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The Mountain West appears to have won a large victory with the recent additions (or not losses if that’s how you choose to look at it) of Boise State and San Diego State. That may in fact be the case. However, there is also the possibility that in its quest for stabilization and increased stature, the Mountain West endangered itself by giving away crucial member equality in order to re-acquire Boise State.
Reports indicate the Mountain West has or will (among other things): 1) re-negotiate its television contract with CBS Sports Network which will allow teams on national television (i.e. Boise State) to make more money through bonuses, 2) sell Boise State’s home games in a separate package, and 3) allocate half of BCS (and future equivalent) bowl game revenue to the participating team (i.e. Boise State) before splitting it among the remaining conference members.
From the quotes of Big East commissioner Mike Aresco, it sounds as if Boise State wanted to stay in the Big East if it would match the Mountain West’s offer. Smartly, Mr. Aresco and the remaining Big East schools’ (bonus points if you can name them) presidents said thanks, but no thanks. In a time when it must feel like everything is crashing down around them, the Big East brass found a line they wouldn’t cross. Good for them. Let’s face it, Boise State to the Big East wasn’t exactly the perfect mix of chocolate and peanut butter. So for the Big East to grant unprecedented perks to a school 2,600 miles removed from the conference office didn’t make a whole lot of sense. Navy Athletic Director Chet Gladchuck even went public with his disdain for the proposed deal, saying:
“What Boise State wanted was outrageous and unprecedented. It was not palatable to any of the other Big East institutions,” Gladchuk said. “In the final analysis, Boise wasn’t worth it. There is zero television interest in Boise along the Eastern seaboard. What it tells me is the Mountain West was desperate. Clearly, the Mountain West was willing to make whatever concessions necessary to keep Boise in the fold.”
But surely it made sense for the Mountain West to do whatever was necessary to bring Boise State back under its tent, right? Maybe, maybe not. The money grab that is conference realignment also has an undercurrent of trying to create and/or maintain stability and long-term viability. As mentioned earlier, the Mountain West seems to have stabilized at 12 members. But when gross member inequality is part of a league’s structure, there can be problems.
Example: When the Big 12 was formed in the mid-90s, its structure was similar to how the Mountain West is currently proceeding. Most notably, it did not share bowl and television revenue monies equally among the members. Rather, the participating teams were first entitled to a larger share. This obviously funneled most of the revenue toward the traditionally successful programs, and smaller amounts to everyone else. (Berry Tramel of The Oklahoman wrote about this structure in 2010.) As time passed the Big 12 and its membership experienced the difficulties of operating a conference successfully when there’s a sense that a few schools are driving the bus and collecting the checks, and the rest are just passengers along for the ride. Ultimately, that and other issues led to the departure of 1/3rd of the Big 12’s schools (Nebraska, Colorado, Missouri, Texas A&M), and a near collapse of the conference entirely.
Whether the Big 12 leadership decided the original structure was a mistake, or that times had changed and therefore the structure needed to change with it, the powers that be agreed to a more (though not completely) equal distribution of revenue in the summer of 2011. It also put a stake in the ground on stability by having each member grant its television rights to the conference for a long period of time (initially six years, but recently extended to 13), essentially removing the largest incentive to other conferences who may wish to come poaching in the future (the importance of this “grant of rights” was well articulated by Mat Winter in a BusinessofCollegeSports.com post last month). I have not read or heard anything along the lines of Boise State or the other Mountain West schools making similar commitments.
So while the Big 12 (barely) escaped the inequality trap and the Big East has avoided it for now, the Mountain West may have fallen right in it. Sure, Utah State and San Jose State are excited to be new members in a league which just got considerably stronger. And the other Mountain West schools no doubt see the tremendous value Boise State brings to all of them. But give those non-Boise State presidents and athletic directors a few years of conference meetings looking over financials, and watching the revenue flow into the conference and out to Boise State. Give them a few years of conference meetings observing how decisions are made.
The camaraderie that exists today may not continue very long. And without a grant-of-rights or similar level of commitment, Boise State is for all intents and purposes a perpetual free agent, available to accept the next best conference offer that comes along. The Mountain West’s current and future members no doubt wanted to make decisions which ensured stability over the long-term. And while the league certainly got immediately stronger with the addition of Boise State, it may be that the deal they made guarantees the long-term will be anything but stable.
