By Robert J. Romano, JD, LLM
On April 22, 2010, the National Collegiate Athletic Association (NCAA) reached a 14-year agreement, worth $10.8 billion (approximately $770 million annually), with CBS and Turner Broadcasting System wherein the two media companies received joint broadcasting rights to the NCAA Division I Men’s Basketball Tournament known as March Madness. In April 2016, the NCAA and CBS/Turner extended their agreement for an additional eight years, through 2032, while increasing the payment from CBS/Turner to the NCAA by an additional $8.8 billion. The total amount the NCAA will receive this year from the broadcasting rights equals the 2019 installment amount of $804 million, together with the ‘Advance to NCAA’ amount of $7.5 million for a total realized gain of $811.5 million ($67.5 million is due, but is not realized, being held in escrow until 2025).
While the NCAA collects its annual multi-million dollar broadcasting rights fee, its member institutions, approximately 1,115 colleges and universities located throughout the United States, separately and individually award nearly $2.55 billion in Division I athletic scholarships. Of the 1,115 member institutions, 351 support a Division I men’s basketball program. These 351 colleges and universities are allowed to offer up to 13 men’s basketball scholarships,[i] with the total number of scholarships granted by Division I schools for the academic year 2018-2019, totaling 4,511. With the average cost of a Division I men’s basketball scholarship being around $38,250 per year[ii], the member institutions, separate and apart from the NCAA, individually paid out, on average, more than $497,250, and collectively, more than $174.5 million, to student-athletes to have them play basketball at their college or university for the 2018-2019 academic year.
Since the NCAA receives millions of dollars per year from CBS/Turner solely for the broadcasting rights to March Madness, (this dollar figure does not include ticketing, merchandising and branding, sponsorship, and other revenue generators associated with the event), should the NCAA be responsible for the cost of a Division I men’s basketball scholarship and relieve its member institutions from the financial burden? Are the approximately 4,500 young men who receive Division I men’s basketball scholarships receiving a fair value for their skills to participate at the highest level of college sports? If not, what would be a fair value for the student-athlete?
As stated, it is the individual member institutions, specifically the college and university athletic departments, that provide scholarships to young student-athletes and not the NCAA. This fact alone raises questions about the amount and method used by the NCAA in distributing the revenue from the CBS/Turner agreement. Instead of the current elaborate system wherein units are generated based upon tournament performance and a redistribution method that may or may not result in a conference team receiving an award, all money from broadcasting rights should be directed towards supporting the student-athlete. One way of doing this would be by eliminating the cost of granting Division I men’s basketball scholarships from colleges and universities and instead making it the responsibility and obligation of the NCAA. The NCAA generates sufficient capital to cover this cost. Shifting scholarship costs to the NCAA would benefit the schools since they would be able to spend the saved money elsewhere. These savings could be reallocated to support worthy causes such as an athlete post-graduation fund, to promote women’s sports and gender equity issues, or other forms of student enhancement. Combined with concerns about the cost of college tuition and the amount of debt students are burdened with, it is this author’s opinion that the NCAA has focused too much of its attention on commercializing college sports and in so doing has failed in its primary obligation of supporting the student-athlete.
