Breaking down the House v. NCAA settlement and the possible future of revenue sharing in college athletics

<p>Duke basketball consistently is the top-earning program in the country.&nbsp;</p>

Duke basketball consistently is the top-earning program in the country. 

The college sports world was taken by storm Wednesday evening as the NCAA and the power conferences — ACC, SEC, Big 10, Big 12 and Pac 12 — voted to approve a settlement for three antitrust lawsuits, most notably House v. NCAA. 

This is a monumental move that will change the college athletic atmosphere, as universities and conferences are allowed to directly pay players through revenue sharing for the first time in history. If the settlement is approved, the era of amateur athletics will be essentially over. 

“The five autonomy conferences and the NCAA agreeing to settlement terms is an important step in the continuing reform of college sports that will provide benefits to student-athletes and provide clarity in college athletics across all divisions for years to come,” said NCAA President Charlie Baker and the Power 5 commissioners

There are two important components of this settlement. 

The first is the roughly $2.8 billion that all conferences and the NCAA will pay to current and former athletes, from back to 2016, for the next 10 years. These athletes claim they lost potential NIL (name, image and likeness) revenue. 

The second is a framework where conferences and schools would directly pay student-athletes.

There are two different ways for college athletes to make money — NIL and revenue sharing, and this article is a more in-depth explanation of the difference. This case deals with revenue sharing, which is money generated from conferences and university athletic department budgets. The settlement has been a work in progress for multiple years now, so we're breaking down the legal claims involved in the case and what the result could be for Duke and the rest of the country. 

The legal claims

This settlement resolves three separate antitrust cases — House v. NCAA, Hubbard v. NCAA and Carter v. NCAA —  all from athletes claiming the NCAA violates antitrust law. Former Duke football captain DeWayne Carter is the namesake plaintiff in the latter case, joined by Stanford soccer player Nya Harrison and TCU/Oregon basketball player Sedona Prince. 

There have been myriad antitrust cases against the NCAA, and most claims are similar in nature. Here’s the gist. 

In 2020, former Arizona State swimmer Grant House and Prince sued the NCAA for barring NIL payments for athletes prior to 2021 — when the NCAA changed its rules to allow NIL. House v. NCAA also raised complaints for a post-NIL world, specifically concerning the lack of TV broadcast revenue gained by players. 

The plaintiffs (House and Prince) say the conferences work together with the NCAA to exploit student-athlete labor and effort without legal representation and also limit the compensation athletes can receive. In addition, they claim the NCAA’s restrictions on NIL and control of TV markets prevent athletes from profiting on their true market value, which is more than scholarships and education funding. 

“This landmark settlement will bring college sports into the 21st century, with college athletes finally able to receive a fair share of the billions of dollars of revenue that they generate for their schools,” said Steve Berman, an attorney for the plaintiffs.

The NCAA and power conferences —-the defendants in the case — likely decided to settle because if they lost the case, the association would have had to pay a lot more (maybe up to $20 billion) and sooner. Additionally, all of the constraints on NIL would be gone, further decreasing the NCAA’s scope of influence. 

Here’s what the NCAA gets in return for settling. Athletes who opt into the future revenue sharing agreement won’t be able to sue the NCAA, which gives it some protection. 

However, Congress has not granted federal antitrust protection to the NCAA — something that is likely not coming anytime soon in an election year. 

Now, let’s dig into the details of the two big parts of the settlement. 

Back pay to former athletes

The first agreement is “back pay,” or payment for work done in the past. This $2.8 billion payment, to be made over the course of 10 years, is geared to the current and former athletes as far back as 2016 that lost out on possible profits from the NIL landscape post-2021. 

The NCAA would use its reserve fund — set aside from its profits — to pay roughly 40% of the $2.8 billion. The other 60% comes from conferences, but in a unique method. 

Out of this 60%, power-conference schools (the ACC, SEC, Big 10, Big 12, Pac 12) will take on 40%, and the rest is shouldered by non-power conference schools. The Group of 5 conferences (think of teams like App State and East Carolina), and even non-FBS schools (those who don’t compete for the College Football Playoff, including N.C. Central and Campbell) pay a fraction.

For Duke, a power-conference school, the payment is about $1 or $2 million total for the next decade. 

Interestingly, the conferences will pay players by taking a chunk out of their future revenue from the March Madness tournament. The NCAA pays conferences based on how many games its teams play in the tournament — roughly $2 million for every game — and conferences will use part of these future “NCAA tournament participation payments” to fund the athlete payments. 

So even though football is the highest revenue-generated sport in the NCAA because of TV viewership and ticket sales, basketball helped support the settlement because the NCAA earns large sums off its annual tournament in March.

However, this structure could end up hurting small conferences more — especially one-bid leagues that rely on this guaranteed $2 million payment for revenue. They would also be forced to pay a disproportionate amount of the settlement to mostly former Power 5 athletes. 