Follow Daniel on Twitter: @DanielHare
By: James Maddox
Social media is becoming increasingly more important for sports fans around the world. It can be as easy as ‘liking’ a page on Facebook and instantly gaining access to news updates, exclusive photos, and creative video content. It’s becoming more apparent, however, that fans are not the only one’s reaping the benefits of social media. Many teams and universities in general are seeing increases in ticket sales, donations from donors, and increases in overall revenue. Does social media deserve some of the credit for these increases?
The benefits of social media are enormous when capitalized in an effective and efficient manner. It’s ultimately a free tool that allows you to connect and engage with fans and followers by sharing news, posting video content, and hosting contests. Some schools, however, take it a step further and use their social media platforms to promote events and ultimately drive ticket sales.
For example, if you take a quick visit to the Facebook page of the University of Tennessee athletics, you will see a picture promoting an upcoming game for the women’s basketball team with a web link on the bottom of the page: UTtix.com. That picture alone had over 200 likes and 20 shares. Thus, the university was able to direct a portion of their 250,000 followers to their ticketing website, allowing fans to not only purchase tickets for that women’s basketball game, but any other sport that they may be interested in.
While visiting the website, fans may find that they are interested in season tickets for the upcoming football season, an excellent source of revenue for any athletics program. By simply posting a photo through social media, the University of Tennessee may have been able to lock in a future football season ticket holder, all for the beautiful price of ‘free’.
Athletics programs across the country are doing the same thing the University of Tennessee is doing across several different platforms. For example, the Louisville Cardinals athletic program is using Pinterest among several different platforms to push ticket sales. There is a board on the UofL page titled ‘Promotions’ in which ads for upcoming games are posted and includes ticket prices, links to other social media pages, and links to the ticketing website.
Additionally, the University of Texas uses Twitter to push ticket sales to fans through several techniques. They recently ran a contest for the best fan photo with the winner receiving tickets to the Texas vs. UCLA men’s basketball game. Another tweet lets followers know that tickets are going fast but still available for the volleyball team that is competing in the NCAA Austin Regional this upcoming weekend.
Whether it’s Tennessee on Facebook, Louisville on Pinterest, or Texas on Twitter, it becomes quite clear that some schools are using social media the right way.
After seeing how some of the elite programs in the country are using social media to drive ticket sales, it begs the follow question: does it work? Are universities seeing increases in athletics revenue, primarily in ticket and donor revenue, due to social media? Social media is a very small factor in the grand scheme of revenue for college athletics, especially when you look at factors such as the wealthy donors in Austin, Texas, and the new KFC Yum Center! generating revenue for the Louisville Cardinals.
However, it’s hard to say that social media hasn’t positively impacted athletics programs across the country. Though in the past it may have been more relevant and useful to call individual donors to gauge interest in purchasing or renewing season ticket packages, programs can now use social media platforms to get the job done. They can reach out to more fans and donors at the same time by tweeting the deadline for ticket renewal on Twitter or posting the link to the website in which you can purchase season tickets on Facebook.
Many programs send out emails regarding ticket packages, season tickets, and upcoming promotions. However, you have to wonder how many of those emails get overlooked or aren’t even given the opportunity because they fall into the spam folder. Social media fixes this problem.
The University of Michigan is a prime example of a program that is dominating social media in college athletics and the results of their social media campaigns confirm this. Every year the Wolverines athletic department holds a social media-only ticket presale for the football team during a two-week period in July. According to Paciolan, the team generated approximately $75,000 in 2011 and was looking to do even better in 2012. With no signs of social media slowing down they did just that by nearly doubling their number in 2011 and raking in over $140,000.
Despite a near 100% increase the number is not so significant considering the athletics department revenue and even football-only revenue is well into the tens of millions. However the impact goes beyond the financials of this successful campaign. The landscape of social media in sports and ticket sales dramatically shifts with drives like this. The idea of making season tickets literally a ‘Like’ away makes it easier for potential buyers and opens up marketing possibilities for the University of Michigan athletic department as well as programs across the country.
