🚛 Schools Backing Up Brinks Trucks for Players

Just when NIL couldn’t get anymore complicated, the courts rule to include schools.

Where were you on Thursday, May 23, 2023? Were you just minding your own business maybe trying to figure out what to have for dinner that evening? Maybe you were starting to pack those bags for your long, upcoming MDW trips in hopes to get tanner instead of the pasty white you’ve been rocking the last 6 months? Or maybe you just started to write your Out Of Office automatic email to ensure your client shuts the hell up before your vacation. Whatever you got yourself into prior to the federal holiday, more than likely didn’t move mountains like the NCAA and the Power 5 Conferences (ACC, Big Ten, Big 12, Pac-12, and SEC) agreed to on this wonderful Thursday evening. What’s the agreement? We’re so glad you asked. The agreement is to allow schools to directly pay players for the first time in the 100+ year history of college sports 😳. Omg is right. We’re going to review how this ruling came to be. Is this a better outcome for players and schools? What will the future of college sports look like?

Let’s get after it…

What are the details of this agreement?

• First, the NCAA will pay more than $2.7B in damages over 10 years to past and current athletes.

  • All Division I athletes dating back to 2016 are eligible to receive a share as part of the settlement — where the split will be based on the damage classes of the class action lawsuit.

  • In exchange, athletes cannot sue the NCAA for other antitrust violations and must drop their complaints in the 3 open cases:

    • House v. NCAA, Hubbard v. NCAA, and Carter v. NCAA

• Second, each school will be allowed to distribute up to ~$20M to its athletes.

  • It’s essentially an amount based on a percentage of the average revenue earned annually by the Power 5 programs.

  • That percentage begins at 22% and could go up over time.

    • To give you an idea, due to their own collective bargaining agreements, players in the NBA and NFL receive ~50% of the portion of revenue paid out.

  • Technically, this format will be considered “optional” for these programs, but we all know if a school doesn’t opt in, they’re doing their athletic program a disservice 😬.

  • It's still up in the air but initial thoughts are that other schools, outside of the Power 5, will be able to opt in at some point down the line.

• So why did the NCAA settle? Well according to documents compiled by Yahoo! Sports, if the NCAA were to lose in trial, they could have been on the hook for damages as high as $20B. Which would have had to been paid out immediately and could have forced the NCAA to file for bankruptcy 🫣.

  • The settlement not only keeps the NCAA afloat, but it gives them more input on payment structures for the damages and revenue sharing.

What will this look like for college athletes?

• Let’s start with the fact that not all college athletes will receive money, and there are still parts that need to be ironed out (yes, hello Title IX, we know you’re in attendance).

• Football players and men's basketball players are the most likely to receive payments. Why? Well, it’s what we talk about all the time: most college athletics revenue comes from TV contracts, which drives both sports.

  • But let’s not rule out women's basketball players, especially after their recent deal with ESPN.

• Ultimately, it will be up to each school on how they choose to distribute the funds.

  • They could opt to offer a portion for players in sports that generally don't generate revenue — like rowing, soccer, tennis, track and field, etc.

• As part of the House v. NCAA settlement, the elimination of scholarship limits are in play, which could be interested. But that could also mean putting a cap on the number of players a team can have on their roster.

  • Scholarship limits have been seen as a means of “attempting” to establish parity among schools while also cost-cutting (see: Table 1).

    • For example: all FBS football programs must adhere to an 85 scholarship limit, all men’s basketball programs are limited to 13 scholarships, baseball to 11.7, etc.

What do the non-Power 5 conferences think of this settlement?

• Let’s just say the rest of the Division I programs are not too thrilled with this settlement, because this could really end up hurting these programs financially.

• The NCAA’s portion of the damages (over $1B) will come out of the revenue that would normally go to the rest of D-I schools. And because of this, the non-power 5 schools, which were not defendants in the lawsuit, have been in their feels.

  • Big East Commissioner, Val Ackerman, suggested an alternative payment model, which 21 other non-Power 5 D-I commissioners signed a letter to show support and unity.

