A financial game-changer in college sports?
Quick, what business makes more money than the NFL yet pays most of its workers next to nothing?
The answer is college sports, which according to a ruling handed down last month by federal judge Claudia Wilken, should indeed be recognized as a business. College sports generate $10.5 billion in revenue, the bulk of it coming from football and basketball. Less than 30 percent of that money goes toward scholarships and financial aid for players.
That may all change, following Wilken’s long- awaited ruling that the NCAA is unfairly restricting college athletes from sharing in the windfall.
The decision stems from a class-action lawsuit filed five years ago by former UCLA basketball player Edward O’Bannon and others against the NCAA and videogame-maker EA Sports. The plaintiffs claim they should have been compensated for the use of their likeness in advertising and as characters in EA Sports’ popular annual college football and basketball video games.
The games produced as much as $80 million annually for the company. EA had suspended making the games until a resolution was reached, and had earlier paid a settlement of $40 million to the NCAA. Yet, that money did not go to the athletes because according to the NCAA the athletes maintain amateur status and cannot be paid.
Wilken’s “business” distinction is an important one, because it means that the NCAA cannot prevent, as it currently does, schools from giving athletes some of the money they bring in by licensing an athlete’s name, image and likeness to companies. (EA has said it would continue making the games if licensing agreements could be reached.)
In her ruling, Wilken suggested that colleges establish trust funds that student-athletes could tap after graduation. But the ruling allows the NCAA to cap payments to players at $5,000 a year, not much more than the cost of a scholarship at many of the top-ranked sports schools.
Wilken also dismissed the NCAA’s claim that such a compensation plan would be a financial burden to the leagues. “The high coaches’ salaries and rapidly increasing spending on training facilities at many schools suggest that these schools would, in fact, be able to afford to offer their student-athletes a limited share of the licensing revenue generated from their use of the student-athletes’ own names, images and likenesses,” she wrote.
Still, current players are largely left empty-handed. The ruling would affect only athletes who enroll after July 1, 2016, at the beginning of the next recruiting cycles.