The system of college athletics faces its biggest challenges since it was organized in 1906 as the Intercollegiate Athletic Association of the United States.
First, the Supreme Court ruled that the National Collegiate Athletic Association violated federal antitrust law.
Second, 18 states, including Illinois, have passed name-image-likeness laws allowing college athletes to cash in on publicity rights.
Third, basketball leagues for teenagers have been launched, and are paying elite players $250,000 to $1 million for the upcoming season. Duke, Kentucky and others have lost commits to them.
Coaching legends Mike Krzyzewski and Roy Williams can’t compete with this.
Together, these developments mean that the NCAA’s 464-page rulebook — with dozens of restrictions on “compensation” for athletes — needs an immediate overhaul.
NCAA v. Alston
In a 9-0 vote, the Supreme Court ruled that the NCAA’s restrictions on education benefits (defined as “compensation”) break the law.
Consider two students, both kinesiology majors. The school offers paid internships to work in a sports-medicine clinic. One student is not an athlete. He can take the job and build his skills and resume. Being paid does not destroy his eligibility as a student or as an intern.
The other runs cross-country, and is on a scholarship. If she takes the job, she violates NCAA rules, forfeits her eligibility and loses her scholarship.
Not anymore, however. The Alston case means that the school cannot stop the athlete from taking the internship that is available to all students in her major.
In fact, the school can offer the same scholarship, plus the paid internship, to out- recruit other schools.
That makes the NCAA marketplace more competitive — and better for athletes — but more expensive for athletic programs. It also removes the strict amateur premise that leveled the playing field for schools. A school with a higher-paying internship has an advantage.
These laws give NCAA athletes rights to earn money for endorsements and their image (think of a player photo).
Name-image-likeness laws have blown up separately from the Alston case, like a second Category 5 storm aimed at NCAA schools. Now, players will compete with their schools for advertising revenue.
These laws vary. Our state law limits the University of Illinois and Northwestern more than Michigan’s law limits Michigan State and Michigan.
A Michigan State player can co-brand himself with a Spartan. UI and Northwestern players need to negotiate with their school to use “Illini” or “Wildcat” in their personal endorsement or branding, with the implication that the school will take a cut. Michigan schools can use this as a recruiting advantage against Illinois.
Schools that are financially sound will compete in this setting. My study finds that the universities of Kansas, Kentucky and North Carolina are financially sound, with 2019 revenues ranging from $107 million to $150 million. Their total debt ranged from $33 million to $100 million. They paid between $2 million and $7 million in interest in 2019.
The UI and the University of California, Berkeley, are saddled with debt. Their 2019 revenues ranged from $88 million (Cal) to $119 million (UI). But total debt for the UI in 2019 was $323 million (before the current wave of construction) and $438 million for Cal.
The athletic department at the UI paid $22.7 million in interest in 2019 — 10 times the amount spent by Kansas ($2.2 million) and UNC ($2.3 million) on interest. Cal paid $9.4 million.
Schools such as Kansas, Kentucky and UNC can exploit these financial disparities. As the G League and Overtime Elite offer lucrative pro alternatives for high school players, these basketball powerhouses will face market pressure to go pro themselves, now that the NCAA’s amateur model has been shattered.
My study estimates that these schools would need to pay $4.98 million, including all employer taxes, worker’s compensation and health insurance, to employ seven elite players in 2021-22. They can probably afford it.
For the UI and other schools deeply in debt, the “arms race” to attract recruits with luxury facilities may tie up too much money — in 30-year bonds that require interest payments — to make a basketball payroll.
My study only captures salaries for this year — salaries that will likely grow with market competition.
The future of college athletics may evolve into a new league of super-elite sports schools that can afford to pay-for-play in basketball, and eventually football. Market forces, the Alston ruling and name-image-likeness laws will pressure them to consider “going pro” with better media deals.
Schools with heavy debt loads may be stuck in hollowed-out conferences with a tattered and ill-defined amateur model, while paying tens of millions of dollars every year to unknown bondholders far from campus.