Widespread revenue changes are set to hit the arena of college sports as schools must start to directly pay student athletes. Iowa State has already announced plans to halt construction on a new wrestling facility, and Texas A&M has conducted a round of layoffs of the athletic staff. This is the tip of the iceberg as funding decisions are being made amidst a landmark shift in how revenues from collegiate sports are spent.
Antitrust Settlement and Revenue Sharing
In the midst of a $2.8 billion antitrust settlement proposal, a revenue-sharing model is being held up as a compromise that will allow schools to dedicate up to $21 million annually to pay student-athletes or opt for 22 percent of average revenue toward that end. College athletic departments are reeling and scrambling with the prospect of the significant loss of funds and trying to work out how to attract top coaching talent to maintain premier performance.
Uncertainty and Volatility
Economics professor Dr. Andrew Zimbalist from Smith College states that the current state of collegiate athletics is an “economic earthquake” due to the redistribution of earnings from the athletic program away from the program and staff to the student athletes themselves.
Transformational Changes
This latest financial redistribution comes after the arena of college sports has already been reshaped by significant reforms in regard to the ability of student-athletes to publicly express interest in transferring to another institution via a “transfer portal” and restructuring of “name, image, and likeness” athlete compensation.
Antitrust Settlement
College athletics have operated on an amateur athletics model for over a century, and the current antitrust settlement underway disrupts the model long regarded by student-athletes, alumni, and the professional athlete pipeline.
Financial Reallocation
Under the potential settlement, football and basketball programs are expected to generate significant income as they have historically. However, the fact that 22 percent of the revenue will shift from the program to the student athletes has a substantial bearing on the direction and decisions of the program and athletic department.
SEC Commissioner
Southeastern Conference (SEC) Commissioner Greg Sankey stated, “When you have a shift of revenue up to 22 percent, things won’t remain the same… That predicts that people will have to make decisions. That may be any number of a wide range of issues that I haven’t even begun to consider, some of which I can imagine, some of which I’m certain will look at this week and in the following weeks.”
Donor-backed NIL Collectives
According to Mississippi athletic director Keith Carter, some funds directed towards “name, image, and likeness” (NIL) collectives “in theory will shift over to the athletic department” to boost revenue.” He further stated that athletic programs will have to reduce costs while finding new sources of revenue. That will mean delaying new projects and construction, even as the SEC has signed a new $7.8 billion deal with ESPN for coverage of the College Football Playoff.
Different Approaches
Carter stated, “It’s going to be an assortment of finding new revenues and eliminating some expenses… It’s different at each institution and how they do it.”
Proactive Changes
Athletic Director at Iowa State, Jamie Pollard, pulled the plug on a new wrestling facility due to economic uncertainty. At Texas A&M, athletic director Trev Alberts cut staff members due to financial uncertainty.
High Coaching Salaries
A significant difference between amateur and professional sports is the compensation of coaches compared to athletes. In college sports, coaches are paid high salaries, including a recent coaching contract for University of Georgia coach Kirby Smart for $13 million annually. In the NFL and NBA, athletes earn much more than the coaches.
Shifting Recruitment Dynamics
Since 2021, college athletes have been able to earn compensation from endorsement deals. Since then, recruitment practices have changed along with just about everything else in the financial picture for college sports. In the past, student athletes were able to attract recruits with the promises of excellent coaching and state-of-the-art facilities. Now, student-athletes can weigh financial offers from schools.
Potential Staff and Facility Cuts
Economist Zimbalist notes the differing challenges athletic departments may have based on the size of the university and how much shift within the financial situation can be absorbed within the program. He states, “Some of the big-time programs have staffs of 250-300 people, have very modern facilities, and have been building more of them. Now, there’s no way they’ll be able to afford that.”
Impact on Smaller Programs
Smaller programs alternatively have different problems with more severe outlooks, as they argue that the settlement terms disproportionately impact them.
Disproportionate Financial Burden
Charlotte’s Mike Hill and Montana’s Kent Haslam are critical of the settlement for hurting smaller school athletic programs. Rather than just cutting costs and delaying new construction on high-tech stadiums and arenas, these programs will have to generate more revenue through increasing ticket prices and sales and soliciting donations.
Revenue Shortfalls
Hill stated, “I understand that this is a complex issue for our enterprise to resolve. However, I cannot reconcile Charlotte and similarly resourced programs forfeiting millions in revenue that should be used to support our current student-athletes. As members of the NCAA, also named in the suit, we knew that there could be an impact on us — but it is disproportionate and disheartening.”
Montana Slated to Lose $200,000 in Distributions
Haslam capitalized on Hill’s claims: “The early numbers show us losing roughly $200,000 in our distributions from the NCAA, and that’s significant for us. That’s got to be made up through ticket sales, donations, and cost-cutting. So it’s real, and it’s hitting everybody, and it’s certainly frustrating.”
