There will be no new release of an EA NCAA Football game this year. The man most frequently blamed for this is a former UCLA basketball star named Ed O’Bannon, who had the temerity to sue the NCAA and EA for using his image without asking permission and without negotiating to pay for it.
The game was built on an elaborate wink-and-a-nod version of the truth. Everyone knew the game was based on real players but because their names were hidden from view,1 and because the player renderings were deliberately inexact, the athletes were supposedly not “in” the game.2
As evidence of the charade became too strong to bear, EA and the NCAA both faced a choice. They could act like a normal business selling a valuable product and negotiate a fair payment for the product’s inputs, or they could stop making the product. EA and the NCAA diverged on this. If it could, EA would gladly, tomorrow even,start giving a cut of the licensing fees it pays to the athletes instead of the NCAA, and get the game back on the market, using players names and making the product better as a result. But the NCAA took the other path: It chose to cancel its involvement in a successful, well-loved commercial product, under the idea that canceling the game was “protecting” athletes from commerce. As NCAA president Mark Emmert testified: “It seemed inappropriate that we be in that enterprise if it was controversy surrounding it, so I, with my staff, said at the first opportunity we have, let’s extract ourself [sic] from this relationship.”
Ed O’Bannon didn’t kill the video game. Concerns about commercialism did. NCAA Bylaw 2.9 (“the Principle of Amateurism”) states, among other things, that “student-athletes should be protected from exploitation by professional and commercial enterprises.” In the O’Bannon litigation, there was a critical moment of the trial where U.S. District Judge Claudia Wilken, faced with evidence of massive commercialization of athletes by the very NCAA member schools that give them scholarships, finally zeroed in on the crux of the issue.
Wilken: “Back to the first part, what—would the exploitation ... that they would be student athletes are—need to be protected from exploitation by commercial enterprises.”
Emmert: “Yes. So ... the fundamental notion is that you—you don’t want to have student athletes, amateur student athletes, be in a position where they are pitching for—for products and for commercial interests and being—being essentially pitchmen for various products.”
Wilken: “Okay. So maybe you don’t want that, but do you consider that to be exploitation of them? Or is it just something you don’t want to be happening?”
Emmert: “The—when this—when this rule, again, has been discussed by the membership, the answer to that would be both.”
Wilken: “You think it’s exploitation of them personally.”
Wilken: “It’s harming them in some way.”
Wilken: “What would that be?”
Emmert: “The assumption is that by providing them with a—again, conversion into—into a professional athlete, that they are no longer a student athlete; they’re not part of an academic environment; they’re not in a position to gain the advantages of being a student athlete. And being a student at that university there, they’re then not avocationally but vocationally in order to make a living off of—off of that process.
Wilken: “And that is what you consider exploitation of them.”
This exchange highlights something we rarely acknowledge, namely that there are at least two distinct criticisms of the way the NCAA runs college sports. One is that the NCAA is too commercial,3 too much like other professional sports, and that college sports would be better off if they were run closer to the way club sports run—no major television contracts, low (if any) coaching salaries, and certainly no athletes receiving pay in excess of the current scholarship (or perhaps a small stipend to cover incidentals).
The second is a very different critique: that the NCAA should be as commercial as the market wants (which is probably a little bit more commercial than it is now, but not that much), but that in that effort it cannot deny its athletes access to the same market system of compensation that every other participant in the enterprise enjoys. I like to call these two views of the world Team Reform and Team Market, respectively.4
Rarely in coverage of the challenges to the NCAA’s business model is this distinction made. Critics like Amy Perko of the Knight Commission and Andrew Zimbalist of the Drake Group are mentioned in the same breath as an antitrust lawyer like Jeffrey Kessler or an economist like me. (Disclosure: I was paid to work on Ed O’Bannon’s case, and I have done paid work on other plaintiffs’ cases against the NCAA, including White v. NCAA, a class action from 2006 that sought to allow schools to pay full cost-of-attendance scholarships. I’ve also done pro bono work for other athletes’ cases. But this article was written entirely on my own time, was not solicited by or paid for by any client, and is not intended to represent the views of anyone but myself.) But other than a common dislike of the current system, these two groups have very little in common. They have extremely different views of how the world works, and they have very different hopes for how the world will be reshaped once the NCAA stranglehold over college athletics is finally loosened. Indeed, the fact that the Knight Commission came out against the recent efforts of CAPA to unionize at Northwestern is telling in this respect.
Both camps see skyrocketing spending on recruiting-qua-training facilities and head coaches (most of whom were content to work in the same field for far less pay a decade ago5) and say there is something wrong with this picture. But at this point, the two camps diverge. To Team Reform, the answer to skyrocketing expenses is (a) to place collective controls on those expenditures, much in the same way athlete compensation is controlled and (b) to actively reduce the incentive to spend money by de-commercializing the product.
