Posts Tagged ‘Ed O’Bannon Lawsuit’

Every once in awhile, there’s a bandwagon worth jumping onto, so I’ve taken the Ice Bucket Challenge (you can see my son dousing me with my daughter filming here on YouTube) and made a donation to the ALS Association. I challenge all of the readers here to do the same. Also, if you haven’t done so already, please watch this great ESPN piece on former Boston College baseball player Pete Frates, who inspired the Ice Bucket Challenge. Onto some of the last mailbag questions of the summer:

This is referring to a list of “Winners and Losers” from the great Mr. SEC regarding the SEC Network. Generally, I agree with his overall premise: the SEC Network is going to be extremely successful and fill the coffers of the likes of Ole Miss and Mississippi State as well as the Alabamas and Floridas of the world. I’m actually more optimistic about SEC TV ratings than Mr. SEC (which he listed as a “loser”) since many of the SEC Network games will be ones that would otherwise have been in the old ESPN Regional syndication package or as part of individual schools’ third tier rights deals similar to how the BTN largely took the Big Ten’s old ESPN Regional syndication package to a national audience. The BTN hasn’t really impacted the national ratings of the best Big Ten games (and instead expanded the audience for lower tier games), so I’d expect the same with the SEC.

On the other hand, ESPN has been using a bit of puffery when it states that the SEC Network is “available” in 90 million homes. Being “available” is quite different than actually being subscribed to in those homes – the SEC Network could be “available” in a home but such home may not be able to receive it on a basic tier or without having to buy a sports pack. A network only gets a fee if it’s actually subscribed to in a home instead of being merely available. For example, the mothership ESPN itself is has nearly 100 million actual subscribers, so it’s getting $5.00 or more per month for every single one of those households. (That’s why ESPN is very literally the most powerful media company on Earth today, and that’s saying something considering that it’s part of the ubiquitous Walt Disney Company that has been eating my credit card over the past several months with a spring break trip to Disney World, buying Disney Princess, Frozen, Marvel and Star Wars toys for my kids’ birthdays, etc.)

To be sure, the BTN is just as guilty of trumpeting of the artificially high “available homes” number in many of its press releases. There will inevitably be a lot of comparisons between the SEC Network and BTN, but at the end of the day, they have similarly-sized geographic footprints where their networks are carried on basic cable on very high rates and then will be carried at lower rates and/or on sports packs outside such footprints. The SEC Network essentially gets the SEC back on more of an even TV revenue playing field with the Big Ten… at least until the Big Ten enters into brand new first tier/high second tier national TV deals in a couple of years that most observers believe will completely blow away any other college sports deal signed up to this point.

l received several questions about the Ed O’Bannon case, where the NCAA was found to be in violation of antitrust law for prohibiting players from receiving compensation for the use of their names, images and likenesses (i.e. video games, apparel, etc.).

My general feeling over the past several years is that the NCAA has been unbelievably and incredibly misguided and naive about student-athlete compensation issues. Regardless of fans’ feelings on either side of the debate about whether student-athletes should be paid, it continues to boggle my mind from a practical standpoint that the NCAA’s argument has essentially been reliant on tradition (“It has always been done this way!”) with an all-or-nothing zero sum approach. The problem is that once you find even isolated examples where players bring more than “nothing” in terms of market value, the entire crux of the argument breaks down in front of a judge. That’s exactly what occurred in the O’Bannon case.

Still, if the NCAA looks at the O’Bannon ruling from a rational practical standpoint, it’s actually a positive ruling for them where the judge allowed for a trust fund cap of $5,000 per year. Of course, the NCAA won’t look at it that way – it will continue to make the all-or-nothing zero sum argument on appeal because it doesn’t have any sense to take what was essentially a compromise ruling and run with it. Now, the NCAA opens itself up on appeal to the argument that even the $5,000 trust fund cap shouldn’t apply and there ought to be unlimited compensation available to student-athletes, which could very well happen with the liberal and labor-friendly U.S. Circuit Court of Appeals for the Ninth Circuit.

