In major change, US college athletes set to be paid directly by schools

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MAY 23, 2024

The NCAA and its five power conferences completed voting Thursday night to approve a settlement agreement that paves the way for universities to pay athletes directly, according to multiple people familiar with the matter, a change that would crush any last notions of amateurism in major college sports.

The agreement, which covers three antitrust cases, includes almost $2.8 billion in damages to be distributed to current and former athletes, who sued in House v. NCAA over not being compensated for the use of their name, image and likeness (NIL) on television broadcasts. But no matter how high the damages are, the most far-reaching component of the settlement terms is a new revenue-sharing model, which would pay athletes a cut of money their schools generate from broadcast rights deals, ticket sales and sponsorships, among other streams.

Should the settlement go through, revenue sharing would likely begin at the start of the 2025-26 academic year. Yet many steps remain before that can happen. First, the plaintiffs have to approve the agreement to settle House along with Hubbard vs. NCAA and Carter vs. NCAA. Once that happens, lawyers on each side will spend the coming weeks hammering out the finer settlement details, including key points on revenue sharing. Judge Claudia Wilken — who presided over major college sports cases such as O’Bannon v. NCAA and Alston v. NCAA — would then call a hearing to review the settlement terms.

If Wilken approves, current athletes would have a chance to object or opt out of the agreement. Then, as a final step. Wilken would then consider any objections before making her final decision. Attorneys estimate the whole process could take between six and eight months.

On Wednesday, the NCAA’s Board of Governors voted to implement the settlement terms. It was a landmark moment in that, though they had been heavily prodded, the NCAA’s top decision-makers approved a system for schools to directly pay athletes. The SEC and Pac-12 conferences, the last of the five conferences to vote, approved the settlement Thursday. The defendants in House, the most significant of the cases, were the NCAA, SEC, Big Ten, Big 12, ACC and Pac-12.

If Wilken ultimately approves the settlement, the NCAA would reshape its budget to account for 40 percent of the nearly $2.8 billion in damages owed to the former athletes who sued. The other 60 percent would be paid by schools across the next decade, most notably through the NCAA withholding some of its March Madness revenue distributions each year. Beyond revenue sharing, the settlement could also establish a new model for at least the power conferences to make and enforce their own rules, according to Yahoo. It’s just another sign of how stratified college sports are in 2024.

As for the revenue sharing cap, the exact number and rules will be a big part of the upcoming discussions. People familiar with the negotiations have mentioned a cap of about $20 million, formulated by taking about 22 percent of the average power conference school’s main revenue streams. Caps are expected to rise as revenues do across the next 10 years. According to Yahoo, a school’s cap spending could include up to $5 million in education-related payments — known as Alston money — and additional scholarships. NIL collectives, the donor-funded groups that have paid quasi-salaries to athletes in revenue sports, should maintain a heavy influence in football and men’s basketball recruiting.

In the past month, settlement talks went into overdrive because the NCAA and the power conferences wanted to avoid a January trial at all costs. Given the NCAA’s recent track record in court, the defendants clearly didn’t like their chances. If they would have lost at trial, the damages would have tripled. They also would have had to pay them immediately instead of over a 10-year period. But in the past week — despite being happy with the overall outcome — non-power conferences have voiced displeasure about how the financial liability will be distributed.

With the proposal the NCAA, SEC, Big Ten, Big 12, ACC and Pac-12 voted on, the power conferences will pay 40 percent of the damages owed from schools. The other 27 conferences will shoulder the remaining 60 percent. Beyond damages, the power conferences will pay for legal fees and the potential addition of scholarships. Many power conference schools would also spend to the revenue sharing cap. (Because revenue sharing will be optional, lower-revenue leagues are expected to refrain.) Either way, the non-power conferences’ argument about the damages payments is simple: Not only are they not defendants in the suit, but a large share of the damages will be paid out to former power conference football and men’s basketball players.

“Based on the numbers we have reviewed, the liability of the … non-[Football Bowl Subdivision] conferences under the proposed formula appears disproportionately high, particularly because the primary beneficiaries of the NIL ‘back pay’ amounts are expected to be FBS football players,” Big East Commissioner Val Ackerman wrote in an email to her schools, which was first publicized by Yahoo on Sunday.

“I have voiced the Big East’s strong objections to the proposed damages framework through recent emails to [NCAA President] Charlie Baker and his counsel and through comments during commissioner calls over the past two weeks.”

While the settlement agreement answers some questions, it leaves many more unanswered. One potential complication is Fontenot v. NCAA, a fourth antitrust case brought by a different set of lawyers. Jeffrey Kessler, a lead plaintiffs’ attorney in House along with Steve Berman, is also representing athletes in Hubbard and Carter, making it easier to consolidate those three cases.

Kessler and Berman had hoped to fold in Fontenot, too, which would have offered more clarity on how much antitrust protection the NCAA (and its schools and conferences) would get from a settlement. But on Thursday, a Colorado judge denied the motion to consolidate Fontenot with the other cases.

The plaintiffs’ attorneys in Fontenot, who are against consolidating, have signaled that some athletes would oppose the settlement terms for House, Hubbard and Carter. How many athletes — and whether it would be enough to shake up a reshaped system — is unclear, though those answers will probably depend on what the final settlement looks like. It is also possible Fontenot could be resolved by the settlement at a later date, according to multiple lawyers.

“Fontenot doesn’t have any relevance if our settlement is approved by the courts,” Kessler told The Washington Post on Thursday, adding that, because of the similarities between Carter and Fontenot, it was more important to consolidate Fontenot before Carter was lumped in with House and Hubbard. “Because our settlement will totally resolve all the claims in Fontenot.”

The House, Hubbard and Carter settlement also doesn’t address employment, meaning the NCAA will keep lobbying Congress to pass a bill that keeps athletes from becoming employees and receiving the rights that come with that status. To that end, the level of antitrust protection with this settlement — to shield the NCAA and its members from similar lawsuits in the future — remains murky.

Starting with this coming fall’s freshmen, athletes would have a choice to opt into the new revenue-sharing model. That system was devised by Berman and Kessler and was a critical part of the settlement agreement. Experts and conference officials originally thought there were two avenues to settling without the risk of the NCAA being immediately sued again on similar grounds: a collective bargaining agreement (which was always unrealistic because college athletes are not unionized) or a congressional bill that included some level of antitrust protection (which the NCAA has been lobbying for unsuccessfully for years). Then the opt-in system emerged as option three.

If an athlete objected to the terms, they would have a chance to argue their case in a hearing. The NCAA hopes that, for at least the next 10 years, settling House, Hubbard and Carter togetherand having the opt-in system for revenue sharing — will lower the frequency and success rate for antitrust suits over athlete compensation, even with Fontenot still lingering. A handful of antitrust experts and power conference officials are not as confident.

Beyond employment, the NCAA will keep pushing Congress for stronger antitrust protections and a preemption on state laws, making it so it can enforce rules without being sued by state attorneys general. The legal and political jockeying are far from over.

And then there are big questions about how revenue sharing will work at each school. How will the money be distributed? How will Title IX apply? Will a potential hard cap invite antitrust scrutiny? To handle the additional expenses, will schools turn to private equity, especially after two firms announced Wednesday that they’re open for business in college sports?

It won’t be a quiet summer. But in an era of nonstop change, that’s certainly nothing new.


Courtesy: Washington Post