There has been a significant amount of discussion recently about how the NCAA has ruined amateur athletics in general and, more specifically, college sports. If ever there was a business on a collision course with the going-out-of-business curve, it is the NCAA. How did a once-powerful organization with over a billion dollars in annual revenue find itself facing multiple threats on multiple fronts? How did the leadership of the NCAA fail to see what was clear to competitors, critics and the courts?
What is the NCAA?
The National Collegiate Athletic Association was formed in the early 1900s to regulate college football. Organized as a nonprofit, the NCAA expanded its reach into all forms of college athletics and restricts the kinds of benefits and compensation college athletes are allowed to receive in return for their athletic services. It negotiates and generates revenue from television broadcast rights, sponsorship deals and tournament ticket sales.
In 2022-‘23, total revenue for the NCAA was $1.28 billion.
Is the NCAA a cartel, a monopoly or a monopsony?
The NCAA hits the trifecta on this one. The NCAA is a cartel. It regulates a combination of independent colleges who work together to coordinate activities and to jointly agree on rules for competing with each other. Think OPEC here.
The NCAA maintains a monopoly on media rights to college championship tournaments. It negotiated the current 15-year men’s basketball tournament television deal with CBS and Turner Broadcasting, worth $770 million per year. The exclusive deal was recently extended from 2025 to 2032 for $1.1 billion annually.
On the buy side, the NCAA acts as a collusive monopsony where it regulates recruiting, eligibility and scholarship rules. This monopsony power, through rent-seeking, has severely restricted the bargaining power of college athletes. Rent-seeking occurs as the NCAA seeks financial gain without making a reciprocal contribution.
Sue me
In 2021, the U.S. Supreme Court upheld a decision that found the NCAA violated antitrust law by restricting education-related benefits that colleges could provide athletes. The decision allows college athletes the ability to be compensated for the use of their name, image and likeness (NIL).
Reluctantly, the NCAA adopted a rule that allows colleges to assist student-athletes with NIL opportunities, which includes facilitating deals between student-athletes and third parties. Even so, the NCAA continues to face the landmark House v. NCAA antitrust case that could result in more than $4 billion in backpay to thousands of college athletes.
Competition
A group of sports business executives, including NFL chief media and business officer Brian Rolapp, Cleveland Browns owner Jimmy Haslam and Philadelphia 76ers owner David Blitzer, has formed a group to consider the further mutation of college football to a more professional and profitable business model. Sports executive, Casey Wasserman, speculated that college football could double its revenue with a different structure.
Unionization
A friend of mine once quipped, “If you don’t have a union and get one, you deserve it.” A college football players association is a near certainty. If any business was ripe for a union, it is college athletics under the NCAA regime.
A slippery slope
The NCAA has been in court on a regular basis since it first decided to prohibit live television broadcasts of college football games in the 1950s. In 1984, the U.S. Supreme Court found that the NCAA’s complete control of television rights violated the Sherman Antitrust Act. In 2014, the National Labor Relations Board classified members of Northwestern’s football team as employees. The decision, reversed the following year, would have granted players collective bargaining rights.
NCAA leadership blindly careened downhill, unsuccessfully lobbying Congress for a Major League Baseball style antitrust exemption. Without the exemption, a day of reckoning for the billion-dollar nonprofit is a foregone conclusion.
What replaces the NCAA is uncertain. College sports fans will live with NIL, transfer portals and early professional opt-outs for the foreseeable future. Fans will continue to grumble and threaten boycotts. Lawsuits will continue. Large conferences like the Big Ten and the SEC will continue to grow, consolidate power and threaten to take control of the money and the regulation. Sports moguls will seek to weasel their way into the college sports gold mine.
But for now, the shortsighted NCAA is the only game in town.
