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Clearing House
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May 31st
Revenue sharing = 22%of what, exactly?
From The Athletic …
What is the precise language of the House settlement? Are schools REQUIRED to pay their student-athletes 22 percent of their athletic department revenues up to $20 million? Or is the amount of payments to athletes OPTIONAL, with a $20 million maximum? Lastly, is the source of revenue TV rights only or do the sources include other athletic department revenues, such as ticket sales, etc.? — Paul G.
Keep in mind this settlement is a long way from being official. All we have so far is an agreement between the plaintiffs and defendants on the “structure” of the deal.
But as I understand it:
• No school would be required to share any revenue at all. But if it does, it can’t go above the agreed-upon $20 million-plus threshold.
• Note the figure they came up with is 22 percent of the average of Power 5 athletic departments’ revenue. It is not specific to the school.
• And specifically, it’s from the following buckets: media rights (TV), ticket sales and sponsorships. Donations are not part of the calculation.
I have a feeling this will not resolve itself as cleanly as the plaintiffs’ lawyers are making it sound. For one thing, I don’t understand how they can resolve an antitrust case that fought the NCAA’s limits on athletes’ compensation by instituting a new “salary cap,” albeit one a lot higher than $0. But that’s for Judge Wilken to decide.
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May 28th
SEC Commissioner – Congressional action required: “a national system deserves national standards”
From ESPN … SEC commissioner Greg Sankey laid out in general terms on Monday evening what congressional help for college sports could look like, saying they constitute “a national system that deserves national standards.”
In his opening remarks at the SEC’s annual meetings here, Sankey addressed what college sports could look like in the wake of an agreement by the Power 5 conferences and the NCAA to settle three antitrust cases.
As the terms of the settlement came together in recent weeks, college sports officials cautioned it should not be viewed as a magic bullet to the issues — both legal and otherwise — in college sports but rather as just the beginning for forging a new era where schools share revenue with athletes.
“I think Congress has still an opportunity to use the structure of this settlement to enact legislation to strengthen the future of college sports,” Sankey said.
Sankey said he already has been to Washington, D.C., at least five times this year. He added that in entering his 10th year as the SEC commissioner, one significant change is the number of members of Congress in his phone. He described the effort evolving from a “curiosity” to “a little bit of interest” and that the education of what’s needed would be a “continuing repetition.”
“I would welcome action between now and the election,” Sankey said. “Most people with whom I converse say that’s unlikely, and so your educational process will continue post-election, and it will depend on who’s in leadership of each party within the House and Senate, where the majorities lie and who occupies the White House. Those realities guide conversations.
“So, as much as it’s been unpredictable, I think it will still be unpredictable.”
… Continue reading story here …
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May 26th
Winners and Losers from House settlement
From CBS Sports … The House v. NCAA settlement signifies a line in the sand. Not since 1984’s NCAA v. Board of Regents of the University of Oklahoma have we seen a court ruling fundamentally alter the landscape of college athletics in this manner.
Not only does the settlement distribute roughly $2.8 billion in NIL backpay, but it also establishes a framework for future athlete revenue-sharing. Details still need to be sorted out, but it’s a landmark step toward getting players in on the financial windfall they generate.
While the NCAA is responsible for roughly 40% of the settlement, much of the burden will fall on its member universities. The power conference schools are poised to contribute roughly 24% of the bill, leaving the often cash-strapped schools that comprise the remainder of Division I to cover the remaining 36% of the total settlement.
It’s a historic moment in college sports that will generate multiple layers of fallout over the months and years to come. For now, here’s an early look at the winners and losers from the House v. NCAA case.
Winner: The players
At long last, the players will get a cut of the billions of dollars flooding into the NCAA, conferences and individual schools. While the advent of NIL compensation was a step in this direction, those payments come largely through third-party collectives funded by big-money boosters and average fans. Now, the athletic departments themselves are finally on the hook financially for the labor that fuels their products and underpins their budgets. While the $2.8 billion owed in backpay is eye-popping, that figure will be dwarfed by the amount paid out to athletes in the coming years as part of the revenue-sharing framework established by the case.
