Collaterall Damage

Charles Pierce is correct that the O’Bannon licensing case is a missle aimed at the NCAA. The groups surrounding the plaintiffs have admitted as much. This is litigation is as much about destroying the NCAA and ending amateurism in college athletics as it is about achieving an equitable award for damages.

But buried in Pierce’s argument (and the arguments of most pay-for-play proponents) is the assumption that college sports will be fine without the NCAA or its amateurism rules. Witness the comparisons to baseball’s reserve clause, the loss of which did little to hamper the popularity of the sport. Or this statement about the impact on non-revenue and women’s athletics:

Hardly anyone would have complained, even though some adjustments would have to have been worked out as regards the non-revenue sport athletes and the provisions of Title IX.

It all leads up to this conclusion:

If it loses the lawsuit, the effect on the NCAA’s financial structure would be profound. About which, at this point, the device has not yet been invented capable of measuring how little I care.

Pierce’s Grantland archive is filled with stories more or less positive about college football and basketball. So it seems safe to assume, at least for our purposes here, that his beef is with the NCAA and its rules rather than the general concept of elite sports on the campuses of institutions of higher learning.

This whole idea of college football and basketball merrily chugging along in a post-O’Bannon world is undermined by what Pierce omits in these three sentences:

If the court were to eventually decide in favor of the plaintiffs, it would force the NCAA to fork over billions of dollars in television revenues and licensing fees. It could also force the development of a more equitable system in which the people who do the work get a decent share of the profits. All the profits.

What the court cannot do is force colleges to have athletics programs. And whether they would if the O’Bannon plaintiffs win a crushing victory is a much harder question than many are making it out to be.

The Financial Impact

The O’Bannon plaintiffs have requested a 50/50 split of all broadcast revenue, plus an unknown split of video game revenue. Withrop Intelligence did an analysis of the impact of that 50/50 split on Pac–12 and SEC revenue. The end result is that in 2014/15, Pac–12 schools would get $16 million less in television revenue than they expect. In general, TV revenue distributions to schools would be roughly at 2009–10 levels, meaning the entirety of the college sports television rights boom would flow to athletes rather than to athletic departments. Not being reset to 2009–10 levels would be expenses like debt service on new facilities and long-term coaching contracts.

That is not the end of it. The NCAA’s television contract, which supports almost $500 million of distributions to Division I schools at this point, would also be split 50/50. If we assume the NCAA tries to run its tournaments and programs more or less as is, then the distributions would be cut not by 50%, but by perhaps 80% to roughly $100 million. Some napkin math suggests that would reduce Pac–12 distributions per school from about $3.5 million to $700,000.

In 2010–11, 19 athletic departments turned a profit or surplus without institutional support. Of them, only Kansas State ran a surplus large enough to weather losing $19 million of revenue. But that assumes 50% of television revenue going to just men’s basketball and football players is all that is involved.

This could be the first of many lawsuits seeking a share of ticket revenue, donations, merchandising, sponsorships, perhaps even a chunk of institutional or taxpayer support. Or lawsuits by athletes in borderline revenue sports, that are inching toward profitability. Title IX will only require an “adjustment” to this plan if colleges win a long, expensive and vicious legal or legislative battle over what Title IX requires. One possible outcome between the O’Bannon case, other potential lawsuits and Title IX is that some colleges would owe more than 100% of athletics revenue to athletes.

The Philosophical Impact

Let’s assume that financial armageddon is avoided, and that schools simply lose a large but manageable portion of television revenue. Reorganization begins. Schools will start by trying to trim where possible but one or both of two outcomes is all but assured: reducing spending by football and men’s basketball or cutting nonrevenue sports.

The former is less likely, since cuts there could reduce revenue even further. Obviously, some sports programs will have to go. The teams saved recently at Maryland and Cal are good examples of squads that probably cannot handle their schools getting $15–20 million less in 2014 than expected. But you can only cut so many teams. The NCAA has minimums, which could be changed, but Title IX imposes restrictions which would not easily be overturned.

Increasing revenue is another possibility, although declining attendance is already an issue athletic departments are cooping with. Where that revenue could come from is anybody’s guess. That might lead many athletic departments to the last resort: asking for more institutional support.

Those are liable to be knock down, drag out fights. Faculty and students will not be willing in most cases to contribute more money to prop up an athletic department that is even further distanced from the academy than it is now. More than a few university presidents will find themselves caught between a governing board which supports keeping or expanding athletics and a faculty and student body in opposition.

