Should College Athletes Get Paid?

A fascinating case before the Supreme Court of the United States this week on whether NCAA athletes should be able to be paid or not.  There is an article in the WSJ but I feel like it’s not deep enough.

I am all for people being able to take risk to maximize their income and improve their station in life.  But, you have to recognize all the issues and trade-offs involved before you just come down on one side or the other.  This is a difficult question to answer and in most cases it is an individual question.

If I am an athlete, can I generate income off my likeness?  Off teaching on Instagram or some other platform?  99% of all college athletes cannot.  I would further wager that of the 1%, few could generate enough income to cover the costs of what really comes with a scholarship.

It bears thinking about the past and why the rules are written the way they are written.  Athletes can only earn so much money and are prohibited from going above that.  Why?  The NCAA is worried that rich alums will hire athletes and pay them a lot of money to go to certain schools.  There are scads of cases where this has happened.  Universities that violated these edicts were put on some sort of probation, or in some cases received the “death penalty” and the athletic program dissolved.

When a person commits to become a Division One athlete at a school, it is not an easy life.  They have the normal stuff regular college kids deal with along with practice, games, and travel.  They also have to endure public scrutiny on social media and in the news that regular college kids don’t have to deal with.  No reporter comments that you blew a question on your science exam but they will comment that a kid choked in the big game.  The highlight will be on ESPN that night and put into the interwebs forever.

The other thing to remember is we are really only talking about two sports.  Men’s football and men’s basketball.  The rest of the athletics programs at universities are money losers.  The NCAA men’s basketball tourney generates almost $700MM dollars.  The women’s NCAA tourney loses a few million.  Most sports don’t generate fan interest.  Even though pro golfers make a lot of dough, does anyone seriously know specific golfers on college teams?  Tennis teams?  Baseball teams?  Soccer?  Bueller?

Many think about it and say, “The NCAA generates a lot of money from the labor of the players.  The players ought to be paid.”  That’s easy logic.  Of course, the players are getting paid.  They get free room and board, free tuition, tutors they don’t have to pay for, free workout facilities and clothes and all the rest that comes with participating in a sport at a high level.

Of course, how many athletes truly take advantage of what is given to them?  How many actually go and participate in class?  How many take a major that is actually worthwhile?  Most of the time they major in communications or some easy major so they can stay eligible to play.  You don’t see a lot of male athletes from the top NCAA teams in football and basketball going on to careers at Goldman Sachs or Ernst and Young.

You might not remember Greg Anthony.  He was the starting point guard on UNLV.  He was making so much money off a t-shirt company he started the NCAA got involved.  They said he couldn’t make that kind of money.  Anthony gave up his scholarship and walked on to the basketball team.  He kept the t-shirt company and played.

Why aren’t top athletes giving up their scholarships and all the side benefits that come with them and try starting a business on their own?  Take a chance.

Of course, when we think about classical economics and supply and demand, the NCAA is grabbing the bulk of the surplus compared to what athletes get.  Coaches are something different.  With the salaries they are getting, you can see how much money is involved.

It’s not trivial.

Sometimes it is good to look at things from the extremes to try and make sense of it all.  We are seeing a silly trade-off being made right now between paying all athletes equally or not paying them at all.  It doesn’t recognize any of the economics involved.  If I play football at Alabama, why should women’s field hockey get a dime?  It’s the football program that drives the revenue.  In fact, it’s the football revenue that allows the school to field a women’s field hockey team at all.  Or a mens’ gymnastics team.

Dig deeper.  What if I am a star on the reigning national champion Alabama football team?  Why should I make the same as a freshman that signed a letter of intent last year and hasn’t played much in a game?  If I am the Heisman Trophy winner DeVonta Smith, why should I get paid the same as anyone else on the team.  Or look at Clemson.  Quarterback Trevor Lawrence will be the number one pick in the NFL draft.  Why shouldn’t he be able to maximize his personal gain?  Why should he have to share it with anyone at Clemson, or anyone in the entire NCAA football universe?

When you layer on things like social media and cryptocurrency along with the ability to create endless images of yourself and tokenize them, this gets really really huge.  Clemson QB Trevor Lawrence estimated earnings are $2MM.

Some plaintiffs think that paying everyone equally will level the playing field for athletes at schools that don’t have the prestige of other schools.   However, there is no way a football or basketball player from New Mexico State will be earning as much as a football player at Alabama or a basketball player from Duke.  Maybe the person is entrepreneurial and can figure something out but on the sheer surface, they don’t get the free publicity the Power 5 programs do.

If the SCOTUS rules in favor of the athletes, the Power 5 conferences will get stronger and get even more shots at better players.  Within those conferences, the cream will get the most.  No one will want to play football at Kansas, but plenty of people will want to play basketball there.

Some colleges like Illinois have taken the initiative.  They are developing startup companies so athletes can take advantage of their likeness.  Serra Ventures, based in Champaign, was the lead investor behind Opendorse.  If you are an athlete, you might want to go to Illinois and work with Opendorse.

I also think if a player tries to generate money on their image or on another project, they ought to forfeit their scholarship. Pay for the training table and all the benefits that they get outside of the scholarship.  Alternatively, the university could put out the exact number of the cost it takes to maintain the facilities, provide uniforms, shoes, equipment, training tables, tutors, room and board, and tuition on a per athlete, per team basis.  As soon as athletes hit that number with outside income generated because they are an athlete, they forfeit their scholarship.  There is no free lunch.  Maybe we will see a lot of them switch their majors from easy ones to entrepreneurship.  That actually would be a positive thing.

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