No, Paying Athletes Won't Bankrupt College Sports

The NCAA's biggest and most bruited argument against compensating players is that athletics programs couldn't take on the additional burden of player salaries without going bankrupt. The argument has a certain appeal to a certain kind of fan, the one who thinks sports took a turn for the worse at roughly half-past Marvin Miller. It's also very wrong. The money's already there.

That's the finding of a report by sport management professor Dr. Daniel Rascher, filed Monday on behalf of the plaintiffs in O'Bannon vs. NCAA; the case is technically only about athlete compensation for the use of their likenesses in video games, but in reality it's a direct shot at the foundational principles of the NCAA. (We'll have more on the latest filings, which together amount to a point-by-point rebuttal of every argument commonly made against pay-for-play.)

Rascher's study, which is below, notes that current Division I revenues would be sufficient under a pay-for-play regime; it's just that right now, without any workforce to pay, an eye-popping share of the money is instead going to head coaches (to say nothing of assistants and administrative staff and plush offices and jewel-encrusted workout rooms).

Here's the data, the percentages of revenue devoted to head coach salaries at 107 top football programs and 60 top basketball programs, compared with those percentages in the NFL and NBA.

No, Paying Athletes Won't Bankrupt College Sports

(The seasons are the most recent for which complete data could be obtained. But Rascher notes that that average college football coach's salary went up 59 percent from 2007 to 2012, and the average college basketball coach's pay rose 112 percent from 2005 to 2012.)

What do these numbers mean? Most simply, this: If the top NCAA programs paid their coaches in line with pro coaches—not the same amount, but the same percentage of revenue—it would free up tens of millions of dollars that could be used to, say, pay players.

Even if that doesn't seem like enough, know this: College programs don't always tell the truth about their profits—sometimes for innocent reasons; sometimes not.

In a separate report filed in the case last April (also below), Rascher detailed some of the ways athletic programs tweak their balance sheets to show a loss even though they're actually turning a nice profit. Among those tricks:

  • Not counting donations unless they're specifically made to that program.
  • Not counting university-branded merchandise.
  • Not counting a successful program's effect on applications, enrollment, and tuition.
  • Undervaluing concessions, parking, and team merchandise.
  • Overvaluing the cost of food, tuition, books, and room and board.

These games aren't new. A famous 1992 study looked at Western Kentucky's claim that its athletics department was losing $1.5 million a year. By adjusting for WKU's creative accounting practices, the study found that the athletics program was actually turning a profit of more than $5 million.

Rascher told me he believes programs usually aren't being malicious when fudging the numbers. Because they're attached to non-profit universities, athletic departments face little pressure to show a profit or even to have precise bookkeeping, and "it's simply time-consuming to try and parse out true sources of revenues or expenses."

But there are glaring exceptions. Rascher notes that the athletics department at Texas counts among its expenses out-of-state tuition for every single athlete, whether they're actually from out of state or not. That's more money going from athletics to the school's bursar than is necessary—"an obvious attempt to falsely increase expenses," Rascher says. Why? Smaller programs might exaggerate expenses to receive more funding. But, Rascher says, it works the other way around too: "Really well-off athletic departments find ways to pay the rest of campus so everyone is fine with them doing their thing."

In court, the NCAA's research czar has argued that roughly two percent of its member schools show a profit in athletics. Aside from any creative bookkeeping, that's a misdirection because it includes every sport at every level. O'Bannon vs. NCAA is only about revenue sports. No one is claiming a D-III gymnast should be paid. In this class action, 100 percent of the class is FBS football or D-I basketball.

Take football as an example: 70 percent of the damages claimed focus on the six power conferences. An analysis of the 66 football programs in those conferences found that only three were in the red; the average program's profit was $18 million.

So, yes, the money is there. The only question is: Who deserves it?