The Fallacy of Paying NCAA Players

Submitted by Gameboy on March 21st, 2014 at 12:17 PM

With March Madness underway, there are numerous articles on how basketball players are under paid. This article from The Atlantic is pretty typical; http://www.theatlantic.com/business/archive/2014/03/if-we-paid-ncaa-basketball-players-what-theyre-really-worth-this-is-what-theyd-earn/284559/

While I empathize with student athletes who are juggling impossible time demands while pursuing their dream, all of these “NCAA athletes are underpaid” articles are fantasies far-removed from the real world.

The first mistake all of these writers make is that the student athletes in football and basketball should be paid the same percentage of gross revenues as what NFL and NBA players get. This is a false argument.

They say that NCAA is a business and they should pay like other businesses. Great! Do you know what other successful businesses pay their employees? About 10% of the gross revenue. That shining beacon of American business, Apple, pays $1 in salary for every $8 the make in profit(! Not revenue!!!). And we are talking about a company full of highly educated, highly skilled employees working in a very competitive market. The share NCAA athletes get in scholarships, support, and coaching is much larger in comparison.

You cannot separate football and basketball from all other varsity sports. From the employer’s (the university) point of view, the athletic department is what they are funding, not individual sports. This is the same in the “real world”. Microsoft makes most of its money in Windows and Office, and lose money in Xbox and Bing. That does not mean that employees in Xbox and Bing get paid nothing and employees in Windows and Office get paid millions. The employees in all of those divisions get equivalent pay. Yes, the executives in charge of those divisions may get paid differently (just like coaches in NCAA), but you will not find much difference in pay scale between those divisions even though the revenue generated per employee differs greatly.

NFL and NBA players are best of the best. They represent top 1% of the players coming out of college. These are highly skilled, very valued employees. There is a reason why MLB players make millions (even the worst MLB player) while AAA and AA players do not even make 1/10 of that salary. To argue that 99% should be paid the same way top 1% players are paid is a fallacy. The pay scale is a logarithmic curve, it goes up dramatically as your skillset goes up into the rarified field.

The pro franchise owners can also afford to pay a greater share of revenues to athletes because the owners make money in other ways – the value of the franchise when they sell. The owners make hundreds of millions when they sell their franchise, they can afford to pay more in salaries. The athletic department of a university is not an asset that they can sell, it CANNOT act like a pro franchise, the economic model is not equivalent.

So, what we are REALLY talking about is few star (<1%) players who are getting compensated far below what they could get if they were pros.

But then why would you rip the system apart just for a very small minority of players? Wouldn’t it be easier just to tell them to go and join a pro team so that they can be paid fairly? Yes, some pro leagues do not allow that to happen, but why is that NCAA’s problem? Why should NCAA pay because pro leagues (who make BILLIONS) won’t?

I understand the fairness issue, and it would be great if everything is fair and square. However, very little in life is fair and square.  

Comments

van

March 21st, 2014 at 12:32 PM ^

It's not a fallacy at all. College basketball players are generating enormous revenue and are economically limited in a number of ways: sharp restrictions on transfers, forbidden from marketing their image, etc. The last one is particularly important, because many college athletes have huge local profiles. For example, after the championship game last year, Spike would have been a prime candidate for local marketing.

The NCAA is a bizarre form of anti-worker socialism.

MaizeAndBlueWahoo

March 21st, 2014 at 1:26 PM ^

"Very few"?

This list has roughly 500 players on it.  Five hundred!

http://espn.go.com/mens-college-basketball/story/_/id/9415252/tracking-every-transfer-2013-offseason-college-basketball 

And that's just for one offseason.

351 D-I teams times 13 scholarships per team - roughly 4,500.  One out of every nine players transfers in just one offseason.  That's enormous.  I don't think restrictions on transfers are all that suffocating.

thisisme08

March 21st, 2014 at 3:25 PM ^

How many of those can be described as lateral moves though? I would wager that many of those transfers are D1-Powerhouse to CUSA/MAC even if the kid was a Top 50/100 player. 

The OP's point stands that many coaches get off by saying "well I know your from Michigan and your Momma is sick (hence reason for transfer) but Michigan/MSU/CMU/WMU/EMU are out, but have fun at Oakland if you want."  The one year sit out rule exists to keep coaches from poaching other teams best players so why the hell should the HC have so much say in where a kid can continue his career at?   