In Team Reform’s words (in this instance, those of the Knight Commission), the goal of reform is to emphasize “academic values in an arena where commercialization of college sports often overshadow[s] the underlying goals of higher education.”
Recognize what that implies: De-commercializing a product means making it less desirable to consumers. Sometimes it seems like what Team Reform really wants is not just to redirect the profits from college athletics to academia but to actually reduce those profits, by lowering consumer demand for college athletics altogether. To some, fewer games should be televised, even though networks think that consumers want more games and those networks are willing to pay for the broadcast rights. To others, stadiums are getting too large and tickets too expensive, even though in most cases those facilities result in higher revenues and fans are willing to pay those high prices to attend games. Some argue that scholarships should be done away with and we should return to a simpler world (circa never!) when big-time college sports were played purely for the joy of competition. One colleague of mine calls this “trying to put toothpaste back into a tube it never fit into to begin with.”
I think the theory behind de-commercialization is that if the product isn’t selling quite as well, there will be less incentive for schools to provide the product at any cost, and as a result the economic pressure to pay more for coaching, facilities, and even players will decline. As will, goes the theory, the incentive to invite in athletes unable to perform academically or to provide them with phony educations designed to keep them eligible just so they can continue to generate revenue through athletics. At core, it is rooted in the idea that money itself is a corrupting force to academia and that absent the lure of filthy lucre, the administrators of college campus would return to their quasi-parental role of educating young men, independent of their ability to generate revenue as athletes. It is rooted in paternalism, in that assumes the problem is that the men and women who run campuses are letting money divert them from their duty to serve in loco parentis for these young, unmolded, uncorrupted men.
If you think I am exaggerating, consider this statement, made by Harris Pastides, the president of the University of South Carolina under the penalty of perjury in the recent O’Bannon litigation:
Based on my experience and observations, fans of college football and men’s basketball are loyal to and passionate about their team precisely because they believe they are cheering for students with USC uniforms on their backs that may have the opportunity to live American dream of getting drafted one day in the future, but right now are going to class, getting an education, and are not yet corrupted by money and other financial influences.
I bolded the part at the end because it galls me to think of what “not yet corrupted by money” means. Am I corrupt because Deadspin paid me to publish this piece? Am I corrupt when I work to support my family? Is Dr. Pastides corrupt when he is paid by the University of South Carolina? Is the University of South Carolina corrupt when it takes donations from its alumni? Even the “yet” drives me nuts—how many years of earning money at our craft does it take before we become corrupted by it? In America, we’re supposed to value hard work and money well-earned. Corruption is what you get from violating the law, not from earning what you’re worth in the marketplace. It literally (and I mean literally literally and not figuratively literally) outrages me every time I read this quote.
The view that bringing money into things is inherently corrupting seems to ignore the fact that, even leaving sports revenues aside, the college campuses that tend to have major sports also generate hundreds of millions or billions of dollars annually from their education businesses (you know, selling college to students6). I think education is a noble calling, but until I see university presidents and their boards living like an order of Franciscans and working for room and board and a living stipend, I won’t believe it’s not also a business. And that’s fine—after all, as Calvin Coolidge explained, “the chief business of the American people is business.”
I am not a member of Team Reform. It’s not that I don’t want to see schools provide better educational opportunities for athletes; I do! It’s just that as a member of Team Market7, I think there’s nothing wrong with universities realizing that they have stumbled onto a very successful commercial product called college sports, and going out and commercializing it. I feel the same way about commercializing college sports as I do when a school’s chemistry department invents a new, safer pesticide, applies for a patent, and seeks to commercialize that. I think commerce is wonderful, especially if it doesn’t pollute the atmosphere, etc. I also think the people who imagine a time where college sports weren’t commercialized are fantasizing, because even before the NCAA existed, deep in the formative years of modern sports (the 19th century), college rowing was paying prizes larger than the median annual wage in the United States. (As Ronald A. Smith has pointed out, in the 1870s, the winners of an intercollegiate rowing regatta on Lake Saratoga were given silver goblets worth $500—this at a time when the average annual wage in the U.S. was $300.)
Ironically (and that word might apply to every paragraph in this essay), my view on commercialism is almost identical to that of former NCAA president Myles Brand, who announced in his 2006 state-of-the-NCAA speech:
Athletics, like the university as a whole, seeks to maximize revenues. In this respect, it has an obligation to conduct its revenue-generating activities in a productive and sound business-like manner. Anything less would be incompetence at best and malfeasance at worst. That is, on the revenue side, the in-put side, athletics, like the university itself, must follow the best business practices.
Where Brand (and the NCAA in general) and Team Market part ways is when Brand adds the part of his philosophy that states with sanctimony and sonorous reverence that the practice of paying the talent isn’t part of those sounds business practices. To Brand the pursuit of filthy lucre is just fine for everyone else, just not the people the fans are paying to see.
