This is the end, they warned. The end of everything.
It was early 1970, and outfielder Curt Flood had recently filed a federal antitrust lawsuit against Major League Baseball challenging the reserve clause, a longstanding rule that allowed teams to price-fix salaries by holding player rights in perpetuity. In an alarmist press release, American and National League presidents Joe Cronin and Chub Feeney defended the status quo: permit Flood and his peers to negotiate and earn a market wage like every other American, they argued, and chaos would ensue. Financial calamity. Wealthier clubs would sign and field unbeatable all-star teams. Less affluent franchises would be out of luck. As more money flowed to major league players, organizations would no longer be able to subsidize minor league baseball, which would soon shrivel and die. Eventually, Cronin and Feeney claimed, Flood's selfish, cockamamie, Golden Goose-killing scheme would cause the entire sport to follow suit, with professional baseball "simply ceas[ing] to exist."
If the all of the above sounds utterly preposterous, congratulations: you have working ears and eyes, and quite possibly have been watching Alex Rodriguez lug his $275 million contract through a rehabilitation assignment with the Charleston RiverDogs and the Scranton/Wilkes Barre RailRiders. And if it doesn't sound ridiculous? You probably work for the National Collegiate Athletic Association.
Late last week, the plaintiffs' lawyers in the antitrust lawsuit filed against the association by former University of California, Los Angeles basketball player Ed O'Bannon and a group of other former college athletes added six current college football players to their amended complaint; in response, NCAA vice president for legal affairs Donald Remy released a statement claiming that O'Bannon and company's "scheme to pay a small number of student-athletes threatens college sports as we know it."
"In particular," Remy wrote, "we would lose the very real opportunity for at least 96 percent of NCAA male and female student-athletes who do not compete in Division I men's basketball or FBS football to play a sport and get an education, as they do today."
In other words? This is the end. Of everything. Make us share more of the pie with greedy revenue-sport athletes and their trial lawyers by eliminating amateurism, and say goodbye to women's lacrosse. Don't you want those hard-working young women to earn college degrees? Cue "O Fortuna" from Carmina Burana. Of course, Remy isn't the only one making dire predictions in the manner of a deeply concerned hostage taker. (Though admittedly, his verbal framing of a legitimate moral and legal argument as a "scheme" -- akin to the plot to steal Initech's money in "Office Space" -- is a unique, personalized touch.) In a series of court statements, University of Texas athletics director DeLoss Dodds and women's athletics director Christine Plonsky, the presidents of Utah State and Wake Forest and the chancellor of the California State University system, all have argued that amateurism's end likely would harm or eliminate non-revenue producing sports. Big Ten commissioner Jim Delany went a step further, claiming an O'Bannon court victory might force his entire megabucks conference take its balls and go home, downsizing to join the likes of Bard College and the Massachusetts Maritime Academy in non-scholarship Division III.
I know, I know: you're laughing, right? It's okay. I'll wait. Take a deep breath. Dry your eyes. Stop imagining Kirk Herbstreit broadcasting live from Ohio State University-Kalamazoo College.
Need another minute? Or ten?
Delany's claim is ludicrous. So ludicrous that he didn't actually write a single word of it. The Big Ten is swimming in cash, riding high on the Sports Cable Bubble. The Buckeyes' football team regularly draws 100,000-plus fans to Ohio Stadium. The school is adding seats. D-III is not in the cards. More to the point, Remy and his fellow Cassandras aren't any more credible. Just as dumping the reserve clause didn't destroy minor or major league baseball, nixing amateurism hardly means the inevitable death of collegiate soccer and cross-country, let alone the scholarships that sometimes come with them. To the contrary, evidence suggests that schools in a post-O'Bannon world still will be able to afford non-revenue sports, and also want to do so.
Let me explain.