Ultimately, athletics will continue in this scenario if the return on the investment is good. Right now we know that athletics has some positive effects on the university, like increasing application quantity and quality, helping with funding, and attracting donors. At the same time, athletics competes for donations and its impact on the best applicants is limited.

There is enough research now to show that athletics has an impact, both positive and negative, on a university. What has not be researched (and likely cannot) is the sum of all these impacts on a university, and ultimately on the university’s bottom line. Pitched battles over increasing support for a now professionalized athletic department are likely to push university to quantify the total impact, and compare it to the amount invested in athletics.

If that return is found wanting, then even an athletic department that could be maintained at or near its current status might find itself defunded or shuttered voluntarily by the university. Current “haves” may find that they do not contribute enough to fend off pushing the athletic department down to something that looks more like Division II or III.

When You Assume

There are two additional assumptions made by proponents of the theory that the O’Bannon case will ruin the NCAA but leave college sports (at least college football or basketball) intact that deserve explanation. The first is that college sports has to exist. Underlying this is the belief that athletics is just too valuable to the university and that the NFL/NBA will not do their own player development.

If costs go up and benefits stay the same or go down, the argument that athletics is too important suffers. At some point, the cold hard realities of business set in and the university has to make a decision about whether it can continue to operate an athletic department. And the NFL and NBA will not do their own development as long as it makes business sense. But if colleges cannot produce enough good players or good enough players, or the professional leagues think they can make a return on the investment, they will step in.

The second assumption is despite the NCAA’s rulebook being criticized as the “best business model in the world”, colleges will still run athletics (again, at least football or basketball) in a recognizable way without that business model. College athletics cannot be both the dinosaur that ignores the incoming meteor and as the mammal poised to take advantage.

The Larger System

Unlike European sports, with integrated youth, reserve, and professional teams, or countries like China and the former Soviet nations where the government plays a large role, the United States has no real system for getting an athlete from birth to a senior professional or national team. Instead, we have a patchwork, jury-rigged, Rube Goldberg machine that manages well enough.

Compare two of the best athletes in the world: Lionel Messi and LeBron James. Since the age of eight, Messi has played for two organizations: Newell’s Old Boys in Argentina and Barcelona in Spain. Since the age of 13, Messi has been with Barca, learning how to play the same way from the same group of coaches all with the same goal: mold him into a player that can play for Barcelona’s senior team.

LeBron had a relatively stable early basketball career, playing AAU with the same core players and attending one high school. But from eight to the pros, LeBron passed through a minimum of four organizations: a middle school, a high school, an AAU team, and a professional team. If he was just a bit older, you could have added a college as well. And if he was coming through now, the odds that he plays for just one AAU team or one high school are much lower.

There’s two points to draw here. First is that college athletics sits at a critical juncture in a disorganized and volatile system. If the O’Bannon case is a wrench thrown into a part of that system, it is not designed to absorb that disruption and continue working as normal. It will break and change other things, like high school and youth sports, even the major professional leagues.

The other point is that there are a lot of potential competitors to college athletics’ cherished place as the last step of the development structure. Damage or weakness to college sports presents an opportunity to any number of organizations across its many sports to grab that slice of the pie. Colleges would still have advantages, like a built-in customer base, but are those really advantages if, for instance, the NFL wants to get involved in football for players aged 18–23? Will college even keep some of its protections like the NFL’s Saturday ban if it is fundamentally changed by the O’Bannon case?

The Last Generation

Ed O’Bannon, his fellow plaintiffs, the lawyers, and advisors in this case are absolutely not attacking college athletics. In fact, they have taken great pains to avoid excessive damage to anyone but the NCAA. Witness, for example, that schools are not being sued, and schools are not being asked to pay athletes, thus avoiding (or attempting to avoid) the Title IX issues that could set off financial apocalypse.

But once there is a final ruling, O’Bannon et. al. lose control of their carefully crafted plan. Depending on what that ruling is, it could be very easy for others to take and run with. All they need are a few sympathetic courts to expand that ruling into a system of college athletics that universities can no longer live with or afford.

The conclusion of the O’Bannon case could still be a few years and a Supreme Court decision away. The slow expansion of that ruling could be another decade. But the decision could put all sports, even the biggest football and basketball programs in dire straights within the next generation or so. If the worst case scenario comes to pass, that will mean losing a unique and valuable aspect of American higher education. But on the other hand, it will force American sports to rethink how we develop athletes, potentially at all levels.

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