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Thursday, January 26, 2017

Why Colleges Cannot Pay Athletes...

At some point during every single NCAA football and basketball season, the argument arises on every sports talk radio and television program: Should college athletes be paid?

The typical argument against is usually “the players receive scholarships”. The arguments for a pay scale for athletes include “the school is generating millions in revenue”, “the player may get hurt and ruin the chance to play professionally”, and “they are athletes that happen to be students, not students who happen to be athletes”. Both sides feel their points are valid, but if we dig past the surface, where does the answer lie?

Based on 2015 data, the NCAA reports that 1.6% of college football players will play in the NFL. Of the collegiate basketball players, 1.2% of men’s players will make the NBA and 0.9% of women’s players will make the WNBA. 8.6% of college baseball players make the MLB. 6.8% of college hockey players play in the NHL. And 1.4% of soccer players go pro. The other sports combine for next to zero. For over 98% of college athletes, this will be their highest level of athletic competition. Afterwards, they must compete in the workforce to make their living. For these athletes, the thoughts of million dollar contracts are little more than pipedreams. But they do get a leg up on their non-athlete classmates: they have the opportunity to walk away with a 4-year degree with no debt.

Consider the annual cost of attending Notre Dame (tuition, books, room/board) exceeds $61,000 and the per year cost of attending Duke is over $67,000, players at these universities will receive annual scholarships worth more than the yearly income of the average American family ($53,657 per family in 2015 based on data from the US Census Bureau). In total over 4 years, these scholarships can be worth more than a quarter of a million dollars alone. This is hardly a value to scoff at considering a vast majority of athletes will never compete professionally in sports.

The argument that universities make millions of dollars on the backs of college athletes is a common one used. They will mention schools like Alabama and Ohio State with revenues that exceed $100M per year from athletics alone. The sheer size of the number seems to validate their argument. But the logic is flawed and here is why. If you own a store and sell a book for $20, did you make $20 profit? Of course not. You had the buy the book from the distributor for $15. You had to pay rent on the store in order to sell the book. You had to pay electricity so the customer could see the book. You had to pay a fee to process the customer’s credit card. And you had to pay taxes on the money you did make. In all…maybe you made $1. This is a gross exaggeration, but the concept remains the same for college athletics. Let’s look at the Texas Longhorns athletic program (based on ESPN publishing of their 2008 fiscal year): The program took in $120.3M in revenue (ticket sales, booster donations, media rights, branding, apparel sales). In that same time span, they spent $111M (tuition for athletes, coaches/staff salaries, recruiting, marketing, etc). That leaves just over $9M. And if you actually dig deeper than that, University of Texas is one of the very few schools even making a profit.

Based on the “2004-2013 NCAA Division I Intercollegiate Athletics Programs Report” published by the NCAA in April 2014, only 20 FBS schools generate more money than they spend. TWENTY. Of the 20 schools that made money, the median profit was $8.4M. Of the 103 schools that LOST money, the median deficit was $14.9M. And only two…TWO…college sports were profitable. That would be men’s basketball and football. The median profit for football programs was roughly $3M and the profit from men’s basketball was roughly $340,000.

One last key component hardly thought of is Title IX. If you are not familiar with Title IX, it is part of the Federal Education Amendments Act of 1972. It states: “No person in the United States shall, on the basis of sex, be excluded from participation in, be denied the benefits, or be subjected to discrimination under any education programs or activity receiving Federal financial assistance” How does this apply to athletics? Per the NCAA’s website, athletic programs are considered educational programs and activities and are subject to the Federal laws under Title IX. The program requires that women and men be provided equitable opportunities to participate in sports. Title IX requires that female and male student-athletes receive athletic scholarship dollars proportional to their participation. And it requires the equal treatment of male and female student-athletes as far as equipment, travel allowances, access to tutoring, locker rooms, etc. If you were to pay college athletes, you would be required to pay female athletes as well, under Federal law.

Let’s consider a situation where the NCAA moved to a system where student athletes were paid a salary on top of current benefits (tutoring, meal stipends, room/board, and tuition). The NCAA research has shown only 20 schools make a profit on athletics and the average profit is approximately $8M per year.

Those schools making the profit are typically the powerhouse schools such as Michigan, USC, Alabama, that have the most athletic teams and most varsity athletes. If you estimate each school has 400 varsity athletes and Federal Title IX requires equal pay, these schools theoretically COULD pay each athlete $20,000 per year without going in the red. But what about the other 100+ universities and their varsity athletes? If you were to pay each of them $20,000, it would require those schools to divert funds FROM their general student fund. You would take away programs and classroom technology and research funds for students that pay tuition and are at the school to learn. Not many university presidents would likely be ok with this. The obvious answer would be to cut programs. Non-profit generating sports would vanish: Wrestling? Gone. Baseball? Gone. Gymnastics? Gone. Hockey? Gone. The only college sports that would survive are the only ones found to be profitable: football and men’s basketball. Again, due to Title IX, you would be required to offer women’s programs, likely basketball.

Not taken into consideration in the hypothetical situation above would be other possible negative ramification of collegiate sports. The top student-athletes would only flock to programs that could afford to pay them. This would further destroy any semblance of parity that still exists in the college ranks. You could potentially see programs that are not attracting top talent and are not reaping profits from athletics completely remove varsity athletics as a whole.

On the surface, one can make arguments supporting paying athletes for their contribution to universities. However, a closer look at the reality of finances and the entirety of the economic situation shows that a payment system to athletes would not but financially possible at most schools and could potentially be devastating to the NCAA sport ecosystem.