Disrupting the business model

Wake Forest University law professor Timothy Davis, one of the nation’s leading authorities on sports law, views the issue as a question of fairness.

“Advocates for athletes, as well as the public, see the enormous amount of revenue that is generated by college sports, primarily men’s basketball and football,” Davis said. “They think it’s unfair, out of balance. The sense is they should share in some of the revenue.”

The money keeps growing. Athletic departments for Division I schools (the highest level of college sports) make money from ticket sales, royalties and licensing, donor contributions, and student fees. But the biggest source is revenue from media rights, which includes television and digital streaming.

The NCAA, which draws nearly all its income from a media-rights deal for the NCAA men’s basketball tournament, receives $1 billion annually for March Madness. Most of that money goes to the universities.

Same with the College Football Playoff, which is separate from the NCAA. It’s expected to secure a new deal with an expanded 12-team field for nearly $2.2 billion per year.

The Atlantic Coast Conference (ACC) has a media rights deal worth roughly $500 million per year. (That’s considerably less than the Big Ten’s new seven-year $7 billion deal.)

Three of North Carolina’s four ACC schools—UNC, Duke, and NC State University—have annual athletic revenues of more than $100 million, and Wake Forest University has $85 million. (Ohio State University generates the most nationally, with $252 million for the 2021–22 fiscal year.)

College administrators feel the pressure to change—but they don’t want to. Paying athletes would disrupt their business model, especially if they had to compensate athletes in every sport. UNC, for example, has 28 varsity sports.

If all college athletes had to be paid, some universities might cut sports, both men’s and women’s. The federal law called Title IX requires universities to treat male and female athletes equally, but it’s unclear if that law would apply if football and men’s basketball players were paid from revenues generated from their sports. Those are the only two sports that typically make money.

In a recent article in The New York Times, University of Notre Dame’s president and athletics director urged Congress to block athletes from being considered employees.

“College athletics is a treasured national institution,” wrote Rev. John Jenkins and Jack Swarbrick. “Professionalizing teams, treating athletes more as employees than as students and weakening the vital connection with the educational mission of their colleges will rob college athletics of its special character.”

Traditionalists agree. If college athletes become employees, they’d fall under the same wage and hour guidelines as everyone else, said state labor commissioner Josh Dobson. They’d have to make the minimum wage of $7.25 an hour, and would get overtime pay when they worked more than 40 hours a week.

But Dobson hopes that doesn’t happen.

“There’s something majestic in college sports, to me, that makes it special, makes it unique,” said Dobson, a college sports junkie who roots for Appalachian State University. “If you go down that road, I think there’s the potential to dilute college sports.”

Supporters of the status quo view the athlete-university relationship as a partnership. In exchange for a scholarship, an athlete gets the chance to compete at a high level, often with good coaching and in good facilities, and potentially become a professional or Olympic athlete.

“People have viewed it as a one-way street, that we’ve held the athletes down,” said former NC State basketball star Debbie Antonelli, who served as director of marketing for Ohio State athletics and is now a college basketball TV analyst. “I don’t think we’ve done that at all.”

In the 1990s, Louis Perkins played tennis at NC Central University, and was an Academic All-American. Now he’s Central’s athletics director. “Being a student-athlete, in modern times, yes it’s a job,” he said.

But Perkins doesn’t know how he would pay athletes in 15 varsity sports. “That’s not an option,” he said. He’s working with a tight, $12 million budget.

The wealthier athletic programs, like those in the ACC, might be able to pay athletes. But schools with smaller budgets “are nowhere near ready for this,” he said. “It will further separate the haves from the have nots.”

John Currie, Wake Forest’s director of athletics, said he

The three-judge panel did not appear swayed by the NCAA’s core principle that athletes shouldn’t be paid. A decision is expected later this year.

Increasingly, the debate is shifting to how compensation would work. How much would the athletes be paid? Would they get overtime? Would they be eligible for a retirement plan? Could a coach fire an underperforming player?

The day after the lawyers argued in Philadelphia, California state representative Chris Holden introduced the College Athlete Protection Act. Holden, who played basketball at San Diego State University, spoke with reporters outside the historic Rose Bowl stadium in Pasadena.

The bill calls for football and men’s basketball players in California to be paid up to $25,000 annually. Colleges also would be required to cover the costs of athletic scholarships for six years, and pay medical expenses for college sports injuries, even after graduation.

Some envision a hybrid form of compensation for the profitable sports—football and men’s basketball.

Amy Perko, CEO of the nonprofit Knight Commission on Intercollegiate Athletics and a former Wake Forest basketball player, envisions treating athletes like medical school residents. “They’re under contract, being paid a salary, but they’re still part of the educational mission,” she said.

Nonrevenue sports could be preserved through student fees or direct financial support from the university, said Holden Thorp, former chancellor at UNC-Chapel Hill.

