June Open Letter From Ricky Volante, HBL CEO

In the six months since hiring David West as the HBL’s COO, our Management Team has been hard at work. With approximately one year until our June 2020 launch, I want to recap what we’ve accomplished and what to expect in the coming weeks.

Inaugural Cities of the HBL

Our team reviewed the Prospective City List carefully, focusing on: (1) market size, (2) the local basketball market, (3) school and educational options, (4) venue options, (5)the city’s appeal to potential recruits, (6) cost of living, (7) proximity to elite talent, (8) commercial marketability, and (9) the geographic footprint of the HBL. Upon concluding our review process, we determined that the following cities will be the Inaugural Eight:

  • Atlanta, GA

  • Baltimore, MD

  • Charlotte, NC

  • Norfolk, VA

  • Philadelphia, PA

  • Raleigh, NC

  • Richmond, VA

  • Washington, DC

The Inaugural Eight includes three of the top 10 markets by greater metropolitan area population in the US (Atlanta (9th), Philadelphia (8th), and DC (6th)), five of the top 25 markets by greater metropolitan area population  (Baltimore (21st) and Charlotte (22nd)), and three of the Top 10 highest rated local markets for NBA viewership  (Norfolk (1st), Raleigh (7th), and Richmond (8th)).

If you have not already noticed, the Inaugural Eight are located on the East Coast, in close proximity within the Mid-Atlantic and Piedmont. These teams will eventually be known as the eastern division (or conference) of the HBL. Over the course of the next five years, the HBL will launch additional divisions of eight teams in the other quadrants of the US.

Why start with the East? In addition to the market size and basketball interest within these markets, we wanted to align ourselves where much of the best talent in the country already resides.

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Additions to the HBL Advisory Board

We have added several important members to the HBL Advisory Board:

  • Manny Ojobaro is the Interim Head of Finance at Capital G, a private equity firm under Alphabet, Inc., the parent company of Google. Manny has a strong background in finance, investments and transactions, having also held positions with EY and Google.

  • LJ Kwak Yang is a leadership and business developer, entrepreneur, investor, and former Googler. LJ has considerable experience in guiding start-ups, developing leaders, and interacting with the investment community.

We’re excited to welcome Manny and LJ and look forward to working with them.

Creation of the Athlete Advisory Board

David and I often mention that we are working to add current and former professional athletes to the HBL Athlete Advisory Board (AAB). The HBL AAB members will serve as mentors to our players and further as a resource to the HBL, especially when making critical decisions that will impact our athletes and the direction of the League. We feel that athletes should have an important voice in the growth and future direction of the HBL. Professional athletes are typically blocked from these kinds of opportunities because the barriers to entry within ownership groups of professional teams are often too high.

The initial members of the AAB will be announced later this week, and we expect to add more people in the coming weeks, especially as the NBA playoffs conclude.

RJ Hampton Goes Abroad and Kenyon Martin Jr. Decommits From Vanderbilt

As many have already discussed, RJ Hampton, a consensus top 5 prospect from the Class of 2019, announced that he will forego all US-based basketball opportunities to play with the NBL Breakers (New Zealand) next season. A week later, Kenyon Martin Jr. decided to decommit from Vanderbilt and announced that he, too, will be playing overseas next season.

What does this mean? Well the obvious answer is that the US-based basketball options for players after high school (but pre-NBA) are flawed. If they weren’t, why would players feel the need to look elsewhere? But rather than dwelling on the downside of this situation, the good news is that starting with the Class of 2020, no player will have to choose between: (1) compensation abroad, (2) playing with 25-year olds domestically, or (3) being exploited for all they are worth domestically. Instead, they will have the opportunity to join the HBL and receive meaningful educational opportunities while being compensated, all without feeling the need to move 5,000 miles away. This won’t be limited to athletes straight out of high school either, as returning players from previous recruiting classes will have the opportunity to join the HBL as sophomores, juniors, or seniors without having to enter the transfer portal.

Looking Ahead

There is still much to accomplish between now and next June. Looking ahead, there will be many more things to announce in the coming days and weeks.

