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What Does the $2.8 Billion NCAA Settlement Ruling Mean?

Dave Keefer

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Jul 4, 2001
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Not that I understand all the complexities of the topic, but here's a great summary of the recent settlement ruling by Rivals Andrew Jones TarHeelIllustrated Publisher:

College athletics dramatically changed Friday night when a federal judge approved a $2.8 billion antitrust settlement that will allow institutions to directly pay its athletes for the first time ever.

Here is what happened and what it means:

*Former Arizona State swimmer Grant House sued the NCAA and the five power conferences arguing the schools and NCAA were limiting athletes’ values by controlling TV markets. Industry experts believe that as TV money soared this development would become a certainty.

*Without getting deeper into the weeds of the suit, we will take a look at the result: Claudia Wilken, a judge in California’s Northern District, a federal court, granted approval for a $2.8 billion settlement with the NCAA. This allows member institutions to pay student athletes for the first time for their names, images, and likenesses.

*Wilken wrote following her decision Friday night: “Despite some compromises, the settlement agreement nevertheless will result in extraordinary relief for members of the settlement classes… (The deal will) permit levels and types of student-athlete compensation that have never been permitted in the history of college sports.”

---Note: Wilken also ruled against the NCAA in the 2014 Ed O’Bannon case that was integral in moving college athletics in the direction it currently resides.

*The settlement affects past student athletes dating back to 2016, each of whom will be awarded monetary compensation for lost earnings from NIL not yet enacted.

*Currently, according to Fortune Magazine, there are nearly 200,000 athletes and 350 schools in Division I alone and 500,000 and 1,100 schools across the entire NCAA.

*What this means moving forward: Schools can share $20.5 million with athletes in the first year, which represents approximately 22% of revenue generated from media rights, sponsorships and ticket sales.

---Growing TV revenue will help cover the costs for many of the bigger schools, but for other athletic departments at smaller FBS/Division One schools to approach the $20.5 million figure ticket prices, among other items for distribution, will increase.

---North Carolina Athletics Director Bubba Cunningham has said multiple times UNC’s intent is to meet the $20..5 million revenue sharing number. However, he told Brian Murphy of WRAL on Friday night, “We’ve got about 45 days that 70 schools can give $20 million to teenagers,” Cunningham said. “So it’s $1.4 billion by July 1. Okay, here you go. Yeah, we’re not prepared for it.”

---July 1 is the date everything comes into effect.

---The $20.5 million figure will grow by 4% each year.

---The expected payout breakdown by sport is 75% to football, 15% to men’s basketball, 5% to women’s basketball players, and 5% to the other athletes.

*Also, future third-party NIL deals must be approved by Deloitte, an accounting firm, and the College Sports Commission will operate “NIL Go,” which will operate as a clearinghouse for all deals.

---Only third-arty NIL deals worth at least $600 must be approved by the clearinghouse.

---Beginning Saturday, June 7, ALL athletes must begin reporting third-party NIL deals of at least $600 to the CSC.

*In addition, scholarship limits were approved and are now the following: football 105; men’s lacrosse 48; women’s lacrosse 38; baseball 34; wrestling 30; men’s and women’s soccer each 28; softball 25; 15 each for men’s and women’s basketball, among others.

---Note: In a report Saturday morning by USA Today, “One hook to all of this is that the amount of money that schools can pay to their athletes for use of the NIL will be reduced by the value of new, or incremental, athletic scholarships they award above the number of scholarships currently allowed in a given sport, up to a maximum of $2.5 million. In an example from the settlement documents, a school currently offering 9 baseball scholarships, versus the 11.7 permitted by NCAA rules, that decides to offer 15 baseball scholarships will have added an incremental total of 3.3.”
 
Jay Bilas has some interesting thoughts/predictions:

ESPN’s Jay Bilas predicts NIL settlement will end transfers: ‘Players aren’t going to go anywhere’​

To start, colleges will be able to spend up to $20.5 million on players, with the amount likely rising each year as revenues increase. It’s a cap: The schools aren’t forced to spend that amount, and players still can earn “fair-market” additional money from endorsements and other endeavors.

But with the new arrangements will come contracts — with buyout clauses that probably will lock them down, said Bilas, a former Duke basketball player.

“The biggest I think thing for me in this is now schools can sign players to contracts,” he said. “So when you sign a player to a multi-year contract with this $20.5 million amount annually, that going to keep going up because revenues keep going up in those arm lengths negotiations. You can also put buyouts in those contracts. And when you put a buyout in, these players aren’t going to go anywhere.”

Bilas said other revenue streams for players will be policed.

“Any contract for your name, image and likeness in the marketplace is going to be subject to review by [accounting and auditing firm] Deloitte for fair-market value,” he said.

“If there’s a local car dealership in Ann Arbor that wants to pay the third-string quarterback $4 million a year to do commercials for a dealership that grosses only a million dollars per year, Deloitte’s likely to say that’s not a fair-market value deal.”
 
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