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Dan Loney_ It's a very uneven system
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that seems—
seemingly is playing out
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where high-level football
players, high-level basketball
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players seemingly are getting a
lot of the attention and the
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resources from that. And some of
the other athletes in other
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sports are not getting it.
- Welcome to <i>The Ripple Effect</i>,
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the podcast that takes you on a
journey through the minds of
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Wharton faculty. I'm your host, Dan Loney.
And in each episode,
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we'll be diving deep into the
inspiration behind the
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groundbreaking research that
Wharton professors have
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conducted, and exploring how
their findings resonate with the
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world today. - Well, as students
gear up for the new school year
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and fall sports start to get
back into session, we're going
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to spend some time today
exploring the dynamic world of
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athletic endorsements. Pleasure
to be joined here in studio by
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Ken Shropshire, Professor
Emeritus of Legal Studies and
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Business Ethics here at the
Wharton School. He is also
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Senior Adviser to Dean Erica
James. How are you, my friend?
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- I'm doing great, Dan, how are
you? - Well. Okay, so
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I'm doing well. But this topic
of endorsements and NIL
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obviously has taken the world
of athletics, college athletics,
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by storm the last couple of
years. We're about, I think,
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almost three years from when we
first started to hear NIL
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really hit our language. What
kind of impact do you think it's
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had in that three years, and to
the positive or to the benefit
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of the overall collegiate
athletic experience?
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It has had a huge disruptive
impact, which I don't know if
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we gauge as positive or
negative yet. It's an
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appropriate change. It's an
appropriate disruptive change
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to have dollars that are coming
into the system, to the labor
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that's produced it. And also, in
some sense, you know, you're not
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giving these student athletes
something new. It's something
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they really have the right to
that the NCAA had taken away,
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this right to make money off of
your name, image and likeness,
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which— which is sort of the
beginning of what this thing
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was. It's evolved into something
a little bit different than just
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what we think about. You
referenced endorsements. It's
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turned out to be something
a little different than what we
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contemplated it was going to be
when these conversations first
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came, came into effect.
- I'll get into the—
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what's going on at
the college level. But I think
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there's also the component I
wanted to talk to you about,
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about the expectation of what
student athletes coming from
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high school going into college
really should start to think
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about. Because it's a very
uneven system that seems—
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seemingly is playing out, where
high-level football players, high-
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level basketball players,
seemingly, are getting a lot of
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the attention and the resources
from that. And some of the other
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athletes in other sports are not
getting it. And so I think the
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perception of what a student
or what a parent should expect
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for their par— for their
student, going into this
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situation, is important to talk
about.
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That's right. And it's gonna
vary to some degree, institution
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by institution. How important
are the— especially in this
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Olympic year— how important are
some of these Olympic sports to
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a school? Like swimming,
gymnastics, whatever, which are
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not revenue-generating sports,
for the most part, anywhere. But
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they may be part of the cachet
of the school. And there may be
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a special interest in getting
some elite athletes and
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providing some extra dollars to
those recruits that are in that
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space. The traditional
places where we think about this,
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with elite football
players, elite basketball
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players, basketball men and
women— you know, those kind of
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make a little bit of sense to
people in terms of, you know, if
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there's a star player, and
somebody wants them to endorse
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something, they should be able
to get paid for that. Even with
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the Olympic sports, we start—
thought in the beginning, "Well,
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you know, these kids can go home
and give tennis lessons or
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swimming lessons. And they
should be able to get paid for
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that. Or they can participate in
these camps that are organized
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by the schools. And they should
get paid for that." This— this
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NIL space, though, has become something
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completely different from what
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was originally contemplated.
There was some original
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legislation in California that
made this distinction between
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endorsement, licensing NIL,
versus this idea of— the best way
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to phrase it is recruiting NIL.
Just paying someone
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outright to join an institution.
And that's where we'll see a
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little bit of the break where
some schools say, "Yeah, we want
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to pay to recruit the swimmer,
we're going to pay to recruit
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the gymnast," where some schools
will say, "Well, you're not
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bringing any money in. So we're
not looking to provide any of
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these dollars from these things
called collectives to those
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students."
- Then the question becomes,
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what should we expect
to see play out
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in the years ahead, in terms of
the investment from these
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collectives? Which, to a degree,
it does feel a little bit like
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the old days of the under-the-
table payments. You know, back
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in the day. You and I both
well know, of—
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Neither of us received them,
because—
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- No, no, no. We never got that.
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But the booster support that
used to be there. And— and it
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feels a little bit like that, but
maybe a little bit more
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structured. Because you have
this quote-unquote "collective"
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component around it.