By: James Maddox
It can be costly these days to hire a coach that will lead a program to great success. It’s unfortunate, however, when it doesn’t play out that way and the head coach is getting kicked out of the door when expectations aren’t met. In these cases schools are forced to buyout the contracts of their former coaches, causing big paydays for said coaches.
An article recently published on ESPN.com by sports business writer and BusinessofCollegeSports.com founder Kristi Dosh shows the financial implications some programs are facing over the next few years.
The biggest is centered around former SEC powerhouse Auburn’s recent firing of coach Gene Chizik, who’s 4 year head coaching tenure included 3 bowl wins, one of those being a national championship, and more recently a dismal 3-9 record in 2012. Chizik received a lump sum of $7.5 million, approximately $2.4 million more than the reported $5.1 million buyout Auburn paid for previous head coach Tommy Tuberville.
Not only does Auburn have to pay the $7.5 million for Chizik’s buyout, but it is also planning to buyout Chizik’s staff for approximately $3 million, pay a $500,000 salary to new coach Gus Malzahn, and pay for the $700,000 buyout to Arkansas State for Malzahn’s departure. The buyout is considered a loan for Malzahn and will be repayed through his contract according to the letter of agreement released by Auburn.
Although the Auburn Tigers have paid the biggest coaching buyout of the year so far, it seems as if another program was financially hit worse by their own buyout. Dosh points out that former Southern Mississippi coach Ellis Johnson is due $2.1 million from his buyout. While that amount doesn’t ring close to that of Gene Chizik’s, it is still considered a high number for a school in a non-automatic-qualifying BCS conference. To put things in perspective, the $2.1 million is equal to over 10% of the schools athletic department revenue generated last year.
The craziness of the coaching carousel doesn’t stop at Auburn and Southern Miss. The former buyouts of coaches from Tennessee, Cal, and Kentucky are well into the millions. In fact, in just the past month the total amount programs have had to place toward buyouts of previous coaches has toppled $31 million collectively.
New Arkansas head coach Bret Bielema will be facing an even bigger payday than that of Chizik or any of the previously listed coaches if he is let go during the next 3 years. If so, he is expected to receive $12.8 million from Arkansas in a buyout. One of the biggest payouts in recent years belongs to Charlie Weis, who has received nearly $9 million so far. Although he was let go in 2009, he will continue to receive annual payments well into December 2015 with the amount expected to near $19 million by then.
A number of Division I conferences have recently increased the fees a member school must pay when it withdraws from the conference. These fees are commonly referred to as exit fees. The ACC is one of the conferences that recently increased its exit fees. And its exit fee provision has been receiving a lot of attention lately because of Maryland’s departure to the Big Ten.
The ACC actually increased its exit fees twice in the span of a year. The ACC first upped the fees from around $12-14 million to $20 million in September 2011 when it announced it would add Syracuse and Pittsburgh. The fees were then upped again this September after the conference added Notre Dame (in all sports except football and hockeyl).
The ACC’s current exit fee calls for a withdrawing member to pay an amount equal to three times the conference’s total operating budget at the time of withdrawal. Based on the ACC’s 2012-13 operating budget, this equates to an exit fee of more than $52 million. It is this amount that the ACC is seeking in its lawsuit against Maryland for the school’s move to the Big Ten.
When the ACC and other conferences increase their exit fees, the general thinking is that it further discourages members from leaving the conference. But, because of how courts analyze the legality of these exit fee provisions, increasing the amount of the fee can actually increase the chances of the exit fee provision being deemed unenforceable. So, instead of discouraging schools from leaving, it can actually embolden them to do so.
In legal terms, conference exit fees are known as liquidated damages. Liquidated damages provisions are commonly added to contracts. They set the amount a party to the contract must pay in the event it breaches the contract. Liquidated damages provisions are useful because they theoretically save the parties the time and expense of litigating the amount of damages caused by the breach.
But, the amount of liquidated damages specified in a contract cannot be randomly selected. Courts will generally only enforce liquidated damages provisions if (1) the anticipated damages in the event of a breach are difficult to ascertain at the time of contracting, and (2) the amount of liquidated damages is a reasonable estimate of the actual damages that would likely be caused by a breach. If a liquidated damages provision does not meet this test it is deemed a penalty and is unenforceable.
