Tag: NCAA

The Hypocrisy of College Sports Leaders and Pay for Play: Why Minor Leagues Aren’t a Substitute

On By Frank the TankIn Big East, Big Ten, College Basketball, College Football, Sports741 Comments

Let me upfront: I’m an unabashed free market capitalist. I’ve never been bothered by TV contracts, conference realignment, ticket prices, rising salaries for coaches and players, sponsorships and the multitude of other financial issues in pro and college sports that fans generally complain about at face value (but then turn around and feed that money monster by continuing to watch games). At the same time, I have long given up the delusional notion that college athletes (at least in football and basketball) are somehow still pure amateurs. We crossed the proverbial bridge of top college conferences being semipro leagues a loooooong time ago. Finally, I’ve generally supported how Big Ten commissioner Jim Delany has led the conference in exploiting new revenue opportunities and expansion (as long as we can forget that whole “Legends” and “Leaders” debacle).

So, I have no issue at all with money flowing through college sports and institutions profiting from high profile teams. Let’s stop pretending that it’s (a) not already happening at a rate on par with the pro leagues and (b) inherently a bad thing. What I have a massive problem with, though, is that this money isn’t flowing at all to the people that are generating all of this revenue. I’m a firm believer that people should be compensated in accordance with their free market value*, and in today’s world, college football and basketball players at the top level aren’t getting paid that way.

(* Note that I don’t look at over-compensation or under-compensation in absolute dollars in the way that much of the populist public likes to do. LeBron James, for instance, is a clear example of someone that is underpaid. If there weren’t the artificial restraints of the NBA salary cap and collective bargaining agreement, he would be making much more than his current $19.07 million salary. That doesn’t even take into account the fact that he’s the rare athlete that can single-handedly increase the value of a franchise by hundreds of millions of dollars and sellout all arenas that he plays in. Even though LeBron’s salary for a single game (much less an entire season) is more than what 99% of American households earn, he is still underpaid in comparison to what his true value is in the marketplace. In contrast, there are minimum wage earners that are making more than what the free market would dictate if that artificial floor weren’t in place, so they would arguably be overpaid.)

With the “pay for play” issue not going away in college athletics, Jim Delany stated that he would like to see football and basketball players be able to sign with leagues directly out of high school in the same way that baseball players do. From ESPN.com:

“Maybe in football and basketball, it would work better if more kids had a chance to go directly into the professional ranks,” Delany said. “If they’re not comfortable and want to monetize, let the minor leagues flourish. Train at IMG, get agents to invest in your body, get agents to invest in your likeness and establish it on your own. But don’t come here and say, ‘We want to be paid $25,000 or $50,000.’ Go to the D-League and get it, go to the NBA and get it, go to the NFL and get it. Don’t ask us what we’ve been doing.”

What Delany states isn’t necessarily wrong conceptually, but there are tons of issues from a practical standpoint and he’s ultimately being disingenuous and further exposing much of the hypocrisy of college sports:

(1) The Interests of the NFL and NBA Ultimately Rule – The power brokers in college sports can complain all that they want, but the NFL and NBA need to be convinced that it’s better for them to pay for and build minor league systems on the scale of Major League Baseball. I’ve seen plenty of arguments that the NFL and NBA could expand create such systems, yet it’s hard to see why it’s better than the current college model from their perspective. Unlike baseball, the NFL and especially NBA have long had a greater need for their athletes to come into the league as ready-made stars and that’s only exacerbated in this social media-driven world. Such star power simply isn’t incubated well in minor league settings at all (as seen in baseball and hockey). College football and basketball provide vehicles where sports fans are introduced to top players on a first name basis and can step in immediately at the next level.

Plus, lest we forget, the NBA tried the “direct from high school” route not too long ago and the results were pretty abysmal. Too many high school players were jumping into the draft that weren’t ready, which meant that (a) lottery slots that used to go to well-known college stars were being taken up by unknown (at least to the general public) speculative draft picks based on raw athleticism with little regard to skills and (b) on the flip side, other high school players that would have been aided by some college experience got drafted lower than expected or not at all and ruined their NCAA eligibility. The NBA wants nothing to do with going back to that model and, in fact, the owners would have pushed for a 2 years out of high school age minimum requirement (instead of the current 1-year standard) in the last collective bargaining agreement negotiations if there weren’t so many other fundamental salary and revenue-sharing issues to deal with. This gets to the next point…

(2) Players Need to be Protected From Themselves – On the one hand, it would be easy for a free marketer like me to try to apply real world concepts to the realm of sports to state that players and team general managers take risks with respect to the draft and then they need to live with the consequences. However, on the other other hand, that real world free market application fails because a draft is specifically not the free market. In fact, it is probably the most directly anticompetitive behavior that professional sports league participate in that they’re only able to get away with due to antitrust exemptions. American high school graduates aren’t free to negotiate directly with any team that they want to play for. Instead, a draft provides a finite number of spots in a predetermined order, which is the antithesis of a free market.

