College Athletes Could Soon Cash In

A new state bill could be a game-changer for athletes, colleges, and the NCAA.
By Bryan Schatz

IN NOVEMBER OF 2015, A FEW DAYS BEFORE the Big Game between UC Berkeley and Stanford, California State Sen. Nancy Skinner attended an Oakland Rotary Club meeting. That day, as it often does, the club was discussing athletics, and it had invited antitrust economist Andy Schwarz, a longtime critic of the National Collegiate Athletic Association (NCAA). Schwarz, “a Stanford guy,” shared the stage with the Cal Band, which played Cal songs, before he began his presentation.

“He was talking about the free-market principle, about the absurdity of the value that student-athletes produce but that they can’t reap, and how restrictive the NCAA rules are,” Skinner remembers. “He talked about how you can’t come up with any other category of labor where it produces wealth for others, but not the people who produce it.”

Doomsday rhetoric has existed throughout the NCAA’s 114-year history. The argument goes that if college athletes are paid, college athletics at large will implode.

It wasn’t her first brush with the critique. In the 1970s as a student activist at Cal, she took a seminar with scholar Harry Edwards, who had pioneered a field of study—the sociology of sports. Edwards was also the lead organizer behind the Olympic Project for Human Rights, which urged black athletes to boycott the 1968 Olympics. The result was one of the most iconic images of the 20th century: American sprinters John Carlos and Tommie Smith raising Black Power salutes in protest while atop the Olympic podium in Mexico City. He has since worked for the NFL, consulting on team culture and diversity, mentored Colin Kaepernick, and is often credited with helping usher in a new era of athlete activism, from basketball players wearing “I can’t breathe” shirts to teams rejecting invitations to the White House. After taking his seminar, Skinner spent time reading and listening to “mostly African-American athletes talking about the value they were producing for colleges and teams, and wondering: What did they get?”

During her time at Cal, Skinner helped organize the Association of Graduate Student Employees, which sought and eventually won collective-bargaining rights for graduate student instructors. It had always bothered her that one particular group of students—athletes—were barred from exercising those same rights. It was Edwards who first put it in a civil rights perspective for her. “This is free labor from black bodies that is enriching the powerful interests,” is how she remembers his message.

By 2015, Skinner, who had gone on to serve on the Berkeley City Council, was beginning her first state Senate bid. She met with Schwarz after his speech and asked him if it was a problem the state could address. Schwarz assured her that the NCAA did have to abide by state law.

It was an opening. In her first two years representing California’s Ninth District, her efforts had been stonewalled. Her staff had told her it would “never happen,” that the state doesn’t fund universities properly to begin with and that paying student-athletes would bankrupt them. “They pooh-poohed it,” she says, but eventually she told her staff, “Next year, I’m not going to take ‘No’ for an answer.” Finally, in February 2019, she introduced Senate Bill 206, originally dubbed the “Fair Pay to Play Act.” It would allow student-athletes to sign with agents, seek out business deals, profit off their name, image, and likeness (collectively known as NIL), and would prevent California universities from punishing students for accepting money. The bill stopped short of her original aim to allow athletes to share in the multi-billion-dollar revenues college sports generate. After consulting with athletes and advocates, she deemed the NIL proposal the best initial step.

“This country we all live in was built on the principle of capitalism. Capitalism meaning: if you’re good, you should be compensated, and the better you are, the more compensated you are.” —Maverick
Carter

She wasn’t alone in the fight. In recent years, there has been a growing chorus of advocates and politicians calling for fair compensation for college athletes—even if the NCAA and the institutions it represents would fight it fiercely. Which it did, in open committee hearings, letters, and calls to legislators’ offices, warning of the dire consequences that would result from the bill becoming law. NCAA President Mark Emmert, in a letter to the legislature, wrote, “As drafted, the bill threatens to alter materially the principles of intercollegiate athletics and create local differences that would make it impossible to host fair national championships. As a result, it likely would have a negative impact on the exact student-athletes it intends to assist.”

