If I were heading off to college these days I would rethink about what I wanted to major in. Perhaps one of the liberal arts, so as to be more well-spoken at cocktail parties. Or maybe one of the hard sciences, to pursue a career in medicine or physics. Then there is always business and technology, real-world skills that should allow one to immediately transition into the working world. Wait a minute. Who are we kidding? I’d want to major in football, preferably a skill position at a Division I university. If you didn’t win the genetic lottery to play football or basketball, any sport will do. The name, image and likeness (NIL) rule will allow you to profit off of your personality and skill in any college sport. The times they are a changing.
The switch in mindset from liberal arts to sports happened this week, when the NCAA and the nation’s five biggest conferences announced that they have agreed to pay nearly $2.8 billion to settle a host of antitrust claims, a monumental decision that sets the stage for a groundbreaking revenue sharing model that could start directing millions of dollars directly to athletes as soon as the 2025 fall semester. Yes. That’s $2.8 billion with a “B.” The settlement amount is to be paid to Division I athletes who played collegiate sports dating back to 2016. The details on the amounts and timing of such distributions are not yet known. What is known is that college sports will never be the same.
It’s really somewhat amazing that the NCAA could pull off this coupe for over a hundred years, aided and abetted by the silence of professional sports leagues like the NFL, NBA, and MLB, who also utilized the free labor of college athletics to their advantage. But it’s primarily about football, the new American juggernaut surpassing baseball as our sports pastime. The one commonality of professional sports is that they are all businesses run for a profit. Colleges hid under the guise of education and non-profit status to make us look the other way to avoid eye contact with the notion of profitability. Oh, they were profitable, they just didn’t share it with the employees, better known as students. And why should they. No one was making them. Kids were living out their dreams attending Division I colleges to play football with a shot at the ultimate payday waiting for them in the NFL.
So what exactly were these schools doing with the billions of dollars of television revenue if they weren’t paying it to the student athletes? Well, for one, they used it to subsidize every other sport on campus, from men’s water polo to women’s field hockey, and everything in between. But you say surely this didn’t account for the millions of dollars in TV revenue. You’re right, building and infrastructure has taken place at the pinnacles of power, the Power 5 conference teams, where you could basically put the word “new” in front of everything, from gyms to cafeterias to stadiums. Don’t forget about the seven and eight figure coaching contracts that are handed out like junior mints, making a state university football couch likely to be the highest paid official of that sate. Remarkable.
The reason why this business model is fundamentally sound enough to attract private equity is that it is loyal to a fault, as new alumni are minted each year to add to the already monolithic fan base that can now actually pay players. Yes, you heard right. Private equity, the guys that smile at you and offer you big bucks for your company, only for you to later find out that it’s all about EBITDA and cutting costs and likely cutting out you. The foray into colleges by private equity is taking baby steps in the form of owning 10 percent of the action in return for advising a college how to proceed in the new rough and tumble world of collegiate sports. According to Tom McMillon, former Maryland basketball player and congressman who has led an association of collegiate athletic directors the past eight years, “There’s no question about it. It’s a huge quantum leap.”
This is only the beginning of the shake-out in college sports, and no one really knows where it will end up. What we do know is that colleges have long traditions and fan bases that aren’t going any. We know that student athletes are now going to get paid for playing sports and ostensibly getting an education. It’s likely that in the next few years a young high school quarterback will sign with one of the Power 5 colleges, make a million dollars in NIL money, and be paid six figures by the school to attend and play football. Not too shabby, but one must remember that that is only one person in a large pool of college students. The one advertisement the NCAA gets right is that only 1 percent of college athletes turn pro in the sport they play in college, while the other 99 percent must hit the workforce. I hope they studied hard and didn’t major in water polo.
