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July 8, 2024

With revenue sharing and direct payments to athletes looming, college sports won’t be the same

PHOTO | UCONN ATHLETICS UConn Athletics Director David Benedict celebrates the men’s basketball team’s 2024 national championship. Amid the changing landscape of college sports, he expects the NCAA to move toward a revenue-sharing model that allows schools to pay athletes.
PHOTO | UCONN ATHLETICS Ex-UConn center Donovan Clingan was drafted by Portland in the NBA.

College athletes have been allowed to benefit financially from their names, images and likenesses only since July 2021.

Yet in the three years since the National Collegiate Athletic Association (NCAA) approved its initial NIL policy, it has grown into an industry valued at an estimated $1 billion annually.

A change on the horizon, though, is expected to significantly alter the landscape — for both NIL and college athletics.

The shift is likely to be a direct result of a $2.8 billion settlement agreement the NCAA reached in May with former college athletes who had filed an antitrust class action lawsuit demanding compensation that had been denied to them.

A condition of the agreement, which still must be approved by a judge, would allow school athletic departments to directly share with athletes the revenue from ticket sales and TV contracts. It sets the amount to be shared at 22% of that revenue to start, or roughly more than $20 million per school per year.

While NIL allows businesses and organizations to pay athletes for promotional purposes, and for athletes to sell branded and autographed merchandise, the settlement agreement, if approved, would set the stage for colleges and universities to directly pay what amounts to a salary to their athletes.

If that happens, experts say, it would be a paradigm shift resulting in collegiate sports looking nothing like what exists now.

And that could have major ramifications for UConn, which has Connecticut’s most high-profile college athletic programs, as well as small universities in the state.

‘Right of publicity’

Jared Guy Thomas

Jared Guy Thomas is executive director of Bleeding Blue for Good, the nonprofit NIL collective that raises money for UConn athletes.

Thomas, a former Army officer and lawyer, helped create and then ran the NIL collective at Purdue University for 14 months. He was then hired by UConn to run its NIL collective shortly after the men’s basketball team won the 2023 national title.

“When the national champs call, you answer and you come running,” Thomas said.

Utilizing his legal and college athletics background, Thomas produces his own predictive analyses of the likely outcomes for collegiate athletics and NIL, and he sees one certainty.

“I believe very firmly that the one component of NIL that will never go back into the box completely … is the idea of corporate endorsement deals,” he said.

When the U.S. Supreme Court in June 2021 unanimously ruled against the NCAA in its lawsuit versus former West Virginia football player Shawne Alston over “education-related benefits” — the decision that opened the door for NIL — the justices identified a fundamental right for college athletes, Thomas said.

“In law school we called it the ‘right of publicity’ — the right for a player to profit off of their own face,” he said. “If Gatorade comes to a player at UConn and offers them an endorsement deal, the Supreme Court essentially said it is their right to take that deal.”

Which makes sense, he added, in an era when so many college students are social media influencers with millions of followers.

“Regardless of where this settlement goes, regardless of any new NCAA guidelines, regardless of any federal legislation, the Supreme Court was adamant that endorsement deals are going to exist,” Thomas said.

‘Boosters’ go pro

As permanent as the endorsement side of NIL may be, the future role of collectives like Bleeding Blue for Good is far less clear.

Dan Murphy

Dan Murphy, a staff writer for Bristol-based sports media giant ESPN who covers NIL for the network, says the old booster clubs — groups of alums and business people who donated cash to support college athletic teams — have been replaced by collectives.

“It used to be that a booster club would pass the hat around so you could stick a whole bag full of cash in a player’s locker,” Murphy said. “That sort of operation is now run by people with a ton of experience in fundraising and the sports industry, and in a much more formal and organized way.”

In the NIL era, he said, “upwards of 80% of the dollars that go to athletes come from these collectives, as opposed to more traditional endorsement deals.”

Within the first few months of NIL, Murphy said, boosters figured out they could use collectives as a way to pay athletes, “so they could recruit the best talent and retain the best talent” for their schools.

Now, though, many schools are concerned that they have lost control over “which players were showing up at their schools,” he said. “The collective was the one who had the money and was paying the payroll.”

