00:00:00
Well, the question of paying college athletes for their performance on the field has been one talked about for many
00:00:06
decades with the last five years really seeing even greater focus. But a recent judge's decision in the House versus
00:00:13
NCAA case has now led to a door opening where colleges will be able to pay athletes without breaking any previous
00:00:21
rules. But what does this mean for the future of college athletics? Pleasure to be joined by Rob Deji who's a lecturer
00:00:27
in the sports marketing department here at the Wharton School and also founder of Iron Horse Marketing. Hi Rob. Good to
00:00:33
talk to you again. Nice to speak to you too, Dan. All right, so let's I mean
00:00:37
we've known this was it's been here for a little while, but in terms of this
00:00:42
settlement, what was your reaction? Well, it it took a while for her final approval. The big last hearing was on
00:00:50
April 7th, so everyone was just waiting. Is today the day? is today the day and finally late Friday the final approval
00:00:57
came down really with minimal changes from that last hearing on April 7th grandfathering in really walk-ons
00:01:05
because of the change of roster limits now replacing scholarship limits. So I I'm I'm thrilled that the new era is
00:01:12
here and excited about all the people commenting about it and eager to see what happens because it's anything new
00:01:18
like this is going to drive a lot of different changes. And for those that don't follow it, a lot of this will be
00:01:24
based on the revenues that the universities are able to uh bring in uh for their athletic programs. Correct. In
00:01:32
terms of how much they will be paying out. Well, the calculations in the settlement were definitely generated by
00:01:37
that. There's a couple different components to this settlement. First, there's the
00:01:42
issue of back pay for damages for players who participated between 2016 and 24. But going forward, current
00:01:49
athletes will share in revenue generated from media sponsorship and ticketing revenue. And that was calculated by 22%
00:01:57
of the average revenue from those sources across the power five now power four conferences.
00:02:05
All right. But when you talk about this, then there's the discussion about what
00:02:08
has been and what will be moving forward in terms of the other parties that have
00:02:15
either legally or illegally contributed finances to athletes. Uh it used to be, you know, donors under the table. I
00:02:23
guess it kind of developed into collectives. What does this mean for that side of this equation? Well, I
00:02:30
think that's a big open issue. Since July 1st, 2021, the NCAA removed its restrictions on
00:02:37
students earning student athletes in particular earning money on their uh name, image, and likeness. What quickly
00:02:43
came together with these collectives where essentially donors would pull their money to set up a company that
00:02:49
contracted with the student athlete who would receive compensation in return for
00:02:55
some voluntary days. It's really odd. It's I've just said something quite
00:02:59
contradictory there. compensation for their volunteering efforts. Yeah. Right. They would volunteer at a a charity and
00:03:06
that charity could use their name, image, and likeness, but they would be paid a million dollars for that. What
00:03:12
that really means is we need a new left tackle and you could get that money. It's different than using your name,
00:03:17
image, and likeness to drive uh test drives at a car dealership. And so, there's two separate types of NIL. I
00:03:24
talk about this in class. There's there's real NIL and there is the payforplay NIL. So what the big question
00:03:31
is what happens with that payforplay NIL that is really a means to exceed this new compensation cap which is different
00:03:40
than a pro cap because that's a negotiated amount between a the management and a union. In this case
00:03:46
it's a cap resulting from a legal settlement. So now what happens with this extra money? What I'm worried
00:03:53
about, what people, the way I see it, it's as if NFL teams were passing the hat around the stadium because they
00:03:58
wanted to exceed the salary cap that had been legally negotiated with the management in the union. In terms of the
00:04:05
money though that universities will be able to pay out, the expectation is that uh the football and basketball programs
00:04:12
will be the ones that see the majority of the money. So I guess the question becomes what happens to or what do the
00:04:18
athletes in the nonrevenue driving sports get at you know probably the the the crumbs at the bottom of the barrel?