In contrast, Team Market thinks that the value of that critical input—the athletes themselves—is being depressed below the market rate because of collusion. Collusion is when independent business come together illegally to stifle the market outcome. Our antitrust laws are designed to stop collusion; the Supreme Court has even said that the antitrust laws are “the Magna Carta of free enterprise.” But for several decades the folks at the NCAA have argued that a legal case in which they were found to have violated those antitrust laws—with respect to their past conduct regarding television—also immunizes them from laws against collusion with respect to the players. They made this same argument with respect to coaching pay and lost somewhat laughably in court, but to date, they cling to their claims with respect to athletes.
The current antitrust lawsuits (O’Bannon, Rock, Allston, Jenkins, Gregory-McGhee, and Floyd all come to mind) and even the unionizing efforts of the Northwestern football players are all challenges to the NCAA claim of immunity from the laws that govern commerce, both antitrust and labor. Team Market vehemently opposes that immunity, seeing economic competition among schools as the best solution to the current mismatch between the athletes who generate value and the institutions that capture the lion’s share of that value and distribute it to the schools, the coaches, the athletic directors, the assistant compliance directors, the shareholders of construction firms that build the lavish recruiting palaces, etc.
In contrast to Team Market and its hope for increased competition, Team Reform welcomes antitrust immunity for the NCAA and seeks to extend it. Team Reform is fueled by the NCAA’s 60-plus years of propaganda about student-athletes and the pure delights of amateurism, taking these claims at face value. The reformers then try to hold the NCAA accountable for the gap between the propaganda and reality. Where Team Market would use that gap as evidence of the need to set up a system that addresses reality, Team Reform instead demands we enact enough rules to make the PR ideal achievable.
In a recently published paper (a shorter version of which can be found in Sports Business Journal), Prof. Matthew Mitten and Stephen F. Ross explained and at the same time embodied this tension between recognizing reality and wishing to find a way to change that reality:
The steadily increasing trend of commercialization, which has been fueled in recent years by new media technologies needing popular content to attract viewers and advertisers—sports is one of the few things that millions of people watch live—should not be surprising. The United States marketplace responds to cultural forces and strong public demand for popular products such as intercollegiate football and basketball games. Thus, the commercialization of college sports directly reflects the marketplace realities of our society. ...
... we do not believe that big-time college sports are subject to the same economic forces as purely commercial enterprises like professional sports. ... Although ... athletic directors seek to maximize the commercial return on big-time sports, non-profit universities do not distribute the profits generated by commercially successful football and men’s basketball programs to shareholders. Indeed, athletic directors are typically motivated to spend surplus revenues from football and men’s basketball programs on socially worthy causes, which often include a broad range of intercollegiate sports for elite athletes that do not generate sufficient revenues to pay their costs, and occasionally subsidies for university academic and educational programs. We suggest that the desire to continue and expand these expensive programs is the real motivation for engaging in anticompetitive practices that might be unlawful if engaged in by for-profit non-sports enterprises (e.g., agreeing to a cap on the value of scholarships student-athletes receive for their playing services).
In other words, because the money is being spent in ways that Mitten and Ross think are good for society, they believe those noble goals should trump the market value of the athletes themselves. It’s not that Mitten and Ross don’t recognize the current collusive exploitation:
Third, in light of contemporary economic realities—including the NCAA’s $11 billion men’s basketball tournament television contract, the more than $100 million in annual revenues raised by several athletic departments, and coaches’ multi-million dollar salaries—the current structure results in significant economic exploitation of elite Division I football and men’s basketball players, without whose efforts these revenues would not be possible.
Nor do they fail to see how the system finds other ways to compete for talent:
Moreover, schools have increased expenditures on facilities and training for athletes designed to enhance their potential for winning games now and for a professional career later, while insisting on time commitments analogous to full-time employment as a condition of an athletic scholarship. These demands make it difficult to sustain the claim that athletes playing for nationally-prominent programs do so primarily for the intrinsic benefits of athletics participation.
Nevertheless, faced with this reality, Mitten and Ross conclude:
Professionalization of commercialized college sports is not the solution ... External regulation by an independent commission is the better solution.