Loser: Competitive balance
Power conference schools are preparing to share in the neighborhood of 20% of their media rights revenue with the athletes. The total could surpass $20 million annually per school, further establishing the big boys as the premier destinations for the nation’s most talented players. Even if Group of Five or FCS teams set aside a similar percentage of their media rights deals for player compensation, it will pale in comparison and widen the gulf between the haves and have-nots. While the big-brand schools have always been the preferred landing spots for most high-profile players, the compensation model of the pre-NIL era was equal: Players weren’t supposed to make anything. Then came NIL and the abolition of transfer restrictions, which made it more difficult for the resource-strapped programs to attract and keep talent. This settlement is another setback for the competitive aspirations of those outside the power conference structure.
Loser: Non-revenue sports
The fate of non-revenue sports (which at most schools means everything besides football and men’s basketball) will hang in the balance as athletic administrators grapple with the financial ramifications of the settlement. In addition to potential measures such as staff cuts and delayed facilities upgrades, non-revenue sports could be on the chopping block. That’s especially true for departments already struggling with financial solvency. With hits coming to their NCAA distributions and pressure rising to pay players in high-profile sports, don’t be surprised to see lower-tier Division I departments axe some of their financially inefficient programs for the sake of making ends meet.
Loser: Mid-level department bloat
As of Sept. 30, 2023, Ohio State’s Human Resources database lists 139 athletic department employees with salaries exceeding $100,000. That’s just one example of the bloat that infiltrated programs around the country as they searched for a place to deposit the annual fortune generated from high-profile college football. A weighty chunk of Power Four revenue is now expected be used to pay the players, which could mean trouble for the army of associate, executive, assistant, deputy and senior athletic administrators employed by most power conference schools. This ruling will also likely hasten the push from private equity firms to take a seat at the table and get a say in how athletic departments of the future are made up. That could spell the end of rising salaries and cushy gigs for the mass of mid-level administrators who’ve claimed a foothold in the fabric of college sports over the last 25 years.
Winner: the Big Ten and SEC
We’ll steal a blurb from my colleague Shehan Jeyarajah, who broke down how the House settlement will impact college athletics in years to come and singled out the Big Ten and SEC as two clear winners here.
“If you wonder why Texas and Oklahoma went to the SEC, while USC and UCLA defected to the Big Ten, the potential cost of litigation played a significant role. A massive new Big Ten television contract could essentially fully cover the cost of the new reality for the Trojans and Bruins.
“For other schools, it won’t be as simple. The ACC’s total ESPN television contract cleared $30 million annually per school only in the past few seasons. The ACC and Big 12 both distributed approximately $44 million per school overall. For comparison, the Big Ten TV contract alone could be worth more than $75 million per school annually.”
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May 25th
Celestial Seasoning Buffs? Private Equity may be the wave of the future
From CBS Sports … Six months ago, Gerry Cardinale stood outside a conference room at the swank Aria Resort and Casino in Las Vegas having already blown away of roomful of attendees during the annual Sports Business Journal Collegiate Athletic Forum.
During his remarks, the RedBird Capital founder and CEO expanded on his private equity firm partnering with LeBron James to bring an NBA expansion team to Las Vegas. As if that wasn’t eyebrow-raising enough, he added that private equity was ready to jump into the college sports landscape cleats first. He specifically pointed to college football being tremendously undervalued.
In terms of total revenue compared to the NFL, college football was earning five times less. In terms of media rights revenue, 10 times less.
“We should close that gap,” Cardinale insisted.
That was a bit shocking to hear from a financial wizard. Or, perhaps it shouldn’t have been. Last August, RedBird Capital led an acquisition of soccer giant AC Milan for $1.3 billion. It already has a stake in the Pittsburgh Penguins and Boston Red Sox.
There were reasons the college gap existed. Schools and athletes were constricted by NCAA rules. Athletic departments were business capitalistic enterprises overseen by a non-profit NCAA. Oil and water get along better.
But with the House v. NCAA settlement on Thursday, the infiltration of private financing into college sports became all but official as the NCAA and the Power Five conferences came to the landmark agreement. The $2.8 billion settlement has opened the door to that influence.
The proof was being laid out that day following Cardinale’s presentation. He was asked by a New York Times reporter, hypothetically, how much would Michigan football be worth as an investment by his company?