This means a “college or pro” choice isn’t exactly that simple. What Delany is suggesting is that a top high school prospect should be put into an “all or nothing” decision when he’s 17 or 18-years old: either he strikes it big in the pros or he completely loses out on a college scholarship, with very little in between. There are very few professions where this is the case. A software programming prodigy can try going to a startup firm out of high school, but if that startup fails, he or she can still go get a computer science degree or work at another company. That’s not how it works in football and basketball where you have one shot if you’re lucky. How many of you here would have had the emotional and fiscal maturity to make that type of decision at that age? Furthermore, how many of you would be able to make a mature decision if you were born into an impoverished environment with no access to a college education otherwise (like a disproportionate number of top football and basketball players)? What if you had family members that were leaning on you for financial support? What if you hired an agent that invariably overinflates your draft value (which played into your decision to enter to the draft)? When I see comments from fans to the effect, “These are decisions that these guys need to live with and they can do something other than sports if they don’t get drafted,” I believe they’re failing to see the context in which such decisions are made along with, in most cases, making that judgment from comparatively more comfortable catbird seats (whether it’s being older or living in a middle or upper class environment where the fallout from making a mistake in life is relatively mild by comparison).

The upshot (and once again, we saw this with the period of high school players going directly to the NBA) is that there are a whole lot more people that submit themselves to the draft prematurely (with devastating consequences) than there are guys that are truly ready. It would be one thing if only the Lebron-type talents would enter into the draft (in which case, allowing high school players into the draft would work), but we’ve seen firsthand that this simply doesn’t happen in the real world*. There are too many high school prospects that get bad information about their draft stock or are pressured into making money immediately to their detriment. That leads to the next issue…

(* Similarly, if NBA and NFL general managers would only draft LeBron-type talents, then having high school players going directly to the pros would work efficiently. As noted earlier, though, the problem is that those GMs then have to rely their draft analysis almost solely on raw athleticism, which leads to a much higher bust rate and a poorer quality product to watch on the field or court for fans.)

(3) The NCAA Needs to Provide a Safety Net for Players – If the NCAA sincerely believes that high school players need to be able to go directly to the draft, then the organization can’t turn around and punish such players (AKA taking away their college eligibility) for utilizing all of the tools and resources at their disposal to make a fully informed decision that will impact them for the rest of their lives. Jim Delany mentions players hiring agents and training firms like IMG, which is all well and good, but then the NCAA will take away their eligibility once they receive any agent benefits. A solid and reputable agent (not a guy off the street or, even worse, an emotionally invested family member) can probably give a player the most realistic analysis of anyone about draft position and long-term earning potential, yet the NCAA (via its rules regarding agents) is forcing athletes to make an all-or-nothing decision on eligibility before he can even receive that analysis. That’s not exactly equitable, particularly when the athletes are the ones in a much more vulnerable position compared to the NCAA and its members.

As a result, colleges ought to reevaluate its eligibility rules completely if it’s being sincere. Players ought to be able to hire agents freely, submit to drafts and play again in college if they fail to get drafted (or even choose to go to college if they get drafted in a lower position than what they wanted). Colleges turning their backs on these players would be wrong even if there weren’t billions of dollars at stake, which ties to the next point…

(4) Delany’s Money Flow is Backwards – Let’s look at the budgets of two sports teams:

BUDGET A: $124,419,412

BUDGET B: $500,000

If you were to plop down those figures in front of anyone that has the basic skill of knowing which number is higher, one would logically assume that the team with Budget A has a lot more money to pay players than the Budget B team. Well, Budget A represents the expenses of the Ohio State athletic department in 2012. Meanwhile, Budget B represents what used to be the annual operating cost of each individual team in the defunct NFL Europe, which was the minor league system that the NFL had run until 2007. A major difference on top of this disparity is that Ohio State brought in $142,043,057 in revenue (a profit of over $17.6 million). Meanwhile, NFL Europe was shut down since it was still losing money at the bare bones cost of $500,000 per team (which translated into a grand total of $3 million in costs for the entire 6-team league in 2007). To put this into context, the NFL minimum salary under the current collective bargaining agreement is $405,000. The last 8 bench players on the Bears’ depth chart make more than what was spent on the entire NFL Europe operation… and the NFL still lost money on it!