Coaching Search

We have begun the process of identifying and contacting potential head and assistant coaches for our teams. This will be a critical component of our overall strategy for recruiting players. It’s crucial that a player and his family feel comfortable knowing that our coaches will be of the necessary caliber to holistically develop and prepare them for the next stage of their career. We’re looking forward to wowing the world with these, and anticipate making our first hire within the next month.

Additions to the Management Team

As with growing any business, it is important to build a team that is talented and mission-aligned, and it’s no different for the HBL. As the hiring of David legitimized our efforts in the basketball community, we will be adding additional members to the Management Team soon that will have NBA front office, player representation, and/or college basketball coaching and operations experience. These additions will contribute to the HBL’s business and basketball operations.

Team Intellectual Property

Now that our cities have been unveiled, our design team has begun to identify potential names and color schemes for each city. Upon finalizing each team name, we will then begin the process of developing a logo/mark and corresponding merchandise. Local artists in each market will have the opportunity to participate in the development process, as we try to capture the essence and vibe of each city.

Team Ambassadors

As an extension of the Advisory Board and Athlete Advisory Board, the HBL will be announcing Team Ambassadors for each of the inaugural eight teams. Ambassadors will be one of the public faces for our teams as they enter the world’s consciousness. Think Spike and the Knicks, though the Ambassador will be more than just the team’s super-fan. HBL Team Ambassadors will be far more involved in the business side of the League, whether as part of each city’s operational team, as an HBL shareholder, and/or even as a coach. As with the other personnel announcements, get ready to be really excited.

Fundraising

Since David joined the Management Team in November we have welcomed a series of new investors, and will continue to. One of the most exciting parts of the regional model we’re implementing is that it drastically reduces the first-year operational costs of the League. We took heed of the AAF’s collapse and wanted to establish a strong footing that will allow the HBL to steadily grow in the coming years, while not taking an all-or-nothing approach at the onset. Our  plan lets us get the HBL right with a regional footprint and then roll it out nationally over the course of the next half decade.

Player Recruiting

Speaking of rollout, scouting for the HBL’s first 100 players has officially begun! As the summer season ramps up, we will continue to identify our targets in the Class of 2020, as well as current college players and top international prospects.  Don’t expect to hear actual names until towards the end of the year or even 2020, as we remain respectful of our targeted athletes’ need to maintain varsity eligibility until they are ready to make their move to the HBL. As these names hit the news, you’ll be able to see why the HBL is confident we will be the premier college basketball league in the world, and that #AmateurismIsACon.

***Statements in this letter that refer to forecasts, future plans, or expectations are forward-looking statements that involve a number of risks and uncertainties. Statements that refer to or are based on projections, uncertain events, or assumptions also identify forward-looking statements. Such statements are based on the company’s current expectations and involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these forward-looking statements.

HBL Prospective City List

The HBL will be announcing the initial cities in June. In the meantime, here is a reminder of the prospective city list under consideration:

  • Atlanta, GA

  • Austin, TX

  • Baltimore, MD

  • Boston, MA

  • Brooklyn, NY

  • Charlotte, NC

  • Chicago, IL

  • Cleveland, OH

  • Detroit, MI

  • Houston, TX

  • Jacksonville, FL

  • Las Vegas, NV

  • Los Angeles, CA

  • Miami, FL

  • Nashville, TN

  • New Orleans, LA

  • Oakland, CA

  • Pittsburgh, PA

  • Philadelphia, PA

  • Portland, OR

  • Raleigh, NC

  • Richmond, VA

  • Seattle, WA

  • St. Louis, MO

  • Washington, D.C.

Ricky Volante
The Real Scandal: We Don't Fairly Compensate College Athletes

Answer this quickly: if a young man in high school develops something special, patents it, and commercializes it, licensing it to a major state university and makes $100,000 in royalties, how do you feel about him?  Do you cheer his ability to turn his talents into financial success?  How would you feel if he then went to the same state university on scholarship, combining his education with his business partnership?

Scandalized yet?