Like most scare tactics, Remy's threat is rooted in a kernel of truth: by colluding to pay athletes exclusively through scholarships -- and otherwise hammering them for accepting the same sort of "impermissible benefits" that are perfectly kosher for coaches and administrators -- schools currently keep labor costs artificially low. End the collusion, and those same costs will rise -- in a free college sports market, Johnny Manziel would be worth a lot more than the sticker price of his Texas A&M University tuition, room and board. When the price of an essential input such as labor goes up, businesses have three ways to cover the increase:
(a) Reduce expenditures
(b) Raise more revenue
(c) Mix and match the above
Now, it's possible that Texas A&M and other schools could choose to pursue option A, and only option A, by cutting track scholarships and the baseball and softball teams. Thing is, they wouldn't have to. Within big-time college sports (note: the BCS conferences and a handful of other schools), there are other places to pinch pennies. Really. Despite the NCAA constantly insisting otherwise. The association's latest financial report claims that only 23 athletic departments operated in the black last year, generating revenues that exceeded expenses. It also claims that expenses for big-time football schools rose faster last year (10.8 percent increase) than revenues (4.6 percent increase). A USA Today analysis concurs. However, neither report adjusts for athletic department and intra-university accounting tricks and practices that make profits look like losses.
As I've written before, a detailed economic study of Utah State's athletic department in 1988 found that a reported $700,000 deficit was actually a $366,000 gain once said practices were considered; meanwhile, a 2000 study published in the Journal of Sport Management found that 90 percent of big-time football school athletic departments actually made money. Still, it's fair to ask: how can an industry that claims to operate mostly in the red foot the bill for higher labor costs?
Better question: why are campus athletics so darn expensive in the first place? The answer largely lies in an economic concept known as gold-plating, which basically means spending more money than necessary simply because money is available to be spent. As I've previously explained:
… a traditional for-profit business spends money in order to increase revenues (that is, profits). A traditional nonprofit spends money to increase revenues, and then spends those revenues on charitable causes, like fighting malaria or supporting breast cancer research. As nonprofits, college athletic departments also spend money to increase spendable revenues -- but unlike, say, the Susan G. Komen Foundation, their only charitable causes are their own operations.
If the Texas athletic department was a normal business, its owner would stick $40-50 million a year of profit into his or her back pocket and be incentivized to reduce costs," says (Syracuse University sports management professor Chad) McEvoy. "But athletic departments have a different model. They're incentivized to ramp up revenue generation and spend everything they bring in. That's why it's such a fallacy when the NCAA puts out reports saying that the vast majority of their athletic departments lose money. They're not profit-oriented organizations. They can't turn a profit. It's like watching college basketball and saying, 'the game I watched last night was boring because no teams scored any touchdowns.'"
According to [the Sportsgeekonomics.com blog], a series of studies -- commissioned by the NCAA, no less -- have found that for every new dollar of revenue athletic departments generated between 1993 and 2007, they also generated almost a dollar in new expenses …
College athletic departments don't answer to dividend-seeking shareholders. They aren't run by ruthless capitalists. They have little incentive to spend wisely -- never mind efficiently -- and every incentive to make it rain, particularly when they're competing against each other for athletic glory made possible by the same coveted recruits whose services they refuse to directly bid for. The result? Money flows everywhere else. Costs skyrocket.
Duke professor Charles Clotfelter reports that the average salaries of football coaches at 44 Division I schools rose from $273,300 in 1985-86 to just over $2 million in 2009-10. USA Today Sports reports that athletic directors at FBS schools are paid an average of $515,000 annually, an increase of more than 14 percent over the last two years alone, and that the number of athletic directors making $800,000 a year has jumped from nine to 15. As I've noted before, Texas' athletic department reportedly spent $25.1 million on administrative and support staff in 2009-10. According to ESPN.com's Gregg Easterbrook, Ohio State's athletic department had 458 employees around the same time - more than double the school's English department, and 10 less than the White House in 2012.
Texas' stadium is home to "Godzillatron," an $8 million, 136-foot-wide high-definition video screen that stands as the largest in college football. The University of Alabama recently completed a $9 million, 37,000-square foot athlete weight room. According to the New York Times, FBS athletic departments in 2008-09 increased their spending by nearly 11 percent over the previous year, never mind that pesky Great Recession. The same article reported that the University of Florida's athletic director had three private jets at his disposal; that the Gators softball coach made $250,000 annually; and that when the school decided to add a women's lacrosse squad, it built the team a $15 million complex before playing a single game.