Call me crazy, but when Jim Delany states that the players should be going to minor leagues to get paid, he seems to have the money flow backwards. When the NFL itself isn’t willing to spend to fund an entire minor league system that costs less than the salaries of 8 bench players making the league minimum, you can see pretty clearly that the money isn’t there. The NBA D-League is run on a similarly shoestring budget. In contrast, the colleges are the ones seeing a massive revenue flow off of these young players, so it’s disingenuous of university leaders and conference commissioners to attempt to make the claim that the minors are where they ought to receive salaries. Texas A&M itself stated that it garnered $37 million worth of media exposure in connection with Johnny Manziel’s Heisman campaign last year, so one can imagine the financial impact of a national championship (or even better, the Heisman Trophy/National Championship combo that Cam Newton delivered to Auburn in 2010 – see Charles Barkley’s comments about how $200,000 that may or may not have been paid to Cam by boosters was a bargain) for a school.

So, sure, if colleges are willing to take reduced or no revenue for football and basketball in the same way that they are for baseball (where even the most elite programs make a fraction of their football and basketball counterparts), then I could see this argument from Delany sticking. However, let’s not be naive to think that there is a vastly different playing field for football and basketball in reality.

Now, I realize that there are Title IX, employment and other issues that come into play in the event that colleges start paying athletes. It’s not as easy to institute as most supporters of the concept would like it to be. However, that doesn’t mean that we should allow colleges (even if we love them as our alma maters) to get away with such blatant hypocrisy toward money. It’s time to ditch the faux amateurism and either go all in on college sports being a massive money-making enterprise or take a Division III approach.  If that means paying every athlete (from members of the football team down to the women’s water polo team) in order to comply with Title IX, then that’s a heck of a lot better than not paying anyone. Once again, I have no issue with the money flowing through college sports at all. The only thing that I want to see is that it flows down to the people that we’re actually cheering for as fans.

(Image from USA Today)

The Real Economic Reason for NCAA Tournament Expansion: Avoiding a Pay Cut

On By Frank the TankIn Big East, Big Ten, College Basketball, Illinois Fighting Illini, Sports101 Comments

Let me preface this blog post by saying that I personally loathe the idea of the NCAA Tournament expanding to 96 teams.  I believe that it will ruin the pace of the event and render an already devalued 4 months of the regular season into a pure seeding exercise like the NBA or NHL.  When NCAA Tournament expansion has been suggested before, I quickly put it down as a short-sighted CYA measure for coaches.  Uber commenters Richard and Adam have provided some good points in support of NCAA Tournament expansion, but it still makes me want to vomit at an emotional level.  I’d rather have Hue Hollins officiate my pickup basketball games or watch the final scene in LOST consist of Jack, Locke, Kate and Sawyer sitting in a diner with Journey playing in the background.

Big Ten commissioner Jim Delany, who has been an outspoken critic of NCAA Tournament expansion, stated yesterday that a super-sized tournament in the future was “probable.”  The NCAA followed that up with confirmation today that it felt that a 96-team tournament would be the “best fit” for the event and then proceeded to outline a clusterfuck proposed schedule with the first round still starting on Thursday but the third round would be played on the following Tuesday and Wednesday.  Exactly why the first round wouldn’t start on the Tuesday after Selection Sunday and then keep the same scheduling for the rest of the tournament as it is today is apparently beyond my pay grade.  There is only one possible explanation as to how a group of presumably well-educated people could come up with this completely illogical scheduling format: the chronic.