Well according to the NCAA, you should be.  At least if the “patented” talent is sports related.  In the wake of recent revelations from Pat Forde and Pete Thamel of Yahoo! Sports that dozens of high school athletes received payments to bring their talents to the elite schools of Division I.[1]  And the NCAA’s response was to call this an “affront,” “systematic failures that must be fixed and fixed now,” and the work of “unscrupulous parties” the NCAA must “clean up.”[2]

The Historical Basketball League (the HBL) couldn’t disagree more.

At the core, the concept of NCAA “amateurism” can be thought of as a wealth transfer.  College sports are valuable, but while Mark Emmert can earn nearly $2 million for his role in commercializing the sport, if an athlete negotiates a contract to share in the revenue he helps to generate, he can be banned for life.  The result is everyone else gets a slice of the pie that the athletes help create.  The scholarship the athlete gets is valuable, but it’s a far cry from what the true market value of those services would be if the rules did not insist that the surplus go to Emmert and other non-athletes when the market outcome would send it to the athletes themselves.

The side payments revealed by Yahoo! Sports start to paint a picture of what a star collegian might be worth.  For example, as alleged by Yahoo! “Dennis Smith, who would go on to play at North Carolina State in 2016-17, received $43,500 to … $73,500 in loans” though the loans only had to be paid back if Smith did not sign with the agency that made the loan.  Others allegedly received smaller amounts, ranging from $26,136 for Seton Hall’s Isaiah Whitehead, to $16,000 to LSU’s Tim Quarterman, to $10,000 to future number one draft pick Markelle Fultz.

This is where you should perform a character check on yourself.  If you hear those figures and you think the scandal is that athletes sought compensation for the services, you’ve missed the point.  If you hear those figures and think the black market nature of the system meant that even the athletes who sought compensation were still underpaid, then you might be ready for the future of college sports.

That future is the HBL.  The HBL will be a professional, collegiate club-sports league operating as a for-profit corporation.  The HBL will employ college athletes to play a full summer season of basketball, and those athletes will also be enrolled as full-time students at Historically Black Colleges and Universities (HBCUs) that will make up the HBL’s membership.  These will be real students getting paid real money to help their universities generate revenue, no different than when the chemistry department pays a chemistry student to work on a new drug patent during the summer semester.

Because the HBL will be a club-sports league, the NCAA and NAIA have no regulatory power over our corporation or the HBCUs’ participation in the HBL, and so the “amateurism” ethos that treats college athletes’ labor, who are predominantly black, as unworthy of full and fair compensation, while allowing white administrators to reap the benefits will be turned on its ear.  With a summer basketball schedule and full-time employment, athletes will no longer have to choose between their education and athletics or between fair compensation and collegiate competition.

From a purely business point of view, what the NCAA wants to do is wonderful for the HBL.  We’re hoping the NCAA keeps insisting on ostracizing anyone who thinks college athletes are worth more than a fixed price scholarship.  Every time they say “you earn too much” we say “come earn what you’re worth with us.”  Every time they say it’s a scandal that the future number one draft choice earned $10,000, we say, you’re right, he should have received $100,000.

The problem with Amateurism is that it makes people confuse capitalism with controversy, business with badness.

It’s time for America to recognize that the real scandal is that athletes have to hide what they are worth or accept a fraction of their value.  The real scandal is that we hear about athletes receiving some portion of what they are worth and we think it’s a problem that must be cleaned up, rather than the first step in righting a wrong.

If you’re ready to right that wrong, come join us at HBLeague.com today.  We’d like you to join us in making the world a little bit more just.  Are you ready to tell the NCAA that their days of exploiting athletes in the name of protecting athletes from exploitation are over?

Amateurism is the scandal; the HBL is the solution.

[1] https://sports.yahoo.com/exclusive-federal-documents-detail-sweeping-potential-ncaa-violations-involving-high-profile-players-schools-103338484.html

[2] http://www.ncaa.org/about/resources/media-center/news/ncaa-statement-yahoo-sports-story

 

HBL Statement on Alston Decision from CEO Ricky Volante

The HBL management team are experts in the business of sports and the legal issues surrounding compensation of college athletes. We have seen this story play out before: a court ruling chastises the NCAA, but the decision lacks teeth to meaningfully provide justice to college athletes. Equity for college athletes will not come from a court decision, and will certainly not come from the NCAA suddenly deciding to do the right thing. This is exactly why we founded the Historical Basketball League.