Don't get me wrong: all of these things are nice. Shiny, even. But none of them are essential. They're optional costs, luxury goods. Historically, Alabama's athletes have managed to get by -- and get buff -- without a weight room that could double as a Harrier jump jet storage facility. Women's lacrosse players don't need purpose-built facilities to have a memorable, life-enhancing college sports experience. Locker rooms and an open field will do. Campus sports aren't cheap, but current budgets are unquestionably inflated. Sportsgeekonomics.com examined men's non-revenue sports spending between Division I schools with major football teams (like Syracuse University) and those without (like Georgetown University) in 2009-10 and 2010-11. They found that expenditures for the major football schools were higher across the board. Likewise, Drexel University professor Ellen Staurowsky calculates that major football conference athletic departments spend an average of roughly $350,000 more per team on non-revenue sports than their small-time football counterparts.
That extra spending, from AD pay to palatial facilities, is fat. Marble on a steak. The first thing an outside management consultant would trim if looking to free up cash to pay for increased revenue sports labor costs while preserving non-revenue sports teams and scholarships. Consider the Texas athletic department, which earned $163.3 million in revenues in 2011-12 and turned a $25 million profit operating surplus. According to a financial statement submitted to the NCAA, here's what the school spent on non-revenue* sports athletic scholarships in 2009:
Women's basketball: $352,640
Women's rowing: $530,067
Women's soccer: $391,401
Total: $4.42 million
* Texas baseball turned a small profit in 2009
Meanwhile, here's what the school's athletic department spent on select other stuff:
Football head coach salary: $4.9 million
Football assistant coach salaries: $3.6 million
Men's basketball coach salary: $2.7 million
Football administrative staff salaries: $10.2 million
Football travel: $2.3 million
Guarantee games: $2.4 million
Salary for men's athletic director DeLoss Dodds: $627,000
Salary for women's athletic director Christine Plonsky: $266,000*
Total: $27 million
* Estimated from 2010 pre-bonus figure
Replace guarantee-game creampuffs with regular opponents. Let Plonsky go -- most schools manage to endure with a single, non-gender-specific athletic director. Cut Dodds' salary in half. Trim $300,000 from each of the remaining categories. Congratulations: you just covered the $4.2 million cost of all non-revenue sport athletic scholarships at Texas. All via savings the school could achieve right now, without waiting for the resolution of the O'Bannon case.
Two years ago, the University of Michigan spent about $9 million on non-revenue sports scholarships. The school earns about $5.1 million in ticket revenue for a single home football game. Do the math: without spending a dime of the millions it takes in from sponsorship deals, alumni donations and television rights fees, Michigan can foot the entire scholarship bill for all of its wrestlers and women's water polo players over two Saturday afternoons.
Point is, there's lots and lots of money in big-time college sports. Plenty to go around. Drawing on Department of Education data, a paper by economist Andy Schwarz estimates that the football and men's basketball teams in the six power conferences generate a collective annual profit of roughly $1.4 billion, an average profit of $19 million per school. (Numbers that are sure to rise as lucrative new television deals kick in.) Meanwhile, the NCAA itself reportedly enjoyed a record $70-plus million surplus in the 2012 fiscal year. Sharing a bigger piece of the pie with what Remy himself calls "a small number of student-athletes" is not going to result in mass lacrosseicide followed by systemic collapse, any more than free agency bankrupted the National Football League. Amateurism's end isn't a Glock to the head of swimming and diving; it's a squirt gun. At most, an O'Bannon loss will force the NCAA and its member schools to prioritize better, to make smart, rational choices about where best to spend their money.
Which, in a larger sense, is something they already do.
Here's the thing about athletic departments: they're departments. Like English and Chemistry. Granted, they make and spend a significant amount of cash. They generate attention and publicity. They entertain the student body, and the general public, too. But they don't exist as stand-alone, self-contained entities. Major college sports might be a big business, but they remain a subsidiary of the much larger business of college itself. Athletic scholarships aren't something successful, top-notch educational institutions need to hand out -- see the University of Chicago or the Massachusetts Institute of Technology -- but they're something a whole bunch of schools want to hand out. Even when those scholarships, like the ones for swimming and diving, don't produce a direct financial return on investment. Every dollar a school spends on softball is one less dollar that can go to the Physics department. So why bother? Maybe schools like offering high-level athletics as part of the overall campus experience. Maybe schools want to offer sports as a student activity they way they offer drama and debate. Maybe schools just want to comply with Title IX. Maybe it's all of the above.