Nevertheless, seven months after Skinner introduced S.B. 206, it passed without a single no vote in either the Senate or the Assembly, representing a stunning defeat for the NCAA and signaling a sea change in public perception; what was long considered impossible suddenly seemed not only achievable but even politically savvy.

What she didn’t know was whether Governor Gavin Newsom would veto the bill. Newsom still faced an aggressive pressure campaign. In a letter to the governor’s office, the NCAA called the bill “unconstitutional,” arguing that the act effectively obligates California schools to defy NCAA rules. “If the bill becomes law and California’s 58 NCAA schools are compelled to allow an unrestricted name, image, and likeness scheme, it would erase the critical distinction between college and professional athletics and, because it gives those schools an unfair recruiting advantage, would result in them eventually being unable to compete in NCAA competitions,” the letter read.

University presidents were also calling the governor’s office to voice their displeasure, arguing that it would destroy college sports, and that if he didn’t cut it down, he would be destroying the purity of amateurism.

That kind of doomsday rhetoric has existed throughout the NCAA’s 114-year history. The argument goes that if college athletes are paid, college athletics at large will implode: Fans will no longer want to watch, ticket sales will plummet, TV contracts will be worth a fraction of their current value. What’s more, the “purity” of the endeavor will be spoiled because students will be playing for money, rather than the love of the game. To protect the status quo, Ohio State President Michael Drake, chair of the NCAA Board of Governors, told USA Today that the NCAA had not ruled out legal action. Newsom would later claim that of all the university presidents who called to sway him against the bill, “not once did they talk about the needs of these kids.”

NEWSOM SIGNED THE BILL WITH VISIBLE GLEE, in about as high a profile setting as he could have chosen: LeBron James’s HBO show The Shop. As the cameras rolled, Newsom sat in a barber chair beside the NBA star and his childhood friend and business partner, Maverick Carter, the man who brokered James’s billion-dollar deal with Nike. Carter observed, “This country we all live in was built on the principle of capitalism. Capitalism meaning: if you’re good, you should be compensated, and the better you are, the more compensated you are.”

As the room cheered, Gov. Gavin Newsom signed the bill, gave the paper a tap with his pen, and declared, “It’s now a law in
California.”

Also in the room was Ed O’Bannon, the former NBA player and UCLA star who sued the NCAA after seeing his avatar in a video game and discovered that the gaming company was paying the NCAA—not him—for the rights to his image. There was Rich Paul, an agent who represents some of the NBA’s biggest stars; Diana Taurasi, who won three NCAA titles, four Olympic gold medals, and three WNBA championships; and Katelyn Ohashi, the UCLA gymnast who became a viral sensation after her jaw-dropping floor exercise routine lit up the Internet and captivated the world. The video of her performance racked up nearly 90 million views—the kind of numbers even the most successful influencers would cash in on, which, of course, Ohashi was prohibited from doing.

“What was that feeling, seeing that happen?” Carter asked her. “It’s so crazy. People are like, ‘Oh, you must be so rich,’” she responded. “And I’m like, ‘You must not know the NCAA, right?’” After her viral success, she got a call from Mark Emmert, the head of the NCAA who in 2017 earned $3.9 million, congratulating her. She wanted to say, “You should be thanking me.”

Newsom had also received a call from Emmert. It was decidedly less congratulatory. “He’s trying to make sure I don’t use this pen tonight,” Newsom said with a laugh. “They’re a little panicked, because they recognize they’re vulnerable.… It’s going to initiate dozens of other states to introduce similar legislation.” As the room cheered, he signed the bill, gave the paper a tap with his pen, and declared, “It’s now a law in California.”

For generations, the college sports landscape has been largely inflexible. Skinner’s bill blew that wide open.

