A Point-by-Point Evisceration of the Myths Preventing NCAA Athletes From Getting Paid

The stadium scene.
Jan. 6 2014 2:43 PM

But Nobody Even Makes Any Money on College Sports

A point-by-point evisceration of the ridiculous myths that prevent NCAA athletes from getting paid.

(Continued from Page 1)

Twenty-first century college football has its version of the 1950s Yankees: the Southeastern Conference. The SEC has won the last seven national championships and Auburn gives it a chance for an eighth. The SEC is home to some of the highest-paid coaches in college sports—averaging more than $3.3 million each as of early November, before the most recent round of competition-fueled raises. The SEC has also dominated the NFL draft. In 2013, the conference’s 63 draftees more than doubled the number from any other conference.

College football has the strictest of salary caps in major sports—there are no salaries at all. Even one car wash’s worth of water and an athlete can be sanctioned. Has this super-strict salary cap allowed the MAC to stay competitive with the SEC? Not at all: Since 1984, current MAC teams are a collective 6–65 against SEC teams. The no-salary-at-all cap has locked in competitive imbalance, much in the same way that the Yankees of the 1950s thrived because of, not despite, the absence of free agency.

It’s not just the SEC. The very existence of acknowledged power conferences within the NCAA’s Football Bowl Subdivision is a sure sign there is no NFL-like competitive balance. Dozens of colleges become football powerhouses, based solely on their willingness to spend money. Even before the season starts, you can predict that the schools in Tuscaloosa, Ala., Norman, Okla., and Columbus, Ohio, are going to do well, just as they did in the 1970s, 1980s, and 1990s. That’s not competitive balance. That’s a system that perpetuates itself, with would-be upstarts scrambling to get into the upper tier before the money train leaves them behind.

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Absent the salary cap called “amateurism,” rich schools with eager fan bases will still spend money to win, but they will shift the money around a bit, possibly paying the next Nick Saban $3 million instead of $7 million, spreading the leftover cash out among future C.J. Mosleys, perhaps in the form of retention bonuses for using all four years of eligibility. While the recipients of the money flows will change somewhat, football powerhouses in 2030 won’t be all that different from football in 2000 or 1970. As long as college football matters more in Oklahoma than New York, Oklahoma will get better football players than SUNY Buffalo.

A strict reading of Rottenberg’s theory says it won’t matter a smidge how the money flows—talent will always end up where it is most valued. To that I would add that demand for quality football is itself likely a function of a steady history of quality football: Fans develop a taste for winning if they see it enough. Oregon forced its way into the elite through a massive construction program and is now a “football school” because, like the sports version of Say’s Law, exposure to high-quality football can create its own demand.

Market competition for talent would allow more teams to grow demand for the sport. While typical businesses attract talent through compensation, college football programs have to rely on space-age uniforms and concrete-and-steel palaces, like Oregon’s $68 million facility. In the competitive world, paying the going rate for top-tier talent like Tahj Boyd would cost less than building a gridiron Taj Mahal.

Myth No. 3: Everyone will go bankrupt.

With all this competition for on-field talent, won’t schools run out of money? After all, if you take schools’ accounting at face value, hardly any of them make money on sports at all.

Stop right there. As economists Brian Goff and Dennis Wilson explain, sports aren’t actually a huge money loser. Rather, schools cook the books in an effort to look poor.

[A]thletic “deficits” reflect the accounting practices of universities or the flow of revenues back into expenses rather than the inability of revenues to meet costs. ... Within athletic departments it can flow into salaries for athletic staff (coaches, athletic directors, support personnel) or into facilities. Beyond the athletic department, it can appear in the general revenue fund as a transfer for grants-in-aid or be embedded in any number of intra-university transactions between athletic accounts and other accounts.

In the last 17 years, 17 schools have entered FBS and not a single one has exited. That is not what a failing industry looks like. If everyone really were too poor to buy talent, who would be buying? The market rate for talent will match the demand for talent, and if schools are broke, eliminating payment caps won’t change the price much. Every major university has an annual budget in the hundreds of millions or billions. Athletic spending is usually a tiny fraction of that budget, especially at the “poor” schools. The decision to spend big (or small) on college sports is not a function of overall revenue. It is each school’s choice.

The price-fixing inherent in scholarship caps doesn’t help Ball State compete with Louisiana State for football talent. Instead, it ensures that when Louisiana State competes with Oklahoma State, everyone pays the Ball State rate.

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