The NCAA rules governing amateur athletes have long been the center of debate. One polarizing restriction, for example, is on players monetizing their image and celebrity. Rule 12.5.2 prohibits amateur athletes from profiting from their name, likeness, or image. However, the NCAA, colleges, and universities have developed a business model that exploits this rule, rather than compliments it. The current business model is in complete contradiction to what the NCAA professes is the main purpose of the organization: “to maintain intercollegiate athletics as an integral part of the educational program and the athlete as an integral part of the student body and, by doing so, retain a clear demarcation between intercollegiate and professional sports.” Interestingly enough, today, amateur athletic programs invariably resemble that of professional sports teams. The NCAA has refused to classify students as employees, however, resulting in the professionalization of college sports.
In every way possible, amateur athletic programs are modeled after professional sports programs. Many schools have state-of-the-art training facilities, professional training staff, and top-quality coaches, some of which are past professional sport league coaches. The NCAA and universities benefit tremendously from restricting and controlling athletes’ images, likenesses, and most off-the-field endeavors, while leaving athletes with a small slice of an enormous pie. Recognizing this, several former and current athletes brought an anti-trust suit against the NCAA for a share of past and future licensing revenue. But the billions of dollars in damages that could have been awarded for past revenue were essentially taken off the table when Judge Wilken ruled that the plaintiffs were not a viable class.
In National Collegiate Athletic Ass’n v. Board of Regents of University of Oklahoma,the Supreme Court set forth the anti-trust standard that governs sports league trade restraints. According to NCAA v. Board of Regents, the essential ant-trust inquiry is “whether or not the challenged restraint enhances competition.” Several NCAA restrictions have succumbed to anti-trust scrutiny, including restrictions on member schools’ negotiation of television contracts and restraints on the market for coaches. While, other restrictions, such as restrictions on the market for players, have been allowed because of the pro-competitive effects of “enhancing competition among member schools” and preserving an amateur brand of athletics, which enhances consumer choice by providing an alternative to professional sports. These justifications lack merit, however, and are much more speculative than courts suggest.
Historically, the NCAA opposed a pay-for-play model and has said it would fight the matter to the Supreme Court, if necessary. But in recent months, many members of the association have suggested a new openness to restructuring the NCAA model to be more accommodating. Under the proposed structure, the five power conferences – the SEC, Big Ten, Pac-12, ACC, and Big 12 – would define the structure for a stipend paid to athletes and allow athletes to use their name, image, and likeness to promote commercial businesses. However, student athletes are seeking more than the proposed structure will offer. Last month, Northwestern football players took the historic first steps toward forming a labor union for collegiate athletes. The College Athletes Players Association (“CAPA”), the working title of the Northwestern union, is focusing on player health and education. The union’s primary talking points are ongoing medical care after college for injured players, concussion safety, and fully-funded education after the end of a player’s college career.
Interestingly, by choosing to pursue player compensation, the union may create more conflict for the players than anticipated. Sports journalist Jon Solomon notes that the NCAA would not be the employer of the players. Rather, universities, who are members of the NCAA and are governed by different state labor laws, could be considered the employer. Additionally, if the Northwestern players won the right to unionize, the union may not include players at public schools given individual state laws. Most notably, giving student athletes employee status would open schools up to further liability. For example, Marcus Smart recently got into an altercation with a fan after the fan allegedly said some racial remarks. Fortunately, neither the fan nor Smart was injured. However, if Smart were an employee of the university and injured the fan during the altercation, the university could be vicariously liable for Smart’s actions and also for negligently “hiring” him. This may not be a chance schools want to take. Lastly, paying collegiate athletes may not be economically possible. The NCAA reported $871 million in revenue in 2012, $71 million of which was surplus. The estimated cost of paying collegiate athletes is $202 million, which would make the model economically infeasible.
What is clear from all of this is that a middle ground has to be achieved in order to attain off-the-field stability in collegiate athletics. The new NCAA proposal, specifically student athlete stipends, is a better approach than student-athlete unionization. However, title IX and economic feasibility are two new problems the stipends bring with them. Allowing students to capitalize upon their likenesses and images through endorsements and business ventures is a better solution this problem.
The music industry has used a similar structure in recent years, called a “360 Deal.” In the music industry, a 360 Deal is a business relationship between an artist and a record label, in which the company agrees to provide financial support for the artist, including direct advances as well as funds for marketing, promotion, and touring. In exchange, the artist agrees to give the company a percentage of all of her income, including sales of recorded music and live performances. This business arrangement is an alternative to the traditional recording contract. Following this model, universities could continue to support their athletes through scholarships and grants, while allowing the athletes to monetize their image through endorsements and other ventures and the school to retain a percentage of the athlete’s income. This would circumvent reclassifying students as employees and adversely affecting the “amateur brand.”
Posted Feb. 18, 2014