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Well, the question of paying college
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athletes for their performance on the
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field has been one talked about for many
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decades with the last five years really
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seeing even greater focus. But a recent
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judge's decision in the House versus
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NCAA case has now led to a door opening
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where colleges will be able to pay
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athletes without breaking any previous
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rules. But what does this mean for the
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future of college athletics? Pleasure to
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be joined by Rob Deji who's a lecturer
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in the sports marketing department here
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at the Wharton School and also founder
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of Iron Horse Marketing. Hi Rob. Good to
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talk to you again. Nice to speak to you
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too, Dan. All right, so let's I mean
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we've known this was it's been here for
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a little while, but in terms of this
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settlement, what was your reaction?
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Well, it it took a while for her final
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approval. The big last hearing was on
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April 7th, so everyone was just waiting.
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Is today the day? is today the day and
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finally late Friday the final approval
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came down really with minimal changes
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from that last hearing on April 7th
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grandfathering in really walk-ons
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because of the change of roster limits
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now replacing scholarship limits. So I
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I'm I'm thrilled that the new era is
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here and excited about all the people
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commenting about it and eager to see
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what happens because it's anything new
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like this is going to drive a lot of
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different changes. And for those that
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don't follow it, a lot of this will be
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based on the revenues that the
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universities are able to uh bring in uh
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for their athletic programs. Correct. In
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terms of how much they will be paying
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out. Well, the calculations in the
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settlement were definitely generated by
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that.
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There's a couple different components to
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this settlement. First, there's the
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issue of back pay for damages for
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players who participated between 2016
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and 24. But going forward, current
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athletes will share in revenue generated
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from media sponsorship and ticketing
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revenue. And that was calculated by 22%
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of the average revenue from those
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sources across the power five now power
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four conferences.
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All right. But when you talk about this,
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then there's the discussion about what
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has been and what will be moving forward
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in terms of the other parties that have
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either legally or illegally contributed
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finances to athletes. Uh it used to be,
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you know, donors under the table. I
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guess it kind of developed into
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collectives. What does this mean for
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that side of this equation? Well, I
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think that's a big open issue. Since
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July 1st, 2021,
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the NCAA removed its restrictions on
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students earning student athletes in
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particular earning money on their uh
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name, image, and likeness. What quickly
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came together with these collectives
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where essentially donors would pull
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their money to set up a company that
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contracted with the student athlete who
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would receive compensation in return for
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some voluntary days. It's really odd.
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It's I've just said something quite
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contradictory there. compensation for
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their volunteering efforts. Yeah. Right.
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They would volunteer at a a charity and
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that charity could use their name,
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image, and likeness, but they would be
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paid a million dollars for that. What
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that really means is we need a new left
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tackle and you could get that money.
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It's different than using your name,
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image, and likeness to drive uh test
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drives at a car dealership. And so,
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there's two separate types of NIL. I
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talk about this in class. There's
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there's real NIL and there is the
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payforplay NIL. So what the big question
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is what happens with that payforplay NIL
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that is really a means to exceed this
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new compensation cap which is different
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than a pro cap because that's a
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negotiated amount between a the
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management and a union. In this case
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it's a cap resulting from a legal
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settlement. So now what happens with
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this extra money? What I'm worried
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about, what people, the way I see it,
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it's as if NFL teams were passing the
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hat around the stadium because they
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wanted to exceed the salary cap that had
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been legally negotiated with the
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management in the union. In terms of the
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money though that universities will be
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able to pay out, the expectation is that
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uh the football and basketball programs
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will be the ones that see the majority
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of the money. So I guess the question
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becomes what happens to or what do the
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athletes in the nonrevenue driving
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sports get at you know probably the the
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the crumbs at the bottom of the barrel?
