparel companies make money from the clothing that the athletes wear as part of their uniforms. The networks make money. And the list goes on.
Any Other Student Can Monetize Themselves. Currently, student-athletes are the only group of college students that are prevented from capitalizing on their names, images, or likeness. Any other student can monetize their name, image, or likeness.
Compensating Athletes Will Help Battle Corruption. Although rules exist against such actions, coaches, agents, clothing representatives, and a whole host of other actors often conspire to pay recruits to join a specific college. Enabling student-athletes to receive compensation for use of their images or names may help alleviate such behavior.
Compensation Enables Student-Athletes to Make Money Off their Skills. According to the NCAA, of the more than 480,000 student athletes that compete across its three divisions, fewer than 2% will make it to the pros. In football, only 1.5% of players will ever see professional compensation. Contrast that figure with the 64% of Division 1 football players in a 2015 NCAA survey who believed it was “somewhat likely” they would become a professional. Enabling student-athletes to “strike while the iron is hot,” provides them with a means of earning some compensation for their abilities.
The Final Nail in The Amateur Coffin? According to the NCAA, if we eliminate the line between amateurism and professionalism in sports, the link between education at a college and sports at a college would weaken. Currently, some 87% of student-athletes receive a diploma. But if a student-athlete, who already spends up to 40 hours per week on sports, is receiving compensation, would the student-athlete’s motivation to go to class weaken?
Once Pandora’s Box is Open…. Once student-athletes receive compensation, how quickly do top tier college sports become just another professional league? The slope would appear quite slippery. One only needs to look at the recent changes, and unforeseen consequences, of the football transfer rule. A rule designed to allow underclassman to retain a year of eligibility—as long as they played in no more than four games—quickly evolved into senior players using the transfer rule when they lost their starting jobs and/or when the season did not play out as expected.
How Do You Regulate? With multiple states and at least one federal law being proposed, how will colleges navigate potentially different rules and regulations? What if certain state legislation is more favorable to athletes? Will athletes flock to schools covered by the more favorable legislation? The law of unintended consequences surely will raise its head here.
Is It Still a Team? Obviously, not all players are created equally. If the “stars” on the team are receiving significant compensation for their names and images or endorsement deals, while the vast majority of the team is receiving little to no compensation, does it negatively impact the sense of “team”?
How Much is a Scholarship Worth? Student-athletes on full scholarships (admittedly typically just football and male basketball players) receive benefits with a value of some $65,000 a year tax free. For a student to receive the same financial benefit, the athlete would need to be bringing in some $100,000 per year.
Significant questions remain about student-athletes monetizing their images and likenesses. To wit: How much of the student-athletes’ visibility and marketability is due to the student-athlete and how much is due to a certain school’s long-established reputation? Yes, there will be certain transcendent athletes— think Zion Williamson as a recent example, who had a reputation before coming to Duke. But this is not true of most student athletes, who, while their play on the field is important, enjoy name and facial recognition because they play for a recognized school. The NCAA is expected to release its own study of the compensation subject this month, and it will be interesting to see how the issue plays out going forward.
- https://www.forbes.com/sites/jackkelly/2019/10/01/in-a-revolutionary-change-newly-passed-california-fair-pay-to-play-act-will-allow-student-athletes-to-receive-compensation/#2c94591157d0, Jack Kelly, October 1, 2019
- https://www.latimes.com/california/story/2019-09-30/college-athlete-endorsement-deals-ncaa-california-law,Melody Gutierrez & Nathan Fenno, September 30, 2019
- https://fortune.com/2019/10/08/ncaa-paying-athletes-california-fair-pay-play-law/, Terry Collins, October 8, 2019
- https://www.usatoday.com/story/sports/college/2019/05/23/ncaa-president-mark-emmert-2-9-million-net-salary-2017/1207369001/, Steve Berkowitz, May 23, 2019
- https://vittana.org/14-should-college-athletes-be-paid-pros-and-cons, Natalie Regoli, 2019
- https://www.ncaa.org/sites/default/files/Recruiting%20Fact%20Sheet%20WEB.pdf, March 2018