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May 24th
Related articles:
— “How historic House v. NCAA settlement will impact college athletics on and off the field for years to come” … from CBS Sports
— “NCAA, Power 5 agree to deal that will let schools pay players” … from ESPN
— “Pac-12 presidents approve House v. NCAA settlement terms as college sports economic revolution continues” … from the Daily Camera
— “What to know about House v. NCAA settlement and a historic day for college sports” … from The Athletic
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Forbes: Ten Things to Know about the House Settlement
From Forbes magazine … The NCAA and Power Five conferences (ACC, Big 12, Big Ten, Pac-12 and SEC) have agreed to a settlement in the House v. NCAA case, which threatened to cost the organizations a potential $4 billion in treble damages had the case gone to trial.
Instead, the parties have agreed to $2.8 billion in damages to former college athletes and 22% of the average Power 5 school’s revenues. That amount is estimated at more than $20 million annually per school for future revenue sharing, which will increase as college athletic revenues increase. Additionally, scholarship caps will be removed, allowing athletic departments to spend more there as well.
“This landmark settlement will bring college sports into the 21st century, with college athletes finally able to receive a fair share of the billions of dollars of revenue that they generate for their schools,” said Steve Berman, Hagens Berman managing partner and co-founder, who represented the plaintiffs in this matter. “Our clients are the bedrock of the NCAA’s multibillion-dollar business and finally can be compensated in an equitable and just manner for their extraordinary athletic talents.”
The former athletes covered by this settlement (should they opt in) include an estimated 14,500 Division I athletes who played from June 15, 2016 until the class was established in the case November 3, 2023 and could have received money for commercial use of their NIL, video games and broadcasts if the NCAA had permitted it. The $2.8 billion part of the settlement is for them, although 25-35% of it will go to the plaintiffs’ attorneys, as determined by the judge.
Reports have the NCAA paying $1.1 billion of the $2.8 billion for past damages, with approximately $1.65 billion being paid by the Power Five and the remaining 27 Division I conferences paying $990 million.
Reports have this being funded through both the NCAA withholding payments to universities (which is largely revenue from March Madness) and direct payments.
Going forward, it’s estimated athletic departments will be able to pay athletes up to $21-22 million annually per school for future revenue sharing. That number will also increase over the 10-year period of the settlement based on 22% of the average Power 5 school’s revenues. The revenue categories being included are TV contracts, ticket sales and sponsorships, but not donations.
Details coming to light include a 4% per year automatic escalator of the revenue figure for the first three years of the deal, with a reevaluation in Year 4. Additionally, some monies already going to athletes will be credited toward the cap, including Alston-related payments.
This is a question every athletic department in the country is asking right now. Do they put facility upgrades on hold? Layoff staff? Cut sports? Lean on donors because it’s one of the sources of revenue that won’t increase the revenue sharing bill?
“Athletic departments will need to tighten belts and make tough choices, such as scaling back on travel, delaying facility upgrades, and reevaluating support for non-revenue sports,” said Davis. “Building reserves for future litigation and addressing donor fatigue are also essential for long-term financial stability.”
There’s no reason to believe NIL collectives will go away because of this settlement. In fact, they could offer a way for schools to spend even beyond the cap agreed upon here for a competitive advantage.
The Collective Association, which represents over 30 collectives, expects collectives to continue to be part of strategies going forward.
According to a report on the settlement from Ross Dellenger, the settlement document also includes a reporting requirement for third-party NIL deals that might be tied to the athlete’s revenue-share payment and a definition of “True NIL,” which will be based on a to-be-developed calculation of fair market value.
One other interesting aspect of the settlement is that it eliminates NCAA scholarship caps and contemplates new roster limits, meaning in sports like baseball, where scholarships are often split into small amounts across the team, full scholarships can now be offered to everyone on the roster if they have the funding.
Speaking of Title IX, there’s already a debate going on across the legal industry about whether or not Title IX will apply to the revenue sharing contemplated under this settlement.
Attorney Mit Winter of Kennyhertz Perry argued on X that he believes Title IX wouldn’t apply.
