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College Football Needs to Learn a Lesson From MLB

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(Illustration: Nathan McKee for B)

(Bloomberg Businessweek) -- If you follow college football, you’ve probably heard about Matthew Sluka. He’s the quarterback at the University of Nevada at Las Vegas who decided to sit out the remainder of this season because of a pay dispute. Sluka played four seasons at College of the Holy Cross, where he won more than he lost and set a record for rushing yards in a single game for a quarterback. Last December, after his head coach left for another job, Sluka put his name on the NCAA’s official register of athletes looking to switch schools, known as the transfer portal.

The NCAA established the portal in 2018 to help ease the work of administrators. A pair of momentous rule changes have since transformed it into a multibillion-dollar clearinghouse for athletic talent. In 2021, under pressure from state lawmakers and federal courts, the NCAA freed players to change schools without the penalty of having to sit out a season. And for the first time it allowed them to earn money through name, image and likeness (NIL) marketing deals.

Sluka had one year of eligibility left when he entered the portal. In January, his agent told the Associated Press, an assistant coach at UNLV promised him a pay package of $100,000 if he enrolled there. There was no written agreement; according to NCAA rules, that would have to wait until Sluka joined the Rebels. Because schools are still prohibited from paying players directly, the money was supposed to come from a group called Friends of UNILV (get it?), one of hundreds of so-called collectives that have emerged in the past three years to raise funds and pay players via NIL contracts.

Over the summer, Sluka transferred to UNLV. He started the first three games of this season, all wins. But the money was not forthcoming. When Sluka’s agent followed up, he told the AP, Friends of UNILV offered substantially less than was originally promised. When Sluka tried to talk with his coaches about it, his father told the AP, they refused to discuss it. In September, Sluka withdrew from the team. Because he didn’t play four games with UNLV, he can still be on the field for another school next season.

UNLV’s athletic department issued a statement saying that Sluka’s agent had “made financial demands upon the University and its NIL collective in order to continue playing” that were “a violation of the NCAA pay-for-play rules” and that the school “does not engage in such activity, nor does it respond to implied threats.” (Sluka’s agent and a spokesperson for Friends of UNILV both declined to comment further.)

If this process sounds needlessly complicated and open to abuse, that’s because it is. NIL was never meant for this. NIL is intellectual property: A previously little-known acronym, it’s been around for decades in sponsorship deals for professional athletes and other celebrities. It’s what’s exchanged, for instance, when Patrick Mahomes puts his face next to a bottle of Head & Shoulders shampoo. Colleges, working in cahoots with collectives, are trying to retrofit it for a labor market. It’s not working especially well for anybody.

If you’re in the shampoo business, NIL goes like this: You (1) sell shampoo; (2) use proceeds to buy NIL rights; and (3) use those rights to sell more shampoo. If you do it well, the surplus from the NIL-induced sales is greater than the cost of the NIL deals. Some college athletes have had, or currently have, NIL contracts like this. (See Caitlin Clark for State Farm Insurance, Livvy Dunne for Vuori or Shedeur Sanders for KFC.) But collectives have no insurance, leggings or fried chicken to sell.

Friends of UNILV, for instance, has hats and T-shirts on its website. Essentially, though, it’s selling a chance to support UNLV athletes. And most collectives are only nominally interested in buying NIL rights: Athletes may have to show up at a meet-and-greet or pose for a picture at a local car dealership to help maintain the appearance of traditional marketing deals, but collectives are paying them for their work on the field. In a normal, competitive market, schools, which sell football games in the form of TV rights and tickets, would pay players directly for the labor required to produce this entertainment. But college sports have never been normal. For more than a century, even as college football mushroomed into a $10 billion business, the NCAA has insisted that its athletes are not highly skilled workers performing highly prized labor—and blocked them from being paid as such.

This fiction created a black market for talent. In large part, collectives are a rebranding of booster groups that have paid players under the table for decades. And for athletic departments, restrictions on pay have created substantial economic rents (revenue generated by somebody else for less than market cost). Because they can’t compensate players beyond scholarships and small stipends, athletic directors, in other words, have extra money to spend. Some of it goes to support sports that don’t generate much revenue, such as swimming or soccer. And some of it goes to guys named Jimbo, Dabo and Kirby.

“The money goes into the athletic department, and then the excess goes back to the college,” says Michael Haupert, a professor of economics at the University of Wisconsin at La Crosse who specializes in sports. “If the excess goes back to the college, then I [as an athletic director] have no incentive to save it. So I build bigger weight rooms. I pay my coaches more. I let them hire a 40-person staff. I give them a new office. I buy them planes.”

On its face, NIL is a convenient arrangement for schools. They can lavish money on coaches and locker rooms while collectives run around holding bake sales to pay players. But schools have lost control. More than 2,700 scholarship football players entered the portal last season, about a quarter of the entire pool. Managing that churn has become its own full-time job. And the contractual ménage à trois between player, collective and school is proving messy.