Assuming that the ACC’s liquidated damages provision fulfills the first element of the test, it is questionable whether it would meet the second element. The requirement to pay three times the conference’s operating budget does not appear to be related in any way to the actual amount of damages the ACC would suffer if a member withdraws. It just seems like an easy way to ensure that the exit fee continues to grow without having to continually vote on it. This makes it look like a penalty.
And the actual number that results from this provision, $52 million, is not a reasonable estimate of the ACC’s actual damages. For example, Maryland’s departure will not result in the ACC’s tv deal being reduced by $52 million. A good argument can be made that the ACC actually suffered no damage when Maryland left. Maryland’s departure allowed the conference to add Louisville. And the general consensus is that the ACC is now stronger athletically as a result (at least in the two sports that matter for tv revenue purposes, football and men’s basketball).
This is consistent with recent realignment history. Over the past two years the Big 12 lost Nebraska, Colorado, Texas A&M, and Missouri. Yet, after adding TCU and West Virginina, the Big 12 signed the most lucrative tv deal in the conference’s history this year. (The one exception to the no damage upon withdrawal argument would be the Big East. The defections in that conference have definitely hurt the value of its tv rights).
When a liquidated damages provision is determined to be invalid, the party attempting to enforce the provision is allowed to instead seek its actual damages from the breaching party. But, as discussed above, conferences often suffer minimal damage when a member withdraws, either because the member added little value to the conference or because the conference quickly replaces it with a new member of equal value (at least in tv executives’ eyes).
As a result, exit fees often leave conferences in a tough position. They have to be high enough to discourage a member from leaving the conference. But, if they are too high they could be declared an invalid penalty. And, if the exit fees are invalid, the conference would then have to prove its actual damages, which are usually much less than the amount of the exit fee. As a result, exit fee disputes have always settled without a court deciding the validity of the liquidated damages provision. Recent examples include the Big 12 settling with Nebraska, Colorado, Texas A&M, and Missouri for less than the mandated amount of exit fees.
So, what is the solution to the problems with exit fees? Grants of television broadcast rights. In these agreements, all of the conference members grant their television broadcast rights to their athletic contests to the conference for a certain period of time. If a member leaves the conference during that time, the conference retains the member’s television rights. Because the value of a school to a conference is the television revenue it can help generate, a grant of rights agreement makes the members essentially worthless to another conference that is looking for new members.
While grant of rights agreements do have potential issues (sovereign immunity issues being the biggest), they are not subject to a subjective test like liquidated damages provisions. Thus, they are much more likely to hold up in court as valid contracts.
Currently, only the members of the Big Ten, the Pac-12, and the Big 12 have executed grant of rights agreements. Other conferences that want to ensure stable membership would be wise to insist on their members signing similar agreements. (Yes, even the mighty SEC should have its members sign grants of rights). If the ACC had one in place, Maryland likely would not be joining the Big Ten.
The O’Bannon case has recently been in the news again. This time the focus has been on the release of the plaintiffs’ class certification expert report. In the report, Stanford economics professor Roger Noll attempts to show that the plaintiffs will be able to prove their case against the NCAA using evidence that is common to the putative class members (i.e., current and former Division I basketball players and FBS football players). If plaintiffs cannot make this showing, their case will not be certified as a class action and the case will likely fade away. So the report is one of the most important documents that will be filed in the case.
Most of the media’s coverage of the report has focused on Noll’s live broadcast revenue damages calculations. Specifically, it has been reported by a number of media outlets that under Noll’s formula SEC football players on team rosters during the 2009-10 school year would share $61.5 million of live broadcast revenue, SEC basketball players $42.5 million, Pac-10 football players $26.3 million, and Pac-10 basketball players $30.4 million. The media reports don’t explain how Noll reached these numbers. But, because you have the good sense to read BusinessofCollegeSports.com, you will now learn. I must give one warning though. If you don’t like math you might want to skip the next few paragraphs.
