College Football, Inc.

With the start of the college football season this weekend, a columnist for has called for college football players to be paid by the universities they attend. He argues that “[t]hese colleges are acting like big businesses. Well, big businesses pay their talent.” Certainly college athletic departments pay their administrators and coaches very well, with more than two dozen college football head coaches making more than $2 million last year. Even some top assistant coaches make nearly half a million a year. So, if the administrators and coaches get rich off college football, why not pay the players as well? It’s an intuitive argument, one that you hear a lot if you follow college athletics. But without defending the eye-popping salaries prevailing these days in college sports, I think the case for paying college football players usually rests on a false premise.

The fallacy often underlying the argument is an assumption that universities make a great deal of money off athletics. That’s not necessarily true at all. The NCAA reported last week that the athletic departments of only 14 out of 120 schools that play in the Football Bowl Subdivision (the highest level of college football—once known as Division I) actually made money off college athletics during fiscal year 2009. What’s more, the profits of the athletic departments at even those 14 schools are not that likely to flow out of the athletic department and back in the university budget. Sure, there are exceptions, and the University of Georgia recently announced that the UGA athletic department would donate $2 million to the university last year, but it’s just as or more likely in the run of cases that the university subsidizes the athletic department in a significant way through shared or subsidized expenses such as facilities and physical plant, academic tutoring, admissions concessions, and general maintenance. In short, only a handful of universities actually make a profit from college athletics from year to year, and only a relatively small amount of money finds its way back to the larger university.

And whatever profitability there is in college athletics for a handful of schools depends almost entirely on the availability of free labor provided by the athletes. Of course, this is the basis of the argument for paying football players, but once the labor is no longer free, college football rapidly becomes even less profitable than it is now. At minimum, paying football players any meaningful stipend would end in large measure any athletic cross-subsidy that hopes to use football profits to fund non-revenue sports like track & field and gymnastics. That’s the main use of any profits from college football right now. Even universities that make money on college football likely would need to shutter secondary sports to help pay the football players. For universities that do not consistently make money on college football, paying football players makes the sport even more expensive and no longer economically sustainable for at least some. Maybe all this is fine, but it’s not obvious that it is.

In other words, the case for paying football players rests on an assumption that college football is a great financial deal for the universities, but it is so only for a very few universities, and actually not so much at all for most for the rest. And when you it make it an even worse deal for universities, such that college football would not subsidize other sports where the ideals of amateur athletics are real, then many universities may not have sufficiently compelling reasons to continue bearing the high costs of college football, whether practiced forthrightly as a big business or not.  After all, as a matter of equity to the players, the package of benefits that universities offer them right now is more than attractive enough that every single scholarship football player accepts it even without being a paid formal stipend. What is more, it’s difficult to find persuasive arguments for public and private universities, consistent with their educational mission, to sponsor what amounts to a minor league for the NFL, as opposed to letting it pay for its own like Major League Baseball and the National Hockey League. A fully professional sport, if that is what college football is to become, should be able to support itself in the market without nonprofit sponsorship, and the association of colleges and what became minor-league football has always been a historical accident. Now, I doubt that the dismantling of college football as big business is very likely, but I’m also doubtful that the more sensible path is professionalizing college athletics even further.

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7 Responses

  1. Ken Rhodes says:

    Isn’t there a number being overlooked in this discussion?

    “… once the labor is no longer free, college football rapidly becomes even less profitable than it is now.”

    The NCAA limit on the number of football scholarships at the top division schools is 85. There are probably no major football universities that issue fewer than that.

    What’s the value of a “full ride?” Well, a cursory glance at tuition-fees-room-board data showed me this:

    Ohio State — $30K
    Maryland — $34
    Georgia — $34
    Michigan — $45

    That’s probably a reasonable range of low-to-high for the basics; I don’t know how much additional is included in a “full ride,” but it’s probably not important to this calculation. Simply multiply $34,000 times 85 scholarships and you get a “salary cost” of about $3 million per year.

    Yes, I know this number is inflated by the use of out-of-state tuition figures, while the state schools give some of their football scholarships to in-state athletes. The lower tuition involved in those scholarships, of course, is a “left-hand-to-right-hand” transfer payment, since it merely means the state government is subsidizing part of the labor cost.

    And for the big time football universities that are not state schools (e.g., Notre Dame, Southern Cal) it’s not relevant at all. Looking at Stanford, for example, their tuition-fees-room-board figure is $50K. That’s over $5 million per year, not even counting whatever else is in a “full ride.”