00:04:26
Well the that is a is a issue right for additional legal thing legal uh challenges but what's worse is they
00:04:34
don't just get the crumbs they may get worse than no payment. their sports may
00:04:39
be eliminated because the athletic departments are going to have to come up with this this money to pay the athletes
00:04:45
somewhere. And like any other business, if you suddenly have a new expense, you're either going to have to generate
00:04:50
more revenue or cut expenses from elsewhere. And so, we're going to see schools cutting expenses, cutting staff
00:04:56
in their athletic department, not having as much money to pay coaches, or doing things a little more aggressively from a
00:05:01
revenue generating standpoint than they've never done before. jersey patches say on their uniforms. Uh and
00:05:08
you we're already as you said seeing examples of that. One which some people
00:05:12
may know about is from here in the Philadelphia area uh Brennan College uh eliminated all of its sports and they
00:05:20
had 800 students in their school. 400 of them played athletics. So this is you know these are the stories we're going
00:05:27
to see play out. St. Francis making its changes from division one to division three. We're we're talking about, you
00:05:33
know, all the changes that have occurred in college athletics in the last few years with conference jumping. I think
00:05:38
we're getting ready for a whole new set of of changes coming forward. It's far
00:05:42
we have not reached the destination. This is one milestone in the journey. There are going to be so many changes
00:05:48
going on over the next few years fueled by additional legal challenges by schools adapting to suddenly having to
00:05:54
pay $20 million a year uh elevating every year 4%. Uh, and so those kind of things are real serious things and no
00:06:04
one not there's going to be a lot of unhappy people. What are your greatest concerns then moving forward with how
00:06:10
these dynamics look now and may play out for I think for the larger scale future
00:06:15
of college athletics? Well, there's so many different things. The power four is
00:06:21
truly going to be like a minor league conference now where basketball and football are going to be compensated.
00:06:27
We're going to lose other sports. We are don't know what's going to happen with
00:06:31
collectives. There's going to be significant antirust violations here where uh where there is a violation of a
00:06:40
salary cap, but it's not a collectively bargain cap and there's not a collective
00:06:44
bargain agreement because there's no union because there's no employees. So
00:06:47
all those issues are still to be addressed. So I I everything is a concern because it's going to be a
00:06:54
massive transformation. And when people ask me how when's this going to finally
00:06:58
end, when's this going to end up? I said, I have no idea. The one thing I'm
00:07:01
certain of, it's not going to end for years. And for the schools that are in
00:07:06
kind of that that grouping of paying uh portions of their revenue out to athletes, uh realistically, they have to
00:07:15
spend all of that money if they want to remain competitive, don't they? Absolutely. If you're in the SEC,
00:07:21
Georgia and Alabama are certainly going to pay their $20.5 million. So, Mississippi State and Vanderbilt and uh
00:07:28
Arkansas are all going to have to step up to stay competitive. And then it trickles down to the other conferences
00:07:34
well as well. And if the conferences all came together and said, "Hey guys, this
00:07:38
is too much. Let's make it $10 million." Well, there'll be a lawsuit on that for
00:07:42
collusion because now it's a free market system on this. What's going to be
00:07:47
interesting is that the division one no football schools like the Big East Conference, they're not going to have
00:07:52
the burden of having to pay for a football program. So, they may have you're going to see Yukon and
00:07:57
Villanovavva, even though they have they don't have top FBS uh football, they're
00:08:02
going to have more resources to pay their basketball players than Alabama and Florida. But when you think about
00:08:07
the structure of these teams and the people that they're bringing onto their
00:08:11
staffs, I guess this is part of the reason why we're seeing the role of a so-called general manager for school
00:08:18
football programs these days and for basketball programs. and you're going to
00:08:23
see maybe a CEO of the athletic department of which the athletic director much like a pro team where you
00:08:29
have someone handling the sports side and someone handling the business side instead of it all being rolled up into
00:08:34
one like it has been historically. Are you feeling worried about the path that we could be
00:08:42
headed on right now? I'm worried because of the essence of students competing
00:08:47
against students is going away. And that's part of that's ingrained in the
00:08:52
foundation of what college sports are. And it that what um John Paul Stevens in a 1984 trustees versus Oklahoma against
00:09:00
the NCA case said said the revered tradition of amateurism in college athletics. That was 40 years ago. We
00:09:07
know that is that has long gone away. And so at some point what I what I'm worried about is people say, "Well,
00:09:14
let's just forget about this whole going to class thing." And that what a school
00:09:18
is going to do is license its intellectual property, its name, and its logo, and lease its facilities, and
00:09:23
you're truly just going to have a minor league business on the campus of the
00:09:27
university, and the whole students competing against students thing goes away. Rob, great to talk to you again.
00:09:32
Thanks very much. All the best. Always good to speak to you, Dan. Thank you. the Rob DeC lecturer in the sports
00:09:37
marketing department department here at the Wharton