The business of college sports deserves to collapse

According to Duke University trustee and former NBA star Grant Hill, who was on the search committee that selected Baker, the NCAA needs to “realize the opportunities and overcome the challenges” facing it. The statement implies that the revenue sport business model is worth saving.
Charlie Baker, former two-term Massachusetts governor, will be the next president of the NCAA, the nonprofit sporting association formed by the trustees of 1,100 American universities and colleges. He thus will be the new man overseeing the business model for football and men’s basketball, the two sports that generate virtually all the revenue the trustees collect from college sports. That’s the business model that lets schools take eight-figure annual slices from a multi – billion dollar TV deal pie, lets bureaucrats and men who teach football and basketball earn seven- and eight-figure annual salaries, and forbids players from earning wages from schools.
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If Baker asks legal counsel to evaluate that business model for regulatory risks, however, they could easily conclude that the situation is far more dire than Hill suggests. They could look past Monday night’s Texas Christian-Georgia championship game and look past the reports that the annual TV revenue for the college football playoff might soon rocket from $470 million to $2 billion. They could conclude that the revenue sport business model has warped higher education into a corrosive shell of the societal force it could be and make a strong case for dismantling it. Why? As a lawyer who evaluates regulatory risks for clients, I see the NCAA’s business model falling on the wrong side of too many facts and too many laws to be defended.
Lessons in educational compromise
In a 2021 case, NCAA v. Alston, the Supreme Court signaled that, given the chance, it might well rule that the association’s business model violates federal antitrust laws. Those laws prohibit agreements that restrain trade in interstate commerce, and the 1,100 schools’ longstanding policy of prohibiting each other from paying a player a wage is likely a prohibited agreement.
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So consider Baker’s plight if university trustees ask him to go to Congress to renew his predecessor’s plea for new laws that would help the trustees keep the business model humming.
First, the list of facts he would probably want to avoid discussing in such a hearing is long.
He would likely not talk much, for example, about workforce exploitation. No mention of Texas A&M’s annual revenue split with its football players. Figuring the players’ cut to be the value of their scholarships, I calculate that the split is about $143 million to $3.8 million, or 38-to-1.
No mention of the University of Kentucky’s annual revenue split with its men’s basketball players. In a world where the annual owner-player revenue split for both the NBA and the NFL is approximately 1-to-1, the split at Kentucky appears to be about $55 million to $600,000, or 91-to-1.
Probably little discussion of how, in using players’ love of playing as a lever for avoiding paying them a wage, the trustees’ business model edges into the territory of stealing player souls.
University of Alabama football coach Nick Saban has a contract that pays him an average of $11 million a season. Butch Dill/Associated Press
If he travels to Capitol Hill, Baker would likely not talk much about commercial overindulgence. Little discussion of how, in 40 of the 50 states, the highest-paid person on the state’s payroll is a man who teaches football at a public university. Little discussion of UCLA, which in 2020 paid the football coach $4.3 million, the basketball coach $3.6 million, the football coach fired in 2017 another $3 million, and $1.2 million more to the basketball coach fired in 2018. The school recently announced that its athletic department is $103 million in debt.
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Under questioning in Congress, Baker would probably gloss over education. No mention of the 2018 College Sport Research Institute report showing that men’s basketball players at the nation’s 65 biggest basketball universities graduated at a rate that was 35 percentage points lower than the rate for the other men at those schools.
No mention of the Institute’s 2019 report showing that football players at the nation’s 10 top-ranked football universities graduated at a rate that was 27 percentage points lower than the rate for other men.
No mention of how the University of Georgia and its peers in the NCAA fire men who lead revenue sport teams not because players don’t do well in school, but because teams lose games. No mention of how the men who lead football and basketball teams at less prominent schools know this win-centric reality and know their current job can be a stepping stone to a job with a seven-figure salary. No mention of the three men who’ve gone from coaching at Valdosta State, whose football player graduation rate in recent years averaged 40 percent, to Southeastern Conference schools that all pay a multimillion-dollar annual salary to the man running the football department. No mention of how, thanks in part to these hiring and firing practices, educational compromise ripples through all levels of the 1,100 schools in the NCAA.