The common perception and what I had long thought is that this is purely a money grab by the NCAA, which can’t wait to fold the ho-hum NIT (which my Illini failed to win this year) that it now owns into a new first round of the NCAA Tournament that will draw a lot more revenue.  Certainly, I can appreciate the potential financial aspect of an expanded tournament.  Most of the readers of this blog know that I’m a “follow the money” type of guy almost to a fault when looking at sports decisions.  Still, I was perplexed by how the NCAA seemed to be jumping at the chance to risk killing the proverbial golden goose with such a drastic and almost uniformly unpopular change.  There just seemed to be no good reason for it other than another network like ESPN coming in with an offer to the NCAA that was over-the-top to the point where the organization would whore itself.  Then, as I was eating an Al’s Italian Beef sandwich (which you should always get dipped) at lunch today and perusing a copy of the Chicago Sun-Times that was left on the table, I came across the following quotes from a prominent college basketball voice that finally illuminated a legitimate and justifiable financial reason (other than just trying to make more for the sake of making more) why the NCAA would be doing this:

On the proposed expansion of the tournament: ”The expansion has absolutely nothing to do with the sport of basketball. It has to do with the economics of the NCAA and its broadcast partner CBS. Because this multiyear contract was backloaded at the end, CBS is looking at losing probably a billion dollars during the remaining years [2010-13] of the contract.

”Surprisingly, the way the contract was written, the ‘out’ for that last three years belongs to the NCAA, not CBS. I can assure you if it was CBS’ ‘out,’ they’d be long gone. The reason it was the NCAA’s ‘out’ was because everyone assumed the rights fees would continue to increase. So the NCAA said, ‘OK, we’ll make it a long-term deal but in 2010’ — which seemed like 100 years from when the deal was signed — ‘we want the right to opt out and see what the financial landscape is like.’

”Now they’re finding out that what CBS is paying this year and will continue to pay through 2013 is far more than any other suitor would pay. The only way the network can possibly offset those losses is to have more inventory to sell. So the expansion of the tournament would allow the rights-holder to cut down on the losses.”

On ESPN taking over the tournament: ”They’re the one guy who wouldn’t have to be covered by all of [the conventional network revenues] because of the monthly [cable-share] charge they get from viewers. Obviously, it would be an enormously prestigious property for ESPN to hold. But they have no reason to take CBS off the hook financially.”

On the NCAA and future rights fees: ”The basketball championship generates over 90 percent of the total gross revenue of the NCAA, which has 86 other championships to fund. If they were to take $300 million less for the men’s tournament, how would they afford to pay for those other championships and maintain the reimbursements back to the schools that participate? That’s why tournament expansion is being discussed. This has nothing to do with the betterment of the event.”

Those quotes came from an interview with former CBS college basketball analyst Billy Packer.  Now, I personally think that Packer is a first-ballot member of the Douchebag Sportscaster Hall of Fame, but also believe that he’s a straight-shooter and on point here.  It suddenly all made sense to me.  The NCAA isn’t really expanding the tournament in order to make more money.  Instead, the NCAA is expanding the tournament because it’s the only way that it can continue to make the same amount of money that it’s making now.  This is all about avoiding a reduction in TV rights fees in the next round of contracts if the NCAA maintains the current 65-team format.  Other news stories have noted that the current NCAA/CBS deal is backloaded where there are escalating payments starting this year through 2014.  It was also believed from the very beginning of the current contract in 1999 that CBS had wildly overpaid for the rights to the NCAA Tournament.  No one can be surprised that CBS is losing a lot of money on the NCAA Tournament, as well.  Almost all sporting events on over-the-air networks, even the highest-rated ones such as NFL games, are “loss leaders” where the networks lose money on the games themselves but use them as vehicles to promote other more profitable shows.  That’s a huge reason why sports programming continues to move en masse to cable networks like ESPN since they are able to take advantage of the dual revenue stream of cable subscriber fees on top of traditional advertising (as Packer noted in his interview).

So, I’m buying what Packer is arguing: the NCAA knows that CBS is paying way over market price for the tournament and losing a lot of money, meaning that expansion is necessary in order to simply maintain the level of revenue that the NCAA receives now.  Such revenue is critical since it funds virtually everything else that the NCAA does.  If the NCAA could come out and say that to the public, then I think that sports fans might at least have a better understanding of the situation and not believe that it’s completely about greed.  Of course, the NCAA can’t do that because it would compound the very problem that it’s trying to avoid – the last thing that it would want to do is admit that CBS is overpaying for the tournament since that would guarantee that no one else would ever pay anything close to that level in the next contract cycle.

I still don’t like it, but if the NCAA Tournament expands, at least I’ll understand why it had to happen.

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

(Image from al.com)