Although it might seem on the surface like this settlement sets up some protection and stability for the NCAA going forward, this agreement only settles three cases: House v. NCAA, Hubbard v. NCAA and Carter v. NCAA. Just yesterday, the judge in the Fontenot v. NCAA case declined to consolidate it with House, and there are multiple other cases across the college athletics landscape that pose future issues.
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7 Replies to “Clearing House”
As I understand a few of the details of the House settlement, I really wonder if this framework is turly more a negotiating point for Congress to pass something, rather than intended to be a true final legal settlement. Given Congress’ abysmal track record over decades (i.e. kick the can down the road), I’m always doubtful that Congress can really pass anything substantive. However, in thinking about college football there may be enough pressure in both Red and Blue states (specifically in the B1G and a few ACC schools) that something like this might actually pass in some form. Congress would have to hammer it out. I think most of Congress might yield to state/constituent pressure in passing something. I think many Red States really cherish their college football even if they are not P65, as well as some Blue states too. Then there is discussion of the overall secondary economic impacts for all schools–game-day where-ever is generally a local cash-cow. Also, the games generate a bunch of exposure for the school, State etc…
On the settlement or future legislation, I have the following 10 thoughts:
1. $22M does not seem like very much for the P65 schools. Many will NIL collective over/around it for football and Men’s hoops. I’m not sure where the final $$$ numbers end up. However, if the $22M (then additions later) is somewhat reflective of what a cross section of P65 and the remaining football schools can contribute, thus survive, then such a number might suffice. Many P65 schools (UCLA, Cal, Wash St., UoA, etc…) are saddled with a ton of debt and bleak financial outlooks. I do not think anyone wants a settlement/legislation that severely contracts college football, specifically rendering the P65 into a largely a regional product with 40ish teams.
2. I think it will have a Title IX component, such that schools may not be able to shrink sports very much. I would think from Congress’ perspective, they still want strong Olympics teams and a balance of Women’s opportunities. College is the backbone for many of those sports, however they do not generate revenue. IMO, it is better to have something, than nothing. If schools have to contract scholarships/sports and facilities in order for their AD to survive this is terrible all the way around.
3. In some Blue States that largely have basketball only schools (I’m thinking Northeast, Big East), they may find the $22M workable. Even for some that have smaller football programs, this may permit them to survive and continue to be competitive in CBB–men’s and women’s teams.
4. For Non-P65 teams and Div II etc… the name of the game is surviving 1st, then looking to thrive later. Keeping a football program for the school’s prestige, local economic opportunities, and the school’s culture is real. They have to get their balance sheets in good shape. I sort of feel bad for of all teams CSU, as they truly needed a new stadium and facilities upgrades, however their balance sheet is in bad shape. Bad timing. They need to field a winning product in the MWC sooner rather than later.
5. Although the B1G and SEC might favor an outcome of Super-League that plays itself, the rest of the country may disagree. If you have 40 team Super-League (even if the B1G and SEC trim a few schools) then the many smaller schools will miss out on their largest pay-days when they play a P65 or get a game on TV. Nationwide, this would be a bitter pill to swallow. In some states like Ohio, the P65 play in-state teams in their OOC schedules, as a means to prop them up.
6. The Super-League could turn off a ton of CFB fans; thus further shrink some revenue throughout the sport. For instance, you look at Professional Golf and the upheaval between the PGA tour and LIV has a net result of less total viewership and really frustrated sponsors. The Euro tour is almost crippled, as are other tours. Could something similar happen in CFB?
