NCAA, pay your players already

Nick Saban just signed an 8-10 year, $30-$40 million dollar deal with Alabama.  Even professional football doesn't offer contracts like that.  There are a number of other college coaches making $2-$3 million per year.  The price of a proven winner is spiraling rapidly upward. 

Why do college coaches make so much money?

This guy suggests that it is because college coaches are proxies for the players, who can't be paid.

That makes a lot of sense to me.

The NCAA is a price-fixing cartel.  It fixes the price of an input -- labor -- rather than the price of its product, but it's price-fixing nonetheless.  It ought to be a crime.  If it were any other industry, it would be a crime. Imagine the movie studios getting together to fix the price of talent.  If they got caught (and they would, since price-fixers notoriously are cheaters and tattlers), somebody would go to jail.

In most sports, it's true, the price the NCAA has set for its athletes is probably at or above market price.  I doubt lacrosse players could get much even without NCAA regulations.  Blue-chip football or basketball players, however, could fetch hundreds of thousands of dollars.

All of this is supposed to be justified by the need to keep college football and basketball "amateur" sports.  I've never bought that.  "Amateur" originally meant someone who engages in an activity as a pastime rather than as a profession.  Athletes in big-time football and basketball programs are engaged in a serious business and they know it.  That some choose to get an education on the side does not change this.   

Over time, thanks to the NCAA (with some help from the Olympics), "amateur" has come to mean "an athlete who doesn't accept money."  In other words, an athlete who competes for free.  Under this definition, the NCAA's chief justification is a tautology:  "We must be allowed to fix the compensation of our athletes because the 'product' we sell is competition between uncompensated athletes."  If that holds water, I'd like my law firm to get into the "amateur associate" business.

The other justification the NCAA trots out is "competitive balance."  I've never bought that either.  The clique of elite programs has been remarkably stable over time.  Sure, you'll see an off-brand program enjoy a string of successful years, or an elite program go in the tank for a while.  But on the whole the teams that are strong today were strong in the '90s, '80s, etc.  You can even argue that compensation restrictions are anticompetitive because they force teams to compete for talent on the basis of reputation and tradition, which favor the big boys.  The strong programs generally can afford the best coaches, too.

I usually go on this rant each year during bowl season.  Nothing else points up the NCAA's avarice quite so vividly.  The San Diego County Credit Union Poinsettia Bowl?  The Aamco down the street would probably like to sponsor a bowl, too, and I bet the NCAA would let it if it could find two bowl-eligible teams.  It wouldn't even have to come up with a fruit-themed moniker, as the Chik-Fil-A Bowl proves. 

The SDCCUP Bowl is small potatos to the Tostitos Fiesta Bowl, Allstate Sugar Bowl and the Sears Trophy, each of which costs its sponsor millions.  The NCAA has leased every inch of its football and basketball franchises to the highest bidder, and rakes in hundreds of millions of dollars per year as a result.  In a free market, a large chunk of that money would go to the athletes who have the natural resources -- scarce athletic talent --that make this possible.  Does anyone doubt that Alabama would gladly shell out $4 million directly to the players?  (Given 'Bama's track record, it might be slipping money to prospects as I write.)

I don't blame the NCAA for trying to maximize revenue.  It is hypocritical, though, to preach the virtues of amateurism while trying to wring every plug nickle out of it. 

Back to Saban.  Schools can't pay a premium for good players, so they pay a premium for their proxy, the coach who has shown he can lure them to his team. 

The irony is that the coaches are taking more and more of the cartel's economic rents.  The NCAA has had a good deal -- a product rapidly appreciating in value, produced by workers whose compensation is set low and in stone.  If the NCAA could fix coaches' salaries, too, then its member schools would keep their surpluses.  Don't think it hasn't tried.  But even the courts, generally NCAA apologists, recognize that that is an antitrust violation.  Because it can't fix coaches' salaries, the NCAA's rents are gradually being competed away.

If this trend continues, the cartel will do little other than transfer wealth from players to coaches.  Hardly fair.

Perhaps at that point, the NCAA will lose its interest in price-fixing, and some of the profits can go to the athletes who generate them.

Comments

[M1EK]

Sports are at their essence a socialist endeavor - every league trends towards a salary cap or somesuch, because frankly, that's the only way to do it - everybody needs reasonable equality of opportunity at the beginning of the season. Combine that with the fact that there's 80 guys on the football team, and even at a football-factory (no education given) like Texas, perhaps 5-10 will make significant NFL money, and paying players is going to destroy the thing.

The 5 or 10 who don't get their big college bucks are more than compensated by the chance to play with the other 70-75 on their team and against the other 100 teams in the league, without which they'd face a much less lucrative career path, a la minor league baseball.

This debate is usually colored by what colleges people are familiar with. Having gone to Penn State, where the offensive linemen who don't make the NFL end up as stockbrokers, lawyers, architects, etc.; I have a different view than fans of the borderline-criminal SEC and former SWC programs like Texas.

[M1EK]

I should have mentioned straight up that for the remaining 70 or so players even on Texas' team, the expected value of the college education is higher than their likely unequal share of the team proceeds, unless we're going to distribute in equal shares (which brings us back to socialist-land, just on a per-school scale).

[AC]

1. The NCAA's limits on player compensation are nothing like the pro sports caps. The NFL and its union are a bilateral monopoly. They bargain over the split of anticipated profits, which are then distributed roughly according to the players' market value. Ditto on pro basketball. It's not "socialist." Give college players a bargaining agent and I'll be fine with capping team payments.

2. We don't know how many players would benefit under an open compensation system. It could be a few or it could be a lot. (Saban's $4MM spread over 80 players would be $50,000/player -- on top of the scholarships.) But let's suppose it's just a few. So what? I don't see why it's ok to gyp some people just because most of the others are already getting market wages. If this is an egalitarian argument about how to split the pie, it'd have more bite if it didn't mean keeping the pie so small.

3. There are lots of players who aren't going to go on to professional careers. There are lots who will end up in relatively low wage jobs. Some will never be in as high demand again -- there's not much room in the NFL (and less in the NBA). The NCAA takes away their one chance at good money. (We haven't even talked about the uncompensated risk of injury.)

4. For the reasons stated in my post, I don't think that compensation limits provide reasonable equality of opportunity. I graduated from Ole Miss. We get the same number of scholarships as everyone else, yet we start each season with zero chance of winning the SEC. We just don't have the athletes, with rare exceptions (Deuce McAllister/Eli Manning).

5. Whether the chance to play in college gives you a more lucrative career path is irrelevant. Anyway, it's true only for those who make the pros.

6. Do baseball players who go to college before turning pro make more money in professional baseball than players who start in the minors after high school? I don't know, but they might. Assuming college baseball players can make more money doing something else, they'll demand more to play professional baseball. But all else being equal, the market value of a college player ought to be equal to the market value of the minor leaguer with equal skill.

[M1EK]

Most of this comes back to the simple question: if you pay the best players, is there anything left for the rest, and if not, what happens?

I've been arguing this issue for over a decade now and am pretty darn well convinced (by the fact that I attended a non-outlaw school where the 90% of kids who will never make NFL money actually get something for their work) that paying players will lead to the whole thing falling down. The star players at the big schools can't make their money without the second-string offensive linemen. Gotta pay them too, then. Then those big schools don't have enough games to play without the middle-tier schools. The middle-tier schools can't pay their players. Bang.