By Henry C. Lucas Jr.
Newswise — For years supporters of college athletics including the NCAA have tried to convince the public that players are amateurs and that friendly competition among schools enhances the college experience for everyone. In a private communication one university president admitted that he joined the Big Ten conference “for the money.”
Colleges have gone to great excess to recruit star players and win conferences, especially the Power Five conferences. Athletic budgets have mushroomed as has the pay for coaches, reaching multi-million-dollar levels. Three universities have budgets of over $200 million for athletics – in comparison our business school had less than a $100 million budget to teach hundreds of undergraduate and graduate students.
The top earner is football; the University of Texas with the highest earnings derives 70% of its revenue from football. The NCAA reports that only 25 of the 65 schools in Division I in the Power Five Conferences had positive revenue in 2019 from athletics. The median profit per school was only $7.9 million and the median loss among the 40 schools with negative net revenue was $15.9 million.
I have discussed the points in this essay with fans who argue that schools derive a lot of indirect revenue from athletics. They argue that alumni like to contribute to the school so that it can mount winning teams. A colleague told me that his school had record contributions the year it had a winning football team for a change. I suspect that most of the donations from team sports go to the athletic department and probably not the English department. I understand that at least one college reserves some donors for the athletic department. Do any schools divert athletic donors to fund academics?
Colleges are criticized for coaches’ salaries and for the fact that players receive little for the huge amount of money they generate for schools. With what is known now about head injuries, colleges also have to face the possibility that football players are compromising their health to play the game.
Several states recently passed legislation allowing college athletes to receive some form of compensation. In 2021 the U.S. Supreme Court ruled unanimously that the NCAA could not prevent “modest” payments to student-athletes. Supposedly the payments have to be related to education, but that sounds like a very flexible approach that opens the door to all kinds of remuneration.
Under-the-table payments to athletes have been going on for a long time. One summer while in college I worked with a man who had played football for a major college team. He reported, for example, going to a store to buy a shirt, paying for it, and receiving change for more than the value of the shirt.
After the Supreme Court decision, a star quarterback is “open for business.” He is looking at paid autograph signings and appearances, ad campaigns, sports camps, videos and more, which he hopes will add up to a six-figure income while in college.
This quarterback is selling signed helmets for $599.99, has a deal with a moving company worth $20,000 and has set a rate of $2,000 an hour for personal appearances. An Iowa basketball player has an apparel line. Another athlete has a tea brand and another one a line of scented candles. A star hurdler at a Florida college immediately after the Court decision received an offer of $2,500 to make three appearances at local YMCAs. So much for modest payments.
The result of these changes is likely to be disastrous for colleges. In the past they could recruit athletes with scholarships, tutoring and other promises to help them survive and flourish on campus. Schools are prohibited from paying players a salary and for paying them to enroll. But now schools will have to compete by arranging outside activities to provide additional compensation for athletes. I can see alumni fan clubs offering huge benefits to potential recruits to the football and basketball teams. How about an expensive sports car to drive while in school? Maybe a furnished luxury apartment all paid for by alumni? There are tremendous opportunities for corrupting the purpose of the university, and for “benefit laundering.”
What about our student-athletes? It is clear that at the Division I schools, athletics trump academics for players. (A player being introduced at one bowl game said that his major was “The History of Physical Education.) How can an athlete fully participate in academics when practicing and playing a sport all the time? How can basketball players attend classes when there may be more than one game a week with an extensive travel schedule. How do they participate in class during tournaments in distant cities? Now the calendars of the top players will be filled with promotional dates. Will there be any time for class?
The Supreme Court has pretty much destroyed the myth of the student-athlete. What is the solution? If most colleges actually are losing money from their athletic programs, it may be time for a different model. I have suggested elsewhere that colleges license their name to a corporation, probably run by alumni, to create professional college teams. Baseball has minor leagues while college, apparently mostly at a loss, provides minor leagues for the highly profitable NFL and NBA. Colleges would receive substantial payments for the use of their name and would rent stadiums and gyms to the college team’s corporation. And the corporation would negotiate salaries for coaches and players without involving the college. Players would no longer have to live the myth that they are really students who came to college to get an education.
People have criticized this idea saying that fans will react negatively to corporate sports as opposed to their support for amateur athletics in college. But wait, a $200 million athletic budget is hardly a sign of amateurism. The degree of professionalism in college athletics is out of control, and the option of paying players is going to make it worse. There is a long history of fans supporting professional athletics. Major league baseball is for profit; the NFL and NBA teams exist to make money. I heard a talk by the marketing director of an NFL team, and it was all about how to market the team to increase revenue. I am not worried that fans will abandon college athletics because we finally admit that players are professionals, not amateurs.
Colleges are educational institutions and should not try to be in the entertainment business. Colleges will be much stronger if they concentrate on what they do best, which is education and research, and outsource high profile athletic teams in football and basketball. It is likely that most colleges will be better off financially for doing so. They will also avoid the corruption that is bound to come with changes in the rules for compensating players who clearly are not student-athletes.
Henry C. Lucas, Jr. is Robert H. Smith Professor of Information Systems Emeritus with the Robert H. Smith School of Business at the University of Maryland.
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