Written by: Gary Loope
Thursday, May 23, marked a significant milestone in college athletics as the NCAA Board of Governors and Power Five conferences reached a settlement in the groundbreaking House v. NCAA lawsuit. This resolution paves the way for a transformative shift in the landscape of college sports, as it effectively brings an end to the longstanding amateurism model that has defined NCAA for over one hundred years.
The House settlement is just the latest development in a sting of cases that have been raised since the U.S. Supreme Court’s landmark ruling in NCAA v. Alston in 2021. The Court’s ruling Alston case, regarded by many to have ushered in a new era of college sports, allowed for student-athletes to benefit from their name, image, and likeness. This ruling came in light of numerous concerns cited by the NCAA at the time, primarily revolving around maintaining competitive balance and differentiating collegiate sports from their professional counterparts.
Effects of the House Settlement
The settlement carries with it two primary changes, both of which lead to one result – athletes getting paid. First, the NCAA and schools are set to pay nearly $2.8 billion in back damages to former athletes. The current arrangement, set to take place over the next 10 years, will result in payments of over $20 million per school, per year for power five universities. Non-power five schools will be on the hook for another 30% of these payments, resulting in sentiment among the smaller programs that the settlement model puts a disproportionate financial responsibility on them given their proportional revenue share from being affiliated with the NCAA. Putting things in perspective, a $20 million payment for an athletic powerhouse like Ohio State represents just 8% of its total budget, while a comparable, but smaller school like the University of Arkansas will now be allocating 13% of its budget to these payments, a nearly 50% disparity between programs.
Second, the door for student athletes to receive direct payments for their play has been opened. As a condition of the settlement, athletic departments can begin directly sharing revenue from television contracts and ticket sales with athletes. Prior to House, schools were expressly prohibited from directly compensating their athletes, outside of educational benefits. While this did grant schools some latitude in using scholarships to cover tuition, room, board, and other related expenses, schools were restricted from engaging in a “pay-for-play” model.
The Landscape of Athlete Compensation Moving Forward
This new payment system for student athletes will come in the form of revenue sharing, wherein schools will take the proceeds from things like ticket sales and television contracts. Currently, the NCAA has placed a $20 million cap on such payments, which are able to be paid to students as soon as the 2024-25 season. What the NCAA has not provided any comment on though is how schools are to split this cap among its athletes. Many commentors are suggesting that power five schools are likely to allocate most of these funds to premier programs like football and basketball, given that they account for a majority of the school’s revenue. Others say that this could lead to increased compensation for less lucrative sports like diving and rowing.
With schools now being able to attract players, both out of high school and through the transfer portal, with promises of direct payments, the NCAA is targeting other means of ensuring competitive balance. Of particular note, the NCAA is considering removing a cap on guaranteed scholarships and decreasing roster sizes for sports like football and baseball.
While Alston and House have answered a number of questions surrounding athlete compensation, it appears improbable that the settlement will resolve all underlying issues. Ambiguity persists regarding employment status and the potential for collective bargaining. The NCAA continues to pursue an antitrust exemption from Congress, akin to those enjoyed by professional sports leagues, which would grant it greater latitude in establishing player regulations without fear of legal challenges. However, even if the NCAA were to regain enforcement authority over NIL matters, it would not signify the resolution of all of the questions surrounding NCAA compensation. Addressing concerns such as collective bargaining and transfer regulations represents just a fraction of the challenges that lie ahead.
Although there is still much to be decided, two things have been made clear – the end of the NCAA’s long-standing monopoly over its member schools and their student athletes is near.
Sources:
Natl. Coll. Athletic Assn. v Alston, 594 US 69 (2021).
Nicole Auerbach, What to Know About House v. NCAA Settlement and a Historic Day for College Sports, NY TIMES, May 24, 2024.
Andrew Brandt, Business of Football: The Supreme Court Sends a Message to the NCAA, Sports Insider, June 29, 2021.
Ben Morse, College Sports Could See a Dramatic Change. Here’s What You Need to Know, May 23, 2024.