    So yes, many coaches are probably overpaid, but no, the labor ain’t free.

  2. BDG says:

    I think I’d want to see the actual accounting numbers before I agreed that college sports programs actually lose money. Creative accounting is certainly rampant at the pro level. For example, the “profitability” calculation probably includes the cost of reimbursing the university for each athletic scholarship, which is a standard practice. This means that a football team “costs” the athletic department about 80 * $40,000 per year, but the university as a whole hasn’t lost any money at all — quite the contrary, assuming many of those players would have been entitled to need-based aid.

    Additionally, many athletic departments may simply grow in response to revenue influx from football — note that the stat you quote said that the “atheletic department” did not profit — it said nothing about the football team itself. Football, in other words, funds other sports, including those that the university uses to attract other students (e.g., club sports).

  3. Bryan Gividen says:

    My primary problem with Mr. Kang’s analysis is the information on which it relies. He uses the NCAA’s number that only 14 athletic departments of the 120 FBS schools turn a profit. This seems like misleading information to me. The football programs at those schools are generally financing the rest of the programs, which then drop the entire athletic department below profitability. The football players themselves are creating the revenue so that coaches, administrators, and other athletes can receive financial benefits. Mr. Rhodes argues they do receive compensation in the form of tuition; that would be more persuasive if the graduation rate for college football players wasn’t between 50-66%. (Graduating and receiving a degree is the primary way tuition will act as an economic investment. College education without an actual degree provides little financial utility.) Gut feeling tells me that the majority of the players who can use their un-paid football experience as training for a career (i.e. those who go pro) are in the 33-50% who are not graduating. Furthermore, those are the players receiving full-tuition scholarships. The rest of the players are essentially playing on their own dime or are on a scholarship, but don’t have a realistic shot at recouping their time investment because they’ll be unable to make it to the NFL. Either way, there’s a large segment of college football that is not compensated in any way for the millions to billions of dollars of revenue generated each year.

    I’m not calling for a specific action (e.g. compensate players); I just think the arguments presented here are not an affirmative defense against the NCAA’s questionable actions.

  4. prometheefeu says:

    Why should they be paid? The amounts they recieve in scholarships obviously is enough to attract them.

  5. Wong Ark Kim VI says:

    An athlete can choose to play a sport where you can go pro without an education, such as baseball, ice hockey or tennis — as Serena Williams once remarked about Martina Hingis, she had “no formal education.”

    In a market economy where you can choose your sport, if you choose college football, then you don’t get paid at age 18 and you have to enroll in college.

    Note that, even now, college football players will eventually get (legitimately) paid — if they win the tournament and get to the NFL. Drew Brees once beat Andy Roddick before he put down the racket and picked up the football.

  6. BDG is wrong says:

    The football revenue drives the bus for every other sport, and Title 9 requires that there be a female team for every male team, which means even more buses need to be driven.

    Track, Wrestling, Tennis, Field Hockey, Lacrosse, Baseball, Softball, Golf, Cross Country. I could keep going. These sports lose money. They are paid for by football revenue.

    Bryan: who are these football players not receiving full tuition scholarships? You must have no idea what you’re talking about.

    Paying college players will never happen and it shouldn’t happen. It would be completely unworkable, and you would have to sacrifice several other sports if it were to be done. And, again, the college football teams get 85 scholarships and they use them all. None of the players are paying their own way.

  7. Dennis says:

    Simple answer: College cannot pay athletes, as they would then lose their tax free status.
    Solution: Let an athlete take whatever they can get, boosters, overpaid jobs, etc, but DOCUMENT the real dollar value of the gift. Then, upon leaving school, athlete must pay back (as gift) to university the amount they received in a unique way:
    If the athlete is not one of the 1% that go pro, 100% of money reported (minus taxes paid) is paid to college to be used for EXTRA (not existing) NON SPORTS Scholarships.
    If athlete is drafted and makes team, they pay back to college amount multiplied by the following draft position: 3rd round and below, twice what they made, 2nd round triple what they made, and 1st round 5 times what they made.
    Additionally athlete MUST take a business course when in college and document as a thesis where he got the money (or things of value) how is was used, and and taxes paid if any on the amount(s).
    IF ATHLETE LEAVES school before senior year for ‘hardship’ then no matter where drafted they must pay 6x whatever the amount was.
    As stated all funds given to college go to non-sports scholarships ONLY, with ZERO money going to administrative costs.
    Some may say this means athlete will only want to go to the bigger schools, but BCS has already made this a reality, because if you don’t go to one of the growing mega conferences, you cannot win a title anyway!