MaizeAndBlueWahoo

March 21st, 2014 at 3:48 PM ^

How many of those can be described as lateral moves though? I would wager that many of those transfers are D1-Powerhouse to CUSA/MAC even if the kid was a Top 50/100 player. 

What difference does that make?  The OP's point that I was disputing - very successfully, I think - is that players are "economically limited" because of "sharp restrictions on transfers."  The fact that in one or two cases a year out of 500, a coach decides to be a dick, does emphatically not constitute "sharp restrictions on transfers."

This is not "many coaches", by the way.  It only seems like that because when it happens, it gets media attention.

The one-year sit out rule exists to limit arbitrary hopping around, by the way, not to keep coaches from poaching other teams' best players.  Tampering rules are in place for that purpose.

Very plainly, it is extraordinarily easy to transfer.  Ifdickhead coaches ought to be cracked down upon in the rare instances they set arbitrary limits, it doesn't change the fact that transfers are very common and not even remotely to be considered any kind of a limit on a player's economic value.

MaizeAndBlueWahoo

March 21st, 2014 at 4:11 PM ^

True, but my calculations also assumed that every program fills their 13 allotted scholarships, which they don't.  1 in 9 is still a valid number as a rough guess.

Graduate transfers, I think, as well as players moving up from the jucos, only serve to prove my point: transferring is easy and it's not a restriction on economic value whatsoever.

ghost

March 21st, 2014 at 12:37 PM ^

"From the employer’s (the university) point of view, the athletic department is what they are funding, not individual sports."

That isn't true at all and everyone knows it.  Schools put a lot more money into their football programs than say swimming.  

Also you are missing the point with the Microsoft comparison.  Microsoft has no anti-trust exemption.  The NCAA does.  

 

Shippanimal

March 21st, 2014 at 1:59 PM ^

There are two main antitrust exemptions when it comes to sports.  The first is that Major League Baseball has a historical exemption.  Essentially at the time of the first Supreme Court decision on the issue, MLB was not considered interstate commerce and, thus, there could be no violation of the Sherman Act.  In subsequent cases, the Supreme Court has followed precedent with respect to MLB, but has refused to extent the exemption to other sports.

The second antitrust exemption applies to any employer who has to negotiate with unionized labor.  Labor law carves out an exemption allowing employers to negotiate with unions.  These negotiations would otherwise violate antitrust law.  This applies to all employers who negotiate with unions (e.g. automakers negotiating with the UAW or the NFL negotiating with the NFLPA).  This exemption is the reason the NFLPA had to decertify to file an antitrust suit against the NFL.

No NCAA exemption exists.  In fact, the NCAA has been found to violate the Sherman Act.  http://en.wikipedia.org/wiki/NCAA_v._Board_of_Regents_of_the_University…

CalifExile

March 21st, 2014 at 2:22 PM ^

The fact that someone is being sued for a violation of the law doesn't mean they violated the law. Frivolous lawsuits are filed every day. Sometimes lawsuits are filed to intimidate a defendant, sometimes they are filed because the plaintiff knows the defendant will be unable to come up with the resources to successfully oppose a meritless claim. In California nuisance lawsuits are frequently filed against businesses in the knowledge that it is cheaper to settle than to defend rights.

CalifExile

March 21st, 2014 at 5:32 PM ^

Even good lawyers lose lawsuits. The point remains: allegations of a violation of the law aren't proof of a violation of the law.

It's interesting to note that you have gone from "the NCAA has an anti-trust exemption" to "the NCAA is being sued for an anti-trust violation, therefore they have no exemption and have violated the law."

WCHBlog

March 21st, 2014 at 12:38 PM ^

The athletic department can't separate pay grades between sports? Does Carol Hutchins top assistant make $900k a year like Doug Nussmeier?

david from wy

March 21st, 2014 at 12:40 PM ^

So, you end this post with "life isn't fair". Okay then, I guess we shouldn't pay players then. Thanks for solving everything!

The idea that equates being able to sell to pro franchise to being able to pay players of that franchise is .... I don't even know. Wrong? How are the economic models any different at all? Michigan sells tickets to sporting events, jerseys, food during halftime. How are they different?

Sure, you bring up a fair point that a NBA star in the weight might not aught to make the same as a bench warmer at North Dakota State, but to just say that no one gets money is taking the point of straw-man land.

