Settlement Boosts Advantage for Power 4 at Expense of Hawaii, According to Stephen Tsai
Woo hoo! Cashing in on College Sports
In a major shakeup for the sports world, California's ruling that NCAA student-athletes should be financially compensated for their name, image, and likeness (NIL) was finally approved. But the NCAA wasn’t going down without a fight.
Back and forth the two parties battled, with over 15 states on California's side. But soon, the NCAA threw in the towel, claiming "uncle."
But, former student-athletes weren't about to let this be the end. With multiple lawsuits being filed, one of which became a class-action suit against five power conferences and the NCAA, alleging illegal limitation of earning power for the players.
The war had reached an impasse... or so it seemed.
The House vs. NCAA settlement was eventually negotiated, promising $2.8 billion in back damages, to be paid over the next ten years, to student-athletes who competed from 2016 to the present. The agreement officially goes into effect starting July 1.
Here's a breakdown of what went down:
What the heck happened?
The five power conferences (now four because of the Pac-12's dilution) and the NCAA decided to split the massive $2.8 billion bill with the Group of Five (G5) conferences over the next decade. The power conferences would pay 40%, the G5 and the NCAA would chip in 30% each. While the power conferences have massive TV deals and licensing arrangements to cover their contribution, the G5 schools, such as the University of Hawaii, can take a smaller annual payout from the NCAA to cover their share.
The settlement permits Division I schools to pay current players directly; however, there's an annual cap of $20.5 million per school, derived from 22% of what the Power-4 schools receive in revenue from ticket sales, TV deals, corporate sponsorships, and licensing. Schools like Hawaii, which belong to the Mountain West Conference, won’t see as much revenue as Power-4 schools and will have to makes due with smaller payouts.
Hawaii student-athletes currently have NIL deals through three collectives. But, the new College Sports Commission will now evaluate whether players are receiving fair-market compensation, reducing the chances of collectives overpaying players. Keep in mind, collectives can donate money to a school, which can then pay the players directly, circumventing the need for approval. Regardless of the method, schools like Hawaii will be at a funding disadvantage compared to Power-4 schools.
Are power Conference players getting all the dough?
While power conference schools will be dishing out the majority of the $2.8 billion in back pay to their players, schools like Hawaii will see smaller portions. The power-4 schools have indicated they plan to distribute funds as follows: 75% to football, 15% to men's basketball, 5% to women's basketball, and 5% to other sports. However, separate lawsuits are likely to result based on this male-dominant distribution, potentially violating Title IX. Furthermore, antitrust advocates argue that students won't be paid fair-market value if disbursements are adjusted.
The settlement clarifies that players paid directly by the school are not considered employees or contractors, creating a grey area for legal implications involving taxes and potential collective bargaining.
Times have changed
Back in the day, a college athlete might receive tuition, room, board, and books. However, successful lawsuits have since allowed schools to provide cost of attendance (money to cover additional expenses, such as cell-phone bills, laundry, and Uber rides). Due to the “Alston lawsuit”, schools are now permitted – but not obligated – to pay up to $5,980 annually for miscellaneous educational expenses for athletes. Currently, Hawaii pays cost of living to its players and offers Alston money to some teams.
Starting July 1, new roster limits and scholarship rules will go into effect. For example, men's volleyball teams will be able to offer scholarships to all 18 players, compared to the current practice of splitting the financial equivalent of 4.5 scholarships. Football and baseball teams, on the other hand, are not likely to increase their number of scholarships.
The clock is ticking
The University of Hawaii needs additional funds – preferably from the state legislature – to pay the expenses associated with the House Settlement Realities, which could cost an extra $16 million if the maximum payments are made to student-athletes. The breakdown includes:
- Back pay
- NIL payments from 2016 to 2025
- School revenues distributed to current players
- Increased scholarships
- Cost of attendance for student-athletes
- Education-related expenses up to $5,980 per player (Alston)
In closing, preparing for these changes and managing the financial impact will be critical for schools like Hawaii in the coming years. It's a new era for college athletes, and all parties will need to adapt to these considerable changes.
- With the financial compensation for student-athletes now a reality, they might reconsider prioritizing education-and-self-development over sports, as their careers outside athletics could potentially be influenced by earnings from their name, image, and likeness.
- As the University of Hawaii faces an additional $16 million expense associated with the House Settlement Realities, career-development initiatives and programs might receive less funding, potentially impacting the overall development of student-athletes.
- The distribution of funds among the power conferences and Group of Five conferences for name, image, and likeness compensation could lead to an imbalance in athletic resources, potentially affecting the level of competition in less financially endowed conferences such as basketball and football in schools like the University of Hawaii.