“It feels like the NCAA is bailing out the biggest spenders, and conferences like ours are paying for the majority of the settlement,” said Robin Harris, the Ivy League executive director

Sports economists will determine how the $2.8 billion will be split amongst the 10,000 former and current athletes affected by the settlement. But studies revealed that 90% of this $2.8 million will go to Power 5 men’s basketball and football players, so these smaller conferences are justified in their concerns. 

The reason the back pay goes to 2016 is due to the statute of limitations — the limit on how far back certain legal claims can be addressed. For the Sherman Antitrust Act of 1890, there is a statute of “four years from the date of the most recent injury,” hence the 2016-17 season cut-off which was four years prior to the NCAA allowing name, image and likeness compensation. 

Future revenue sharing structure

The second  — and perhaps more important —  thing this settlement does is create a future framework for schools and conferences to directly share their revenue with athletes. 

The current proposal creates a spending cap of roughly no more than $22 million annually for each university — similar to salary caps used by professional leagues — starting in the 2025-26 season. This figure represents 22% of “average media rights, ticket sales and sponsorship revenue of each power-conference school.” Basically, the average power-conference school generates about a $100 million annual revenue stream, 22% of that being $22 million. 

This figure could increase as revenues do, and each school could decide how much they want to use to pay student-athletes as long as it doesn’t exceed that cap.

The agreement makes TV deals that networks pay to conferences (e.g. the ACC’s deals with ESPN and the CW) even more important, because schools can use conference TV revenue to pay athletes. So, more fruitful TV deals equals less money they have to cut from their other expenses. 

Clemson and Florida State are currently suing the ACC — Duke’s conference — arguing that they aren’t able to maximize their value and compete in this environment. For example, the new Big 10 media contract could give its schools $75 million annually, with the ACC’s average deal generating roughly $44 million per school. 

It’s important to note that revenue sharing to athletes is all in addition to NIL deals — the sponsorships players negotiate with booster collectives or companies to make appearances in commercials and at charity events. Those can still continue, but an April ruling allowed schools to directly facilitate NIL deals, meaning universities can be an intermediary between athletes and collectives. 

NIL allows the big booster programs to maintain an advantage because with revenue sharing, every power-conference school is paying athletes the same roughly $22 million amount. However, those with big collectives can make up the difference by offering lucrative NIL deals. 

Athletes in each incoming class would be able to “opt-in or opt-out” to the future revenue sharing agreements. But why would athletes opt-out on an opportunity for money?

“If players opt out, they will give up any money they would receive from the damages but retain the right to sue the NCAA and its schools in the future for antitrust violations,” ESPN college football reporter Pete Thamel explained. 

This means players could be getting more money as a result of other ongoing antitrust cases like Fontenot v. NCAA out of Colorado, so they might be incentivized to opt-out and retain the right to sue the NCAA. 

What’s left to decide?

Well… a lot. 

First of all, the settlement has to be approved and reviewed by Judge Claudia Wilken of the U.S. District Court for Northern California, along with the plaintiff attorneys. This could take months, but it is likely to be approved. 

There are still a lot of questions on how the future revenue stream will be distributed amongst players. Duke has 27 varsity sports, and evidently not all of them generate the same money for the athletic department, so how will that be taken into account?

The answer is that payment allocation will probably be left up to the school. College football is the big money maker because of its lucrative TV deals, and even at a school like Duke where basketball culture is prominent, the football team earns the highest revenues for the Blue Devil athletic department. Schools could have trouble funding lower-revenue sports, which are now more vulnerable. 

The new revenue sharing system also has Title IX uncertainties. Title IX is a federal law that says “schools must provide male and female student-athletes with equal treatment and benefits.” According to The Athletic, school administrators believe the annual revenue-sharing total dollar amount will likely need to be equal between men’s and women’s teams, but individual athletes and teams do not have to make the same amount. Also, NIL deals will still favor the highest revenue-generating athletes. 

“I expect the athletes who are generating the most money would get the greatest economic return,” said Jeffrey Kessler, a plaintiff lawyer in the House case, to the New York Times. “That’s the economic competitive market we live in.” 

This settlement also eliminates scholarship limitations for all sports because decreasing restriction gives the NCAA antitrust protection. Schools can decide how many scholarship players they want per team, as long as it is within a roster limit. Say a school gets a lot of revenue from baseball — they might decide to increase the scholarship allocation from the current 11.7 to 15 or even 20 players. 

Most scholarship payments will be made on top of the new revenue sharing requirements, further hurting many athletic departments. But as the details aren’t yet finalized, some scholarship expenses from universities could count for the $22 million figure as well. 

Finally, the settlement doesn't address employment — including the pending Dartmouth union case. Some think the future of college sports is collective bargaining, whether student-athletes are part of a union or not. 

While the settlement creates more questions than answers, this is truly a significant weekend for the future relationship between the NCAA and the athletes. 

Ranjan Jindal profile
Ranjan Jindal | Sports Editor

Ranjan Jindal is a Trinity junior and sports editor of The Chronicle's 120th volume.


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