Note, however, that in order for a student-athlete to be eligible to compete at the college or university level, he or she must be deemed “an amateur” in accordance with how the term is defined by the NCAA. A student-athlete will lose his or her amateur status and will not be eligible for participation if any of the following occur:
uses his/her athletic skill for pay in any form in that sport;
accepts a promise of pay even if such pay is to be received following completion of intercollegiate athletics participation;
signs a contract or commitment of any kind to play professional athletics;
receives a salary, reimbursement of expenses, or any other form of financial assistance from a professional sports organization based on athletic skill or participation, except as permitted by NCAA rules and regulations;
competes on any professional athletics team even if no pay or remuneration for expenses was received, except as permitted by the NCAA;
after initial full-time collegiate enrollment, enters into a professional draft; or
enters into an agreement with an agent.”[iii]
Article 15 of the NCAA Division I manual, in lieu of the above, permits a member institution to offer a student-athlete financial aid in the form of a scholarship so long as the scholarship terms comply with By-law 15.01.6 Maximum Institutional Financial Aid to Individual: “[A]n institution shall not award financial aid to a student-athlete that exceeds the cost of attendance that normally is incurred by students enrolled in a comparable program at the institution.”[iv] Additionally, any financial aid offered by a member institution will not violate By-law 12.2.1, supra, because 12.01.4 provides an exception for member schools: “A grant-in-aid administered by an educational institution is not considered to be pay or the promise of pay for athletic skill, provided it does not exceed the financial aid limitations set by the Association’s membership.”[v]
Therefore, in accordance with the myriad of rules and by-laws implemented by the NCAA, the most a student-athlete can receive in exchange for his or her athletic talent is the value of a scholarship. For a Division I men’s basketball player, that scholarship is worth, on average, $38,250 per year.[vi] But is this amount reasonable? Is it enough to fairly compensate a Division I basketball player for his skills and talents, because in actuality, it is the talented student-athlete for whom the audience pays to watch? And most importantly, is it fair compensation based upon the revenue generated by the NCAA from its broadcasting agreement with CBS/Turner?
The NCAA maintains that it is and that (all) student-athletes are amateurs who should not be paid more than the worth of an athletic scholarship. NCAA president Mark Emmert has held firm that an education is well worth the efforts asked of student-athletes, calling a funded education a “game changer”. Emmert was quoted saying, “[T]he game changer for a young person in life is that they get an education. We know that means they’ll make a million dollars more than they would have otherwise.”[vii]
However, Emmert and the NCAA’s position may be coming to an end. In March 2019, a federal district court found that the NCAA’s position regarding “amateurism” is fundamentally flawed and its rules regarding student-athlete compensation violate federal antitrust law. In the case of Alston v. NCAA,[viii] the district court found that the NCAA can no longer limit the scholarship packages offered to student-athletes and it must allow its member institutions the opportunity to offer their students education-related items. Educational-related items above the cost of a typical student-athlete scholarship, the district court found, include “computers, science equipment, musical instruments, art supplies, expenses for study-abroad programs, tutors, and other items not included in the cost of attendance but nonetheless related to the pursuit of academic studies.”[ix] Most importantly for antitrust reasons, the district court found that the defendant (NCAA) “did restrain trade in the relevant market” and its limitations on scholarships “produced significant anticompetitive effects.”[x]
The federal district court’s ruling does not force member institutions to change their student-athlete scholarship packages, nor direct them to pay traditional salaries; it holds that the NCAA may not be able to stop them from doing so. Interestingly, however, a reading of the district court’s ruling does support the proposition that the student-athlete scholarship, $38,250 per year to a Division I men’s basketball player, is not adequate compensation for those who compete at the college level.
Then what is the value of a Division I men’s basketball player?
As a result of the court’s ruling in Alston, what if the NCAA concedes that its concept of amateurism is ‘fundamentally flawed’ and its rules regarding student-athlete compensation violate federal antitrust law? What if a college or university decides to change its scholarship package, and how would it decide what is fair to a perspective student-athlete?
Member institutions may want to look to the professional sports leagues for assistance since within the various leagues there is a balance of equities as a result of collective bargaining. In the professional leagues there are two important concepts regarding player compensation that may lend guidance: 1) minimum salaries, and 2) equitable distribution of revenue. Each of the major U.S. sports properties has a set minimum salary that escalates for a player the longer he is part of the league. They also have a revenue-sharing structure, wherein league revenue is divided between the owners and the players, with the divide being on average around 50 percent each.
In the National Football League (NFL), as agreed upon by the NFL Players’ Association through collective bargaining, an incoming rookie receives a salary of no less than $495,000.[xi] Additionally, league revenue, which includes broadcasting rights fees, is divided and the players must share an average of no less than 47 percent.[xii] The percentage does fluctuate, but has averaged around 48.5 percent. In dollar figures, the NFL owners share has been approximately $8 billion annually, with the players’ share just under $8 billion annually.