I would counter the general idea that paying players is removed from the real world by saying you are removed from the world of a student-athlete. As a college educator, I know damn well how hard these kids work for their sport and for the instructor (since I don't use their sport as an excuse...). They work hard. They face crazy amounts of stress. They get hurt and put their health (mental and physical) on the line. Lots of people make serious money based on their efforts. It isn't fair for us to watch from the stands and yell at them and tell them they are greedy for wanting a piece of the pie.

van

March 21st, 2014 at 12:40 PM ^

As a follow-up, if current players were allowed (even limited) marketing rights, there wouldn't be so many awful commericals starring coaches during the tournament.

jdon

March 21st, 2014 at 12:46 PM ^

let players market themselves.  If someone or some company wants them some commercials or appearances then let the players make money.

 

Also, stop paying Bowl game executives ridiculous sums of money.

jdon

 

david from wy

March 21st, 2014 at 12:50 PM ^

And if that company just happens to be run by a team booster? What if Nike starts to run commercials in northern Azerbaijan about Oregon football and pay players 10,000k a semester for their image.

The fact is, there isn't one simple way to fix this.

Agree 100% on the bowl game shadiness needing to end though.

HouseThatYostBuilt

March 21st, 2014 at 12:57 PM ^

Even the few players who are being compensated far below what they would make as professionals are still deriving HUGE value from college athletics. They get to market their skill set to a national audience and to the professional leagues while earning a 200,000 degree. I don't think the value of that marketing can be understated. Sure, these star players are not being compensated directly, but the ability to showcase your talent to professional leagues before you can even play in those leagues is extremely important.

david from wy

March 21st, 2014 at 1:14 PM ^

I never said it was anyone's fault. You stated that part of the compensation players get is showing off their skills to the NBA. I countered saying that plenty of players were scouted and drafted out of high school with decent or great success in the NBA, implying that not compensating players because they are going to look better for the draft due to their time in college is silly.

Note, this of course doesn't imply players don't get better in college, and hence do better in the draft.

TrppWlbrnID

March 21st, 2014 at 1:05 PM ^

To see what it would cost of every UM athlete got minimum wage for every hour or practice time allowed by NCAA and it was like $3000 a year and a total of $500,000 a year, or 10% of one home games ticket take. Doesn't seem too bad to me, if the Indiana states of the world can't hack it, see you in D2.

MaizeAndBlueWahoo

March 21st, 2014 at 1:19 PM ^

I have a really hard time buying your numbers.

If minimum wage is $7.50 (just for ease of calculation) then according to how you ran those numbers every athlete practices 400 hours a year and we have 166 athletes.

I'll buy the 400 hours, roughly, given NCAA practice limits that we know about for football, but that's just football - other sports practice more because they don't have the safety limits that football requires, and we have more than 166 athletes for sure.  At least 500 would be my SWAG.  We're talking more like $3 million of compensation.

Plus it's easy to say "if you can't hack it too bad" but those schools will try to hack it, and dropping to D2 isn't going to be their solution in the real world.  Chopping sports left and right will be their solution in the real world.

MaizeAndBlueWahoo

March 21st, 2014 at 2:19 PM ^

Why should a kid be forced into football or basketball if he wants an athletic scholarship?  Do you understand the Title IX implications of what you're saying - that there would basically be two men's sports and 12 women's sports?  How is that a better situation than what we have now?

I would be one of the biggest capitalists in the whole MGoCommunity if we had a political board, but college sports is absolutely no place for this kind of capitalism.  Your argument is totally, 100% incompatible with Title IX reality for starters, not to mention grossly unfair to athletes who aren't built in such a way to succeed at football or basketball.

MaizeAndBlueWahoo

March 21st, 2014 at 3:23 PM ^

Because Title IX is federal law, not some NCAA bylaw, with armies of people ready to step up and vigorously fight any changes to it should you desire to so much as remove a comma, and Congress won't touch that with a billion-foot pole.  There is absolutely no stomach for messing with it.

And it doesn't deal with college sports.  It's only applied to college sports.  Its effects are much further-reaching than the NCAA.

Accept that Title IX will never be changed and your arguments will be that much more grounded in reality.

MileHighWolverine

March 21st, 2014 at 3:50 PM ^

1. The problem with college sports is that it is trying to have its cake and eat it too. So many people are becoming rich of the sweat of the student athlete it's ridiculous. If you don't want it to be capitalistic, cut the coaches, admin and any other support staff budget by 90%. You could have students take on those roles for scholarships instead of Nick Saban making close to $7mm a year.

2. Under this imaginary scenario, people not suited for Football and Basketball could still get scholarships for their chosen sports, just not at Michigan.