The first step in Noll’s formula is determining the amount of live television revenue a conference’s football and basketball teams generated in a given year. According to Noll’s figures, in 2009-10 the SEC’s football teams generated $123,096,376 in live television revenue and its basketball teams generated $85,043,590. The Pac-10’s football teams generated $52,506,327 and its basketball teams generated $60,480,049. (On a side note, the huge gap in the amount of TV revenue earned by the SEC and the Pac-10 points out just how far the Pac-10 was falling behind the other BCS conferences in revenue generation. Luckily, the Pac-10 members hired Larry Scott as their commissioner and have now closed the gap).
Noll’s formula assumes that this revenue is shared equally among conference members. That leaves us with the following per-team revenue numbers:
• Each 2009-10 SEC football team earned $10,296,733 in live broadcast revenue.
• 2009-10 SEC basketball teams earned between $6,991,974 and $7,205,685 in live broadcast revenue (the basketball calculations also include a small amount of school specific live television revenue).
• Each 2009-10 Pac-10 football team earned $5,250,633 in live broadcast revenue.
• 2009-10 Pac-10 basketball teams earned between $5,519,602 and $7,142,893 in live broadcast revenue.
Noll’s formula also assumes that yearly live broadcast revenue is split evenly between a school’s athletic department and the members of the men’s basketball and football teams. So, each of the per-team numbers above is divided in half to calculate the players’ share of the live broadcast revenue. Here are those numbers:
• 2009-10 SEC football players’ share per school: $5,129,016
• 2009-10 Pac-10 football players’ share per school: $2,625,316
• 2009-10 SEC basketball players’ share per school: between $3,490,636 and $3,597,328
• 2009-10 Pac-10 basketball players’ share per school: between $2,744,750 and $3,551,969
Lastly, to calculate the per-athlete damages, Noll divides the players’ share of the live broadcast revenue by the number of players on a team’s roster. Because the roster size is different at each school, the amount of per-athlete damages varies by school. Here are the per-athlete damage numbers:
• Per-athlete damages for an SEC football player on a 2009-10 roster vary from $46,627 to $66,610.
• Per-athlete damages for a Pac-10 football player on a 2009-10 roster vary from $26,253 to $44,497.
• Per-athlete damages for an SEC basketball player on a 2009-10 roster vary from $177,860 to $295,475.
• Per-athlete damages for a Pac-10 basketball player on a 2009-10 roster vary from $171,547 to $253,171.
A couple of interesting observations can be made by examining the per-athlete numbers and Noll’s model in general.
First, although football generates more total broadcast revenue, basketball players will be entitled to more money under Noll’s damages calculation than football players. There is one reason for this: because of the large difference in roster sizes there are fewer players on a basketball team to split the revenue with.
The per-athlete basketball and football numbers are so skewed by roster sizes that a basketball player at a mid-major like Bucknell would be entitled to more live broadcast revenue than a football player at USC. Using Noll’s formula, a basketball player on Bucknell’s 2009-10 team would be entitled to $34,903. (This revenue comes solely from the broadcast rights to the NCAA men’s basketball tournament). A member of the 2009-10 USC football team is only entitled to $28,229.
Second, in many instances, a BCS football player’s live broadcast damages would not even be equal to the value of his athletic scholarship. For example, the per-athlete number for Stanford’s 2009-10 football team is $36,463. The value of a full athletic scholarship at Stanford in 2009-10 was over $50,000.
Lastly, while the O’Bannon case is still a long way from resolution, if it results in a system like Noll’s being implemented if will be a shock to the collegiate athletics model. Division I members will lose a large chunk of their athletics budgets. As a result, colleges are paying close attention to the case. For example, the Big 12 has recently convened a task force to study what the college sports landscape will look like if the O’Bannon plaintiffs are successful.
The NCAA will also lose the vast majority of its revenue if the plaintiffs prevail. Nearly 88% of the NCAA’s revenue comes from the sale of the broadcast rights for the NCAA men’s basketball tournament. But, in a post O’Bannon world, all of that money will be distributed to Division I men’s basketball players and the schools, not the NCAA. Despite this, the NCAA will not be as affected as the schools. The NCAA already distributes 96% of its annual revenue to NCAA member schools. The loss of NCAA revenue will most hurt the schools that are reliant on the NCAA distributions.