Last night, Judge Claudia Wilken issued her ruling in the Alston case. She determined that the restrictions on educational benefits established by the NCAA and its member-schools violate antitrust law. I'm going to say that once more for the people in the back: A Federal Judge, ruled in court, that the NCAA and all the schools profiting from college athletes, are violating federal laws designed to protect consumers and the free market.

Judge Wilken further stated that “amateurism” is likely not a necessary part of college sports in the eyes of consumers. We agree. This all sounds great so far! Federal courts will provide equity to college athletes, right? Unfortunately not. This isn’t the first time that a federal court has found the NCAA to have violated antitrust law. As in each of the previous cases, the ruling was not paired with anything that would meaningfully change outcomes for college athletes.

Judge Wilken left the restrictions on benefits not related to education intact. Essentially, she decided to protect the salaries of conference commissioners, athletic directors, and coaches over the rights of college athletes to be paid directly for their labor.

Judge Wilken saw through the con that is amateurism.  She made clear that consumers “enjoy watching sports played by student-athletes who receive compensation and benefits.”  When a Federal Judge is willing to say that NCAA rules “do not follow any coherent definition of amateurism,” that's legalese for #AmateurismIsACon.

She saw that the optimal decision would likely be to pay the athletes to please the consumers, writing that: “In a market free of the challenged restraints...student-athletes would receive offers that would more closely match the value of their athletic services.” We agree, which is why we are making that market.

Judge Wilken wrote over 100 pages detailing all of the harms caused by the con of amateurism. Yet in her ruling, on the last few pages, she chose to leave almost all of that harm in place.  She actively worried that the six- and seven-figure salaried athletic directors and commissioners who run these college sports leagues might make “miscalculations” and overpay their athletes. On this (poorly reasoned) ideal, she chose to deny all college athletes their right to fair market pay.

Think of your job. Imagine if a judge said that because Brad from accounting might be overpaid, no paychecks for any other employees, including you, will ever be handed out. Oh by the way, your boss now makes $6 million a year from all the money freed up from not paying you and your coworkers. But at least you get free coffee, a parking spot and a desk, and the opportunity to work “for the love of your job.” After all, isn’t that enough?  

We feel that this ruling is poorly reasoned because it prioritizes the powerful over the vulnerable, the privilege of wealth over the rights of the poor.

There are four ways to dismantle an economic cartel: (1) litigation, (2) legislation, (3) unionization/organization, or (4) competition. The first three are far too slow for the arc of history to ever bend towards real justice.  The cases against the NCAA have now taken 13 years – and will likely take years more once the NCAA appeals this decision. Justice delayed is justice denied.

Similarly, legislation introduced in the State of Washington to permit athletes to sell their name, image, and likeness rights (i.e., sign endorsement deals) died in committee. While similar bills have been introduced in California, Maryland, and North Carolina, you can be sure the NCAA will be sending their lobbyists to Sacramento, Annapolis, Raleigh, and DC to try and kill these efforts as well.

Unionization efforts proved unsuccessful at Northwestern in 2015. These efforts also resulted in certain states (e.g., Michigan and Ohio) passing bills that specifically prevented college athletes at public universities from unionizing.

It should also be considered that any reform, whatever the method, will still end with the same people in charge – the NCAA, conference commissioners, and athletic directors. We have over 60 years of evidence that they will put themselves above the athletes every time.

The only method of providing justice to college athletes that is immune to the above shortcomings, is competition. The Historical Basketball League is that competition. The dimension of competition that should be prioritized, is providing long-term value to college athletes. No amateurism con. No false choice between education and compensation. No restriction from profiting from their own likeness.

The HBL is the first college basketball league to educate and compensate its athletes.  When it launches in June 2020, the HBL will be the premier destination for elite college basketball players to shine on a national stage. Structured as a single-entity sports league independent of the universities, the HBL will take a holistic approach to developing each athlete on and off the court.