I’ve been fairly upfront on this blog that I’m an ardent free marketer when it comes to college sports: conferences and schools should be free to make whatever arrangements that are best for them to maximize revenue and, in turn, student-athletes should be able to seek compensation commensurate with their free market value from such conferences and schools in the same manner. (Antitrust economist Andy Schwarz had an excellent breakdown of college athlete compensation issues on Deadspin earlier this month. I’m firmly on the side of “Team Market” as opposed to “Team Reform”.) Even if you personally don’t agree with me (and based on the comments on previous posts, I know that many of you don’t), the reality is that the O’Bannon case is only the start of the college sports world heading in that market-based direction.

The Big East won’t ever end up as part of the Power 5 conferences from an NCAA autonomy perspective. FBS football is such a dominant and driving force with respect to NCAA autonomy issues that having the Big East (or any other non-football league) as part of the “cartel” is a non-starter. The Big Ten and SEC don’t want conferences that aren’t dealing with football to have any say over what are largely football-driven decisions. That being said, the Big East isn’t really any worse off than the Group of 5 non-power FBS conferences within the NCAA structure itself. The marketplace is really where the Big East can distinguish itself – the league (despite low ratings) have an excellent TV deal with Fox that pays it more for only basketball than what any of the Group of 5 conferences (including the American Athletic Conference that has the remnants of the old Big East football league) are getting paid for TV rights for both football and basketball. The Big East also has a new non-conference challenge set up with the Big Ten next season, which indicates that it is considered to be a power conference for basketball purposes. It’s not an easy world out there for leagues that aren’t part of the Power 5, but the Big East may very well be the healthiest of any of them despite not playing any FBS football.

Enjoy the last days of a “Fancy”/”Rude” summer* and be sure to take the Ice Bucket Challenge if you haven’t done so already. Only one more week until the college football season starts!

(* You won’t be able to make it through this list of top songs from each summer for the last 20 years without either laughing uproariously at or being mortified about what we were listening to back in the day. There are some badly dated duds every year, but I have fond memories of the summers of 1992, 1997 and 2007.)

(Video from YouTube)

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(Note: as conference realignment has slowed down, I’m going to shift back toward looking at some of the broader issues in the business of college sports, such as the impact of television rights, tensions between the power conferences and the NCAA, and the new playoff system. I’ll also likely get into some related pro sports angles with how the NFL, NBA, NHL and Major League Baseball are dealing with domestic franchises along with looking internationally for new markets and fans. Obviously, if conference realignment heats up again, I’ll cover it thoroughly here. For those that still need a conference realignment fix, I had a Big Ten-focused realignment Q&A last week with Off Tackle Empire and will have a different Big 12/Texas-focused one with Burnt Orange Nation in the near future.)

The notion of the power conferences splitting away from the non-power leagues to form either a new association separate from the NCAA or a different division (hereinafter called the “Super FBS”) has been percolating over the past few years. For various reasons, the talk has been intensifying lately with the settling of the conference realignment landscape and increased calls for greater compensation for student athletes beyond their respective scholarships (with the Ed O’Bannon lawsuit against the NCAA as a backdrop)*. There is already a de facto split between the 5 power FBS conferences (Big Ten, Big 12, Pac-12, SEC and ACC) and the rest of Division I schools in terms of TV and postseason football revenue, so it seems natural to many observers that a split along those lines would make sense.

(* In the interest of full disclosure, I’m personally a strong supporter of paying college athletes. While the cost of a college scholarship is substantial, the power conference athletic departments are still receiving outsized revenue gains off of the backs of football and men’s basketball players and they ought to be compensated accordingly. Now, I understand why colleges want to fight those types of payments to the death and there are major Title IX implications, as it’s likely that payments would have to be made across the board to all non-revenue sport athletes on top of the revenue generators. It’s easy to point to the quarterback whose jersey is getting sold nationwide and say that it isn’t fair that he hasn’t been compensated fully, yet should a water polo player at the same school be receiving the same type of payment? There’s no easy answer to this. From my vantage point, the inequity of the quarterback not getting fully compensated for the revenue that he’s bringing in for a school is much greater than the thought that non-revenue athletes would have to get paid, too, but I know others may disagree.)

Warren K. Zola had an excellent commentary in the Chronicle of Higher Education that outlined several potential proposals that a Super FBS division could implement that would serve both the commercial reality of college sports and improving student-athlete welfare:

  • Have athletics scholarships cover the full cost of attendance and not be capped at tuition and fees, room and board, and required books. A stipend, in the neighborhood of $3,000 per student, according to a recent study, would help reduce the growing underground compensation system for elite athletes.

