Will a New California Law Level the Playing Field for College Athletes?

paying college athletes

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Seton Hall's Charles Grantham and Drexel's Ellen Staurowsky discuss a new California law that allows college athletes to be compensated for the use of their name, image or likeness starting in 2023.

College athletes in California may soon be able to reap some monetary rewards from their performance in their sport. In an online-only episode of HBO’s “The Shop” hosted by basketball star LeBron James that aired on Monday, California Gov. Gavin Newsom signed into a law a bill that will give student-athletes the right to be compensated for the use of their name, image or likeness starting in 2023. Nationwide, colleges and universities make $14 billion each year from student athletics. The National College Athletic Association (NCAA), which regulates student athletics, takes in $1 billion annually, Newsom said in a statement.

New York, Colorado and South Carolina are among the states considering similar legislation, according to a Reuters report. That emerging scenario would clearly upend the unified national system that currently exists. The NCAA has said that if other states pass similar laws, it “will make unattainable the goal of providing a fair and level playing field for 1100 campuses and nearly half a million student-athletes nationwide.”

But Newsom said he wants to discard the current system for good reasons. “Collegiate student-athletes put everything on the line — their physical health, future career prospects and years of their lives to compete,” he said in his statement. “Colleges reap billions from these student-athletes’ sacrifices and success but, in the same breath, block them from earning a single dollar. That’s a bankrupt model — one that puts institutions ahead of the students they are supposed to serve. It needs to be disrupted.”

Remedying a Wrong

“This restores [to college athletes] a right that has been denied for far too long,” said Ellen Staurowsky, professor of sport management at Drexel University and program director of the school’s athletic administration concentration. “What we’re grappling with is creating a 21st century model that recognizes the tremendous value that athletes bring to the table.” She is also co-author of the book, College Athletes for Hire: The Evolution and Legacy of the NCAA Amateur Myth.

“If the NCAA were smart and if they were reasonable people, they would respond with modifying the rules and regulations governing amateurism and work with the states to solve the problem before 2023 comes.”–Charles Grantham

Charles Grantham, director of the Center for Sport Management at Seton Hall University’s Stillman School of Business and a longtime representative and adviser for NBA players, agreed. “College kids deserve a share as well,” he said. “They have no representation, and it’s about time. [I am] just hopeful that 10, 15 or 20 other states will join [California’s move].” Grantham was an expert witness in the 2014 case of basketball player Ed Bannon against the NCAA, where Bannon’s side argued for financial compensation to student-athletes with mixed results in the court verdict.

California’s move breaks long-held myths, mischaracterizations of student-athletes and bastions of entitlements, according to Staurowsky and Grantham, who spoke on the Knowledge@Wharton radio show on SiriusXM. (Listen to the podcast at the top of this page.)

“If the NCAA were smart and if they were reasonable people, they would respond with modifying the rules and regulations governing amateurism and they would be less restrictive and work with the states to solve the problem before 2023 comes,” said Grantham. “[That is] because in 2023, it would be chaos between agents and local advertisers.”

“Most people have come to realize that there is no reason why compensation should not be allowed,” said Kenneth Shropshire, Wharton professor emeritus of legal studies and business ethics and Adidas distinguished professor of global sport at Arizona State University. “There may be economic reasons. There may be logistical reasons. But no harm is caused to an individual by virtue of receiving compensation.” Shropshire is also CEO of the Global Sport Institute at his university, and formerly headed the Wharton Sports Business Initiative.

Shropshire said that although the proposal to compensate college athletes has been talked about for a while, he was surprised when the California legislature passed the bill unanimously. He also noted “the form that it has taken, starting off with the image and likeness, [which] is not to be confused with actual pay compensation for playing.” The NCAA’s student-athlete concept has “some validity” in the way it was originally conceived, “but it currently doesn’t exist in the way that people aspire for it to,” he added.

According to Shropshire, the NCCA’s “biggest argument” that the latest law would change the primary distinction between college sports and professional sports “doesn’t make an awful lot of sense.” However, the NCAA does have “some reason to complain or be concerned” over the prospect of different laws in each state and the confusion it would cause, he added. “A national level law may be what’s needed,” he pointed out, adding that there is “a lot of conversation” on that route.

A Business Model Under Fire

In any event, there will be “some scuffle first” between the NCAA and other stakeholders like state legislators, athletes, colleges and universities. At the heart of that scuffle will be the NCAA’s so-called “amateur” model for college athletes, which has for long been controversial. “If the states apply pressure, then the NCAA will come to conclude that there is a reasonable way to resolve this without tainting or harming their amateur business model,” said Grantham.

