Abstract
Intercollegiate athletics has long been caught in the ambiguous space between professional and amateur sport. As a hybrid and immensely popular system run by the NCAA, intercollegiate athletics has been critiqued as ethically hypocritical, educationally corrosive, materially exploitative, and economically unsustainable. Economic, political and legal pressure has been building over the last 10 years to reform the system. Such reform will ultimately require a choice between the professional and the amateur models, or a bifurcation whereby a select group of a few dozen schools chooses a professional paradigm while a thousand-plus schools opt for the official NCAA vision of academically centered amateur athletics. After considering the arguments for a market-oriented reform in the direction of professionalism, I argue for an educationally-based reform that is accompanied by a constrained and conditional antitrust exemption for the NCAA or an alternative governing body.
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Notes
The legal pressure has come from a plethora of anti-trust and labor challenges. On the antitrust front, in recent years, there has been: Law, Keller, O’Bannon, Agnew, Jenkins, and Alston. On the labor front, there has been the unionization effort by the Northwestern scholarship football players, the Berger case under the Fair Labor Standards Act by athletes at the University of Pennsylvania who sought minimum wage compensation, and the similar Dawson case for athletes at USC. Each of these cases—even those with temporary resolution—have left open issues for subsequent challenge.
Curiously, Andrew Schwarz, perhaps the principal proponent among economists for a market-oriented reform, has estimated that the market rate of star college athletes in football and men’s basketball is only about $100,000. If this were true, the top-paid college athletes would receive an after-tax (federal income tax, FICA, and state income tax) income of around $60,000. This is a lower value than the nominal value of a full-ride scholarship at private universities. See https://www.youtube.com/watch?v=g1iDwmr_3JA. Arguably, Schwarz was projecting this sum to be on top of a full-ride scholarship.
Joe Nocera of the New York Times proposed a salary cap, along with other market constraints, and asserted that those constraints could be legally negotiated by the National College Players Association (NCPA). The NCPA, however, is an association, not a bargaining unit, whose leader is not elected. The non-statutory exemption, which is the source of the various labor market constraints in professional sports, cannot apply to the NCPA. Many other problems encumber Nocera’s nostrum for paying players; see Nocera (2016).
These and other figures, if not otherwise noted, come from the most recent NCAA Revenues and Expenses 2004–2015: NCAA Division I Intercollegiate Athletics Programs Report., 2016 (Indianapolis: NCAA). The largest operating deficit in FBS in 2015 was $44.6 million. Retrieved January 4, 2017, from.
http://www.ncaa.org/about/resources/research/finances-intercollegiate-athletics.
Note also that these figures apply to entire athletic departments. If football or basketball programs in FBS are considered separately from the rest of the athletics program, roughly half of them generate a surplus on an operating basis.
It might be objected that the true cost of educating an additional athlete (marginal cost) is below the nominal tuition of the school. Since the nominal tuition is used in computing the value of scholarships and scholarships that are attributed as expenses to the athletics department, the actual economic costs are lower than the reported costs. While this observation is largely accurate, it is also true that the necessary adjustment to account for the difference between the marginal and accounting costs is on the order of a few million dollars, while the adjustment for the inclusion of capital and indirect costs is on the order of tens of millions of dollars. There are, moreover, other indirect costs that are not attributed to athletics, such as the salary to the college president and his/her staff prorated by the share of the work week that is spent on athletics and the accompanying office space, materials, and communication expense, but would be considered as expenses in any normal business.
Ebon Novy-Williams (2017).
See Meyer and Zimbalist (2017).
To be clear, the concern here is not the potential diminution of Olympic medals for the United States but rather the reduction in support for team sports: When conducted properly, team sports offer substantial physical, emotional, and developmental benefits to college students.
More specifically, the NCAA was seeking to overturn that part of the Wilken and Ninth Circuit rulings that concluded that a scholarship that precluded a COA payment was unnecessarily restrictive and violative of antitrust law. In other words, these decisions said that NCAA labor market rules were ultimately subject to antitrust law. This contradicted the longstanding NCAA argument that the Supreme Court in Board of Regents had declared that college athletes could not be paid, even though this position was clearly dicta in Board of Regents.