IN REALITY, THE BILL WON’T GO INTO EFFECT until 2023, giving the NCAA plenty of time to consider rule changes. But it immediately shook up the college sports industry. The NCAA responded in a statement, saying that it “agrees changes are needed to continue to support student-athletes, but improvement needs to happen on a national level through the NCAA’s rules-making process.” Pac-12 Commissioner Larry Scott warned of “many unintended consequences,” and California schools argued in favor of the NCAA’s approach, saying that a national model was needed to keep a level playing field. And they worried that the law could unintentionally change the nature of their sponsorships. 

Skinner said that in her meeting with college reps, the concern was raised that if students could negotiate sponsorships directly, it would hurt the universities’ ability to sign deals of their own with companies like Nike, Under Armour, and others.

Cal’s athletic director, Jim Knowlton, underlines the stakes: “If I were all of a sudden to have my budget cut by $20 million because of a change in how sponsors work, and now I can’t provide student-athletes trainers or doctors or nutrition, that is not what any of us want.”

As Newsom predicted, in the weeks and months that followed, the issue reverberated across the country. Lawmakers in more than 20 other states raced to draft similar proposals. At the federal level, Rep. Anthony Gonzalez (R-Ohio) announced plans to propose a new law that would allow college athletes to make endorsement money. Sen. Mitt Romney (R-Utah) warned the NCAA, “We’re coming for you.” Other efforts were already in the works, including North Carolina Republican Rep. Mark Walker’s Student-Athlete Equity Act, which he had proposed in March. Had it passed, it would have revoked the NCAA’s tax-exempt status if the organization didn’t allow student-athletes to profit off their own NIL. That same month, Sen. Chris Murphy (D-Connecticut) started issuing a series of reports looking critically at the business model of college sports, highlighting the inequities for student-athletes.

For generations, the college sports landscape has been largely inflexible. Skinner’s bill blew that wide open. Several presidential candidates have made expanding student-athlete rights a part of their platforms, including Elizabeth Warren and Bernie Sanders. The NCAA was thrust into an uncomfortable and difficult position. Even if it could battle California, it would likely be tied up in litigation in states across the nation. Yet having to adhere to a different set of regulations in each state, some of which could go into effect as early as this year, would make it virtually impossible to govern all of its member institutions.

“They found themselves outflanked,” says Harry Edwards.

A month after Newsom signed the bill, the NCAA announced that it “must embrace change,” and that it would permit student-athletes to benefit off their NIL, in a “manner consistent with the collegiate model” as part of its “continuing efforts to support college athletes.” It tasked each division to create their own rules that would be implemented in January 2021, two years ahead of S.B. 206’s timeline. It was a capitulation, but the announcement was vague, riddled with caveats. Some view it as a mere stall tactic.

Edwards is skeptical that the NCAA will deliver on this promise. “This is a situation with the NCAA which not only demands vigilance, I think it demands surveillance, because the NCAA is simply not to be trusted when it comes down to the fundamental issue” of athlete compensation.

What proponents of amateurism have long argued is that student-athletes, by and large, have it pretty good.

One thing both Edwards and the NCAA agree on is that there needs to be a nationwide program. “Because let’s face it,” says Edwards, if California is the only state to implement a bill like S.B. 206, athletes from across the nation looking for financial opportunities will flock to California schools. “And under those circumstances, that would be a tremendous disadvantage to other states.”

THAT S.B. 206 WAS SIGNED INTO LAW is both “earth-shattering,” says Schwarz, and “nothing.” “Earth-shattering because it was finally the first time that a fully sovereign political body—the legislature and the governor and the executive branch—got together and stopped treating the NCAA like it was above the law, or the law.”

There had been previous attempts. Ernie Chambers, a state senator from Nebraska, made more humble efforts in the 1990s to no avail. In 2003, California State Senator Kevin Murray got as far as having a hearing for a piece of legislation aimed at supporting student-athletes, but it died in committee. Skinner managed to steer it through five committees, despite the NCAA’s influence and power. She placated the senators who could have killed the bill “without unduly sacrificing the intent of the bill,” notes Schwarz. “It got watered down, to be sure, but she preserved the essence of it.”

