Wednesday, March 30, 2011

Paying College Athletes

Periodically the question of whether or not college athletes should be paid a stipend or salary flares up in society. With the recent airing of the ‘The Fab Five’ documentary by EPSN this issue has once again arisen with questions that while outside marketing individuals and the university was making millions off of the Michigan Basketball program the players were unable to benefit in the same way. Rather than develop the standard pro/con list, this post will function more as a trial where the burden of proof is on the pay proponents to demonstrate why the NCAA should change its existing policy to allow college athletes to be receive a stipend or salary.

The principle opening statement for those that support athlete pay would highlight the sheer amount of money that college athletic conferences make from football and men’s basketball and how that money is then divided among the member schools. Unfortunately those players who are providing the product, which is imperative to accumulating these revenues, are not entitled to any significant piece of the pie. Some would go so far to claim that such unfair treatment is un-American. In addition to the general ‘unfairness’ of the system as it stands proponents would argue that paying players would also reduce the probability of talent drain by giving players another incentive to not leave early for the professional levels. Finally paying athletes should reduce the incentive for players to violate NCAA eligibility rules because losing eligibility would involve not just the loss of playing time, but also tangible money they are now receiving for playing. Note that for sake of brevity the argument that players should be paid because of the significant revenues that accompany their sport will be referenced as the ‘excess revenue’ argument.

Before beginning it must be acknowledged that the ‘excess revenue’ argument inherently only encompasses football players and male basketball players not other collegiate athletes because their sports do not generate anything close to the revenues football and male basketball generate if they generate positive profit revenues at all (which most do not due to a lack of popularity). The first argument against the ‘excess revenue’ argument is that it is incorrect to argue that collegiate athletes do not receive appropriate compensation. A large percentage of these athletes receive full college scholarships as compensation for their services, which depending on the residency status of the individual typically ranges in value from 5,000 to 35,000 dollars per year. For a vast majority of athletes the purpose of going to college is to develop the skills and knowledge that will be needed for their non-athletic professional careers, thus the scholarship they receive is viewed as adequate ‘payment’ for their athletic performance.

However, because the issue of ‘excess revenue’ is commonly brought up by sports reporters their inherent bias on the issue means that focusing on non-elite athletes may miss the real motivation behind this issue. For example no one addresses the issue of ‘excess revenue’ through lamentation that the 9th man on the Washington State Cougars basketball team drives around in a broken-down 11-year old car. Instead the common lament is that fate has befallen superstar 1st team All-American John Doe from Kentucky. Furthermore this mindset drives some sports reporters to excuse John Doe’s behavior when he takes money from a booster using the reasoning that he took the money solely to fix his car, i.e. he needed it to survive. Therefore, truly debating this issue may need to focus on those that are elite athletes who have a reasonable probability of becoming professionals and thus do not effectively use the academic advantages provided by the scholarship in order to find a resolution.

The problem with focusing on the ‘superstar’ argument is that there are pitfalls which derail any legitimate claim for a salary. First, addressing the fairness argument, sports reporters do not seem to grasp the fact that college sports for these ‘superstar’ players is akin to an internship for a business professional. In an internship the intern is expected to carryout tasks similar to those carried out by those that are officially employed in a full-time job at company x despite being paid an amount disproportional to what they are helping the company earn. If the intern performs well then he/she receives a formal job offer at the company and then makes a salary more ‘deserving’ of the role in the company. This evolution is similar to the college player proving at the college level that he has high potential to be valued asset to a professional team and the high salary reward that potential commands. This being the case why are sports reporters not raising public concern with the unfair treatment of Johnny the Intern at the Fortune 500 company?

Suppose proponents of ‘excess revenue’ argue that perspective in that regard is not their purview, addressing issues outside of sports, but if asked they would disagree with the internship structure used in professional industry similar to how they disagree with the lack of payment for college players. If true, a lingering question for proponents would involve the distribution of these funds. As suggested above, most sports reporters focus entirely on the superstar players with regards to the additional pay; this leads to the natural question: should players receive additional payment based on skill level/performance?

There are two main arguments one could make in favor of the above position. The first argument is that superstars are the principle driver for high-quality teams. Teams that do not have at least one superstar caliber player will more than likely not have a large amount of success and it is success that drives the high revenues that conferences and schools receive from the football and basketball programs. While it is reasonable to suggest that teams have a higher probability to perform better as a whole with a superstar player, the argument that present success drives the high revenue stream potential for a given school is less valid.

The simple fact is that most schools have established a particular reputation based on tradition and their fan bases root for the jersey more than the players wearing the jersey. Therefore, it is difficult to argue that superstar players, who would view collegiate sports as an internship, significantly influence the total revenue potential of their particular sport at a given university over the course of their playing career. Interestingly enough it can be argued that because of the tradition structure certain superstars can establish ‘winning’ traditions for universities that previously did not have such notoriety, but by the time such a turning point can be officially linked to those particular superstars they will have already left the university rendering any payment moot.

The second argument is the old question of offering incentives to influence positive behaviors. It has been established above and through simple logic that a team who exerts more effort and plays at a higher level will have more success and more successful teams will, in very basic terms, have a higher potential of creating larger revenue streams. Therefore, if paying players induces them to perform better, it is a win-win situation for both sides as long as a proper balance can be found for the amount paid. With respects to superstar players there should be a higher payment ceiling because of the inherent higher talent ceiling.

Unfortunately under closer examination the logic of that argument falls apart. There are two different psychological categories for the college player, those that are going to move on to the professional level or think they have an opportunity and those that participate for either the scholarship/free education or simply for enjoyment of the game. Offering more financial incentive should not induce higher quality play from those in the first category because they are motivated to acquire the highest draft spot as possible both for money and prestige, elements that would dwarf what the university could offer as a motivator. Offering more financial incentive for the second group should not increase their quality of play because these individuals should already be playing as hard as they can simply to keep their scholarship or for the love of the game.

