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College Athletics is Big Business

But should the players be paid? Should they be able to unionize?
COMPLETE COVERAGE: Commentary from Economist Peter Morici | How Much Money do Colleges Make? (Below) | Northwestern Alum Steve Tasker Applauds Players
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Economist Peter Morici on The Athletes & The Big Money Schools

AXA Advisors' Paul Peck, UB Football Announcer & Financial Planner

(WBEN) - It's no secret, college athletics is a billion dollar business.

"College sports now apparently generates more revenue than (professional) hockey and part of basketball," says author and Professor of Sports Economics at the University of Michigan Rod Fort.

Just how did it get this way? It's fans that make the money happen," Fort said. "It's the increasing willingness of fans of college sports to spend more and more and more money enjoying it."

STEVE TASKER(WBEN) Recently, Northwestern University football players voted to organize a union and gain collective bargaining rights. A former Bill and Wildcat says while he applauds their initiative, he wonders what they'll gain.

"I think it's an enormous step, and I think with what all's been said about paying college athletes and criticism of colleges making so much money off their sports programs," says Tasker, currently a CBS Sports analyst. "I think it's a logical step, I don't know how much it will change for the players but it will be interesting to find out."

Tasker also wonders why players signed on if they felt they were being exploited. "If I didn't like the deal, I could not play, not accept a free college education. The colleges are the ones who run the program. If the kids feel they're being exploited, they don't have to go," believes Tasker. He adds for every one player unhappy about the deal, there are "at least ten players standing in line to take that scholarship."

Tasker says he doesn't have an issue with the players pursuing a collective barganing agreement, but he believes the only organization they'll have to negotiate with is the NCAA. "In my observation, the NCAA a lot of times seems arbitrary at best when it comes to colleges violating the rules. It will changes the landscape some, but I don't know if the NCAA is all adept at those kinds of negotiations. The NCAA doesn't negotiate, it sets the rules and that's it," says Tasker.

Tasker adds there is a fraction of a percentage of all college-athletes who have a chance to make money off their names while playing in college.

When they spend that money, many of those fans believe that they are supporting not just a school's athletic department, but the academic side as well. Fort says that's not necessarily the case.

"You'll hear people say, sports makes millions for their university. It does, but only indirectly, because the university treats its athletic department like it treats any other department on campus."

That means that universities don't expect to see any money back from their athletic departments, which are in many cases expected to spend all of the money they take in.

So what happens to the excess of revenues? Fort says the money is usually spent on facilities, coaches, athletic directors, and recruiting costs. But that doesn't mean that there is no money left over to spend on athletes.

"If athletes need more compensation, however that happens, it'll just have to be rearranged out of the places where the money that they're generating anyways is currently being spent. So it would just be rearranged away from coaches, and athletic directors, and facilities, and recruiting. It's not a matter of can they afford it, the money's already there."

Fort sees a future where athletes are compensated, but says he thinks it will take years to get to that point


Economist Peter Morici at the University of Maryland writes:

The advent of cable television gave universities vast opportunities to profit from football and basketball, and the large and most lucrative programs have consolidated into five major conferences. Those programs dominate the national championship tournaments and earn huge sums.

 Northwestern University football reaped an $8 million profit on its $30 million in revenue during the 2012-13 season, and it is hardly a perennial powerhouse like Notre Dame or Alabama.

 The National Labor Relations Board in Chicago sided with Northwestern football players a week ago, ruling that the players are employees and can vote to form a union. The football players are not necessarily seeking salaries as much as better opportunities to complete degrees and get additional health insurance.

 Universities monopolize the market for athletes' services through the National Collegiate Athletic Association, which mandates that players are amateurs and can't be paid salaries. This denies them the value they create with their labor and unique talents through ticket sales, concessions and TV rights.

 Coaches earn millions, universities use profits to subsidize other activities, and the fans get cheap entertainment. Universities twist admissions standards and faculty bend grades to deliver winners and appease wealthy donors.

 In exchange for scholarships for tuition, room and board, and limited expenses, student athletes are expected to train year round and work 40 to 60 hours a week during the season. Their lives are tightly controlled - when they study, social media activities and the like - and often this impairs their development into fully capable adults.

 Star athletes like Alabama quarterback A.J. McCarron, who delivered two national championships, are simply worth millions more than the scholarships and are terribly exploited.

 Most athletes, unlike McCarron, will not enter a professional league, but instead will leave college with a degree in a soft major that has little value in today's tough job market or no diploma at all. Many leave with medical conditions from injuries but no financial assistance to pay for future care.

 The NLRB's decision will greatly aid plaintiffs in two pending antitrust lawsuits that seek to break NCAA rules prohibiting salaries and permitting universities to use player images and names in endorsements and promotions without compensation.

 Those suits have the potential to do to college sports what free agency did to professional football, baseball and basketball, after the courts struck down owners' monopoly practices similar to current NCAA rules.

 The top 30 or 40 programs in each college sport will be able to pay top dollar to attract the best athletes, and the other universities will not be able to effectively compete.

 The solution may be to permit the top 30 or 40 major universities to form football and basketball teams "affiliated" with their institutions and a major pro franchise, but require those be self-financing based on game-day revenues and contributions from the professional team.

 Pay the athletes, offer them the opportunity to earn a degree over five or six years, but don't require them to enroll if they are not capable or are simply disinclined. By disengaging university-sponsored athletics from academic programs, the potential to corrupt admissions and faculty would be greatly reduced, and a broader range of gifted young athletes would have the opportunity to participate.

 Then all the other universities could have walk-on programs for genuine amateurs, and those programs, in a manner similar to the Ivy League schools and military academies, could compete at a level that complements a decent university education.

 After all, a quality education is why young people should go to college.

 Peter Morici is an economist and professor at the Smith School of Business, University of Maryland, and widely published columnist. He tweets @pmorici1

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04/14/2014 6:36AM
College Athletics is Big Business
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04/14/2014 12:06PM
Speaking of big money
The CBO has a report out today regarding the federal deficit. Just like with McCutcheon, you won't hear about that on WBEN.
04/14/2014 8:04PM
Excuse me...
Unionized college athletes? This is a joke. Right?
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