Slowly and reluctantly, the powers that be in college sports are reckoning with the need to pay players directly. In May, the NCAA and those five biggest conferences reached a settlement agreement in class actions brought by athletes who were prohibited from earning NIL money prior to the rule change. In addition to $2.78 billion in damages over 10 years, the agreement includes a framework for schools to begin paying current players. Earlier this month, the judge in the case granted preliminary approval for it to take effect next year.

It’s potentially a big step forward, but the NCAA is still under the mistaken impression it can dictate the terms of the market. The settlement lets schools provide up to 22% of their athletic revenue as compensation for players across various sports, which comes to about $20 million per school for the 2025-26 season. “What the NCAA wants, of course, and what the schools want is essentially a salary cap,” Haupert says. “And that’s going to be hard to do without collective bargaining.” Even if the settlement gets final approval, any unilateral attempt to restrict pay is likely to be challenged in court. If history is any guide, the NCAA will lose. 

MLB and its players’ association entered into the first collective bargaining agreement in US pro sports almost 60 years ago. It became the industry model for good reason: It allows leagues to coordinate schedules, TV contracts and salary scales without running afoul of antitrust laws. It could solve problems for college football, but the NCAA and its conferences would have to get over their resistance to unions first.

Earlier this month, an outfit calling itself College Sports Tomorrow—backed by heavyweights including Blackstone’s Inc.’s David Blitzer, Avenue Capital Group’s Marc Lasry and Cleveland Browns owner Jimmy Haslam—put forward a proposal to reorganize the top 136 programs into a two-tiered system. The College Student Football League, as they plan to call it, seems dead on arrival, mainly because it would require the heads of the richest conferences to cede some power. But its framers see that any sustainable plan begins with a players’ union on one side of the table and something like a pro league on the other.

The path to forming either promises to be winding and contentious. But the sooner players and their schools can hammer out a collective bargaining agreement (CBA), the better off they will be. The process will likely put an end to the more profligate spending by athletic departments, but both sides stand to benefit.

In 2020 researchers from Northwestern University put out a working paper that detailed how the economics of college football might work under a CBA. According to their analysis, which uses the revenue-sharing models of the NBA and NFL as a benchmark, annual payroll for college football teams would be about $25 million, with average player pay of about $375,000. If the wage distribution were similar to the NFL’s, a starting quarterback would make about $2.7 million and a linebacker would earn $1.1 million.

That’s not far off from what the NCAA wants as a baseline. Achieving it by collective bargaining would shield schools from legal scrutiny and help legitimize the outcome in the eyes of players. A CBA helps foster competitive balance between schools and locker room harmony within them. “People care about pay equity and fairness,” says Matthew Notowidigdo, a co-author of the 2020 paper who’s now at University of Chicago Booth School of Business. “Collective bargaining can provide a salary schedule that people can all get on board with.”

The biggest riddle a CBA can help solve is how to smooth the awkward marriage between higher education and pro sports. Players and schools need to decide whether to maintain the connection to campus and classroom. Do they want to be haggling over minimum grade point averages? Or do they want to drop the notion that football players are students?

In the long run, Haupert argues, college football will move away from its academic roots and toward becoming a minor league for the NFL. Teams will still play in campus stadiums—with students in the stands and mascots on the sidelines. But legally and financially they’ll become part of NFL franchises, which will pay their players and have the option of promoting them to their rosters. As an example, Haupert says, “the University of Alabama happens to have a football stadium and weight room and training facilities, and they just rent that to the Minnesota Vikings, who also pay a fee to Alabama for use of the name.” 

This radical approach has the benefit of simplicity. If football players are no longer enrolled at the colleges whose names are on their helmets, there’s no incentive to create fake classes to help athletes maintain eligibility or pay tutors to do classwork for them. “Look at all the money and the time and the effort that athletic departments spend policing this stuff,” Haupert says. “Which they don’t want to do, because they’re not interested in their students going to school.”

To be sure, athletic directors say they’re interested in their players going to class. And some student-athletes appear genuinely interested in going. But even if schools and players could do without academic requirements, it’s no sure thing consumers would accept ersatz college football. There are, after all, no minor league baseball games that draw 25 million television viewers. 

Alumni and other fans, says Woody Eckard, an emeritus professor of economics at the University of Colorado at Denver Business School, want to tell themselves they’re watching college kids play. “The fans need the make-pretend part of it,” Eckard says. “If they get the idea that this is a hired team, independent of the school other than that they play at the school stadium, then all of a sudden the eyeballs aren’t going to show up on the TV.”

Any attempt to maintain the connection between gridiron and classroom will be messy. When the stakes are this high, some schools and players will cheat to win. Here, too, collective bargaining can help. If a CBA can establish work rules for dockworkers, nurses, actors and grad students, it can handle student-athletes. “I would be pretty optimistic,” Notowidigdo says. “I could easily imagine unions helping to address some of the really unseemly things that have gone on in college sports, because unions are all about having a process for dealing with grievances.”

Matthew Sluka and UNLV could’ve used such a process. If they’d had one, he might be playing this weekend.

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