In the end, the O’Bannon case has the potential to be as important as the U.S. Supreme Court’s NCAA v. University of Oklahoma Board of Regents decision. That decision granted schools the ability to sell the broadcast rights to their athletic events. Prior to tha decision, the NCAA controlled and sold the television rights. With schools allowed to sell their television rights, money began to flow directly into the school’s athletics coffers. If the O’Bannon plaintiffs are successful, some of that money will begin to flow directly into the hands of the student-athletes.
BY: CAITLYN LAWRENCE
Duke is a school that prides itself on excellence in education, leadership opportunities, research, and athletics. In athletics, this excellence has been expressed by having won 12 NCAA championships. Now, in effort to continue this legacy, Duke has started the “Duke Forward” campaign, an initiative to raise $3.25 billion for the university from now until June 30, 2017. Of this $3.25 billion, the Duke athletics department is looking to raise $250 million that will help change the face of Duke Athletics by addressing the need for restructuring certain athletic facilities.
Perhaps these goals for change could not be coming at a better time as Duke is facing low attendance at their home football and basketball games. During the 2011 football season, an average of 24,393 tickets were sold per game, translating into only 71.87% of the stadiums full seating capacity. This was the lowest football attendance in the Athletic Coast Conference and ranked Duke 79th in attendance for the nation. Maybe this is expected, with the Duke Football program on the decline; they have not won a conference championship since 1989 and their last winning season was in 1994.
However, Duke’s basketball attendance should be a different story considering its success. Duke has reached the Final Four fifteen times, appeared in 10 championship games and has won four NCAA championships, the most recent being in 2010. Yet over the past five years, student attendance at their games has dropped, causing the athletics department to increase the sale of general admission tickets to fill the student section at Cameron Indoor Stadium. Is it possible that facility changes could increase the popularity of Duke athletics?
The changes planned are not only geared towards the high revenue sports, mainly football and basketball. Duke is hoping to help every student-athlete through these advancements. The first stage of the plan is to help Olympic sport student-athletes by building a new track stadium. This stadium will include a new track allowing them to remove the current track that surrounds the field at the Wallace Wade Football Stadium. This new facility will also include an infield with sport-specific throwing lines, grandstands, and a press box.
The development of a new track stadium will also help with the transformation of the Wallace Wade stadium. By moving the track to a separate facility, they can remove the track from around the football field, allowing them to lower the field and extend the stands closer to the action. The current press box will also be removed and a new tower will be built that will include premium seating. With these changes, it is expected that the capacity of Wallace Wade will increase from the current 33,941 seats to 43,915.
Since Duke is already having trouble filling the stands, they have said that they do want to wait to complete the expansion at Wallace Wade until they are sure that game attendance will consistently have almost 44,000 people. This will require immense football growth; growth that usually comes from Championship success. Perhaps Duke is looking to create that success this year. They are starting with a current record of 4-1, the best Duke start since 1994. Furthermore, they beat Wake Forest for the first time since 1999. Both of these are indications that there is a change in the atmosphere of Duke Football that could potentially boost its attendance and popularity.
As for the Cameron Indoor Stadium, no changes are being made to the seating. However, Duke plans to construct a connected grand entrance to the football and the basketball stadiums. This includes a three-story pavilion that will include ticket offices and a team store for the public, but also offices for the athletic department, new training rooms, and a weight room for Olympic sport student-athletes. In addition, Cameron will have new locker rooms and player/coach facilities, plus a new special access club room, and a Legacy Room.
The Duke Forward campaign is looking beyond facility enhancements and is also hoping to increase Duke’s athletic endowment. Currently, about 30 percent of their athletic scholarships are endowed, but there is hope that by the end of the fundraising campaign this percentage will rise to 35 percent. Duke is also hoping to raise $100 million for operating expenses to help cover a wide range of expenses, from un-endowed scholarships to equipment maintenance.
If these changes are made possible, will the face of Duke Athletics be changed? It is very likely! With the excitement associated with facility enhancements, it is possible that the school will see a renewed spirit. As the school grows not only on the athletic side, but also in the world of academics and research, new pride will be fostered and will hopefully be expressed by supporting Duke Athletics. This will hopefully lead to increased home game attendance and increased revenue for the institution. These changes may even lead to more NCAA championships. More student-athletes may look to attend this institution after seeing the emphasis put on success in athletics. The wait won’t be long to see if the changes will help move “Duke Forward” since they hope the first changes will be implemented in the spring of 2013.