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Yeah. So the collectives have
become exactly that. What is
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really above board old school
booster payments to athletes
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that schools desire to recruit
out of high school, that they
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want to retain— because of the
transfer portal. They don't want
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their student athletes to
leave. So we'll just make these
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payments to keep these students
as part of— you know, Old, Great
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University, whatever— whatever
it might be. So that's not what
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people contemplated this was
going to be. But what happened
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when California, Florida, all
these states began to pass
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legislation saying NIL is
okay, the NCAA, for whatever
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reason— partly because there was
a Supreme Court case, the Austin
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case, that said "You know what?
You better allow some more
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revenues to go to these student
athletes," the NCAA kind of
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froze. And then institutions
started doing what they wanted
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to do, because there was no
regulation by the NCAA. And
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that's when it flowed over from
this whole idea of licensing to
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this idea of, "Hey, we can just
give money to bring in student
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athletes that we want."
- And the state law
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or regulation becomes
that much more important
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in terms of what you can and
can't do. And maybe what we will
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see play out in other states
over the next several years. And it
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also makes me wonder, you know,
again, are we seeing another
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layer to the control
of the NCAA being
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whittled away because of this?
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We are. And the other piece that
we are starting to see— well,
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some would surprised if it does
happen— because the conversation's been
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going on for a while. Congress—
Senator Cory Booker and others kind of—
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Senator Blumenthal, others
leading the way. We need federal
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legislation to cover this. So we
have this patchwork. Now it's
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about 27, or eight states that
have regulations. We have the NCAA
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coming in every now and then.
And this is a classic spot, as a—
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as a lawyer, where we understand
federal legislation is to come
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in and make this kind of
controversial issue uniform
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across— across the states. But
the problem, I mean, as important as
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you and I might think it is
because it's sports, there's a
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lot of other things going on in
the world that Congress should
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be focused on, rather than how
do we take care of these issues
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regarding athletes and payments?
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I was thinking about this the
other day. But when you look at
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what has played out, I think
there's also a case to be made
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that there's a "benefit"— and I
use the term in air quotes— for
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the individual, for the student
athlete, in the understanding of
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what this process is, and— and
the component of their brand.
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Because I don't think it was
discussed, you know, as much in
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years past. And it's probably
something that most student
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athletes didn't even consider.
That they actually have a brand
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that has some value, depending
on, you know, where you are. And
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that's an important lesson to
understand as you move forward
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and move your way through
college and into the
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business world.
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No, that's exactly right. We
do a program here at Wharton for
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NFL athletes. We started doing
it again this year. It brought
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36 athletes. One of the topics
we have is understanding your
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brand. And the great professor
Americus Reed comes in and talks
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to them about this value. And
for some of them, it's the first
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time the light bulb's going off
that "Hey, the way that I am
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projected out there may match
with a company or some endorser,
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whoever. So I have to be
cognizant of how I am out there."
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Now wouldn't it be great, or— you know,
maybe, maybe not— the younger
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you start with thinking
about that, the stronger your
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brand is, and the stronger you are
in thinking about those kinds
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of issues, and being able to
monetize them. So some of what
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started early on as NIL
began to flurry— I know at
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Tennessee, Texas A&M, a couple
other schools, they did
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incorporate instructors from
their business schools and
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otherwise to talk to student
athletes about this. Another
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piece that came into play, kind
of related to what you're saying,
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is the idea of financial
literacy, fluency. And so a
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number of investment companies
joined schools to kind of
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deliver this info— you know, what do
you do if you get $400
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extra a month, what should
you do with it?
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Yeah. Right. Right.
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And it becomes that much more
important for the— for the growth
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of the— of the college student.
- Right.
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If you channel your 18-year-old Dan
self,
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400 extra a month, what
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are you gonna do with it? The
answers probably are not—
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- That was— back in 1985, that
that could be a dangerous question.
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I think also, do you have to look
at this from how it could
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potentially impact high school
athletes? Because there's even
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more of a conversation about the
component of your name, image
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and likeness, as these young
individuals are in high school.
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And obviously, there's the
component of social media,
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everybody's on social media, and
you're promoting yourself and
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things that you're doing on
those different platforms. It
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makes me worried of how much
farther this path goes. - Right.
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- In terms of the connection
around NIL.
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Yeah. I tell people in this— in
the sports space, the younger
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this athlete gets, the more we
should be okay with being
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paternalistic. The more we
should be okay with thinking, is
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this really the right thing for
this young person to have? For
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example, as a eighth, ninth
grader, to have businesses
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approaching them about having
these relationships. Is— what kind
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of requirements can we have in
there to make sure it goes
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through parents? All these
things, the younger they get.
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But, you know, the idea where,
push back when
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people are disturbed by, is, you
know, everybody should have the
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right to make as much money as
they can by legal means,
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especially from their name,
image and likeness. So that's
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where we have to be careful. But
I think it is okay to think
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about having more concern for
how these— these young people are
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treated and what they learned in
this process. - So
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then, what do you think is the
path, then? I mean, is there a
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path to truly find a scenario
that works for everybody? And
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you know, there is the benefit.