In a sample of 45 Division I public universities, the Duke University economist Charles Clotfelter found that between 1986 and 2007, the average compensation of full professors rose 30%, while that of university presidents grew 100%, that of head basketball coaches jumped 400%, and that of head football coaches increased 500% (Clotfelter, unpublished research). Clotfelter had full data on basketball salaries for 22 schools and on football salaries for 45 schools.
One attention-grabbing severance clause appeared in the contract of Mike Sherman, Texas A&M University’s football coach: If terminated, he would have been paid $150,000 a month for the remainder of his contract; this would have amounted to a $7.8 million “golden handshake”.
In a 41st state, New Hampshire, the head ice hockey coach earns more than the governor.
Johnson (2008).
Barra (2005).
The revenue estimates for NBA and NFL teams come from the 2016 Forbes annual reports. Retrieved January 5, 2017, from http://www.forbes.com/nfl-valuations/list/#tab:overall and http://www.forbes.com/nba-valuations/list/#tab:overall.
Those for college football and basketball teams come from the NCAA Division I Revenues and Expenses 2016 Report, op. cit., 43–44, available at the Association’s website. The low-end revenue figures for the 32nd team in football are extrapolated based on the decile ranges that are provided in the report. The other figures are provided in the report.
College coaches have protested that college football teams cannot be properly compared to professional teams. The latter, they say, can always call up reserves when players get injured, but college teams must have players on their rosters to replace the injured. First, NFL teams have a maximum of 16 players on reserve and practice squads to complement their 45-men active rosters. Second, the NCAA Injury Surveillance System Summary reports that for the 2000–01 season, the serious-injury rate during games in football was 14.1 per 1000 exposures, while the rate in football practices was 1.6 per 1000 exposures. If we assume that 60 players enter a game and the team plays 13 games during the year (that is, including a postseason game), then the average total number of serious injuries (requiring a player to be out seven or more days) from games is 11 per year. If on average each such player misses two games, then the average number of game-injured players is 1.69 per game. Performing a similar calculation for practice-injured players yields 1.48 per game, for a combined average of 3.17 injured players per game. This hardly constitutes a justification for carrying 85 scholarship players and 120 total players on an FBS team.
Teams are also allowed to carry up to eight additional players on their practice squads.
This data come from the 2016 NCAA participation rate report, retrieved January 5, 2017, from http://www.ncaapublications.com/productdownloads/PR1516.pdf, 78.
This number is based on 25 men’s scholarships at $50,000 each, plus the possibility of realizing savings on women’s scholarships and the probable reduction in costs for athletic support staff and equipment.
NCAA (2009).
This sliding scale eligibility was introduced after a two-decade struggle with the Black Coaches Association, which claimed that a hard cutoff on standardized tests was arbitrary and discriminatory toward minority athletes. It is interesting to note the growth in the participation of African American athletes in college sports actually was more rapid before 2003 than it was after. In 2016 the GPA threshold is at 3.55 for students with the lowest possible score on standardized tests.
For a fuller discussion of this point, see Gurney et al. (2017).
The district court in O’Bannon ruled that the NCAA was responsible for this sum. Note that some part of these litigation costs may be picked up by the NCAA’s insurance underwriter.
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NCAA. (2009). 2004–08 NCAA Revenues and Expenses: Division I Intercollegiate Athletics Programs report Indianapolis: NCAA, October, 37.
Nocera, J. (2016). A way to start paying college athletes, New York Times, January 8, 2016.
Novy-Williams, E. (2017). College football’s top teams are built on crippling debt, Bloomberg News, January 4, 2017. Retrieved January 5, 2017 from https://www.bloomberg.com/news/features/2017-01-04/college-football-s-top-teams-are-built-on-crippling-debt.
NCAA Revenues and Expenses. (2004–2015): NCAA Division I Intercollegiate Athletics Programs report., 2016 (Indianapolis: NCAA).
Clotfelter, C. Unpublished research. Department of Economics, Duke University.
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Zimbalist, A. Whither the NCAA: Reforming the System. Rev Ind Organ 52, 337–350 (2018). https://doi.org/10.1007/s11151-017-9598-4
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DOI: https://doi.org/10.1007/s11151-017-9598-4