Documents that were recently released in connection with the filing of a motion in the NCAA student-athlete name and likeness litigation (O’Bannon v NCAA) show that one of the defendants, the Collegiate Licensing Company, has contemplated starting a college athlete’s union. The CLC aids many universities, conferences, bowl games, and the NCAA in protecting, managing, and developing their brands. As part of that process, the CLC is the trademark licensing agent for these entities.
Presumably, the idea behind starting a college athlete’s union is the opportunity to provide the same types of services to the union and its individual members: college athletes. But, what many, including the CLC, may not know is that a college athlete’s union already exists: the National Collegiate Players Association (“NCPA”).
The NCPA was founded by Ramogi Huma. Huma is a former UCLA scholarship football player. He started the NCPA after the NCAA suspended one of his teammates for accepting groceries after his scholarship money ran out at the end of the month. The NCPA claims that it has over 14,000 current and former student-athletes as members.
Huma and the NCPA have been behind some of the recent efforts to make NCAA bylaws and state legislation more student-athlete friendly. For example, the NCPA was intimately involved in the White v. NCAA litigation. This case sought to allow Division I institutions to provide athletics-based scholarships to men’s basketball and football players equal to each school’s actual cost of attendance. I was a member of the attorney team that represented the NCAA in this case and it ultimately settled with no change to the NCAA bylaws. Ironically, the NCAA now agrees with the NCPA’s stance on allowing Division I members to award athletics-based scholarships up to a school’s cost of attendance. But, much of the membership is still opposed to the rule change. I previously discussed this topic in this earlier entry.
More recently, the NCPA was successful in lobbying California to pass legislation known as the Student Athlete Bill of Rights. The legislation mandates that certain California universities continue to provide scholarships to student-athletes who suffer career ending injuries, pay health insurance premiums for low-income student-athletes, and pay for injured student-athletes medical bills (even after they are no longer attending the university). Governor Jerry Brown signed the bill into law last week. I previously covered some of the problems with the legislation here.
The NCPA also, among other things, successfully pressured the NCAA into increasing the amount of the NCAA death benefit and removing the cap on the amount of money a student-athlete can earn from a part-time job.
While the NCPA has had success in changing NCAA bylaws and passing state legislation, it appears the CLC envisions taking things a step further: organizing student-athletes for the purpose of licensing the use of their names and likenesses during and after their college careers (the CLC documents refer to the organization as the College Student-Athlete Players Association). For example, if a Manhattan, Kansas car dealer wanted to use Colin Klein in a TV ad, CLC would negotiate the terms of the deal. CLC would do the same for other current and former student-athletes who had offers for advertising, apparel, or other promotional opportunities.
The CLC’s potential plan has one big problem: current student-athletes are deemed ineligible the moment they accept payment from third parties based on their participation in college athletics. Once Colin Klein accepts payment from the car dealer he can no longer play football for Kansas State. And he is no longer on TV, no longer being talked about as a Heisman candidate, and no longer helping the car dealer to sell cars. The same would be true for other current student-athletes who sign on with CLC, and CLC would quickly run out of student-athlete clients.
The only chance of current success for the CLC’s potential plan would be a massive organizing campaign of FBS football and Division I men’s basketball players. These student-athletes are helping to generate nearly all of the revenue for many university athletic departments and the NCAA. If they were to strike, and if the flow of revenue stopped, it would cripple the athletic departments and the NCAA. Perhaps the NCAA would change its bylaws to allow student-athletes to profit from their names and likenesses as a result.
Would current Division I football and men’s basketball student-athletes organize en masse and refuse to play in an effort to gain the ability to license their names and likenesses? Maybe. Putting myself back into my 18-year-old mind, if a CLC representative came into the locker room and told me that my teammates and I would be able to get paid for promotional appearances if we joined the CSAPA it would be appealing. But, if he or she then told us that we would likely not be playing basketball for at least a portion of the season and that we could potentially lose our scholarships, I would have likely rejected the invitation to join. I’m sure many current student-athletes would feel the same way. Putting a free education at risk for non-guaranteed licensing payments is a big risk.
