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.