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College athletes or unpaid workers? A debate rages

Nik Stauskas #11 of the Michigan Wolverines drives against Luke Hancock #11 of the Louisville Cardinals during the 2013 NCAA Men's Final Four Championship at the Georgia Dome, April 8, 2013 in Atlanta.
Andy Lyons | Getty Images
Nik Stauskas #11 of the Michigan Wolverines drives against Luke Hancock #11 of the Louisville Cardinals during the 2013 NCAA Men's Final Four Championship at the Georgia Dome, April 8, 2013 in Atlanta.

As the NCAA college men's basketball tournament—better known as March Madness—begins March 18, the very term "student-athlete" is under fire.

Efforts to unionize the Northwestern University football team and an ongoing lawsuit against the National College Athletic Association for antitrust violations have some advocates for college athletes saying it's time for them to be classified as workers.

"It's long overdue to see that revenue-producing college athletes are employees and should get paid," said Ellen Staurowsky, a professor of sports management at Drexel University. "The term student-athlete is just propaganda to avoid paying athletes."

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Staurowsky explained that when the NCAA—the non-profit organization that oversees college athletics—first started college sports scholarships in 1953, it devised a system of pay-for-play through those scholarships but that it purposely limited student-athletes' rights to be workers.

However, she said, as hundreds of millions of dollars are now made from college athletics, the NCAA rules governing the players must change to let them receive some of the financial benefits.

Union battle

This past January—and for the first time in college sports—a group of athletes at a university asked to form a union. Members of the Northwestern University football team filed a petition with the National Labor Relations Board in Chicago to organize.

Ramogi Huma, president of the college athlete advocacy group National College Players Association, filed the petition on behalf of several Northwestern players. He said the athletes want an "equal voice when it comes to their physical, academic and financial protections."

The immediate goals do not include calling for salaries for players, Huma added, though he wouldn't rule out the possibility.

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"We have a battle over this from Northwestern but we will fight this all the way," said Huma, a former linebacker for the UCLA Bruins. A ruling from the Chicago NLRB could come later this spring. (Northwestern has come out against the effort, saying student-athletes are not workers)

Not everyone sees a union a viable option.

"You'd have to deal with labor laws, and those would be difficult to enforce at the college level," said Mark Conrad, a professor of sports law at Fordham University. "I don't think it will work, as universities can claim they give athletes scholarships."

O'Bannon vs NCAA

The other big case drawing attention to college athletics is an antitrust lawsuit against the NCAA by former UCLA basketball star Ed O'Bannon.

The suit, O'Bannon v. NCAA, was originally filed in 2009. It seeks to end the NCAA's ban on compensating college athletes for the use of their likeness on such items as DVDs, photos, video games and rebroadcasts of games on TV. The trial date is set for June, but the judge has asked both sides to settle.

(The lawsuit included defendants Electronic Arts and Collegiate Licensing Co. However, this past September, an undisclosed settlement was reached with the two firms and is likely to include some compensation to former college players, according to a report in Sports Illustrated.)

"I don't think O'Bannon wants to settle at this point," said David Hollander, professor of sports management at New York University. "The suit is more about having a fairer system for athletes moving forward."

NCAA reacts

The NCAA opposes any efforts to unionize college athletes. In an email response to CNBC on the Northwestern University case, the organization said "The NCAA is not a party to the proceeding, but it is our hope that after reviewing the record, the NLRB will agree with Northwestern that student-athletes are first and foremost students of the university, not employees."

As for the O'Bannon suit, the NCAA said, "The NCAA will of course participate in the court-ordered mediation, however, we will continue to protect the core principles of the collegiate model."

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On its web site, the NCAA says that it "and our member colleges and universities together award $2.4 billion in athletic scholarships every year to more than 150,000 student-athletes.

In addition, we provide almost $100 million each year to support student-athletes' academic pursuits and assist them with the basic needs of college life, such as a computer, clothing or emergency travel expenses."

The NCAA has considered some sort of limited payment to athletes, in addition to athletic solarships. But plan to give a $2,000 stipend based on need was rejected in 2012 by 160 of the 350 Division I member schools who wanted modifications to the plan to include more athlete-students.

Billions in revenues

College basketball scholarship shortfall

Rank
School
Fair market
value
basketball
player
(2011-12)
Value of
athletic
scholarship
(2011-12)
Fair market
value denied
(2011-12)
In poverty?
(On-campus
2011-12)
Scholarship
shortfall
(On-campus
2011-12)
1 Louisville $1,632,103 $17,370 $1,614,733 -$3,730 -$4,356
2 Syracuse $995,722 $52,244 $943,478 $2,084 -$1,546
3 Duke $987,144 $55,245 $931,899 $797 -$2,080
4 UNC $923,510 $17,629 $905,881 -$1,700 -$3,686
5 Kentucky $830,718 $19,928 $810,790 -$1,170 -$2,240
6 Arizona $782,301 $18,826 $763,475 -$2,630 -$3,540
7 Michigan St $739,543 $21,402 $718,141 -$2,966 -$1,800
8 Ohio State $725,862 $22,119 $703,743 -$388 -$4,752
9 Texas $710,710 $21,090 $689,620 -$748 -$3,624
10 Indiana $690,016 $18,767 $671,249 -$2,751 -$3,282
Average $901,763 $26,462 $875,301 -$1,320 -$3,091
Source: Drexel University and NCPA

The revenue from college sports is huge—some $10.6 billion was generated from college athletics in 2012, according to the NCAA.. The average division one school got $15.8 million of that for football alone.

But left out of the financial equation are the athletes, according to a joint study by Drexel University and Huma's NCPA group.

The study said, among other claims, "that the average scholarship shortfall (out-of-pocket expenses) for each 'full' scholarship athlete was approximately $3,222 per player during the 2010-11 school year...and that the room and board provisions in a full scholarship leave 85 percent of players living on campus and 86 percent of players living off campus living below the federal poverty line. "

(Read more: WNBA and players agree on new CBA)

Those types of figures prove revisions must be made when it comes to student-athletes, said NYU's Hollander—and sooner rather than later.

"This is about fairness," he said. "If there was a moment to change, this is it."

—By CNBC's Mark Koba. Follow him on Twitter @MarkKobaCNBC.

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