Mitten and Ross propose any schools adopting the recommendations of this commission be granted an antitrust exemption, to allow them to thwart the market. These recommendations are two-fold. They start out with a nod toward improving the share of the profits doled out to the profit-generators:
First, schools should be required to guarantee at least a four-year athletic scholarship, “which may be taken away only for failing to meet minimum academic requirements, engaging in misconduct, or voluntarily choosing not to continue playing a sport.” ... Second, schools should be required to provide free medical care or health insurance for all sports-related injuries. ... Third, the NCAA should be required to eliminate its requirement that any university seeking to participate in a Division I sports competition must operate at least fourteen sports at the Division I level. ... To provide an oversimplified illustration, if a school were to determine that operating a Division I men’s basketball program serves its educational mission, and complies with Title IX by operating an equivalent women’s basketball program, for it to then be required to spend funds it would prefer to spend on English professors in order to fund Division I lacrosse and tennis programs is both unsound social policy as well as inconsistent with the NCAA’s own principles calling for athletic programs to be operated as an integral part of the educational program.
In the third “benefit” you can see where this is heading. The goal of the independent commission is to make sure the profits from sports go to non-revenue generators in education rather than to non-revenue generators in sports:
By creating an independent regulatory commission with rule-making authority to ensure that surplus revenues generated by big-time intercollegiate sports are spent on socially worthy causes, voluntary adoption of the commission’s rules by the NCAA and its member universities would justify providing their implementation with immunity from antitrust challenges.
In other words, the problem is not that the people generating the money aren’t given the right to negotiate their share of the split; it’s that, once the money has been extracted through anticompetitive conduct, the wrong people—coaches rather than professors—are getting the bulk of the largesse.
The same can be seen in yet another proposal to exempt college sports from market forces, published in the midst of the O’Bannon trial by members of the Drake Group. They write:
... since the Big Five usually earn the most revenue, many argue they should reap the bulk of the profits. But that reasoning presupposes a purely commercial model of college sports. If the games are to remain faithful to the educational setting in which they were born, all members of Division I should share in the bounty from the football playoff so as to increase scholarship support and medical benefits to all athletes. Such improvements would assist more athletes than a victory for the plaintiffs in the O’Bannon case.
Here, as with many of Team Reform’s proposals, the problem is not the exploitation of a small group of talented athletes; it’s just that those profits, once extracted, aren’t being doled out properly. At the root of this thinking is a recognition that you can’t dam only one part of a stream. Colluding to restrict the flow of profits to one set of potential beneficiaries doesn’t, by itself, ensure that those benefits stick with the host institution. And so, argue people like Alan Sack and Andrew Zimbalist in their recent Drake Group analysis, we need to build a bigger, better dam. To Team Reform, the answer to ineffective private “regulation” of the market by a cartel (i.e., collusion) is more private regulation of the market by a cartel, only now it’ll be enshrined into law. More rules; more bans; bigger, higher dams.
Team Reform seems to take its intellectual foundation from Justice Byron “Whizzer” White, an All-American football player at Colorado who went on to become a justice on the U.S. Supreme Court and who wrote a dissent in the landmark NCAA rulingBoard of Regents v. NCAA. In that case, schools like Oklahoma and Georgia argued that they should be allowed to commercialize their own television broadcasts and that the NCAA’s insistence on control of that market amounted to illegal monopolization via collusion. The schools won, 7-2, and the NCAA’s collusive activity with respect to football TV was ended. That same ruling contained the language the NCAA points to for its claimed antitrust immunity, but just as importantly, in his dissent with that ruling, Justice White argued that efforts to restrain commercial competition were actually “pro-competitive” even though he also argued that the purpose of the rules was to prevent “purely competitive commercialism of [an] ‘every school for itself’ approach to television contract bargaining.” In essence, Justice White said, we need to destroy competition to save competition.
The conclusion that Team Reform reaches from Justice White’s remarks is that opening the floodgates was an error. Team Reform thinks the world was better with one or two college football games on TV each week rather than the 30-plus on a typical weekend in the fall. (Team Reform does not have an “every day should be Saturday” view of the world, which is already a strike against it.) And Team Reform thinks that going back to that antediluvian paradise, where the NCAA could freely and widely stifle commerce, would solve all our problems8. That’s the genesis of the view that the NCAA should be granted statutory antitrust immunity, especially with respect to coaching pay and facilities spending.
Faced with the potential that its current claim to be exempt from the need to compensate athletes might fail in court, the NCAA may now see Team Reform as the lesser of two evils. As we wait to hear whether Judge Wilken will announce an important victory for Team Market in her ruling in O’Bannon, the NCAA has begun arguing how maybe Team Reform has it right and the NCAA should get an antitrust exemption to let it continue to collude on athlete pay. As Mark Emmert recently put it, an antitrust exemption would be good (in his view) because there “is strong interest in the American populace to preserve this and anything that destroys it would be met with great resistance.” Buried deeper in the story is the less savory truth, related by Daniel Lazaroff, professor of sports law and antitrust law at Loyola Law School: “you’d just be letting the people who are now violating antitrust laws do so with impunity.”