In the National Basketball Association, per its Collective Bargaining Agreement with the Players’ Association, its minimum rookie salary is $838,000 and a majority of revenue generated is classified as Basketball Related Income (BRI).[xiii] The BRI includes ticket purchases and concessions, broadcasting rights fees, and merchandising rights from jersey and apparel sales. In the NBA, as per their agreement with the owners, the players receive 51 percent of BRI.[xiv]
Using the professional model in determining a fair value for Division I men’s basketball players, revenue received from the NCAA’s agreement with CBS/Turner should be divided equitably with the student-athletes.
It is the author’s position that the total amount the NCAA receives annually from the broadcasting rights with CBS/Turner for March Madness, including the 2019 installment amount of $804 million, the ‘Advance to NCAA’ amount of $7.5 million, and the escrowed amount of $67.5 million, even though not realized until 2025, (why should the current students be penalized and future students be rewarded), in following the model established by the professional sports leagues, should be equally divided between the NCAA and the 4,511 Division I men’s basketball players. In light of such, the author proposes the following:
The NCAA will be responsible for the full cost of covering all Division I men’s basketball scholarships, relieving its member institutions of this obligation.
Each member institution will retain control and decision-making power when deciding to whom it will offer a Division I men’s basketball scholarship.
The NCAA will follow the professional sports league model and share the entire amount received from the rights fees with CBS/Turner per fiscal year including the installment amount, ‘Advance to NCAA’ amount, and the escrow amount. For the fiscal year 2019, the total amount of $879 million will be divided equally, with the NCAA retaining $439.5 million and the Division I men’s basketball players retaining the balance of $439.5 million.
The NCAA will divide the balance of $439.5 million equally among all 4,511 Division I men’s basketball players, with each player’s share being $97,429.
From the $97,429 share, the NCAA shall be responsible for covering the cost of the student-athlete scholarships, an average of $38,250 per year (or the scholarship amount at each individual player’s college or university). The balance, ($97,429 – $38,250 = $59,179) will be held in trust/escrow for the benefit of the student-athlete and will become available to the student-athlete upon graduation or within one-year from the time the student-athlete leaves his college or university.
If the student-athlete decides to continue with his education, either to earn a bachelor degree or by enrolling in medical school, law school or other graduate program, the vested/escrowed amount will remain in trust, with proceeds being used to fund the student-athlete’s continued education.
If a balance remains after graduation from a post-graduate program, the balance will become available to the student-athlete upon graduation or within one year from the time the student-athlete leaves his post-graduate program.
All amounts will increase annually at the same rate as the value of the NCAA’s agreement with CBS/Turner.
For a Division I men’s basketball player whose value to a team is considerably more than the $97,429 share, (Zion Williamson type of players), that athlete is entitled to additional compensation paid from other revenue-generating sources such as ticketing, merchandising, and/or in-season broadcasting rights fees.
All other intercollegiate sports shall follow this model. Example, money received from broadcasting rights to all FBS games and bowl games shall be pooled and distributed equally to all 11,350 Division I football players.
Therefore, the value of a Division I men’s basketball player is $97,429 per year.
[i] http://www.scholarshipstats.com/average-per-athlete.html
[ii] Id.
[iii] NCAA Division I Manual, Constitution Art. 12.1.2
[iv] NCAA Division I Manual, Constitution Art. 15.01.6
[v] NCAA Division I Manual, Constitution Art. 12.01.4
[vi] http://www.scholarshipstats.com/average-per-athlete.html
[vii] https://www.deseretnews.com/article/865599978/Is-a-scholarship-fair-compensation-for-student-athletes.html
[viii] Alston vs. NCAA, Case 4:14-md-02541-CW Document 1162 Filed 03/08/19, U.S. District Court for the Northern District of California
[ix] Id.
[x] Id.
[xi] NFL/NFLPA Collective Bargaining Agreement, August 4, 2011.
[xii] Id.
[xiii] NBA/NBPA Collective Bargaining Agreement, January 19, 2017. https://www.hoopsrumors.com/2018/06/nba-minimum-salaries-for-201819.html
[xiv] NBA/NBPA Collective Bargaining Agreement, January 19, 2017.
