Let’s be crystal clear: the days of amateur athletics are over. By the end of 2025, college athletes will have at least two methods of capitalizing monetarily on both their skill and marketability: (a) name, image and likeness (NIL) opportunities where the athlete can receive sponsorships and endorsements and (b) revenue sharing, which will be more significant in moving NCAA athletes into the professional ranks.
The NIL landscape continues to be the wild west, where athletes can sign individually negotiated deals with donor-supported “collectives” as well as businesses. Revenue sharing, however, presents different issues as it involves paying athletes directly from the college or university, effectively turning them into de facto employees.
For purposes of this article, we will focus on revenue sharing as there is very little that can be uniformly stated and discussed about NIL, given the individuality of the deals.
How NCAA revenue sharing was created
For background, the advent of revenue sharing results from several lawsuits filed by former college athletes against the NCAA—Carter v. NCAA, Hubbard v. NCAA and House v. NCAA. The cases were based on plaintiffs’ claims that the NCAA’s effective monopoly on college athletics, its control of TV markets and its rules preventing athletes from capitalizing on their own names, images and likenesses violated antitrust law. The plaintiffs sought both injunctive relief as well as “backpay” for their time as college athletes.
On Sept. 26, 2024, the parties to all three cases submitted a proposed settlement of the matters for consideration by the U.S. District Court for the Northern District of California. On Oct. 7, Judge Claudia Wilken issued preliminary settlement approval. There is currently a deadline for objections and claims to the proposed settlement set for Jan. 31. Provided these are all resolved, the settlement will likely be finally approved at a hearing on April 7.
More UB: Here are the 20 most lavishly lucrative athletic programs
Generally, the settlement terms provide $2.78 billion in back pay to former college athletes, with the majority allocated to football and men’s and women’s basketball. More significantly, going forward, the settlement provides a 10-year revenue-sharing plan for current and future college athletes where up to 22% of the revenue earned from media rights, ticket sales and sponsorships (with a cap of $22 million) can be shared with the athletes.
Potential issues with the settlement
On its face, this may appear to be a neat and tidy way to settle issues surrounding college athlete pay. But the reality is that this settlement, if approved, will create a myriad of issues that schools will need to deal with, including, but not limited to:
- Title IX requires that schools must treat male and female athletes equally. But the majority of revenue sharing will likely be allocated to football and men’s basketball because of the disproportionate amount of revenue generated by those sports.
- College athletes may now be considered “employees” of the university, which raises issues of unionization and collective bargaining.
- Athletes may end up quitting or being forced out of their sport by injury or other circumstances, which means these revenue-sharing agreements likely need to be renewable annually.
- Approximately 190,000 athletes compete at the Division 1 level. Even if only a quarter were eligible to participate in revenue sharing, that would still be 47,500 athletes. Creating contracts that govern the relationships between each athlete and their school, which are renewable annually, is an incredibly labor-intensive feat.
Preparing for the new era
It would be absurd to believe that there are not going to be voluminous disputes based on these revenue-sharing agreements or revenue-sharing arrangements more generally. One need only look at the history of the contentious relationships between the NCAA, schools and athletes to know that a tidal wave is coming.
While this is a scary thought for college and university legal, athletic and compliance departments, a great deal of it can be mitigated by proper preparation, scalable processes and consistency of treatment of the athletes. But this remains a lot of work.
Regardless, April 7 is rapidly approaching and the rubber will meet the road this year. Burying your head in the sand is not a solution.
A first step in preparation is creating form contracts that can be used across the board for athletes. Uniformity helps prevent allegations of bias. Uniformity also creates scalability as athletic/legal/compliance departments become more familiar with the provisions and they are better able to act on complaints.
Finally, an ironclad arbitration provision that is fair and equal to all athletes is integral to ensuring disputes can be resolved quickly and fairly for both the school and the athlete. These are just some basic steps that will assist colleges and universities during these very interesting times.
