Is the NCAA in danger?

January 30, 2013

The NCAA attempted to have a court case filed by former players thrown out in court.  The former players led by Ed O’Bannon want to recoup some of the broadcast right fee revenue that has only been shared by the NCAA and member institutions.  This initially focused on re-broadcasts of games, but now a new ruling from Judge Claudia Wilken is signaling that players (former and current) can go ahead with their antitrust lawsuit against the NCAA.  So what does this mean exactly?  If, and that is still a big if, but if the NCAA loses this lawsuit, it could mean that the face of collegiate sport as we know it could change forever.  It would also mean that the NCAA could be held liable for hundreds of millions (or even billions) of dollars in revenue to be paid back to former student-athletes.  That would be in addition to having to potentially split some of the broadcast revenues from here on out with student-athletes in those events.  If such events were to transpire, this could mean that many programs which need their current level of revenue from broadcast right revenue would find themselves short of money, and that they would probably find themselves in the red.  I would anticipate athletic departments either going into the red, or making cuts to many programs on campus in an attempt to stay financially stable.

What would all of this mean?  It would be a major sweeping change in athletics, and the financial and economic structure of how the NCAA and member athletic departments do business.  It would also make things more interesting as it would push forward the discussion of whether a student-athlete is an employee or not.  Many argue both sides of this, with discussion of whether the National Letter of Intent which all student-athletes sign is a contract or not.

This is still in its early stages, and is sure to be battled in court for quite some time.  With that said, I’m sure many in the NCAA and athletics are probably sweating a bit after today’s ruling.


Justice Department Investigation of the NCAA

September 24, 2010

So, I was looking through ESPN and saw that the Justice Department was investigating the NCAA.  Apparently this is old news, and is something that actually which began earlier this spring.  In this USA Today article, it is detailed that the NCAA is now under investigation for potential violations of antitrust laws because of the current scholarship policy for student athletes.  Currently, the NCAA policy has scholarships that renew each year for student athletes.  That means if a student athlete is injured during the off season, the school which they can play for can withdraw their scholarship, often citing that the player “broke team rules.”  While not all schools may guilty of such a malicious use of scholarships, the fact that the scholarships are not guaranteed for four or five years is something that the Justice Department is looking into.  In the article it is evident that the Justice Department is interested in this manner, and have been interviewing sport management professors, and possibly others with intimate knowledge of the inner workings of college athletics.

Now the speculation seems to be that if the NCAA were forced to allow schools to open up the ability to offer multi-year scholarships, it is believed that schools will not be able to better compete for student athletes by offering longer scholarships.  That is, the Justice Department might not force schools to give single year scholarships, but instead make the NCAA change the rule, thus allowing schools to offer a four or five year scholarship if they wished.  The Justice Department possibly believes that through doing this, they are creating more of a free market situation, where schools could potential offer different a “price” (price in regards to the number of guaranteed years of scholarship) than other schools when competing for a student to play for their school.  In this, the current state of NCAA affairs may be akin to price fixing, at least that is what the authors of this article at hints.

Thinking about this from a financial standpoint, changing the rules could indeed allow schools to bid with longer scholarships for athletes, but this could also lead to higher potential costs for schools, as guaranteeing a four year scholarship to an athlete who may not be able to play the whole time because of injury or other issues could be costly to schools.  With the state of finances as they are for athletic departments (the majority of athletic departments are in the red), this move by the justice department could potentially create a more level playing field, but also could be more costly for many schools.  It will be curious to see how this plays out, its been several months now since this news was quietly broke, yet there seems to have been little progress since then.

Major League Soccer players to go on strike?

December 18, 2009

Major League Soccer is now in the off-season, having just completed its fourteenth season.  However, the league and players seem to be gearing up for a big fight over the current league structure and salary cap.  Just recently, goalkeeper Kasey Keller on his blog hinted that players may be going on strike as of February 2nd.  The big issue is that the MLS currently allows teams a salary cap of $2.3 million for its entire roster, except for two players per team who can get a special exemption which doesn’t count towards the salary cap.  David Beckham is probably the best example of this exemption, as his salary is said to be about twice what that of the salary cap for an entire franchise for a year.

The main issue at hand, really revolves around the MLS status as a single-entity organization.  The league owns all player contracts, and there is no real sense of free-agency or even free transfers within the league.  While the Bosman ruling changed the face of player movement in European football, the MLS is still living under the guide of single-entity, keeping it from allowing free movement of players.  FIFA recently did an investigation of the MLS and said the league is compliant with its rules, however FIFAPro, the players organization has said the MLS is in violation of many FIFA statutes.  The MLS adopted the single-entity model for several reasons, mainly to keep player costs low, as that is what is believed to have been a major issue which lead to the fall of the North American Soccer League (NASL).  Additionally, under the single-entity model, the MLS is granted some leniency in regards to anti-trust violations, making it difficult to successful win court cases against the league in order to force any changes to the current model.  While players are allowed to move freely after their contract ends if they head to a league in another country, players can not move from one MLS franchise to another after their contract ends.  Rather, the league continues to own the contract and has the final say in deciding where a player will go.

The MLS players have also began to argue that there should be an increase in the salary cap because of the fans demand for more high profile players to come play in the league.  However, even if the MLS were to drastically increase the salary cap, I believe most teams would not see a great increase in talent.  Most teams would probably see some increases, but star players from overseas would probably demand salaries so high, they would continue to have to be placed under the special exemption category.

For more on the potential MLS players strike, as well as some quotes from Prof. Sauer of the SportsEconomist blog, click here.

Despite all this fighting, the league did give Landon Donovan a new four year contract, which is estimated to be worth $2 million a year.  This is the largest contract the MLS has ever given to an American player, and has included clauses to allow Donovan to go overseas both on loan in the off-season, or for good if a good enough offer is made for him after World Cup 2010.  Already Donovan has signed a 10 week loan deal with Everton of the Premier League, where he might actually get some playing time, especially with Everton in danger of falling into the relegation zone.  Donovan has gone overseas twice before, and each spell has been quite a disaster for him, getting almost no playing time.  The MLS seems to have ridden out the recession well enough, and has the money to keep its top players, yet they still want to keep the salary cap in place.

I think all signs point towards a potential work stoppage, something a soccer league in America really can’t afford.  If fans were so angry with work stoppages in hockey and baseball, I don’t know if the MLS really has the legitimacy and tradition that would help them overcome such a problem.