What to expect from the NCAA’s proposed rule changes for paying athletes
Credit to Author: Dan Murphy| Date: Wed, 6 Dec 2023 18:09:10 EST
NCAA president Charlie Baker says he’s ready to address the “elephant in the room” in college sports.
Less than a year into his tenure as president, Baker is pushing schools to take steps that would lead to a radical change in how they compensate and compete for athletes. He announced proposed rule changes this week that would allow schools to funnel more money to their players and create a new subdivision in which the wealthiest tier of college athletic departments could make rules that better fit their financial reality.
“This is a conversation we need to have,” Baker said Wednesday during an interview at the Sports Business Journal Intercollegiate Athletics Forum in Las Vegas. “… We need to have it, and get somewhere with it.”
To get there, schools will have to be willing to cross a Rubicon that many considered anathema until recently: directly paying athletes in a way that is not tied to educational support. Baker’s proposal lays out the broad strokes of a plan that will require more details before being put into practice. Here’s what we know about the plan so far:
How would schools be able to pay their athletes under these proposed new rules?
Baker’s proposal offers two new options for schools to provide money to their athletes.
First, all Division I schools would be able to sign name, image and likeness deals with their athletes. For example, Oregon could pay a future quarterback to use his picture on a billboard promoting the team’s upcoming season, or Nebraska could pay its volleyball players for social media posts that encourage fans to buy tickets to an upcoming match.
The second mechanism for paying players would be through an “enhanced educational trust fund.” Baker proposed creating a new subdivision for schools willing to set aside extra money for their athletes. To be part of the subdivision, schools would have to give a minimum of $30,000 per year to each of at least half their scholarship athletes — essentially creating a minimum wage for some. For an average power conference athletic department, this would mean a minimum investment of roughly $7 million to $10 million each year, which in most cases would be less than 10% of their annual budget.
The NCAA says that trust dollars are meant to support athletes in career development or education opportunities, but under the current proposal, athletes would be free to spend the money however they want. The details of when athletes would receive the money — would they, for example, have to graduate before getting a lump sum payment? — would be up to individual schools to decide.
The $30,000-per-athlete price tag is a minimum. Schools could choose to pay more money to each athlete, and they could choose to pay more than half their athletes. Schools could also choose to pay different amounts to each player. The trust fund opens the possibility of a future where schools compete for talent with no cap on how much they could offer to their current students.
What impact might this have on the current NIL marketplace?
Under this new proposal, athletes would not lose their right to sign endorsement deals with other companies. However, experts believe there’s a good chance that Baker’s plan could significantly change the way that boosters inject money into the college sports economy.
The majority of money spent on NIL deals in the past two years has come from booster collectives, groups loosely associated with a particular school who use NIL deals as an incentive to play for their team. In some cases, these well-organized groups have become de facto outsourced payrolls for the teams they support, taking some control away from the athletic department itself. Baker’s proposal would likely provide an incentive for some boosters to give their money directly to the schools.
“If passed, you would then have an avenue to go directly through the athletic department and have the department directly paying the athletes,” said Casey Schwab, chief executive officer of Altius Sports Partners, a group that advises schools on NIL matters. “The collectives that solely exist as pass-through entities for booster dollars, those dollars would be redirected back to the athletic department so there would be no need for those collectives.”
The majority of money the collectives are spending now goes to football players, according to multiple industry experts (most estimates are upward of 80% to 90%). If collective donors instead start providing that money to schools to distribute to their players, the schools would have to make sure it is distributed more evenly between men and women.
Some collective operators say Baker’s proposal might slim down their operation and allow them to focus on finding NIL deals for the biggest star athletes at their schools, while the athletic department’s direct payments would take care of other players. Others believe that some collectives could pivot to representing athletes when negotiating their athletic department-paid NIL deals with the schools.
Do these proposed rules comply with Title IX?
Title IX prohibits sex-based discrimination in any educational institution that receives federal funding. For college sports, that means that schools must provide equal opportunities and benefits to men and women athletes. Baker’s letter to the NCAA schools said these proposals would help to improve gender equity in college sports by more evenly distributing some of the money that flows to athletes.
A judge would likely have to decide exactly how these unprecedented payments to athletes fit into Title IX, but past rulings about other benefits that schools give to their athletes provides some helpful guidance.
For the trust fund money, Title IX law would likely dictate that schools distribute a proportionate amount to women and men. For example, if a school’s total trust fund for athletes is $10 million and half of its varsity athletes are women, then $5 million of that fund would go to women.
For the NIL deals, schools would have to at least provide equal opportunity to their athletes. It’s unclear whether the courts would say those deals would have to pay out equal dollars to men and women. Some schools could argue that there are legitimate, non-discriminatory reasons for paying more to star players if they can show those players have an objectively higher value in the endorsement market.
Why would schools want to pay their athletes using these rules?
Schools that operate the proposed trust funds would be part of a new top-tier subdivision of college sports that would have the power to create rules for a wide range of issues. Those rules could dictate how the schools recruit, how athletes in the subdivision use the transfer portal and how the athletic departments use their large pools of resources. If that subdivision, for example, wanted to allow teams to expand roster sizes or coaching staffs, or even add things like in-helmet speaker systems for calling plays on the football field, they would be able to do so without the rest of Division I’s approval.