3. What do you mean by this - “grossly unfair to athletes who aren't built in such a way to succeed at football or basketball.”? Is it fair that we give out scholarships for some sports but not for ALL sports that exist? Where do you draw the line, and who determines where that line will be, if you don't use capitalistic principles to determine what should and shouldn't deserve a full ride to Michigan? 

 

MaizeAndBlueWahoo

March 21st, 2014 at 4:08 PM ^

First off, not that many people are "getting rich off the sweat of college athletes."  Having your cake and eating it too is exactly what you're doing here, I think - a very populist argument to support a more capitalistic structure.  You would have a hell of a time finding anyone at, say, Texas Southern, getting rich.  You'd have a hell of a time convincing most of the support staff at Michigan that they're getting rich.  "So many people are getting rich" isn't much of an argument - you ought to quantify a statement like that.  And by the way, a salary cap on coaches would be a pretty good idea.  Less capitalism in that regard would chip away at the money-chasing that screws up a lot of good things.

We already don't use capitalistic principles to determine what sports should be subsidized with scholarships.  If we did, at least half the teams would be gone.  What principle of capitalism determines we should have a men's golf or a women's water polo team?

I don't know what you're referring to in #2, but here's what I am saying.  "What's wrong with chopping sports," you ask.  In that case the end result - at damn near every school, not just Michigan - is men's sports that turn a profit and just enough women's sports to satisfy Title IX.  Wrestlers and runners and such wouldn't just lose Michigan as a choice, their sport would cease to exist.  That's what I mean by grossly unfair to athletes who aren't football or basketball players.

MileHighWolverine

March 21st, 2014 at 4:31 PM ^

1. Let's define getting rich. How about any individual making $150,000 a year or more which equates to roughly 3x the average household income in US? I think that's fair. Now, how many people in the Michigan AD make that amount or more? I don't know the answer, but would hazzard a guess of maybe 70+ at Michigan alone if you include every coach, administrator, marketing person, etc sine we spent $44,000,000 in personnel expenses on 339 people. Now extrapolate that number across every AD in the country, obviously adjusting for size, and you get to an awful lot of people getting rich - as we've defined it.

2. We don't use capitalistic principles and I'm arguing that we should. We should cut anything that can't support itself while still being in compliance with Title 9.  

3. If we were to chop the non-revenue generating sports you would probably see other institutions, the ones who couldn't compete with football and basketball power houses, pick up these other sports as scholarship sports in order to attract higher profile students. The sports would exist on scholarship levels somewhere, just not at places like Michigan.

 

MaizeAndBlueWahoo

March 21st, 2014 at 5:55 PM ^

1. Even if $150,000 is "getting rich" - I call it making a good living, but that's not really going to put you in a mansion and driving the fanciest cars unless you've got no kids - 70+ is probably really, really pushing it.  About $8.5 million of that is spent on five individuals - Hoke, Nussmeier, Mattison, Beilein, and Brandon.  Another million or so for Kim Barnes Arico and Red Berenson.  I'd say it's more like 20 or 30 getting rich by your definition, and only the smallest handful making really life-changing scratch.

And beyond that, extrapolating one of the richest departments in the country across all 351 D-I programs is crazy.  70 * 351 = 24,570.  But let's say the average department is half our size.  If 12,375 people are getting rich by making $150,000 apiece (the bare minimum - surely the average "rich" person in an athletic department makes 1.5 or 2 times that) then we are talking close to $1.8 billion dollars being spent just on 20% of the personnel spending of an athletic dept (according to the 70/339 proportion.)  Never mind what it costs to maintain facilities, cover athletic scholarships, and the other 80% of the support and admin personnel.  Clearly your calculation and extrapolation blows the roof off reality.  The NCAA distributed $527 million to its member schools last year.  We're talking about $1.3 billion more to come from somewhere just to cover the people getting rich, let alone all the other expenses.

2. I think cutting off anything that can't support itself is capitalism defined.  You are in fact arguing for capitalistic principles.

3. I thoroughly disagree.  Wrestling, golf, and water polo attract higher profile students?  They do not attract any student whatsover, outside of wrestlers, golfers, and water polo players.  I think it's totally illogical to say that if a rich program refuses to support non-revenue-generating sports, poor programs will do so.  That's totally backwards.

MileHighWolverine

March 21st, 2014 at 7:01 PM ^

Are we debating the same thing? I've been arguing for capitalistic principles the entire time. I started my point by saying we should cut the lower tier sports to compensate the higher tier athletes. You said that college sports is "no place for this kind of capitalism" which I disagree with completely.  

