Spreading the wealth

Perhaps the news that the Pac-12 is exploring the opportunity of allowing a private equity investor to buy a stake in the conference should cause me to take these college football program valuation stories that crop up in Forbes and the Wall Street Journal more seriously.

Brewer’s study calculates what a college team would be worth on the open market if it could be bought and sold like a professional sports franchise. Brewer analyzes each program’s revenues and expenses along with cash-flow adjustments, risk assessments and growth projections.

The problem with that approach is that the value of a college football team is based in part on its business model, which incorporates amateurism, and that is something that is unlikely to translate seamlessly on the open market.

Then again, those times may be close to a-changin’.

While tens of millions of college sports fans watch the action between Alabama and Clemson unfold Monday night in Santa Clara, Calif., college sports power brokers, and their lawyers, will be monitoring developments about 40 miles away in Oakland where, any day over the next few weeks, a federal judge could issue a ruling upending the economy of major college sports, clearing the way for more money to make its way to athletes…

In a statement, Donald Remy, the NCAA’s chief legal officer, denounced the athletes’ demands, and asserted they would sap money from sports subsidized by football and basketball.

“All of the Clemson and Alabama student-athletes taking the field in the College Football Playoff championship game are just that: students. However, the plaintiffs would rather see a world in which paid professionals would instead take the field,” said Remy, who earned $933,000 in 2017, the most recent year the NCAA’s nonprofit IRS filing is available.

“Replacing scholarships with salaries would professionalize college sports, de-emphasize academics and reduce future opportunities for incoming student-athletes,” Remy said.  [Emphasis added.]

It’s okay to be a professional as long as you don’t step on the field, eh, Donald?

At the bench trial late last year, lawyers for the NCAA and the conferences essentially made two major arguments: (1) Droves of fans would stop watching college football and basketball if they knew the players were getting paid, and (2) Allowing pay would “drive a wedge” between college athletes and their classmates, hurting “integration,” an essential goal of college sports.

Those are tough sells in this day and age.  With regard to the second argument,

To counter the integration argument, the lawyers for the athletes put their clients on the stand, where they testified the feared “wedge” between them and their classmates already exists, created by demanding practice schedules, frequent travel, and high-end workout facilities and dormitories built exclusively for athletes.

Former West Virginia running back Shawne Alston testified he was told by academic advisors to take only easy classes that met in the mornings, so he’d maintain eligibility and not miss practice, and he spent his little down time with other athletes.

“We never built relationships with other people,” Alston testified.

And as for the first,

Last March, meanwhile, provided what could be considered a real-world experiment on how college sports fans’ behavior might change when they learn players are getting paid for their talents.

As an ongoing Justice Department investigation roiled college basketball with revelations that Adidas officials arranged bribes to players and families to get them to attend preferred schools, CBS reported ratings for the first full weekend of the men’s tournament: They were up by 11 percent.

Never mind that players are already getting paid with COA stipends, that student-athletes aren’t disqualified if they receive payment from their countries’ Olympic committees for winning medals and that the NCAA recognizes that a student-athlete who turns pro in one sport retains his or her amateur status in another.  The irony here is that the schools and the NCAA count on our continued passion for consuming sports as the basis for ever increasing revenue streams from ticket sales and broadcast deals, no matter what they do about conference realignment, scheduling and playoff expansion, while pretending that it’s fragile enough to be unable to withstand more dollars in student-athletes’ pockets.

If you’re looking for the real driver behind player compensation, you don’t need to go any farther than your mirror.

10 Comments

Filed under It's Just Bidness, See You In Court, The NCAA

10 responses to “Spreading the wealth

  1. MagnusDawgus

    Sell 51% of the programs to PEGs and let the universities retain 49%. Or replace PEGs with well-heeled boosters or use the Green Bay Packers model of letting fans buy shares. Put in a real board of directors that hold the sham amateur administrators to account.

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  2. W Cobb Dawg

    So the Pac-12 will be renamed the Nike-12?

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  3. paul

    What legal issues might be involved? State schools are supported by both tax revenue and federal funds.

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    • Most P5 state school athletic departments don’t receive state funds.

      Also, it sounds like all of this is at the conference level.

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      • paul

        They absolutely do. Student fees are often collected by the athletic department. Coaching staffs are state employees, paid by the state. They also receive additional compensation but still receive a state salary. Facilities are located on state property (owned by the state) and are often paid for, at least in part, with tax dollars. Scholarships are technically “paid” for by the university, a state entity. Athletics is not an entirely independent and separate concern.

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  4. Texas Dawg

    It will be an interesting dynamic if they go to a professional for profit model and then try to still wring money out of the alumni every year. What then becomes of student fees that go to support athletics? I’m sure some enterprising lawyer will take that on. What then will happen to that rainy day fund that McGarity sits on? No matter what side of the argument you are on, one thing is for sure. If the model changes, CFB as we know it will be radically changed. Better? Worse? Only time will tell. If they are forced to change, then the Packers Model as suggested but Magnus would help retain the passion that college fans have that would be be lost if they are “owned” by some faceless corporation. They would still get money from the alumni in that model, but the alumni would possibly get something in return that they are not now getting. If they become “pros” I would no longer donate, but I would consider buying shares in the team.

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  5. Chopdawg

    “…CBS reported ratings for the first full weekend of the men’s tournament: They were up by 11 percent.”

    Who are you and what have you done with our Senator? He hates the NCAA Men’s Basketball Tournament and would never post anything remotely positive about it.

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  6. Doug

    Props to the WSJ for sliding the NCAA chief legal officer’s salary in there. Though I’m sure if you asked the guy, he’d say he’s worth every penny.

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  7. Whiskeydawg

    “allowing a private equity investor to buy a stake in the conference” – great. Can I interest anyone in some Georgia Tech junk bonds? Maybe something more exotic for the savvy investor; the SEC Index Fund.

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