Nebraska athletic director Trev Alberts said he thinks the new system will also create more transparency around NIL deals and make it easier for athletic departments to create a business plan for how they’re going to operate moving forward.
“I mean, everybody hears the rumors: ‘Well, XYZ school is spending this amount in NIL or this player’s getting that,” Alberts said. “The reality is there’s no uniformity in terms of the contracts. There’s no transparency around it. So I think that would be wonderful. At the end of the day, what I think it’ll do, though, is it allows institutions to make decisions on what they think is in their best interest.”
Would this new subdivision compete for different championships than other schools?
No. While the details of how much of this proposal will work are yet to be determined, the NCAA intends to still have all Division I schools compete for the same titles — including in March Madness tournaments. The College Football Playoff would have to decide whether a new divide within FBS football changes who has access to football’s postseason.
How could this impact the current legal challenges the NCAA faces?
The NCAA is battling potentially existential threats on at least three fronts in the court system. Multiple attempts to unionize athletes are in progress with the National Labor Relations Board, a federal court is reviewing a case that could turn athletes into employees (Johnson v. NCAA), and an antitrust lawsuit about past NIL policies (House v. NCAA) that could cost the NCAA billions of dollars in damages if a court rules in favor of the plaintiffs.
Passing this new proposal, in theory, could be a show of good faith that the NCAA is trying to fix some of the issues that have invited legal scrutiny in the past decade. It’s not clear if that would be enough to encourage courts to look at the association more favorably than it has in the past decade or convince judges to view the new top subdivision of college sports separately from the larger majority of schools when making future rulings.
In some ways, Baker’s proposal makes the NCAA’s case weaker in their pending lawsuits, according to Ramogi Huma, the founder of the organization that filed a pending unionization case in California.
“Just the proposal boosts our efforts in every realm,” Huma said. “…The NCAA’s most persistent argument is that they can’t pay players. This shows their rules could have been more reasonable and less restrictive.”
Huma, whose organization is also working to create a new law in California that would allow for some athletes to share revenue with their schools, praised Baker for attempting to be proactive, which he said was a much different approach than how the NCAA treated the push for NIL rules to change in past years.
How could this impact the NCAA’s request for a new federal college sports law?
The NCAA could also avoid some of its looming legal issues if Congress passes a new law that declares that college athletes are not school employees and provides antitrust exemptions that college sports leaders say would allow the association to make rules about transfers, NIL transparency or other subjects without the fear of being sued. Baker and many of his colleagues have been asking for such a law for the past several years.
Despite more than a half dozen proposed bills in the past few years, little tangible progress has been made toward voting on a new college sports law. Several U.S. senators have told Baker and others that the NCAA needs to do more for athletes if Congress is going to help. Sen. Chris Murphy (D-CT), who has been one of the NCAA’s sharpest critics on Capitol Hill, said that yesterday’s announcement was a small but positive step in the right direction.
“It has been a slow and painful process, but the NCAA is finally realizing if they want to survive, business as usual is not an option,” Murphy said.
On Wednesday morning, Murphy reintroduced a bill that would give college athletes the right to unionize — something the NCAA leaders do not want to see happen. Others in the Senate — especially Sens. Ted Cruz (R-TX), Cory Booker (D-NJ) and Richard Blumenthal (D-CT) — have been trying to combine their previous bills to create legislation that could be voted on in the coming months. A Senate aide who has been working on NIL legislation in the Commerce Committee told ESPN that Baker’s proposal wasn’t an orchestrated compromise to spur action with Congress and won’t necessarily change the pace at which they’re working toward a law.
Will athletes have a say in shaping the details of these rule changes?
A new NCAA system will likely have to receive buy-in from athletes amid the growing efforts to organize and empower players.
The highest-earning college athletes, mostly football players, could potentially lose some of their current market power if schools distribute NIL dollars equally between men and women, or if Congress grants an antitrust exemption that gives the NCAA more freedom to cap spending.
“It’s a complex issue,” said Jim Cavale, who recently launched Athletes.Org, a company aimed at organizing college athletes. “Football players create the majority of the value in college sports and that value gets distributed to fund other sports. The ways that the folks in the room choose to allocate sports revenue to pay athletes who play different sports is what we have to figure out. It’s not a one-size-fits-all situation.”
Cavale said the new model proposed by Baker is likely to evolve over time as more stakeholders get a chance to weigh in on it. Baker’s decision to lay out an initial plan, Cavale said, is a major step forward in acknowledging the reality that many leaders in college sports have quietly viewed as inevitable during the past couple years.
“We’ve got to stop being scared, and someone has to step up and acknowledge the problem,” Cavale said. “The top leader in college sports did that this week. That’s why this is a big deal.”
What are the next steps, and how long might they take?
Baker’s letter this week asked schools for feedback on his proposal, which hasn’t yet begun grinding its way through the NCAA’s formal rule-making process, which would include a vote from Division I schools. The NCAA hopes that schools will ask questions and provide suggestions that help fill in the details of how this type of a new system would work — and what challenges it would encounter — in practice.
The path from an informal proposal to rules in place typically takes more than a year, but some in college sports believe that this process could move faster given the pressure that college sports faces from ongoing lawsuits. Baker said he plans to move with “urgent patience” and that a year from now he’d like to have a new framework in place that properly addresses the “elephant in the room.”