- Right. - But you're also doing it
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in a landscape where the
structure is complementary to
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the individual as well.
- Yeah.
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Here's— here's what I think,
in the end. So there are laws in
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place. For years, there have
been laws in place, especially
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in California and New York, for
regulating child actors, and,
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kind of the old Mickey
Rooney stories and Judy Garland,
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how do you make sure these kids
get their money in the end? So
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those regulations are— you know,
they have never been perfect,
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as we— we've seen some kids
grew up and— but— but they're
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tried and true, and probably the
best that we're going to have.
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And at the higher end, the idea
of— you know, there was one kid
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that was offered, apparently,
you know, $14 million to come to
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Florida or Miami or one of the
schools and, you know, ended up
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accepting nine somewhere else
and didn't get paid that so he—
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lawsuits and all. The market will—
this is a very Wharton answer.
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The market will eventually
settle out. There's a lot of
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crazy stuff going on now. But if
you— if you let the Wild Wild
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West take place for a while,
and you let legislators try to
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figure out, "Where can we play in
this? Oh, yeah, we have these
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existing laws, let's put these
in place." And maybe there's some
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overlay of federal law that
comes into play. But it's— but
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it's going to take time. But in
the end, what we have is, the
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myth of amateurism has been
exploded. - Yeah. - The idea that—
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that athletes should not receive
revenue for their athletic
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ability at some age. All that's
been pretty much blown out of
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the water. And, you know, with
these Olympic Games coming up,
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it does remind us, again, why
were we so concerned about
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keeping college athletes from
receiving compensation when
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every other commercial we see,
during the Olympics is
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one of these Olympic athletes that's
out there performing? - It
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makes you wonder where we're
headed with this in general,
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over the next handful of years,
as this becomes more and more
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the landscape. Because I— you
know, I'm a dad that's got three
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teenagers, two of which who
might very well have a chance of
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playing college athletics. But I
want to make sure that they're
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in a good framework, good set.
And I think this also puts more
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pressure on the parents to
really make sure that they have
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the framework in place so
their— their young Johnny or
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Jane is prepared for this
component of the college
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experience. Right?
- And as
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parents— parents have to
be in this. - Yeah.
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This this— it's not— this is
another one of these things that,
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it's not— not easy. But it's
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important to allow it to move
forward because it's going to
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take us to a better place than
we were before than saying,
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absolutely, you can't
receive anything.
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Is this the part of the downfall,
then, longer term, of the NCAA as
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we move forward here?
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The NCAA— somebody told me years
ago when I first got to Wharton,
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a professor had done some work,
wrote a great, great book on the
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NCAA. And I talked to him. And this
wasn't in the book. He said, "You
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know, in the end, the one thing
the NCAA does great is runs
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championship tournaments." - Right.
- So let us continue to find ways
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for the NCAA to focus on that. I
mean, they lost the College
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Football Championship already.
- Yeah. - But the basketball
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tournament, all these other
tournaments, different
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divisions. They do a great job.
So— so there's some level at
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which— and you almost compare the
NCAA with, you know, the NFL,
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the League office is great at
putting together schedules.
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- Right. - But don't— don't
have them do
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the day to day running of a
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team. So— so there's—
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there's some— there's some
movement that needs
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to take place. I don't think the
NCAA is going away completely at
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any point. - Yeah. This
association kind of setting for
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college sports is important. But
there's a lot that they should
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not be involved in.
- So it
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sounds like you're fairly
optimistic on— on— well, and
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that's— that's a tough question,
I think right now, because of
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all of the issues around the
NCAA and around college. I mean,
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we're talking about a time where
you have conference upheaval,
00:15:38
and, you know, you don't know
where you're going to be playing
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and all these different
components, that, you know, if
00:15:44
we can have some level of
confidence about this component
00:15:48
of college athletics moving
forward, then at least we're
00:15:52
taking at least one step in the
right direction. - We're
00:15:55
headed to a better place. Ivy
sports, which have never had
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this big money problem in the
modern era— but parenthetically,
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this was the place where the
problem did exist historically.
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That— that sport is as exciting
as it's been. And guess what
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the— the SEC and the Big 10 are
as exciting as they've been, and
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there's plenty of upside for
them. And they're gonna have a
00:16:20
lot more money there, where the
Ivies are gonna be kind of where
00:16:23
they are.
- Great seeing you again.
00:16:26
Thank you. Ken Shropshire, who is
Professor Emeritus in Legal
00:16:30
Studies and Business Ethics here
at the Wharton School. - Thank you
00:16:34
for listening to <i>The Ripple
Effect</i>. We hope you found this
00:16:36
episode informative and
engaging. Don't forget to
00:16:39
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00:16:42
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