How College Athletes Could End Up Getting Paid Like Pros
Senior Editor, CNBC
A class action lawsuit marching through the courts could dramatically change the economics of college sports and the status of amateur athletics in the U.S.
The suit — led by former UCLA and NBA forward Ed O'Bannon and joined by former college and pro stars Bill Russell and Oscar Robertson — targets the NCAA with antitrust violations and seeks revenues from live and taped TV broadcasts of college football and basketball games as well as profits from merchandise licensing fees on video games and clothing.
Just this week, a federal judge in Oakland, Calif., allowed the two year old lawsuit to go forward over NCAA objections. A trial is scheduled for July 2014.
Television broadcast revenues of college sports have soared to nearly $2 billion a year. College sport merchandise licensing revenue — from items like T-shirts, caps, jersey, shoes and video games — was estimated to be $4.6 billion in 2012.
The plaintiffs say they, as well as current and future college athletes, should be compensated for use of their images in all media and want a trust fund set up for payouts once an athlete leaves school. (Read more: Cold Weather Super Bowl Could Be Financial Boon)
The NCAA, the nonprofit governing body of college sports, argues the athletes are or were amateurs and have no standing to be paid since they waived their marketing rights when they entered college.
Analysts contend the lawsuit has the potential of permanently altering the status of college sports and could end up with collegiate athletes being paid.
"It's enormous what it could do to change the concept of what we view as amateurism," said Exavier Pope, a sports and entertainment lawyer.
"The lines are very blurred when it comes to college athletes and compensation, but this could change that once and for all if the players win. By getting this money, they would lose their amateur standing and we could see athletes seeking to be compensated for what they do on the field and it could happen," Pope said.
The NCAA which collects and controls most of the collegiate media-related revenues, has always banned athletes at its member schools from being compensated for anything done in competition. But it does not prevent schools from marketing their actual likenesses or even selling replica apparel that references them — like the use of their athletic number. Athletes just don't get any payment for that. (Read more: Most Unusual Super Bowl Bets)
"College athletes are really not amateurs when you think about it," said Scott Minto, director of San Diego State University's sports business program. "Their likenesses are in video games, on shirts and caps. Plus they add value to their schools. Texas A&M got some $37 million in media exposure after their quarterback Johnny Manziel won the Heisman Trophy in December. He did't get paid one dime from that."
O'Bannon, now a car salesman near Las Vegas, alleges that when EA Sports used images and likenesses of the 1996 UCLA team in its video games — with apparent NCAA approval — he could have gotten money if it hadn't been for the NCAA's ban on compensation from the images. The suit attacks the ban on payment for using player likenesses on TV and other media, calling it an illegal collusion against the players.
"The money around college sports and the NCAA is just huge these days.TV revenue deals are in the billions, EA Sports is making millions off players after college and players don't get anything," said Mark Conrad, director of sports business specialization at Fordham University. "The NCAA has to be scared that this whole thing could open the floodgates for paying college athletes."
Not everyone sees reason to attack the NCAA and give players any kind of compensation beyond athletic scholarships.
"This lawsuit is a disaster for college sports," said Connee Zotos, a professor of sports management at NYU and a former member of the NCAA's management council.
"Many if not most schools couldn't afford lower level sports if the NCAA didn't fund them," said Zotos. "Everyone forgets about the little schools and how much the NCAA helps them with the revenues it gets. If that money's gone and given to the elite athletes from bigger schools, you're taking money away from all college students at every school who aren't big time stars."
"We may need to change things to make sure money is going to the right places in college but I believe in amateurism," Zotos said. "Student athletes are getting a good education and excellent opportunities in school on scholarships."
San Diego State's Minto said the definition of an student athlete has changed. (Read more: Sit in on College Courses Without the Visit)
"The money is too big these days.This is not the 1950s or '60s when athletes graduated and maybe played pro sports," he said.
"You see coaches with million dollar salaries, conferences raking in billions from TV deals, state of the art stadiums and athlete's images all over the place," Minto said. "The old model of amateurism doesn't work. College has become a minor league for the pros."
What's likely to happen from the lawsuit is a sea change in college sports that's been long overdue, said Exavier Pope.
"College athletes want to be paid. They know they're being exploited," said Pope. "The NCAA will fight this lawsuit all the way, but I think it's a good idea to do. It could end the improper benefits in college sports and clear up once and for all who is an amateur and who isn't."