The Rich Get RicherAndy NolanBall State University “Our purpose is to governcompetition in a fair, safe, equitable and sportsmanlike manner, and tointegrate intercollegiate athletics into higher education so that theeducational experience of the student-athlete is paramount” (“NCAA CoreValues”, 2016). This is the purpose statement of the National Collegiate AthleticAssociation. It is printed in big, bold letters on its website and bits andpieces can be found in many of its marketing campaigns.
The NCAA is anon-profit organization designed to create an atmosphere where athletes canexcel in their studies and play sports on the side. It is a regulatory agencythat sets rules in order to create a level playing field among its institutions.Or is it? While this purpose statement sounds fine and dandy, the current stateof Division I Athletics paints a very different picture. In a system that issupposed to be equitable, there is a significant financial disparity between Power5 and Group of 5 conferences. This is largely due to multimillion-dollartelevision deals, a direct result of a 1984 Supreme Court case.
This issue iscritical to understand because not only is it hypocritical to the NCAA’smission, but it also has had significant implications on the state ofcollegiate athletics. While the future remains unknown, if the trend continues,it would not be surprising to see a new division created specifically for Power5 schools. Overall, it is clear. The rich are getting richer and it is becomingmore and more difficult for the poorer schools to keep pace. After reviewing the finances ofseveral schools from different conferences, it is clear that there is ahuge gap in revenue between schools in a Power 5 conference andconferences like the MAC. For example, in 2015 Texas A, amember of the SEC, raked in well over $192 million of revenue.
Meanwhile, thehighest revenue generating school in the MAC, Western Michigan, onlymanaged to bring in $34 million (NCAA Finances). Figure 1 and Figure2, found in the appendix of this paper, are great visual representations of therevenue generation difference between Power 5 schools and Group of5 schools in NCAA Division I. The gap is astounding. In a level of sportwhere competition is supposed to be equitable and fair, it is hard tounderstand how mid-majors like Ball State are ever supposed to consistentlycompete with schools in the Power 5. It is clear that there is a financialdisparity in the NCAA. A significant portion of the revenuegenerated by Power 5 schools comes from the recent boom in televisioncontracts.
According to Samson (2013), a deal between the PAC 12 and ESPN andFox Sports allows each institution to bring in over $21 million a year. The Big12 has a similar deal that allows its institutions to bring in $20 million ayear. In comparison, 21 non-power 5 Division 1 conferences reported revenuefrom TV contracts at less that $10 million a year (Samson, 2013). This isbefore the revenue was split up among their institutions. That is right. Individualinstitutions in major conferences are making twice as much as most entireconferences in NCAA Division I Athletics. In an industry that struggles tobreak even each year, this creates some serious issues.
Smaller schools areforced to make difficult decisions, such as cutting programs and/or gatheringrevenue in other ways, in order to try and keep up with the arms race incollegiate athletics and remain competitive. While there has always been someinequity in the NCAA, the financial disparity has not always been this substantial.In fact, it was a Supreme Court case in 1984 that sparked the issue.
Backin the 80s, TV contracts worked much differently than they do today. The NCAAused to control TV contract rules and regulations and set limitations on theamount of games that were broadcast each year. It granted two networks therights to negotiate TV broadcast games, ABC and CBS.
The TV companies wouldnegotiate directly with the institutions in terms of the specifics of the deal,but there were limitations. First, the price was essentially fixed, as it didnot vary based on size of viewing audience, number of markets in which game wastelecast, or characteristics of the game itself. There were also appearancelimitations.
No institution was allowed to appear more than six times, fourtimes nationally, in a two-year period and those appearances were required to bedivided equally between the two carrying networks. It also limited ABC and CBSto broadcast only 14 games total each year. Some larger schools, the Power 5schools of today, did not like this. They thought they should be able tonegotiate their own deals, allowing them to get more exposure and essentially,more revenue. 62 of the major football programs in the country joined togetherto set up the College Football Association and began negotiating an outsidedeal with NBC, a network that was not included in the NCAA plan (Siegfried& Burba, 2004). In response, the NCAA threatened to ban any institutionthat did not comply with their TV rules from all athletic contests.
The boardsof Oklahoma and Georgia jointly sued the NCAA. The district court ruled infavor of the schools. It was appealed.
The appellate court affirmed theirdecision. And the case made it all the way up to the Supreme Court, where theSupreme Court affirmed and ruled in favor of the institutions. In theirdecision, the court ruled that the NCAA’s TV deal violated the ShermanAntitrust Act. Calling upon precedent, the court noted that the restrictionsset a fixed price and limited output, thus creating a monopoly for the NCAA(Montez de Oca, 2008). The regulation unfairly restrained trade and the memberinstitutions were granted injunctive relief.
It was “the first time theSupreme Court had ruled amateur sport to be in violation of antitrust laws. Thejustices ruled that the NCAA TV plan was a purely commercial venture in whichthe universities participated solely for the pursuit of profits” (Smith,2011, p.139). This major decision allowed individual conferences to make theirown TV deals and obtain the revenue from it. This was great news for Power 5conferences, like the Big Ten, who not only were able to set major deals withbig name stations like ESPN and Fox Sports, but even created their own network(Big Ten Network) to keep all the profits in house. Group of 5 conferences,like the MAC, were unable to land nearly the same TV deals and the missing outof these million dollar contracts led to the growing disparity we see today.