In fact, NCAA rules initially prohibited schools from interacting with collectives, “which didn’t make sense,” Murphy said, “so that’s changing.”

He agrees that NIL endorsement deals are here to stay, but says “the collective stuff is a little bit more in doubt” because of the pending settlement agreement.

“Anyone who tells you they know the answer to that is lying to you,” he said of the question about what the future holds for NIL. “The schools, the athletic directors themselves, they don’t know yet exactly what will happen to NIL.”

‘A competitive edge’

Of course, that doesn’t mean there are no educated guesses.

Murphy said the settlement agreement is “aimed at reigning in NIL collectives and bringing that more in-house by letting schools pay the athletes directly for their NIL rights.”

While the agreement caps those direct payments at about $20 million a year, some schools “have a budget big enough to pay more than that for athletes,” he said. “Where there’s an opportunity to pay $1 more to get the better recruit, somebody in college sports … is going to find a way to do that to gain a competitive edge.”

UConn Athletic Director David Benedict views that issue another way. He expects the NCAA to move toward a revenue-sharing model, which he said would “create somewhat of a level playing field,” but he does not believe it will be required of every school.

“There will be some campuses that don’t have any money to share,” he said. “So from that standpoint, the enterprise is going to evolve, because that’s new.”

The NCAA may say “this is the money that you can share and you get to decide how and who you share it with,” Benedict said, but collectives raising money from donors “and then providing that to the student athletes is going to probably die down or be eliminated once you get to a place where there’s revenue sharing.”

Getting organized

Once the NCAA adopts the revenue-sharing model, it raises other issues, including that athletes may try to unionize.

Eric Brown

Eric Brown, a labor and employment attorney in Watertown who counsels college athletes, said he believes “that’s inevitable.”

“I think it’s ultimately going to happen, because it always happens when there’s big money around,” he said.

The ability of student athletes to unionize depends on whether they can be considered employees, since they would now be paid. If they are, Brown said, there are many issues to negotiate, including whether athletes are paid for their performance or just for participating.

“Can a scholarship be considered a form of payment?” he asked. “And if it is, is that going to be taxable as income? What kind of benefits are going to be available? And can you cut players if they’re not performing?”

Murphy said another issue concerns the 22% rate for revenue sharing. “The question is, are athletes going to be happy with that rate forever?” he said.

Still, organizing college athletes won’t be easy, Murphy said, because they “are a very transient population who have a lot of other stuff going on and are only 18 to 22 years old, for the most part. Can they organize themselves and create the kind of union that would have enough resolve to have some negotiating power?”

The athletes also face another huge hurdle: The NCAA and its members “are very much against” student athletes being considered employees, Murphy said, because it raises issues such as eligibility for workers’ compensation, and complicates the coach/athlete relationship.

The NCAA is already lobbying Congress to pass a law to prevent it, he added.

Big unknowns

Brown said there are other issues related to the settlement agreement that must be ironed out, including how the shared revenue will be distributed.

“Are all the sports going to be treated equally, or are there going to be prorated payments based on a revenue-production basis?” he asked.

That’s an especially acute question when Title IX is considered. The federal law requires male and female student athletes to be treated equally. Will that apply to revenue sharing, Brown asked, since “we certainly know that revenue from women-based sports is lower than revenue from men-based sports.”

For Murphy, the ESPN writer, the biggest unknown is whether revenue sharing will ultimately cause the most successful and profitable schools, particularly in football, to split off from the NCAA.

“I don’t think that’s a foregone conclusion yet,” he said, “but … I do think it increases the likelihood that the biggest schools eventually decide they need to form their own league.”

Of course, college athletics has gone through many changes over the decades, and schools have adjusted. Murphy says there will come a time soon when schools will have to decide what their alums and fans will support.

“Do you want to be a school that is in what might be a full-blown future entertainment industry-level, professional sports league?” he asked. “Or, is it important to you to feel more like the Ivy League, the way that’s more what you may have thought of college sports in the past?

“I think schools have been able to straddle those two worlds for the last quarter-century,” he said. “And I think that time is coming to an end. You’re going to have to pick a lane and stick with it.”

See related story: Big deal for the Big East

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