Yes, I believe there will be other schools that would pick up wrestling, golfing and water polo and make it their focus/identity to attract student athletes that enjoy those sports that might not consider going to those schools if said sports were not offered. Like schools in geographically undeseriable locations or schools looking to change their academic profile.

I think we've hit the limit of our debate and just have to agree to disagree at this point.

ca_prophet

March 21st, 2014 at 5:03 PM ^

Title IX doesn't say you'd have to pay female student athletes equal to male SAs, even in the collective. It does say you have to have athletic opportunities roughly equal to the percentages of your student body.

In practice that means you get men's football with 85 spots and four-five women's teams with 15-20 spots. Or you could choose to limit the size of your team or not field a football team (both of those are effectively get out of big-time college football options). Paying male football players only means you've just increased the cost of fielding that team, and will in turn make it harder for some colleges to field that team.

I happen to think that's a good thing, and it would be better for college football and those colleges if they stopped paying for a bottom tier Div I football program and focused their resources elsewhere. I don't think the top 40-50 college programs will have any trouble paying a pittance especially if the NCAA is forced to cough up more of the national TV contract and bowl money.

Everyone Murders

March 21st, 2014 at 1:10 PM ^

I'm surprised people are downvoting you just because they disagree.  (And by surprised, I mean disappointed but not surprised in the least.)  I agree that too many folks oversimplify the issue of paying student athletes. It's not as simple as "Ehrmagerd, look at all the money sports generate - pay these kids, because otherwise they're serfs", at least in my mind.

One thing, though, that I'd appreciate some elucidation on:  you say "(y)ou cannot separate football and basketball from all other varsity sports" without really explaining why.  Is there are reason that you cannot treat different sports differently (is it a Title IX issue)?  I don't think the argument that "universities are running an athletic department, not individual sports" (my paraphrase) is particularly compelling, especially since some sports are scholarship sports and some are non-scholarship sports.  So already student athletes in different sports are getting different "pay".

In any event, thanks for posting this.  It's good food for thought, and I think does a good job underscoring the complexity of an issue that many seem to think is very simple.

Key Play

March 21st, 2014 at 1:19 PM ^

But Title IX is a huge issue. You pay your QB $100,000/ year? Now you are required by federal law to provide female atheltes an additional $100,000. All marketing provided to male athletes must be available to female athletes.

 Say FB player salaries are around 1 million for all 85 players, basketball another 500k,  that's another $1.5 million you have to pay out per year. For Michigan that's not a big deal, for EMU it's crushing, for Purdue it is certainly complicating. 

ca_prophet

March 21st, 2014 at 5:07 PM ^

A little googling will give you the difference between equal opportunity for student athletes and equal scholarship compensation. There aren't nearly as many female scholarship athletes as males, and there's little reason to think that Title IX is going to mandate more if they haven't done so already.

Gameboy

March 21st, 2014 at 1:47 PM ^

I address this in the post. The athletes are athletes. It is not like tennis players trying any less or wrestlers are not competing as much. They are doing exactly what all athletes are being asked to do, which is why they should be compensated equally.

This is just like why programmers working on Bing are getting paid in the same scales as the programmers working on Windows, even though Windows brings hundreds of times more in revenue than Bing.

Wisconsin Wolverine

March 21st, 2014 at 2:18 PM ^

It seems that you've based your equal pay idea on an anology in the business world (the Microsoft thing).  Just because Microsoft does it one way doesn't mean that's the right way or the only way, does it?  So they pay all their programmers the same.  What about a different company?  In many fields (including my own), your pay is based on your accomplishments and performance - not effort.  Even employees who hold the same position can be paid differently based on how well they do and what they're worth to the company.  Your adherence to an equal pay model as an example of how business works in the "real world" seems arbitrary.

ZooWolverine

March 21st, 2014 at 2:57 PM ^

It doesn't even have to be performance-based--I am a professor at a small university and although I don't know the numbers of others, I can pretty much guarantee that I get paid more than most other faculty who started around the same time I did, because I'm in a field that's more competitive (accounting and computer science are two common examples). To me, that's the exact same as paying football players because their sport is competitive or revenue-drawing. As someone pointed out, the football coaches get paid more than the softball coaches, so the parallel is very easy to draw.

If Microsoft pays XBox developers the same as Windows developers (something I wouldn't be too confident about), it's because the company values those two systems similarly, even if the revenue draws are different.