Staurowsky spotted kinks in the NCAA’s “amateurism” model. “There has been a mythology around amateurism,” she said. She pointed out that the NCAA already has a compensation scheme in place with its athletic scholarship program. “This pretense that somehow they’re opposed to paying athletes is simply patently not true,” she noted. “They do have some mechanism of compensation. It’s just that they want to suppress the value of that to effectively zero, and then benefit from the profits.”

“In terms of economic fairness, the affront is astounding,” said Staurowsky. She noted that the NCAA contends that only 2% of student-athletes go on to become professional sports players, and that it emphasizes academics for them. “If the NCAA is really committed, as they say that they are, to protecting the interests of the athletes who compete in their system, this mechanism [in California’s bill] does protect the 98% that they’re always talking about, because the 98% have value – value that has been unrecognized for decades – and they’re in their prime earning time when they’re in college. No one has even quantified for them the magnitude of the denial of their value. And so, this actually recognizes that and remedies that problem.”

“What we’re grappling with is creating a 21st century model that recognizes the tremendous value that athletes bring to the table.”–Ellen Staurowsky

Grantham said he is a firm believer that “the model is already there,” and pointed to how the Power Five conferences in college football are run. He said the professionals they hire to run their programs or run their franchises “are no different than the Philadelphia Eagles or the [Philadelphia] 76ers or the [Philadelphia] Phillies,” which are football, basketball and baseball teams, respectively. “They are run the same way. Their sources of revenue are the same. The only partner that’s lacking is the student athlete. He has no representation at the bargaining table.”

Grantham said a trust fund that holds the earnings of college athletes until they graduate could be a compromise. “Some type of trust fund that they perhaps couldn’t access until they graduated … would be an incentive for many of the young people that we see today leaving school to chase a dream that’s not possible,” he added. He noted that Claudia Wilken, the district court judge who heard the Ed Bannon case, had ruled that colleges be allowed to create such a trust fund, but that advice has been ignored.

A Play on Words

According to Staurowsky, the reference to college athletes as “kids” is a mischaracterization that helps those who want to deny them their due share of compensation. “That is an intentional framing,” she said. “These are not kids. These are young people of military age who are early in their careers. This whole discussion about whether or not they should have money or what they will do when they get money is very disturbing. It should be disturbing to anyone because 75% to 80% of all college students work for a wage. No one is criticizing them for having done so. But within college sport, it’s manipulation to somehow create this [idea] that they can’t be trusted.” She noted that the prominent sports agent Rich Paul has said that giving college athletes a share of the earnings they generate would help them gain some understanding of sports deals while they are young.

Staurowsky added that as the debate advances on compensating student-athletes, it is important to recognize that the NCAA does not represent athletes; it represents “institutions and institutional interests.” There is a need for a players’ association for college athletes, or some other entity that could represent the interests of athletes at the college level, she noted. “From there, we get to collective bargaining.”

Academics First, Compensation Later

Shropshire suggested a switch in the priorities as the debate continues on the subject.  “The focus should not be on compensation; the focus should be on ensuring that these student-athletes receive an education,” he said.  “If that was done in a more focused way, there would be more dollars spent making sure athletes have the opportunity to go back to complete their degrees, that they have more tutoring and all those things that would make getting a degree a possible reality. And then, if you have money left over, it’s fine to pay these student athletes directly — without trust funds or anything else.”

Shropshire also had suggestions for the NCAA on where it could invest to make student-athletes’ academic lives better. “They could mandate academic boot camps before school begins. They could mandate that all these student athletes receive lifetime scholarships and come back at any time. They could employ counselors to help athletes figure out how will they transition when they are no longer playing, as to what would they do with their lives.”

“The focus should not be on compensation; the focus should be on ensuring that these student-athletes receive an education.” –Kenneth Shropshire

The Next Round

Grantham expected a gradual build-up of the resistance to the change that California has triggered. “The NCAA … will move very slowly and try to defer, delay, perhaps even [file] a lawsuit here and there to get this in litigation territory,” he said. “So, I don’t I just see a lot of activity over this next six to eight months. A lot of talking, [but] very little progress.”

By the end of October, the NCAA is expected to receive a report from a committee with recommendations for changes, and the California law provides for changes based on those recommendations, a New York Times report noted. Grantham said he doubted if the committee report would be ready by October, “and then all of a sudden they announce that they’re going to give a share to these student-athletes.”

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