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Well the that is a is a issue right for
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additional legal thing legal uh
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challenges but what's worse is they
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don't just get the crumbs they may get
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worse than no payment. their sports may
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be eliminated because the athletic
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departments are going to have to come up
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with this this money to pay the athletes
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somewhere. And like any other business,
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if you suddenly have a new expense,
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you're either going to have to generate
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more revenue or cut expenses from
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elsewhere. And so, we're going to see
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schools cutting expenses, cutting staff
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in their athletic department, not having
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as much money to pay coaches, or doing
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things a little more aggressively from a
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revenue generating standpoint than
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they've never done before. jersey
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patches say on their uniforms. Uh and
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you we're already as you said seeing
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examples of that. One which some people
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may know about is from here in the
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Philadelphia area uh Brennan College uh
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eliminated all of its sports and they
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had 800 students in their school. 400 of
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them played athletics. So this is you
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know these are the stories we're going
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to see play out. St. Francis making its
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changes from division one to division
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three. We're we're talking about, you
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know, all the changes that have occurred
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in college athletics in the last few
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years with conference jumping. I think
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we're getting ready for a whole new set
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of of changes coming forward. It's far
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we have not reached the destination.
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This is one milestone in the journey.
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There are going to be so many changes
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going on over the next few years fueled
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by additional legal challenges by
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schools adapting to suddenly having to
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pay $20 million a year uh elevating
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every year 4%. Uh, and so those kind of
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things are real serious things and no
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one not there's going to be a lot of
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unhappy people. What are your greatest
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concerns then moving forward with how
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these dynamics look now and may play out
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for I think for the larger scale future
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of college athletics? Well, there's so
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many different things. The power four is
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truly going to be like a minor league
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conference now where basketball and
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football are going to be compensated.
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We're going to lose other sports. We are
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don't know what's going to happen with
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collectives. There's going to be
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significant antirust violations here
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where uh where there is a violation of a
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salary cap, but it's not a collectively
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bargain cap and there's not a collective
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bargain agreement because there's no
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union because there's no employees. So
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all those issues are still to be
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addressed. So I I everything is a
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concern because it's going to be a
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massive transformation. And when people
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ask me how when's this going to finally
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end, when's this going to end up? I
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said, I have no idea. The one thing I'm
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certain of, it's not going to end for
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years. And for the schools that are in
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kind of that that grouping of paying uh
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portions of their revenue out to
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athletes, uh realistically, they have to
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spend all of that money if they want to
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remain competitive, don't they?
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Absolutely. If you're in the SEC,
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Georgia and Alabama are certainly going
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to pay their $20.5 million. So,
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Mississippi State and Vanderbilt and uh
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Arkansas are all going to have to step
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up to stay competitive. And then it
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trickles down to the other conferences
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well as well. And if the conferences all
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came together and said, "Hey guys, this
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is too much. Let's make it $10 million."
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Well, there'll be a lawsuit on that for
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collusion because now it's a free market
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system on this. What's going to be
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interesting is that the division one no
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football schools like the Big East
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Conference, they're not going to have
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the burden of having to pay for a
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football program. So, they may have
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you're going to see Yukon and
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Villanovavva, even though they have they
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don't have top FBS uh football, they're
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going to have more resources to pay
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their basketball players than Alabama
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and Florida. But when you think about
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the structure of these teams and the
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people that they're bringing onto their
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staffs, I guess this is part of the
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reason why we're seeing the role of a
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so-called general manager for school
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football programs these days and for
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basketball programs. and you're going to
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see maybe a CEO of the athletic
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department of which the athletic
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director much like a pro team where you
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have someone handling the sports side
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and someone handling the business side
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instead of it all being rolled up into
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one like it has been historically. Are
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you feeling
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worried about the path that we could be
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headed on right now? I'm worried because
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of the essence of students competing
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against students is going away. And
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that's part of that's ingrained in the
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foundation of what college sports are.
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And it that what um John Paul Stevens in
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a 1984 trustees versus Oklahoma against
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the NCA case said said the revered
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tradition of amateurism in college
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athletics. That was 40 years ago. We
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know that is that has long gone away.
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And so at some point what I what I'm
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worried about is people say, "Well,
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let's just forget about this whole going
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to class thing." And that what a school
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is going to do is license its
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intellectual property, its name, and its
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logo, and lease its facilities, and
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you're truly just going to have a minor
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league business on the campus of the
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university, and the whole students
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competing against students thing goes
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away. Rob, great to talk to you again.
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Thanks very much. All the best. Always
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good to speak to you, Dan. Thank you.
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the Rob DeC lecturer in the sports
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marketing department department here at
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the Wharton