If the NCAA has antitrust immunity over coaches’ pay, it’s easy to see what would happen, because efforts like that have already happened. In the 1990s, the NCAA passed a form of price-fixing known euphemistically as the “Restricted-Earning Coach” that capped certain coaches’ pay at $16,000 per year. When this rule was imposed, some of those coaches had been earning $50,000 per year or more, which seems crazy-low in today’s market, but imagine if you were working at your job, bringing home a solid $50,000 and then your boss and all of your boss’s competitors got together and colluded to cut your pay by two-thirds. You wouldn’t much like that form of collusion, would you?
Fortunately for those who believe in market outcomes, neither did the federal courts. First a District Court and then the 10th Circuit Court of Appeal confirmed what we’d all expect—price-fixing people’s wages is illegal. Why? The court explained:
… cost-cutting by itself is not a valid procompetitive justification. If it were, any group of competing buyers could agree on maximum prices. Lower prices cannot justify a cartel’s control of prices charged by suppliers, because the cartel ultimately robs the suppliers of the normal fruits of their enterprises. .... As the Supreme Court reiterated in Superior Court Trial Lawyers, 493 U.S. at 423, “the Sherman Act reflects a legislative judgment that ultimately competition will produce not only lower prices, but also better goods and services. . . This judgment recognizes that all elements of a bargain—quality, service, safety, and durability—and not just the immediate cost, are favorably affected by the free opportunity to select among alternative offers.”
In contrast to the reformers, Team Market thinks Justice White’s dissent misses the point entirely. Justice White chides the majority for treating college sports like a commercial product, but Team Market thinks it’s silly to deny that college sports teams are businesses. The proof? Once schools were freed by the Board of Regents decision to provide that valuable commercial product to consumers, the sport grew in popularity (contrary to the doomsaying of the NCAA, which argued that college sports would die if exposed to market competition among colleges and conferences). To Team Market’s eyes, the commercial appeal of college sports is a positive feature of economic competition, not a bug in need of squashing. Unshackled from the NCAA’s collusive control, college football on TV became the proverbial better mousetrap, and the viewers beat a path to its door.
And so we come to a crossroads. We have a commercial product produced by young men who are denied (not by law but by collusion among competitors) the same access to the market as everyone else. To Team Reform, the answer is to undo the error of commercialization, to better match the “amateur” workforce by making the product itself less interesting to consumers, less commercial, less professional. To the NCAA, the goal is to stay the same—be as commercial as possible with respect to revenue, be as amateur-qua-collusive as possible with respect to costs, and maybe trick Congress into giving it legal exemption from the laws that govern commerce so it can extract as much value as possible from the athletes. Team Market simply wants to take the transformation of college sports to its logical conclusion, to let the market outcome that works so well for schools and for coaches, athletic directors, conference commissioners, NCAA presidents, large construction firms, television networks, and apparel companies also be put to work for athletes.
To Team Market, there are lots of solutions (and indeed, one size may not end up fitting all). One is an utterly free market—every team (school) is an individual actor in the market for coaches; they can also be an individual actor in the market for players. That would work—it’s how the 53 soccer leagues across Europe run things. Another option is one Dan Rascher and I proposed in a paper we published in 2000, which is that if you feel you absolutely need to have athlete-compensation agreements among teams, do it at the conference level. If the surveys you may have seen saying fans don’t want to watch paid college athletes play football or basketball are true, the market rate of compensation won’t be very high. Schools will only spend money on players if they feel it will generate value for their consumers—alumni and other fans—and that they can charge for that value through ticket prices, broadcast contracts, and requests for donations. If “buying” talent makes the talent less valuable as a revenue generator, the price for that talent will stay close to zero.
If, contrary to all evidence that fans prefer winning, it is “amateurism” that drives demand and fans will only cheer on their alma maters if the players on the field are kept in a perpetual state of price-fixed pay, then those few misguided schools foolish enough to try paying their players will suffer with lower attendance and ratings, and the schools that stay “pure” will grow in popularity. Big Ten Commissioner Jim Delany wrote under penalty of perjury:
...it has been my longstanding belief that The Big Ten’s schools would forgo the revenues in those circumstances [if players get paid more than the cost of attending school] and instead take steps to downsize the scope, breadth and activity of their athletic programs. Several alternatives to a “pay for play” model exist, such as the Division III model, which does not offer any athletics-based grants-in-aid, and, among others, a need-based financial model. These alternatives would, in my view, be more consistent with The Big Ten’s philosophy that the educational and lifetime economic benefits associated with a university education are the appropriate quid pro quo for its student athletes.
Maybe Delany is right when he implies that the Division III version of The Ohio State University football team will continue to command TV ratings and ticket revenues on par with the ratings and revenues of today, despite a dropoff in quality. I seriously doubt it—I mean seriously; I would bet my mortgage and my wife’s and my retirement funds this is not actually true—but the beauty of the solution Team Market offers is that we can actually answer the question.