What could the future of college athletics look like?

• Title IX back to the courts. Title IX has had a lasting imprint on the nature of college athletics for years, as schools are required to pay out scholarships in equal proportion to women as they do for men. Now, schools will have to determine how the law applies to future revenue payments to athletes. We could see this go through the courts for a number of years just to resolve the question if women will be paid equally to the men. Or will the courts decide revenue distribution is based on TV/broadcasting rights?

• College athletic employment. It’s already starting to feel like it, but are these athletes going to college or are college athletics now becoming the new-age “semi-professional” league? We know there are billions and billions of dollars in college sports, and with players now getting the chance to make money off their name, image, and likeness it’s extremely useful — especially now that not all the money is going to the NCAA, schools, and athletic programs. But for college athletes to become employees, it changes the whole nature of sports and competition. We should preface, athletes are not currently considered employees, but there are two cases involving USC athletes and Dartmouth athletes, which are going through the National Labor Relations Board now. But with the progression players/schools have made within these last few years, don’t be surprised if employment is next. Which means, players could bargain for everything from wages to limits on hours and overtime pay, to additional health insurance benefits, as well as becoming eligible for workers’ compensation.

• NCAA needs a savior. This is the combination of a short/long-term play but, with all these settlements occurring, the NCAA is hoping it can come across positively to Congress. They want to take the settlement to Congress to show how many concessions they’ve made in favor of paying players. Then their thought is to ask Congress to pass a law that would save the NCAA from any other legal challenges to its business model in the form of an antitrust exemption. This could ultimately end the domino effect of players rights and put the NCAA back ahead by preventing any further concessions in the future.

• NIL will need to button-up. What could be an interesting turn of events from this settlement is the future of third-party NIL collectives. Ultimately, schools will now have more power of the marketplace instead of relying on boosters and businesses to offer payment packages for players to attend a specific school. For the last few years, NIL has essentially been considered the “Wild West”, with little to no regulation. Now, this could be an interesting way for schools to involve themselves with these NIL-recruiting campaigns.

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Quick Hitters

• 🏎️ The Indy 500 is back in full G-force! Over the weekend, the event generated an average audience of ~5.3M across NBC Sports platforms, +8% from last year and +10% from the year before, according to figures released by the network. Not only was viewership up (even with the 4-hour rain delay 🙄), but the total purse increased as well. The Indy 500 paid a total purse of ~$18.5M, up by 8% from a year ago, and race winner Josef Newgarden of Team Penske earned ~$4.3M as he became the first repeat champion since 2002.

• 🎰 Just when we thought all was good in the world when it comes to sports gambling, the states get greedy again. A budget agreement that will nearly 3x the tax on some sports bets in Illinois sent shares of DraftKings down ~14% during trading Tuesday, while competitor Flutter, owner of FanDuel, plunged 8%. Officials in Illinois agreed on a fiscal 2025 budget, for the year starting July 1, which includes a graduated tax plan that increases depending on how much adjusted gross revenue a sports book operator generates in the state. Since both DraftKings and FanDuel dominate betting in the state, the progressive tax will affect them the most, with each expected to pay 40% rates based on their market share (it was previously at a 15% flat rate since 2021).

• 😵 We know, RSNs are making our heads spin too. So let’s add more to the dizziness. Last week, Diamond Sports Group (DSG) announced it has renewed a deal with Fubo (1.5M subscribers), the sports-based multichannel distributor. The deal means that the Bally Sports regional channels will remain on Fubo’s Pro package (i.e. basic subscription tier). DSG operates 18 regional sports channels across the country, with multiple MLB, NBA, NHL, WNBA teams and college sports events under its umbrella. As it attempts to reemerge from Chapter 11 bankruptcy, DSG’s new pact with Fubo makes this the 4th renewal agreement after coming to terms with Charter, Cox, and DirecTV. However, Comcast is still left in the dark (Comcast is ranked #2 for video distributors…Fubo is ranked #10…ouch).