The HBL’s basketball operations division, led by 2-time NBA champion David West, is recruiting the top athletes from the freshman class of 2020, as well as identifying athletes at existing schools ready to take their talents pro without having to give up their college education. The more the NCAA schools cling to amateurism, the easier it is for the HBL to disrupt their model by offering fair wages for athletic services – what’s bad in Judge Wilken’s decision is great for the HBL business model.

In addition to being employees of the HBL, the players will be enrolled as bona-fide students at two- and four-year colleges and universities, as well as vocational and online programs. With our regular season taking place in the summer, an HBL player can actually be a student and an athlete. As an employee of the HBL, each player will receive an annual salary ranging from $50,000 to $150,000, plus they will no longer be denied the right to earn third-party income from sponsorships, endorsements, and even their own social media channel.

We continue to add mission-aligned investors and ramp up basketball operations. The HBL was recently featured in the Wall Street Journal, and will be featured in a number of national outlets over the next few weeks.

The HBL will initially consist of 12 teams in strategically selected cities across the country – here are the 20 markets that we are considering. We are identifying and engaging mission-aligned investor-operator groups to run these teams, and look forward to bringing together a group of powerful investors ready to change the world and make money in the process.

If like us, you are tired of college football and basketball players from low socioeconomic backgrounds being economically exploited for the benefit of college coaches, athletic directors, and universities, then the HBL is meant for you. David West, the HBL’s COO, explained that being pro-HBL means being “on the right side of history” by helping create an equitable system for college sports. Amateurism is a con, and the HBL will provide a path to a better, juster, and more professional future.


Paying College Athletes Will Not Ruin College Sports

By: Ricky Volante (HBL CEO & Co-Founder) and Andy Schwarz (HBL Chief Innovation Officer & Co-Founder)

In a recent opinion piece for the New York Times, Cody McDavis trotted out a series of stale and mostly discredited arguments against antitrust remedies proposed by the plaintiffs in the Alston v. NCAA case. He argued the proposed remedies would lead to the death of college sports. His lead thesis claims that unravelling the pay caps imposed by the NCAA would “distort the economics of college sports.” McDavis has confused cause with effect, poison with cure.

The economics of college sports are highly distorted because of “amateurism.” The 350-plus NCAA schools that band together to set maximum compensation caps are a classic example of a monopsonistic cartel — a group of independent businesses that agree not to compete on price for an essential input to their business.

Imposing price caps almost always distorts markets, and in the case of a monopsony (economics jargon for a buyer’s monopoly), the most typical impact is the cap distorts the price of related complementary inputs, things like coaching salaries and facilities spending.

And indeed, this distorting effect has been massive. In the late 1990s, Steve Spurrier (then the head coach of the University of Florida) was the first college football coach to earn $2 million dollars in a season. Today, according to the college football coach salary database compiled by Steve Berkowitz ofUSA Today, 62 football coaches — all but a handful of the Power 5 Conference schools earn $2 million or more, with the highest honor going to Nick Saban whose guaranteed pay exceeds $8 million.

Similarly, schools spend lavishly on athletics facilities and athletics-specific amenities, in part, to attract elite athletes to their campus in the absence of the more traditional ways of using compensation and benefits as a direct inducement.

This dramatic rise in coaching pay and facilities spending has two causes. First, college sports have become more lucrative, and second, athlete pay is capped. Schools invest in indirect means of recruiting because the NCAA will punish and/or ban them if they use the direct methods. This has led to Alabama’s locker room featuring a waterfall and $10,000 player lockers in Texas’s football locker room.

The result is market distortion. McDavis sees the positive changes that would occur as schools adjust their spending downward to appropriate levels for coaches and facilities, and upward for athletes as a problem, rather than as a sign that things were finally coming back into equilibrium.