Since its inception, the NCAA has viewed any form of federal government intervention with scorn. Because of S.B. 206, that is no longer the case. As USA Today’s Dan Wolken explains, “NCAA President Mark Emmert brought a new message to Congress: We need help.”

“They used to not want anything to do with the federal government,” says Schwarz. “And now they’re begging Congress to intervene. That’s powerful stuff for one woman from Berkeley to have done.”

Schwarz predicts the NCAA, with its extensive connections, money, and powerful lobbying efforts, will ultimately succeed in weakening NIL provisions at the national level. “Almost certainly, what the NCAA does in Congress is going to be a rollback from what California did, and it’s probably going to get completely co-opted.”

Two weeks after Romney told the NCAA he was coming for them, he backpedaled. “What you can’t have is a couple athletes on campus driving around a Ferrari,” he said, “when everybody else is basically having a hard time making ends meet.”

Solomon Hughes, a former Cal basketball player and outspoken critic of the NCAA, sees Romney’s comment as racist. “Are you kidding me? No, you don’t want black guys driving around campus in Ferraris,” he says. “It’s like we’re in this matrix of Birth of a Nation, the film, which is like you give black people some political power and all of a sudden the world just falls apart.”

SCHWARZ AND HUGHES BASE THEIR CYNICISM on the NCAA’s own history of trying to circumvent what they view as fair and reasonable protections for college athletes. Even the NCAA’s term “student-athlete,” which has become ubiquitous, is problematic. By his own admission, the NCAA’s Walter Byers, who led the organization from 1951 to 1988, crafted the term as a shield against paying workers’ compensation for injured athletes.

In his eye-opening book, Unsportsmanlike Conduct: Exploiting College Athletes, he called this erstwhile organization “a nationwide money-laundering scheme.”

What proponents of amateurism have long argued is that student-athletes, by and large, have it pretty good. Knowlton, for one, argues that the NCAA gives young men and women an opportunity to get “a great degree and a great education while also playing the sport they love.… It’s a life-changing experience.”

“I don’t think there’s an AD in the country that’s not trying to find ways to improve the way we support student-athletes and improve their experience while they are here,” Knowlton says. He runs through a list of accomplishments. “We’ve provided more nutritional support, added the ability to cover insurance for injuries up to two years after they leave the university, and provided additional resources for cost of attendance. We’ve also made sure that scholarships cannot be canceled based on athletic performance, and we created time-management reforms. So, it becomes a significant amount of money over their four years, in addition to scholarships,” he says.

Sure, allows Schwarz. People often see “the value received—which is greater than a typical person gets—but they don’t see the value denied.”

According to a 2011 study by Drexel University and the National College Players Association, the average Division I basketball player’s annual value was between $121,000 and $265,000, and the best players were worth as much as $1 million. Yet, the study states, “The NCAA restricts the value of the full scholarship to a level of compensation that is at or below the poverty level for the vast majority of athletes.”

“These athletes are going to wake up one day and say, ‘Wait a minute, nobody’s coming to see coach play football. Nobody’s coming to see the athletic director play basketball; they’re coming to see us, and … we can’t afford to go out and have a hamburger.” —Harry Edwards

In September 2018, former Cal basketball player Justine Hartman filed an antitrust case against the NCAA, arguing that limiting the amount of scholarship money she could receive for playing college sports meant she often went hungry. Because her athletic scholarship didn’t cover her expenses, she had to pay rent with money meant for food.

Critics also point out that the “full-ride” scholarship is largely a myth; even the most generous athletic scholarships don’t typically cover the full cost of college. According to the Drexel study, out-of-pocket expenses for “full-ride” athletes averaged more than $3,000 annually. And while some schools provide multiyear scholarships, there’s no requirement to do so. For years, by NCAA rules, student-athletes could only receive one-year scholarships that carried no guarantee of renewal. The decision was at the whim of their coaches, who, critics note, make six- and even seven-figure salaries.