Alternately, maybe it's because sports produce an indirect financial return.
When Texas A&M recently announced a $450 million (!) redevelopment of its football stadium, Kyle Field, school chancellor John Sharp called the project "a megaphone to the world." Others refer to sports as a school's "front porch." They're right. Here's how I previously put it:
… [sports are] basically an enormous advertisement for the increasingly competitive and expensive higher education industry. Viewed without sentiment, athletic departments are actually marketing departments. Teams are brand extensions. Athletes are poorly compensated spokesmodels. A sponsored postseason title game aired in prime time for prime-time rights fees isn't simply commercialized -- it is, in fact, a free-standing commercial.
Here's how it works: In 1984, Boston College defeated Miami on a last-second, game-winning touchdown pass thrown by Eagles quarterback Doug Flutie. Over the next two years, applications to the former school went up by 30 percent. Academics and marketers alike call this "the Flutie Effect" -- that is, the admissions uptick that accompanies high-profile athletic success, like Georgetown's applications increasing by 45 percent between 1983 and 1986, the same period in which Patrick Ewing led the school's basketball team to an NCAA title and national prominence. Numerous academic papers have found that winning big-time football and basketball teams spur increased donor and alumni giving, too, the same way a slick Apple marketing campaign spurs sales of the latest iPhone. When the St. Mary's (Calif.) men's basketball team reached the Sweet 16 of the 2010 NCAA tournament, a study found that the total publicity value to the school was roughly $9.3 million. Last year, Texas A&M estimated that quarterback Johnny Manziel's Heisman Trophy win earned the school $37 million in media exposure …
If football and men's basketball are the equivalent of mega-budget ads running during the Super Bowl, then non-revenue sports are like late-night infomercials: lower key, but still valuable. Athletic success in soccer and cross-country creates positive emotional associations for current students, alumni and the surrounding community alike, all of whom have something to offer. (Donations, usually, or perhaps allowing a school to build a new dorm just off campus without a massive residential zoning fight). Why would schools be eager to eliminate a relatively inexpensive source of goodwill and publicity, particularly when they don't have to?
Torpedo amateurism, and the most likely outcome is as follows: Coaches, administrators and facilities -- the financial black holes that most benefit from the college sports status quo -- get less money. Football and men's basketball players get more. Everything else stays basically the same.
For the sake of argument, however, suppose current cost structures remained fixed. Florida women's lacrosse can't function without a $15 million building. There is no way to replace Louisville athletic director Tom Jurich with a perfectly competent executive who will accept less than Jurich's $1.4 million annual salary. Now suppose that in a free market, schools have to shake the couch cushions and come up with, say, 50 percent more money to compensate and/or bid for revenue sport athletes. Guess what? They could find the money. Without slashing women's rowing. Fact: sports are a small part of overall campus budgets. In 2009-2010, total expenses for non-revenue sports (that's for everything, not just scholarships) at Florida were $79.5 million -- approximately three percent of total campus revenue. At Michigan, the University of Maryland, the University of Illinois and UCLA, total non-revenue sports expenses over the same period were approximately one percent of the same. If schools truly value scholarships in sports like field hockey and track, they can find ways to pay for them -- just like they do in the here and now, even as overall expenses go up.
Contrary to his self-serving, fear-mongering public pronouncements, Remy is smart. So is Delany. So are many of the people running college athletics. They might be disingenuous, paternalistic and unwilling to share their toys with the other kids in the sandbox, but they're also adaptable. If O'Bannon wins, they'll adjust. More than a half-century ago, the NCAA adopted something called "the Sanity Code," which permitted schools to offer athletes need-based financial aid for tuition -- a once unthinkable, amateurism-sullying practice -- but not money for room and board. Arguing for the rule, association president Karl Leib warned that anything more generous would create "chaos worse than anything we ever dreamed of" while fretting that "if athletes are obtained on the open market, I pity the schools who cannot bid high." A year later, the Sanity Code was dead; today, Kentucky men's basketball players reside in a $7 million player dormitory that includes a private chef.
The end is always nigh. Except when it isn't.