California challenges the NCAA

Big news from the NCAA world. California is to let college athletes profit from brand sponsorships and endorsement deals. Even though it won’t take effect until 2023, this is BIG news for NCAA athletes. 

As a former college athlete and a college coach for the past 10 years, I see both sides of the story. BUT, this is not an opinion post, just sharing the facts. 

It is no secret  the NCAA generates a TON of money. The NCAA reported total revenues of more than $1 billion in 2018, 80% of which came from television and marketing rights fees. In 2016, CBS and Turner broadcasting extended their contract with the NCAA tournament with an 8-year, $8.8 billion extension, which made the value of March Madness at more than $1 billion per year. 

How does that compare to other sports?

  • Superbowl
    • CBS, Fox and NBC will pay around $3 billion a year just to broadcast the Super Bowl
  • World Series
    • Terms were not disclosed, but it was reported the current deal which will expire in 2028 was worth $5.1 billion for 7 years or $728,571.43 a year. 
  • Men’s World Cup
    • $425 million cost to Fox for the TV rights ONLY in the United States for the 2018 and 2022 World Cups.
    • $3.5 billion for the 2018-2022 FIFA Cycle
    • $6.1 billion in projected revenue for FIFA for the 2015-2018 cycle

These are all big numbers, but it puts in perspective how much money the NCAA generates. 

How did we get here?

Former UCLA Star Ed O'Bannon

Let’s step back a few years to 2016. Former UCLA basketball star Ed O’Bannon brought a lawsuit against the NCAA over the use of athlete's images in video games and other media. O’Bannon become the lead plaintiff and the posterboy for the NCAA fight. Players included in Electronic Arts NCAA Basketball 09 obtained a $60 million settlement from Electronic Arts, which amounted to an average of $1,600 per player. 

"The lawsuit filed against Electronic Arts and the NCAA resulted in the discontinuation of the college video game franchise," ESPN wrote at the time of the settlement. "NCAA Football 14, which hit shelves in July 2013, was the last game that was produced." The similar NCAA basketball series of video games was discontinued after the 2010 edition.

Let’s look at the facts of the bill. The Fair Play to Pay Act does NOT require colleges to pay athletes. It does allow the athletes to hire agents and get paid by third parties for sports-related endorsements. 

California Governor Gavin Newsom was quoted as saying,

"Colleges and universities reap billions from these student athletes' sacrifices and success but block them from earning a single dollar. That's a bankrupt model."

California Governor Gavin Newsom

Newsom said in his announcement of the bill signing. When it takes effect in 2023, the new law will make California the first state in the nation to allow student athletes to receive compensation from the use of their name, image, and likeness," the announcement said.

Starting on January 1, 2023, the Fair Pay to Play Act will allow all student athletes enrolled in public and private four-year colleges and universities in California to earn money from their name, image, or likeness. Student athletes will also be able to hire sports agents and not lose their scholarships if they receive income for their work. Further, SB 206 prohibits California colleges from enforcing NCAA rules that prevent student athletes from earning compensation and will prevent the NCAA from banning California universities from intercollegiate sports if their athletes sign sponsorship deals.

What is the Big Deal?

Well, The NCAA's amateurism rules say that student athletes may not:

"Promote or endorse a product or allow their name, image, or likeness to be used for commercial or promotional purposes." Violating the rule would prevent athletes from getting the "amateurism certification" they need to compete in NCAA sports.

The organization said the law is "creating confusion" among current and future 

SEC commissioner Greg Sankey

student-athletes. The Pac-12 said it is afraid the law will have "very significant negative consequences" for athletes due to the unintended consequences of professionalizing college sports. SEC commissioner Greg Sankey told SportsIllustrated he was concerned that individual states having different laws will make it hard to manage a nationwide group of colleges.

As ESPN.com reports: Ohio State Athletic Director Gene Smith, one of the co-chairs of the group, told reporters the day after California's law was signed that it was "a complex issue" and he was worried about how the NCAA and schools would monitor "bad actors" in an open market.

NCAA President Mark Emmer

NCAA President Mark Emmert asked California lawmakers to hold off on creating their law until the NCAA had a change to reviews it own rules. Skinner, the bill's author, said the NCAA has had decades to change its rules and was in need of some legislative pressure to be forced to act.

What is the NCAA going to do?

If the NCAA does not change their rules by 2023, there could be a major standoff between California and the NCAA. The NCAA has said the law would prohibit schools located in California from participating in NCAA events. 

A lot can, and most likely will change by 2023. Currently other states like New York, Colorado and South Carolina are considering adopting similar legislation. The more states that join California the more pressure it puts on the NCAA to change their rules. If California stands alone, it may find itself in a dog fight with one of the largest and most powerful sports organizations in the world. 

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