In its defense, the NCAA falls back on its argument that raising scholarship caps would effectively turn college athletes into professionals and destroy “amateurism.”

But as Schwarz argued in a 2018 Deadspin article, that “magical line” of compensation that would trigger the collapse of college sports always changes. Prior to 1956, even athletic scholarships were deemed pay and required athletes to forfeit their amateur status. Since then, the goalposts repeatedly moved. College sports, meanwhile, have only became more popular and more profitable.

Take March Madness, the NCAA basketball championship. It is one of the most watched sporting events on the planet, attracting more than 100 million viewers. In ad revenue alone, the monthlong tournament brings in more than $1 billion. As Senator Murphy’s report notes, “Everything that can be branded has been. That iconic moment where athletes climb a ladder as they cut down the nets to celebrate a berth in the Final Four or the championship? Even the ladder is sponsored.” The students, of course, see none of the windfall.

Edwards says this won’t last. “These athletes are going to wake up one day and say, ‘Wait a minute, nobody’s coming to see coach play football. Nobody’s coming to see the athletic director play basketball; they’re coming to see us, and … we can’t afford to go out and have a hamburger. And in point of fact, if somebody gave us a hamburger, it would be against NCAA rules and we’d be ineligible.’” 

WHEN COLLEGE ATHLETES ARE FINALLY able to benefit from their NIL, it’s easy to imagine the winners—the star athletes with high name recognition. But what about the other students?

“In economics, we have this term called pareto optimal, which means that no one can get better without somebody getting worse,” says Schwarz. “And you could say that’s true. But with athletes there’s a pareto improvement over the current situation. Which is to say: If you let athletes go out in the market and earn their individual value, some athletes are going to earn more, and no athletes are going to earn less.”

For Cal’s athletic director Jim Knowlton, the future is “murky at best.”

While that may be true in the revenue-generating sports, unprofitable sports—basically everything but football and basketball—could suffer cuts if athletic departments lose sponsorship revenue.

But the real “losers” in this situation, according to Schwarz, are athletic directors, coaches, and those who own stock in the firms that build big locker rooms and athletic training facilities “because they’re the biggest recipients of the athletes’ value right now.”

WHATEVER THE MORAL IMPLICATIONS OF SKINNER’S BILL may be, there appears to be a renewed—and bipartisan—appetite to challenge the status quo. But learning how it all actually shakes out on the national stage will take time. For Knowlton, the future is “murky at best.” Hughes, the former Cal forward/center who has been advocating for student-athlete rights for years, anticipates the NCAA will emerge unscathed and without making serious concessions. “I think it’s going to be more of the same, and they’re just going to create really crappy language that makes it seem like they have now given student-athletes back these rights that all other students have.”

Even if real change doesn’t come about through the federal government, Harry Edwards sees a way forward. “I’m looking at a situation where, one day, just as surely as we’re talking, [the NCAA] is going to call for a national championship or Final Four championship game, or a national championship in football or something, and the athletes are going to be sitting in the locker room and they will send word out saying, ‘We will take the field when somebody comes in here and talks to us about the money.’” 

Bryan Schatz is a reporter in Oakland. Find him on Twitter at @bryanschatz.

From the Spring 2020 issue of California.
Filed under: Law + Policy
Image source: Gov. Gavin Newsom signed S.B. 206 into law, which once in effect by 2023 will allow student-athletes to profit of their name, image, and likeness. // Illustration by Phil Wrigglesworth
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Comments

The article itself is informative and hopeful. The lead teaser on the web-page is not. To suggest that equity to athletes is anathema to capitalism is nonsense. At bottom, capitalism is a system of allowing the market to determine value. Clearly the current NCAA system does not. It is the interference of the market that permits the NCAA to effectively undermine the value an athlete brings to the sport. The challenge to “equality” will be when superstars (regardless of race or gender) are handsomely paid, while their supporting teammates are not.

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