College Sports as Corporations?

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College Sports as Corporations?
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College Sports as Corporations?

It will be raining cash in North Texas this weekend as the National Collegiate Athletic Association holds what many consider to be one of the crown jewel events on the college sports calendar at Jerry Jones’s football palace in Arlington: the Final Four. The cash is coming in from all precincts, television, ticket sales, corporate sponsorships and for the colleges who participate, it is tax free. Everyone is making a buck off of the event except the people who are the stars of the show—the “student-athletes.” While coaches rake in millions, while athletic directors may get a bonus for their boys doing so well in the tournament, the players’ are left with their scholarship, possibly a ring, but they won’t see any money from their sweat on the court.

That is the problem that the NCAA is both facing and fearing. The players want a share of the billions that are being made off of their backs. The schools and the usual suspects, like coaches and athletic directors, say that is not possible and ask, Why ruin a good thing?

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The NCAA is staring at a court case in June brought on by former players who are unhappy that the college body is making money off of the likenesses and faces and an antitrust action foiled by a very powerful sports litigator and attorney. Northwestern University’s football players got the go-ahead from the National Labor Relations Board to unionize. Former college football players Chris Walker, Ben Martin, and Dan Ahern are suing the NCAA so it will fund a medical monitoring program for former football players.

It’s similar to the class action suit filed by former National Football League players for failure to properly care for head injuries. Players and owners came up with a $765 million settlement that was nixed by a judge who felt the NFL was not putting away enough money to care for post-career physical issues caused by concussions suffered in games and practices.

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Colleges are claiming now that they cannot afford to give players compensation, what happens if the college suit goes forward and there is a similar settlement to that of the NFL? Where would the colleges and universities find that money for care of former players?

Dr. Harvey Schiller, who led the NCAA’s Southeastern Conference, said he thinks college sports will have to evolve to stay in business. Dr. Schiller sees a future where players can be compensated and colleges spin off the sports programs into a private entity.

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“The following will be a long time coming but: major conferences form a new corporation with “players” treated as pros, said Dr. Schiller. “The corporation obtains a license to use their marks, facilities, etc. Maybe each sport is a different corporation much like the European model.”

Most of the anger about the Northwestern unionization decision has come from the college industry and with good reason. The whole industry on big time sports-playing campuses needs to scramble to protect their jobs and they want to keep the student-athletes from sharing in the revenues. At one time, trading a scholarship for athletic performances made sense. There wasn’t much money available in college sports even in the revenue producing sports of football and basketball. But as TV money seeped into the industry, coaches were paid more and more money and colleges felt they needed to spend more money to get the best available coaches to recruit and instruct. State legislatures approved astronomical raises for coaches and in many states where public colleges are part of the college sports industry, the football or basketball coaches are the highest paid public employees.

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College presidents, provosts, chancellors and boards of trustees have followed the TV money and have realigned conferences based on the needs of ESPN, Comcast, or Fox. They pay the money, and the college heads dance to Disney songs.

Millionaire coaches like Syracuse’s Jim Boeheim bristle at the idea of paying college players even though the industry is flush with money from television and marketing partners. 

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The easiest solution for the college’s newest problems is to pay the players. How to do that is simple, in theory. Every player whose team appears on TV in every sport should get some sort of negotiated flat rate when a game is on national TV, another for regional TV and yet another for local. Colleges are getting paid by cable companies because the sports provide programming to fill sports networks time. The athletes, not Boeheim and his counterparts, are the stars of the show.

But a former college athlete and Olympic gold medalist sees a potential problem with that. Nancy Hogshead-Makar who is a trial lawyer and senior director of advocacy at the Women’s Sports Foundation notes that football and basketball drive the revenue train—not sports like swimming (hers). Convincing the Ivory Tower decision-makers may take quite an effort if they choose to share TV revenues.

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“Since federal Title IX rules mandate that schools have to provide equal treatment for male and female athletes, if a school would like to keep under the umbrella of a non-profit university status, it would need to treat male and female athletes the same,” said Hogshead-Makar.

College sports are not-profits. The industry has a blanket antitrust exemption that allows schools who play in college football bowl games to skip paying taxes from bowl game earnings. Yet NCAA members are getting billions from TV, and hundreds of millions alone from the Final Four weekend. At the same time, players are no longer content with missing out on their earnings. Dr. Harvey Schiller may have predicted the future for the industry, becoming a professional entity because there is too much money at risk for it not to happen.

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