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Dan Loney_ It's a very uneven system that seems—
seemingly is playing out where high-level football
players, high-level basketball
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players seemingly are getting a
lot of the attention and the 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>, 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, we'll be diving deep into the
inspiration behind the
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groundbreaking research that
Wharton professors have 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 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 athletic endorsements. Pleasure
to be joined here in studio by
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Ken Shropshire, Professor
Emeritus of Legal Studies and 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? - 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 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, 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 had in that three years, and to
the positive or to the benefit
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of the overall collegiate
athletic experience? 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 appropriate change. It's an
appropriate disruptive change
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to have dollars that are coming
into the system, to the labor 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 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, 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 what we think about. You
referenced endorsements. It's
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turned out to be something
a little different than what we contemplated it was going to be
when these conversations first
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came, came into effect.
- I'll get into the— 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, about the expectation of what
student athletes coming from
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high school going into college
really should start to think about. Because it's a very
uneven system that seems—
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seemingly is playing out, where
high-level football players, high- 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 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 for their par— for their
student, going into this
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situation, is important to talk
about. 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 Olympic year— how important are
some of these Olympic sports to
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a school? Like swimming,
gymnastics, whatever, which are 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 a special interest in getting
some elite athletes and
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providing some extra dollars to
those recruits that are in that space. The traditional
places where we think about this,
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with elite football
players, elite basketball 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 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 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 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 by the schools. And they should
get paid for that." This— this
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NIL space, though, has become something completely different from what was originally contemplated.
There was some original
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legislation in California that
made this distinction between endorsement, licensing NIL,
versus this idea of— the best way
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to phrase it is recruiting NIL.
Just paying someone 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 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 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 students."
- Then the question becomes,
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what should we expect
to see play out 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 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— Neither of us received them,
because— - No, no, no. We never got that.
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But the booster support that
used to be there. And— and it feels a little bit like that, but
maybe a little bit more
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structured. Because you have
this quote-unquote "collective" component around it.
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Yeah. So the collectives have
become exactly that. What is really above board old school
booster payments to athletes
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that schools desire to recruit
out of high school, that they 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 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 people contemplated this was
going to be. But what happened
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when California, Florida, all
these states began to pass legislation saying NIL is
okay, the NCAA, for whatever
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reason— partly because there was
a Supreme Court case, the Austin 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 froze. And then institutions
started doing what they wanted
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to do, because there was no
regulation by the NCAA. And 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 athletes that we want."
- And the state law
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or regulation becomes
that much more important 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 also makes me wonder, you know,
again, are we seeing another
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layer to the control
of the NCAA being whittled away because of this? 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 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 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 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 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 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 be focused on, rather than how
do we take care of these issues
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regarding athletes and payments? 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 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 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 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 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 and move your way through
college and into the
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business world. 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 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 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 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." 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 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 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 incorporate instructors from
their business schools and
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otherwise to talk to student
athletes about this. Another 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 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 extra a month, what should
you do with it?
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Yeah. Right. Right. And it becomes that much more
important for the— for the growth
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of the— of the college student.
- Right. If you channel your 18-year-old Dan
self,
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400 extra a month, what are you gonna do with it? The
answers probably are not— - 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 potentially impact high school
athletes? Because there's even
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more of a conversation about the
component of your name, image and likeness, as these young
individuals are in high school.
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And obviously, there's the
component of social media, 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 makes me worried of how much
farther this path goes. - Right.
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- In terms of the connection
around NIL. 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 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 example, as a eighth, ninth
grader, to have businesses
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approaching them about having
these relationships. Is— what kind 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. But, you know, the idea where,
push back when
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people are disturbed by, is, you
know, everybody should have the 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 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 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 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 in a landscape where the
structure is complementary to
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the individual as well.
- Yeah. 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 in California and New York, for
regulating child actors, and,
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kind of the old Mickey
Rooney stories and Judy Garland, 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, 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. 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 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— 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 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 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 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 myth of amateurism has been
exploded. - Yeah. - The idea that—
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that athletes should not receive
revenue for their athletic 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, it does remind us, again, why
were we so concerned about
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keeping college athletes from
receiving compensation when every other commercial we see,
during the Olympics is
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one of these Olympic athletes that's
out there performing? - It 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 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 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 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 Jane is prepared for this
component of the college
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experience. Right?
- And as parents— parents have to
be in this. - Yeah. 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 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, absolutely, you can't
receive anything.
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Is this the part of the downfall,
then, longer term, of the NCAA as we move forward here?
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The NCAA— somebody told me years
ago when I first got to Wharton, 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 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 for the NCAA to focus on that. I
mean, they lost the College
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Football Championship already.
- Yeah. - But the basketball tournament, all these other
tournaments, different
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divisions. They do a great job.
So— so there's some level at 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. - Right. - But don't— don't
have them do
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the day to day running of a team. So— so there's— 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 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 not be involved in.
- So it
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sounds like you're fairly
optimistic on— on— well, and 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, we're talking about a time where
you have conference upheaval,
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and, you know, you don't know
where you're going to be playing and all these different
components, that, you know, if
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we can have some level of
confidence about this component of college athletics moving
forward, then at least we're
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taking at least one step in the
right direction. - We're 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, 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 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 lot more money there, where the
Ivies are gonna be kind of where
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they are.
- Great seeing you again. Thank you. Ken Shropshire, who is
Professor Emeritus in Legal
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Studies and Business Ethics here
at the Wharton School. - Thank you for listening to <i>The Ripple
Effect</i>. We hope you found this
00:16:36
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