Team Market doesn’t force anyone to pay anyone anything. Team Market just wants to end the collusion that currently prevents the market outcome from emerging. Team Market wants to let economic actors make choices and play out the consequences. In contrast, the schools, those who claim there is no consumer demand for paid athletes, are also the ones most reluctant to put that claim to a market test.
A market solution would cut through the rhetoric and let fans vote with their feet and their wallets. It would offer a wider diversity of consumer choices. Perhaps Big Ten fans really would stop buying tickets if pay rose above a certain level. In which case, the Big Ten will go into the market with a scholarship offer based on what it thinks its fans want (in terms of the mix of compensation vs. quality). On the other hand, perhaps SEC fans have a stronger preference for quality and they’d be OK if their schools used money to attract better athletes and thus improve the quality of SEC teams. The market can provide for that, too.
It’s not hard to imagine the SEC putting more weight on athlete quality (and thus be more inclined to pay for that talent9) and the Big Ten putting somewhat more weight on the “amateurishness” of the current scholarship-only system, if the Big Ten really thinks its fans will turn away from a product in which the players are paid some psychologically “too much” amount. By doing it at the conference level, we let self-identified like-minded schools huddle together and create balanced systems that generate regular seasons of relative parity, and then, JUST LIKE WE DO NOW, we’d let the big spenders and the small spenders meet in the pre- and post-season. In basketball, Mercer will pay less than Duke and will occasionally win anyway. Florida State football will destroy Bethune Cookman 54-6 whether the Florida State guys are paid or not.
If the issue is a consumer aversion to too much money flowing into young men’s hands all at once, the market may find that a series of deferred payments strikes the proper balance. I personally question the undertones of complaints that athletes may blow their payments on bling and tattoos, when we applaud college students for spending money on ephemeral activities like traveling to Florence for a semester of wine and museums, but as a member of Team Market, I am willing to entertain the possibility that deferred payments will bridge the gap between paying suppliers and pleasing consumers and result in the most popular market-produced product. And if so, great. In some sense, Team Market is stuck with whatever racism and classism inheres in the supposed aversion of fans to seeing athletes earn their value. But even there I think that over time, fans’ love of quality sports will wear down whatever aspect of this aversion stems from bigotry. “Fear of a Black Wallet”10 need not rule the country forever.
In a market we might also see a lot of the Team Reform goals met. On a recent airing of Meet the Press, Secretary of Education Arne Duncan, an earnest member of Team Reform, advocated for a system in which each college athlete would be guaranteed a scholarship that lasted not four or five years, but for however long it took for the athlete to complete his undergraduate degree, and perhaps even an advanced degree. Duncan wants to see this come about by a common agreement among all schools.
But Team Market thinks just letting schools compete will get us to a similar spot. For athletes who want a promise that they can return to school for as long as it takes to get a bachelor’s (or master’s or Ph.D., as Duncan suggested), that’s easily negotiated and relatively inexpensive for a school to provide, compared to a cash payment. In the world envisioned by Team Market, athletes who want to get paid in more and better education are able to do that. Team Market just doesn’t force that same outcome on the men who’d prefer to be paid in other ways. And, voila, Indiana University has taken that very step, offering a lifetime scholarship to its athletes.11 Even Mark Emmert jumped on the bandwagon, telling the Senate that athletic scholarships should be “scholarships for life.”
As a highly (and perhaps over-) educated economist, I appreciate the incredible value that can be generated from completing one’s undergraduate education, but I am deeply troubled by the noblesse oblige attitude that an agreement among those with all of the economic power to restrict what the on-field talent receives to education is sufficient as long as the education agreed upon is “good enough.” Education is great, but in this case it is also a form of company scrip, the tables scraps of the feast the system dines on regularly. The Team Market view is if that’s what you think will work in the marketplace, make the offer and see if it works. Just don’t prevent others from offering something different, like cash, and letting athletes and fan bases who value one or the other offer sort themselves out. When Duncan, however well intentioned, makes it clear he thinks a real education that leads to a degree is fair enough compensation to replace a market outcome, he too is saying his values are what matter, not the give-and-take of a market system we rely on to set value throughout the rest of our economy. No matter how benevolent the dictator, he is still a dictator.
Team Market agrees with Team Reform that one problem of the current system is that it diverts the value created by young men, many of whom are in what should be the four highest-earning years of their whole lives, and funnels it to middle-aged (and mostly white) men who coach and administer athletics, rather than to the schools who (ostensibly) own the programs. But to Team Market, the answer is not to add layers of rules on top of layers of rules, like Ptolemaics struggling against the simplicity of Copernicus’s insight in an effort to salvage a clearly unworkable system. Rather, Team Market’s proposal is the same solution we use throughout our society—to trust that the market generally does the best job of ensuring that those who generate value in society can capture that value.12
Team Reform is appealing to many Americans. Some of this appeal stems from an underlying belief that rewarding athletic prowess with money reflects a reality about America’s values that we wish were not true.13 As I watched the Senate Commerce Committee grill Mark Emmert about perceived failings of the NCAA on July 9, I heard the strains of this yearning to have the NCAA reflect an America that should be, rather than the America that is, to help create a more intellectual America where academic prowess is well compensated and sports are not.