7. I suppose there is always the chance that some states (i.e. California) will deem student athletes employees and unionize, however I doubt that will have a positive impact. For those states that do it, I think the State via their taxpayers will simply have to prop up athletic departments. IMO, staying competitive will be difficult. Also, if you are in employee injured on the job, the work comp settlements could be huge. I will never count it out, however I do not see the Justice Department or Congress mandating this;
8. I think Federal Legislation is possible, as the multiple complex issues provide many gives and takes, whereby it could be one of those elusive bipartisan win-wins. The Dems probably gain more regulation and oversight through NIL reporting and measures in the name of “protecting student athletes.” The GOP gets to largely protect the status quo and it remains the competitive free market (wild-west ) in many respects;
9. I still think the biggest threat to college football’s survival is the handling of future medicals. We know concussions are real and can be devastating in all sports. Same with other injuries. Before it was the athlete mostly bears all the risk for a free education; however I think that will gradually change adding another substantial cost to doing college athletics; and
10. I doubt that NIL or the transfer portal are going to be reigned in anytime soon. Given the Court opinions, it appears well decided that student athletes are free to contract/make $$ and their freedom of movement is protected. I just do not think any scholarship is really viewed the way it was in the past, specifically in CFB given the potential $$$ available. Any legislation will have to make it through the Courts. I think conferences/legislation could perhaps enforce academic related requirements, however that is a thin argument against permitting a player to leave for more $$ or just future opportunity (i.e. QB’s that transfer can play). I do think NIL may somewhat reign itself in somewhat given: (1) so many HS blue chips become attrition (i.e. betting the house on an 17-18yo is akin to owning thoroughbreds) and future NIL may take that into account; (2) once the newness wears off, unless the NIL really gives their school a huge competitive advantage, the contributors/sponsors may just get weary; and (3) the NIL pool will inevitably compete with upgrading the schools facilities and other sports, so their could be a shift. Also, using the player freedom movement, I do not think walk-ons will be prohibited or huge roster limitations.
Ultimately this will be done exactly like it is in pro sports, with a collective bargaining agreement between the players union and the NCAA (or whatever comes after the NCAA). I imagine the union will cover all athletes and of course those outside of football/basketball will get a zero cut, but will still be able to make their own NIL deals (just as pro athletes do). So this is far from over until the athletes unionize.
How is NIL going to impact Title IX?
If NIL is based on the individual, doesn’t that contradict the whole equal opportunity for all?
How can you equalize NIL opportunities among the sexes?
How can you force spending on non revenue sports, based on a semi-pro payment structure in the revenue sports, football and Basketball?
It’s not NIL that it going to be shared, it’s the 22% of the athletic department’s revenue (approximately $20 million) that is supposed to be shared with the athletes.
Does that mean $10 million for men’s sports, and $10 million for women’s sports? TBD.
But allocation of scholarships under Title IX has nothing to do with who brings in the revenue, so if there isn’t some sort of a collective bargaining agreement with the players that football and basketball get a great slice of the pie … there will be lawsuits.
I wonder if donations/gifts to the athletic departments will count towards revenue? What about conference distributions (ie media payouts).. is that revenue? Or is revenue just ticket sales/merchandise? Different schools in the same conference could be affected in different ways depending how ‘revenue’ is defined.
I understand all that, but if you’re paying players six/seven figures a year, do they need a scholarship? No.
Can you give more opportunities to men in revenue sports than women? Probably, with the exception of a few women that get national attention, like the basketball players in the championship game, but no way near the number of men’s basketball would normally get. And paying an addition 25 walkons enough NIL to get around scholarships and bloat the rosters of men’s football could be shown as unequal opportunities per Title XII; they already have to offer the same schollies to multiple women’s sports to make up for football. If that was shown as a work around for schollies, then it could be argued.
So many ways NIL can be used to game the system, how long before a lawsuit comes up because of unequal opportunities?
If you have a staff working on a NIL collaborative, how long before a lawsuit regarding equal representation for the sexes if 70%, 80% or more of the money the collective is getting is committed to football and only a few top females get top dollar?
I’m not saying it has to be equal enforcement wise, I’m asking how long before someone brings another lawsuit? This time regarding how much effort a school puts towards NIL for revenue sports v. non? Males v. females? Football (the bread winner) v. all others?
Some sports like skiing/boarding or track & field (shoes & apparel) have their own built in sponsors so to speak, but others are limited on how many stars can be supported by sponsorship’s/NIL.
My question is really how long before these questions become lawsuits?
They opened up a can of worms and they don’t know how to fix one thing without effecting another.
“… if you’re paying players six/seven figures a year, do they need a scholarship? No.”
Which is why the SEC doesn’t want a total cap on players… they like the idea of having as many walk-ons as possible since they know those players beyond the base 85 can just be compensated through NIL, keeping the SEC’s competitive advantages fully intact.