But, if the plaintiffs in the O’Bannon lawsuit are successful that risk could be eliminated. The plaintiffs in the case are currently asking the court to implement a system where money generated from the licensing of the names and likenesses of Division I football and men’s basketball players is held in trust until the student-athletes’ playing careers are over. This would be a lot of money as it includes the money the NCAA, the conferences, and the schools receive from television broadcast rights agreements.
It would be interesting to see how the NCPA and the CLC react to the implementation of this system. Would they join forces to act as student-athletes’ licensing agents or fight for supremacy? We’ll have to wait and see how the litigation progresses, so stay tuned for further developments in the case.
2010-2011 Football Revenue (broken down by revenue category for all public FBS schools for which data is available)
2010-2011 Football Expense (broken down by expense category for all public FBS schools for which data is available)
Today’s news that Notre Dame is leaving the Big East for the ACC surprised many. Similar to its arrangement with the Big East, all of Notre Dame’s sports will compete in the ACC, save for its football program which will remain independent. The one difference from its membership in the Big East, though, is that Notre Dame football will be able to compete in the ACC’s non-BCS bowl games. Given that the Big East is the only conference of the six BCS AQ conferences that does not have a bowl set aside for its conference champions, this is a significant perk for Notre Dame. This perk, along with Notre Dame’s financials depict why the school’s transition from the Big East to the ACC is a logical move.
After months of watching the conference realignment carousel turn, there is no question that finances drive schools from one conference to another. There are several components to the finance issue at play when a school chooses to switch conferences. First, is how much money the school can bring in from the respective conference. Second, is how the respective school’s athletic department’s finances stack up against other athletic departments in the conference.
Notre Dame will undoubtedly reap more revenue from ACC membership than it does from its current Big East membership. The timing of Notre Dame’s decision is arguably not coincidental: Its current conference is in the midst of a 60-day exclusive TV rights negotiation process with ESPN. The outcome of those negotiations will shape how lucrative of a new television deal the Big East obtains. Given that Big East basketball powerhouses Syracuse and Pitt recently defected the conference for the ACC, the conference’s bargaining power has arguably decreased. Take away Notre Dame on top of that, and the Big East’s bargaining power has dramatically shifted. In contrast, Notre Dame is joining a conference which in May, negotiated a $3.6 billion year television rights contract through 2026-27. Prior to Notre Dame’s addition, it was expected that ACC members would capture $17.1 million per year from the television contract. The addition of Notre Dame, however, will likely increase that figure. It is likely that the recent television contract contains a term allowing it to be modified upon the addition of a new conference member. Given Notre Dame’s national popularity, this will likely drive the price of the contract up, and as such, put more money in each ACC school’s pocket. The realization that it will earn more per year in television revenue as an ACC member than as a Big East member was likely a driving factor in Notre Dame’s decision to move conferences.
As noted above, an athletic department’s financial health is another factor schools take into consideration when moving conferences. A school must be able to expend and bring in a similar amount of revenue as its competitors in order to remain competitive. In terms of the ACC, Notre Dame is on similar footing to its competitors. According to data submitted to the Department of Education, in 2010-11, Notre Dame had the sixth-highest net income of all Division I athletic departments. That same year, the ACC school with the highest net income was Virginia, whose net income was just over $13 million less than Notre Dame’s. The control of its budget puts Notre Dame on strong footing as it enters the ACC.
Similarly, Notre Dame’s spending is comparable to ACC members’ spending. Per data submitted to the Department of Education, in 2010-11, Florida State’s athletic department spent the most of any ACC institution at $86,946,503.00. While Notre Dame’s expenditures were more than $11 million less than that, the athletic department’s $75,360,209.00 worth of expenses were still sizable. In fact, Florida State was the only ACC institution that out-spent Notre Dame in 2010-11.
Overall, entering the ACC is a victory for Notre Dame. First and foremost, it achieved a coup by keeping its independent status in football. Secondly, it gained access to greater TV revenues by partnering with a conference that is home to a more lucrative television rights deal. Finally, Notre Dame will be on more equal financial footing with its ACC competitors than it was with other Big East members.