The Supreme Court certainly made theright decision, as the TV regulations were a clear violation of the ShermanAntitrust Act. However, that decision certainly had a major impact on thelandscape of collegiate athletics. Why should one be concerned about inequalityin college sport? As Zimbalist (2013) explains, “it can impede theaccomplishment of two basic league goals: competitive balance and financialstability” (p. 20).
The first point, competitivebalance, is a little more obvious. Teams like Alabama have the financialresources to build the best facilities, hire the best coaches, and besuccessful on the field. Schools like Ball State simply cannot afford to do soand are left in the dust competitively. However, Zimbalist’s second point is alittle less obvious, but just as important.
Because of increasing financialdisparity, schools like Ball State are required to subsidize to meet theirexpenses, pulling from the school’s general funds, state funds, and studentfees (Slabaugh, 2015). Yes, all students at Ball State are paying for theathletic department as part of their tuition, even if they never go to a game.Whether this is right or wrong is another debate all together, but the pointis, Power 5 schools do not have to subsidize very often, many times not at all.
Looking just in state, as Slabaugh (2015) notes in The Star Press,”While Ball State’s “athletic subsidy” was $38,425 per athletein 2013, Indiana University’s subsidy was only $3,876 per athlete and PurdueUniversity’s was zero” (Slabaugh, 2015, p. 3). We’re talking over a 70%subsidy for schools like Ball State and no more than 10% for schools in the BigTen, often 0% (NCAA Finances). On average, Lavigne (2016) notes thatPower 5 schools bring in around $100 million of revenue with only 5.4%generated through university subsidies. Meanwhile, Group of 5 schools averagearound $35 million of revenue with over 55% of that revenue coming fromsubsidies (Lavigne, 2016). The difference is stark and concerning. While the financial disparity isclearly an issue in NCAA Division 1 Athletics in terms of competitive balanceand financial stability, solving that issue is not cut and dry.
The NCAA cannotdo much in terms of limiting TV contracts, as doing so would violate theSherman Antitrust Act, as showcased in the case that sparked this whole mess, NCAA v. Board of Regents of Univ. of Okla. (1984). However, thereare two realistic potential efforts that may help alleviate the problem.
First,the NCAA could look to allocate additional funds to schools that cannot receivethe same financial benefit from TV contracts as Power 5 schools can. AsLawrence (2013) explains, “Providing support to financially weaker schools tohelp them generate more revenues and beginning to close the gap between thefinancially strong schools and the financially weak schools would improve thestudent-athlete experience” (Lawrence, 2013, p. 39). The NCAA claims to be anacademic-first organization in place to create a level playing field. Yet, thecurrent distribution model of funds rewards athletic success. If the NCAAreally wants to be who they say they are, something needs to change.
AllDivision I institutions are expected to compete in the same championship, yetthat is no longer even remotely a realistic possibility due to the widening gapin revenue generation. Simplifying the distribution model and allowingsmaller-conference teams to earn revenue from the NCAA in other ways may helplessen the disparity. Another option would be to separate the Power 5 conferencesinto a new division.
This would essentially eliminate the problem altogether.Giving majors and mid-majors their own separate National Championship wouldeven the playing field and allow for teams to compete with schools that mirrorthem in terms of revenue generation. Financial inequality will probably alwaysexist in the NCAA, but there are things that can and should be done to tightenthe gap. Doing so will create a level playing field for member institutions andhelp create financial stability.
In conclusion, it is clear thatthere is a substantial financial disparity between Power 5 conferences and therest of NCAA Division 1 conferences. This was, in large part, sparked from theSupreme Court’s ruling in NCAA v. Board of Regents of Univ. of Okla.(1984), which allowed schools to negotiate their own TV contracts withoutregulation.
This greatly benefits big name conferences that are able togenerate hefty revenue from TV contracts, and in turn, sign and retain the bestcoaches, build the best facilities, improve recruiting, and not have to worryabout subsidizing. Meanwhile, schools in conferences like the MAC must makedifficult decisions and often even cut programs or subsidize just to stay inbusiness. The financial playing field is not level and because of this, theactual playing field is not level. This has created prominent issues in thecurrent state of the NCAA, especially in terms of competitive balance andfinancial stability.
While there is no fix-all solution, reallocating funds tothe smaller conferences or creating a new division altogether may help tolessen and eventually eliminate the gap. The disparity is astounding andcontinues to worsen year after the year. If the NCAA truly wants to be whattheir Purpose Statement suggests, they need to take steps to resolve theproblem. Until then, the rich will continue to get richer and the poor willcontinue to get poorer. ReferencesLavigne, P. (2016, September06).
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Journalof Intercollegiate Sport, 6, 5-24. Retrieved December 10, 2017. Appendix Figure1 Figure 2