McDavis also trotted out the “sky is falling” arguments, saying that if schools had the choice to pay athletes, some would simply quit. In supporting this, he pointed to the testimony of University of Wisconsin chancellor Rebecca Blank, who testified last September that: “It’s not clear that we would continue to run an athletic program.” McDavis omitted the fact that the outcry against this testimony was so great that Wisconsin issued a retraction one day later, stating publicly it has “no plans to stop offering athletics,” lest the Badger State rise in revolt at this ridiculous claim.

To be clear, McDavis knows these arguments are threadbare and have been rejected by federal courts. Indeed, his Op-Ed is essentially a precis of his 2018 article in the Marquette Sports Law Review, where he specifically acknowledges that these arguments were rejected at the summary judgment phase of the recent Alston v. NCAA case, meaning the NCAA’s argument was so weak, it was rejected even before the trial began.

Among these rejected arguments, McDavis adopts the idea that capping athlete pay helps balance college sports. He bemoans the likelihood that college sports will become imbalanced, with only the top 25 schools capable of winning the national championship. But that is the case now.

Try telling a fan of any women’s basketball team other than UConn and a handful of other contenders that the 26th best women’s program has a realistic chance to win it all. McDavis essentially offers up the nightmare scenario that Clemson and Alabama might play each year for the FBS football championship because they would spend the most on athletes, but of course three of the last four years have featured that exact match-up even with “amateurism.” Why? Because those teams spend the most on coaches and facilities. Think it’s more balanced in the Football Championship Subdivision (FCS)? Guess again. North Dakota State University has won 7 of the last 8 national championships.

Even in men’s basketball, seen as a haven for “the little guy,” the last ten championships have been won by Villanova (2), North Carolina (2), Duke (2), UConn (2), Louisville (1) and Kentucky (1). These are blueblood programs, winning year after year. Indeed, if we total all national championships won by these programs and just three others (UCLA, Indiana, and Kansas), those nine schools won 48 of the 80 national championships ever awarded in men’s basketball. That’s approximately 2.6 percent of the schools participating in Division 1.

You cannot call a sport “balanced” when 2.6 percent of the teams have collectively won 60 percent of the championships.

But where McDavis really goes astray is when he tries to make the economic argument against compensating players.

He points to rule changes which came in the wake of a court ruling against the NCAA’s previous (and more onerous) pay cap, that allowed, but did not require, schools to pay athletes a cash stipend of between $2,000 and $6,000 — known as the “cost of attendance” scholarship.

Over 250 of the schools in Division 1 adopted this increase in one form or another within three years of the rule change. Sounds good, right? Not to McDavis. Instead, he argues that by allowing schools to choose where they would direct their funds in a more open-market manner, this has led them to giving more money to basketball and football, but led to cuts in other sports like golf and tennis.

As it happens, he gives just one example — a school that cut, inter alia, golf, though the causal connection between the school’s adoption of higher pay for some sports and the decision to cut other sports is rather dubious.

However, if his single example were true, that simply means the current market is encouraging schools to under-compensate athletes who play football and basketball, and over-compensate those who play golf. In light of the fact that at many schools approximately half of the participants in basketball and football come from families with income low enough to qualify for Pell grants, it is not clear why McDavis supports shunting their money into country club sports. But for our part, we posit this is a distortion that needs to be fixed — not preserved.

Who are we? We are David West, Ricky Volante, Keith Sparks, and Andy Schwarz, the executive team of the Historical Basketball League (HBL). We are launching the first professional college sports league in June 2020. The HBL wants to end forever the forced (and false) choice between education and economic rights by offering athletes both: guaranteed five-year scholarships (that can be suspended while an athlete pursues an NBA career and then resumed thereafter) and market rates for their basketball services. Plus, HBL athletes will be able to tap into the lucrative market for endorsements, like sneaker deals, and still remain eligible for the HBL as long as they remain students in good standing at their school.

We think college athletes, like all of us within the American economy, deserve the benefits of a vibrant market in which the best talent can seek the best rewards, free from collusion among employers. The HBL can’t make the NCAA stop being a cartel, but we can make them pay a heavy price for denying athletes their fair market value.

We plan to attract the best collegiate talent in the good old-fashioned American way — by paying more for quality. The NCAA schools can choose to compete, or they can accept becoming the amateurs.