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Baker would also likely steer clear of detailing how the trustees’ business model teaches 20 million students a corrupting lesson in prime time every autumn Saturday and every March weekend. The lesson is plain: Talk about honesty and values is fine in those seminars on “Doctor Faustus,” but when billions of dollars are on the table, exploiting whomever you need to exploit to pocket the dollars is OK.
Living outside the laws
Now consider all the legislation Baker might have to convince Congress to pass to keep the business model lawful. That’s a long list, too.
In addition to some sort of antitrust law relief to protect against the risk looming in the wake of the Supreme Court’s ruling in the Alston case, the NCAA’s business model may also need protection from worker compensation laws and tax laws. The National Labor Relations Board recently reviewed complaints by USC revenue sport players that they are employees of the university, its conference, and the NCAA, and that they thus deserve fair-market compensation for their work. The Board determined that the complaints “have merit.”
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If the Board determines the players are employees and they start to receive compensation, the likelihood increases that schools will have to pay players benefits under state worker compensation laws. Similarly, the likelihood increases that football and men’s basketball revenues will be taxed under federal tax laws. Schools would owe such taxes because the revenues would be seen as earned from a business unrelated to the schools’ educational purpose. The NCAA itself would owe the taxes because it would then be seen as fostering competition among paid employees, not amateurs.
Left as is, these laws could have an astonishing financial impact on the business model. A pro-player antitrust case ruling could require the schools to allow each other to pay the players. An agreement to pay the players a pittance would likely not comply with such a ruling. A reasonable revenue split with them would almost certainly cause the total financial outlay provided to football and men’s basketball players to soar.
Compliance with Title IX, which prohibits discrimination in higher education on the basis of sex, would then require a corresponding increase in the amount of aid and/or payments given to female players. Add on the worker compensation and tax costs, and operating the model could become a fiscal impossibility.
In July 2020, the trustees sent Baker’s predecessor to a Senate Judiciary Committee hearing to ask for new laws that would exempt the business model from antitrust laws and prevent revenue sport players from ever being considered employees. The trustees told him to pick up a third law, too, if he could. That one would preempt state laws allowing players to make endorsement deals and curtail players’ deal-making freedom.
NCAA President Mark Emmert, right, met Senator Roger Wicker before the Senate Commerce, Science, and Transportation Committee held a hearing on college sports in 2021. J. Scott Applewhite/Associated Press
Baker’s predecessor did not return from the halls of Congress with the hoped-for Preemption Exemption Gift Basket Deluxe. But even if he had, and even if Congress had thrown in a Title IX exemption for good measure, trustees would still face significant legal risks connected to the business model of big-time college sports. State laws governing charitable corporations in California, Texas, Florida, and most everywhere else require trustees to operate their university in accordance with its institutional purpose — i.e., education. The laws empower attorneys general to force compliance with this requirement. The laws also set standards for trustee liability when duties are breached.
Why does this matter? The facts indicate that the revenue sport business is marked by such extreme workforce exploitation, educational compromise, and commercial overindulgence that, rather than being part of a university’s educational purpose, the sports business has arguably become a purpose unto itself that undermines trustees’ effort to fulfill their educational responsibilities.
State laws governing charitable corporations may be the legal reckoning that not even Baker’s formidable political acumen can help trustees avoid.
Baker’s appointment represents a moment of truth for trustees. Perhaps based on his experience as a college athlete and a governor, Baker can help them see that, while basketball and football are gateways to experiences that can border on sublime, operating billion-dollar leagues for these sports is not the job of higher education trustees. Educating students all the way to graduation is.
William Devine is an attorney in Silicon Valley specializing in regulatory risk. He once coached a season of basketball at Menlo College in California.