“All the Division II and III universities are paying for [sports], and you never hear that some faculty at a D-II school got upset about the cost of the athletics program,” said Thorp, who was the provost of Washington University in St. Louis, which is in Division III.

Dewayne Washington was an NC State football star in the early 1990s, then had a 12-year NFL career and now serves on the school’s board of trustees. He’s concerned that the player-coach relationship would change to an employee-boss dynamic. But overall, he said, paying college players wouldn’t be bad, just different: “Over time, we’d get used to it.” doesn’t consider playing a college sport to be work. And he said Wake couldn’t afford to pay players without cutting other parts of the athletics budget.

But he said college administrators need to recognize that the public has long viewed the athletes as employees—and that change is coming.

Bilas, the former Duke player, is unmoved by the nostalgia some feel toward the amateur model.

“Amateurism doesn’t do anything for the athlete—doesn’t make them a better athlete, person, or student,” he said.

“It just means the school has total control and they don’t have to come out of pocket with regards to anything in the way of payment. I’ve always thought that was wrong, to the point of being immoral.”

“The train is moving”

The U.S. Court of Appeals’ Third Circuit in Philadelphia heard oral arguments on January 18 for the case Johnson v. NCAA. Trey Johnson, a former Villanova University football player, argued that under the Fair Labor Standards Act, Division I athletes are employees and thus entitled to minimum wage and overtime pay.

“The train is moving,” said Washington. “I don’t think you can stop it. We’ve got to have some guardrails so we don’t fall off.”

The Duke Model

David Grenardo has been waiting for this moment for six years. Few people have given as much thought to how colleges could pay athletes as the former Rice University football player.

“Could it be done? Absolutely!” he said. “It happens every single day in all the industries in the United States. There’s plenty of money to go around.”

Grenardo graduated in 2002 from Duke Law School. In 2017, when he was teaching at another law school, he published a paper called “The Duke Model” that laid out a statistics-based system for compensating college football and men’s basketball players. He is now a professor at the University of St. Thomas law school in Minneapolis. (Duke University has not endorsed Grenardo’s plan and declined comment for this article.)

The Duke Model features tiered payments based on playing time and bonuses for outstanding performance. Grenardo says it can be adapted for any college sport, men’s and women’s.

It includes base compensation derived from playing time and bonuses for athletic and academic performance. Conferences would determine how much money was available to compensate athletes and would set limits on pay to maintain competitive balance. Each school would submit its financial data to the NCAA.

The base compensation for football players in the largest conferences (such as the ACC) who start every game would be $40,000.

Players who led the team in various statistical categories, such as passing, rushing, tackles, and interceptions, would receive a $5,000 bonus per category. Players who received all-conference or All-American honors also would receive a bonus, as would teams who won postseason games.

A star running back could receive $40,000 in base compensation; $10,000 in bonuses for leading his team in two statistical categories; $22,500 for individual honors; and $9,500 for team success, for a total of $82,000.

Grenardo calculated that a backup player could make $29,500.

The total for a team with one first-team All-American that made it to the semifinal round of the playoffs would be less than $2.5 million.

That kind of season “would reap millions of dollars in revenue for the university, some of which should be allocated to pay the players for achieving those successes for the school,” Grenardo wrote in his paper.

Universities can afford to pay their players, he wrote. One option: they could reallocate coaching salaries. He used the University of Kentucky basketball program as an example.

In men’s basketball, the base compensation would be based on minutes played. A player who averaged 35 minutes a game would receive $35,000. Players who led the team in scoring, rebounding, blocked shots, or steals would get a $5,000 bonus. As in football, there would be bonuses for individual honors and team success.

Grenardo calculated that a basketball team that won its conference championship and made it to the Final Four with a national player of the year and two all-conference players would have a total compensation of $571,800. In 2017, Kentucky men’s basketball coach John Calipari had a salary of $7.4 million.

“The incentives align with the players— the more they play, the more they get paid,” Grenardo said. “It aligns for the coaches as well. They want the players to want to play more, and they want to play the best players.”

Even smaller athletic departments could figure out a way to reallocate money to pay their athletes, he said.

Grenardo’s plan compensates football and men’s basketball players. If universities had to meet Title IX requirements, they could spend an amount equal to that compensation on women’s sports, which “could lead to a significant increase in spending on women’s college athletics,” he wrote.

Grenardo pushed back when asked if a system like this could lead to issues with team chemistry and jealousy. Players wouldn’t just be competing for playing time; they’d be competing for pay.

“All those issues are nonsensical to me,” he said. “I’m not going to play worse and jeopardize my playing time to make somebody else look worse.”

Grenardo believes paying college players is inevitable. He says that universities should take the initiative to adopt a model like his before something else—possibly more expensive—is forced upon them by Congress or the U.S. Justice Department.

He also has published a free-market plan in which schools would compensate athletes based on their market value, although teams would have a salary cap to maintain competitive balance.

He said: “All I care about is, eventually, they start getting paid.” W