Some, including Taylor Branch and (to a lesser extent) Sen. Cory Booker focused on simply letting athletes recognize their economic value through more market freedom, but the rest, Democrats and Republicans alike, focused on a very paternalistic vision of whether the benefits doled out by the schools were sufficient and whether too much emphasis was being placed on commerce. Committee chairman Jay Rockefeller explained his view: “This country is now so soaked in the culture of ESPN, plus I guess a couple of other stations, and watching football, baseball, world soccer, all the rest of it, I mean it’s ... I think it’s under—my own view is it’s undermining our values.” It seemed odd to hear such a suspicious attitude toward commerce coming from the Senate Commerce Committee, particularly when it also came from Republicans Kelly Ayotte and Tim Scott, all of whom were suddenly concerned with the perils of market-driven commerce.
This ambivalence about good old American capitalism fuels Team Reform and gives it an appeal that would be unusual in any other industry. The market, unfettered, channels commercial rewards to sports. This makes us look in the mirror and see who we really are, and it is not quite as intellectual as Team Reform would like. And so there’s the desire to erect higher barriers to our own expressed failings as a nation—to punish ourselves for liking sports more than school. And if that requires us to extract the market value of the true revenue generators to redirect it where we wish the market had gone, so be it.
This may also explain some of the surveys that we see from time to time, including even the one the NCAA presented in the recent O’Bannon litigation. The question wasn’t framed as “Do you prefer watching undercompensated athletes play if it means you can rationalize your love of sports as somehow more noble than you secretly know it is?” or “Does your interest in college sports increase as more value is taken from the athletes and then ostensibly used to further more noble goals?” but maybe it could have. If you dig into those survey results, there were two groups with notably different answers, far more favorable to athletes receiving a market rate of compensation if they are worth it: hardcore fans and African-Americans. The survey didn’t explore why, but it could be as simple as the fact that hardcore fans know they like watching football and aren’t too worried about justifying it as anything other than what it is. To African-Americans, it just might be a tad more salient as to who is being entertained and who is being denied rights to make that entertainment feel less crass. To the more casual, whiter survey respondents, the sense of being virtuous by funneling other people’s money to seemingly more noble causes probably trumps what little interest they have in the athletes who provide it.
But to Team Market, fixing the system should not have as its primary goal merely to shift the extracted athlete value from coaches to professors or to make non-fans feel better about academia for having higher goals than commerce. To Team Market this looks a lot like just another paternalistic path, with the idea being that exploitation is justified if the money flows to a better cause. To Team Market, the market outcome is the goal in and of itself, but Team Market believes the market outcomes are best because they reward value-generators: in this case, the players themselves and not coaches, administrators, or professors. Professors already earn money in a competitive market; they have no more right to pervert the market’s view of who deserves the money (i.e., college athletes) than does the NCAA’s director of compliance. When creative people develop a popular product, as long as that product isn’t truly opprobrious (like trafficking in stolen human organs), we should recognize that as a net benefit to society, and we should let competitive forces of supply and demand channel that money to where the value resides.
So let the money flow to where the market wants it to flow. Let schools include money (or other benefits above and beyond the current compensation cap imposed by NCAA collusion) in their offer to the talented young men who generate the profits. Let the market decide if deferred payments make the most sense. Let the market allocate talent where consumers most want it and tinker with issues of competitive balance (unlikely as they are to emerge) after the fact rather than allow them to act an outright impediment to creating a better world.
The fact that millions of people love Saturdays in the fall because there is so much good college football being played is not a problem to be solved. It is a joy to be cherished.
1 It came out in the O’Bannon v. NCAA litigation that there were tens of thousands of real athletes’ names baked into the database used to make the game itself. The Keller v. EA settlement is built around the idea that during the claims process, a large portion of the class will be able to show that in-game avatars were modeled to represent them.
2 In the O’Bannon case, under questioning by plaintiffs attorney Bill Isaacson, Mark Emmert testified that EA was contractually obligated to limit the level of realism in the avatars:
Emmert: “The issue was, of course, whether or not the realism of the—of the avatars in the game was acceptable or unacceptable.”
Isaacson: “And what was the discussion, and why was there any ambiguity that was part of that discussion? Would you explain.”
Emmert: “There’s a contract with EA, stated that they were not allowed to use name, image, or and likeness of athletes. And the question that was—that was being raised was, were they in fact doing so.”