The above analysis makes it difficult to support the position that superstars should be paid more money than other individuals on the team. Therefore, if payment were provided it stands to reason that each individual on the team should receive payment. However, how much should each player receive? The two thought processes for the payment value stem from the needs argument vs. the production argument.

The needs argument is developed largely through the number of sports reporters who comment that poor superstar John Doe cannot pay routine bills even though many others make money off of his work and/or name. Under this mindset the issue is necessity over ‘fairness’ due to the time requirement of the sport the individual is unable to take a job to cover these daily/weekly costs. Using this reasoning each player should receive a smaller amount of compensation, like 500 to 1,000 dollars a month. In the production argument the issue is not about any daily/weekly costs, but instead fairness. The players should receive some percentage of the money their work product creates for the university and the athletic conference. Using this reasoning each player receives an amount dictated largely by the amount that can be confirmed as ‘earned’ by the particular sport.

Unfortunately for ‘excess revenue’ proponents both pay styles have problems. The need argument runs into the problem of equality. The time devoted to playing the sport, which under other circumstances could be used for a job to acquire money for routine bills, is not volunteered. That time and performance on the court is exchanged for scholarship money. Non-scholarship students may have time available to take a job to help pay these routine bills, but more often than not that money will be devoted towards paying college tuition, a concern scholarship athletes do not have. It is illogical and unfair to suggest that one group of individuals should receive compensation for certain financial responsibilities when another group does not. Interestingly enough the blind bias of ‘excess revenue’ proponents to this inequality is rather sad in the lament that sport A takes up too much time disallowing the player from taking a job to pay for routine costs, but the non-athlete is able to do so. The challenge to the proponents, identify a job available to a college student that pays 5,000 – 35,000 dollars a semester which requires as much or less opportunity cost and applied work as a college sport.

The production argument runs into the problem of determination. While there are occupations that pay based on performance relative to revenue generated (commission), in these occupations the mechanism for determining how performance directly influences total revenue generated is very simple and has few ‘moving parts’. However, that is not the case in college sports. There are a wide range of factors that go into determining the total size of the revenue stream. Further complicating the issue of determination is the aforementioned ‘jersey’ issue where most fans and media contracts stem from the school reputation itself not from the specific players that are competing at the time. Therefore, it would be very difficult to rationally assign an appropriate percentage from the total revenue to pay players.

Regarding the supposed side benefits to paying players to argue that players should be paid because it would dissuade them from violating NCAA rules is a foolish argument. The core of the argument amounts to – in effort to stem student-athletes from violating NCAA rules through the acquisition of improper financial benefits these individuals should receive payment. Such a position is similar to saying ‘gee there seems to be a lot of embezzlement at our company… I know let’s give everyone raises to hopefully reduce the amount of embezzlement.’ The NCAA is under no obligation to provide additional positive incentive to ensure compliance with its rules and nor should anyone expect such incentive.

The argument that a salary at the college level will have any effect on whether or not an individual enters a professional draft for his perspective sport is rather foolish as well. Suppose the NCAA mandates a 10,000 dollar per year stipend, that 10,000 dollars is suppose to reduce the probability of an individual that has the skills to receive millions of dollars as a professional from leaving college and becoming a professional as early as is allowed? One aspect that may work in favor of the ‘less talent drain’ argument is that high school age players would not seek out income opportunities from foreign basketball clubs instead of going to college. However, since the number of individuals of notoriety that have gone overseas to play basketball in lieu of college can be counted on a single hand and football does not have a similar outlet, this aspect is rather meaningless as an advantage.

Overall the situation regarding payment of players can be summarized as followed: players are clearly made aware of the arrangement between the university and themselves with regard to received compensation. Thus, those who elect to participate in collegiate sports fall into one of two categories, those that view college sports as a mere internship/stepping stone to the professional level and those that view college sports as a means to provide financial sustenance to further their educational goals while focusing on the enjoyment of the sport. The millions of dollars that athletic conferences and universities receive from media deals and merchandizing are frequently funneled back into the university to pay for sports and event activities that do not produce a profit; therefore, these millions are gross revenue not net revenue (profit) and thus are not freely available for distribution as a form of tangible player salary.

The needs argument is the most popular sub-rationalization for payment, beyond ‘excessive revenue’, but the provided scholarship routinely exceeds, by large margin, anything that a player could earn on his own working an independent job. If the player is not interested in using the scholarship for its intended purpose then that is the player’s decision, alternative measures of redress should not be expected or required. Assigning an alternative means of redress would be irrational anyways because the scholarship itself is not part of the revenue stream, but an exchanged cost. The university does not have the resources to provide cash equivalency to the player in exchange for foregoing the scholarship.

The jersey argument eliminates ‘uniqueness in importance’ as a means of justification for player payment as there are a small number of high-quality intramural teams that could draw large audiences if wearing official school colors in lieu of highly recruited athletes. In the end the only argument that proponents have is the fairness argument, which is no argument at all without a moral or logic backing which have been eliminated by the above analysis.

Even if proponents are not willing to accept the above arguments the one immutable obstacle restricting paying players is Title IX. The equality requirements of Title IX, which are tied to public school funding, make any additional payment towards athletes highly improbable in any public institution for any significant amount. With regards to private institutions they have clearly demonstrated that they are not willing to ‘rock’ the proverbial boat and provide additional payment to their players in lieu of public institutions not having the ability to do so. Overall the simple fact is that at this time it seems impractical for proponents to push for a system that provides athletes with additional money beyond scholarships for their athletic performance because beyond a seemingly hollow belief of ‘they deserve it’ there is no reason to support such a system.

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