  • Embrace the Olympic amateur model by lifting the restriction on college athletes’ commercial opportunities. This shift would offer any student the opportunity to secure endorsement deals or receive payment for the use of his or her name and image.

  • Create an education fund that provides continuing financial assistance to college athletes, allowing them to complete their degrees even after their athletics eligibility, and corresponding scholarship, has expired.

  • Provide full health insurance for all athletes and cover all deductibles for injuries related to participation in an intercollegiate sport. Offer full disability insurance to elite athletes, protecting them against catastrophic injuries that could derail their professional careers.

  • Allow athletes to hire agents to protect their rights, including providing assistance in evaluating scholarship offers from institutions, negotiating commercial opportunities, and navigating the transition from college to professional sports.

I believe that all of these suggestions are on the mark. The reference to the “underground compensation system” is astute and one of the largest issues that I have with the current NCAA model of anachronistic recruiting regulations on the books with haphazard and inconsistent enforcement of those terrible rules on top of them. NCAA recruiting rules are sort of like campaign finance regulations in Washington – everyone publicly votes for them on one day and then privately tries to find loopholes around them the next day. I’m much more of a full disclosure-type of person as opposed to attempting to put the brakes on market-based transactions, where I believe colleges and universities would have better control over the “underground” market if they acknowledge that it exists and provide a viable alternative that allows for athletes to take advantage of their talent to get stipends directly from schools and commercial endorsements.

The last bullet about allowing athletes to hire agents is an interesting one. There have been many prominent power brokers over the years, such as Worldwide Wes for basketball*, that have effectively taken that role, so I believe that there’s some benefit to formalizing that type of relationship. The NCAA’s agent contact rules are just as backwards with spotty enforcement as the organizations recruiting rules, so having a reactionary stance of zero tolerance simply isn’t realistic in today’s world. It’s better to get those relationships out in the open and snuff out as much under-the-table action as possible.

(* If you haven’t read it already, this GQ piece on Worldwide Wes from a few years ago is one of the most fascinating profiles that you’ll ever see of a behind-the-scenes sports figure.)

So, I see a lot of potential benefits to separating the power conferences away from the non-power conferences simply from the student-athlete perspective. Of course, the increased control and, in turn, revenue that the power conferences would see from a breakaway would be the real reason why they’d want to do it. That isn’t necessarily a bad thing in and of itself, but it also makes it difficult to draw up clear criteria as to why a school or conference would be in “regular” FBS while another one is in Super FBS. For instance, would it really benefit the 5 power conferences very much if, say, the AAC and Mountain West Conference are willing to pay student stipends, thereby qualifying for Super FBS? It would seem that the power conferences would only want to split off into a new division if they could ensure that they’re the only ones in it or else it would defeat the purpose of that split*.

(* Speaking of power conference revenue, one byproduct of the Ed O’Bannon case is that the specific terms and payment schedule of the Pac-12’s new contract with ESPN and Fox have been disclosed. Nothing is too surprising, although it’s interesting to see some of the items that we have speculated on confirmed, such as the rights fees escalating approximately 5% per year. The term sheet is here.)

Now, there’s the more nuclear option of the 5 power conferences simply breaking away completely from the NCAA that would serve as a clean revenue-based split, although I find that to be an option that guys such as Jim Delany and Mike Slive would prefer to keep in their back pockets than one that would ever be implemented. While I generally believe that many non-power conference fans overstate their influence with politicians (i.e. mistakenly thinking that they’ll step in to help them with the playoff system or taxing power school revenue), a full-scale break-off would be one of those events that could definitely spur an untenable political backlash. It might be a move that the power conferences would secretly like in the back of their respective heads, but there are too many political landmines (particularly at the state-by-state level) to realistically engage in that scenario.

The upshot is that nothing is really easy or clear here. Power conferences definitely want more autonomy, but the process of making sure that they’re truly their own group without perceived “interlopers” might be more difficult to achieve than any changes about compensating student-athletes. All of Zola’s suggestions could still be implemented in theory without creating a Super FBS Division – it’s just that the power schools and maybe a couple of the non-power conferences are probably the only ones that could afford to put them into place.

(Follow Frank the Tank’s Slant on Twitter @frankthetank111 and Facebook)

(Image from Real Clear Sports)