3 To be precise, when people say the NCAA is too commercial, they usually mean the subset of the NCAA known as Division 1, and within that, the subset known as FBS (previously known as Division 1A). And they also probably mean just the sports of basketball and football. Few people think FCS football, D-II or D-III basketball, or any of the so-called Olympics men’s or women’s sports are “too commercial.”
4 There’s probably a third major body of criticism that says the NCAA would be fine if they just had a Vice President of Common Sense who could vet all the picayune rules and weed out the patently stupid ones. Both Team Market and Team Reform have a common ally in this team—call it Team Don’t Be Ridiculous, because both Reformers and Market proponents see the ridiculous excess of the NCAA as a symptom that their respective solutions would fix, whereas Team Don’t Be Ridiculous sees the symptoms as the problem, and really doesn’t object to the collusion, just when that collusion is taken to ridiculous extremes.
5 As an example, Clemson head coach Dabo Swinney recently explained that his current pay bears no relationship to the much smaller amount it took to draw him into the profession: “I didn’t get into coaching to make money—coaches weren’t making any money when I got into coaching. It’s what I wanted to do with my life, and I was able to do it because of my education.”
6 In another piece I wrote for Deadspin, I laid out one of my guiding principles: that we can know more about people’s true priorities by what they choose to spend their own money on than by what they say they value. By their budgets ye shall know them. But the good news here for the people who think America should value higher education more than football is that we do. With the exception of some notorious football factories (*cough* LSU *cough* Alabama *cough*), very few schools spend more than single-digit percentages of their budgets on sports. Even the University of Texas, which has largest athletic department budget in the country, spends only about six-tenths of one percent ($6 of every $1,000) of its total budget on intercollegiate sports.
7 I should also be clear that while I think the various plaintiffs suing under the antitrust laws are also members of Team Market, I can’t speak for their motivations. But I can say that the law they’ve chosen to sue under, the Sherman Act, is all about the powerful positive impact of market forces.
8 This is not a straw-man statement. Legal commentators Philip D. Bartz and Nicholas S. Sloey write in “The Joy of College Sports” that if only we’d listened to Justice White, and thus “[i]f the NCAA had not been stripped of its authority over television in 1984, many of the problems we see today could have been avoided.”
The same is true of my friend, Ron Katz, who recently wrote on Forbes.com that he agreed with Justice White that “NCAA is the ‘guardian of an important American tradition.’ Although, like many institutions, the NCAA is not free of hypocrisy, that’s no reason to dismantle a tradition that is cherished by tens of millions of Americans.” When I asked him, over excellent Chinese food at Jing-Jing in Palo Alto, whether he thought the world with two games per Saturday was preferable to today’s smorgasbord of choices, he wholeheartedly agreed that we’d be better off if commerce had been stifled per Justice White’s view back in 1984.
9 I highly recommend reading this article, by Steven Godfrey in SB Nation, on the culture of “bag men” in the SEC, for a flavor of why SEC fans might not be quite as enamored of “amateurism” as Jim Delany is.
10 “Between 2007 and 2010, Black men were 2.8% of full-time, degree-seeking undergraduate students, but 57.1% of football teams and 64.3% of basketball teams.” See Harper, S. R., Williams, C. D., & Blackman, H. W. (2013). Black male student-athletes and racial inequities in NCAA Division I college sports. Philadelphia: University of Pennsylvania, Center for the Study of Race and Equity in Education.
11 I will mostly restrain myself from giving you a lecture on how insidious it is to call this proposal a “bill of rights,” but suffice it to say that there is a difference between being handed an iPad and being allowed to exercise one’s right to access a market free of collusion. You can read about this offer here: “Indiana will offer what Glass calls the ‘Hoosiers for Life’ program, a lifetime degree guarantee ‘open to any former student-athlete who was eligible for at least two seasons, left IU in good standing, did not transfer and is readmitted under university rules.’ IU will cover tuition, books and fees for any former athletes who wish to return and complete their degree.”
12 Note—this is not always true. I can come up with many examples that don’t work best under laissez faire. But the core premise of our economy and our antitrust laws is that this is the right starting point —market outcomes are best outcomes—and that the exceptions (e.g., laws against pollution, the right to collective bargaining, standards setting organizations, laws prohibiting the sale of one’s body or body parts, etc.) are specially carved-out exceptions.
13 This may be based, at least in part, on the skin colors of those from whom the money is extracted and to whom it is given, but certainly not entirely; the myth of amateurism began so long ago that the college sports in question were segregated at many major sports schools. In this sense, amateurism began as a way to exclude those not already pre-excluded by racism.
Andy Schwarz is an antitrust economist and partner at OSKR, an economic consulting firm specializing in expert witness testimony. Follow him on Twitter, @andyhre. Photos via Getty and AP.