College athletics are most definitely changing. For more than a century, the NCAA has maintained absolute control over the athletes’ labor market and restricted their pay to only a scholarship. But it appears that soon athletes will be paid a share of the revenue that college sports generate. This means that the expense report of each athletic department around the nation will soon include a new entry: Wages Expense—Athletes
So, where will the money come from to meet this expense?
It is important to emphasize right now that athletic departments do not currently have money to pay athletes a wage. Colleges and universities are non-profit organizations. This means, as the name obviously implies, there are no profits. Whatever money is brought into the organization is spent on the mission of the organization (or whatever the decision-makers decide is the mission). There is no entity like owners in professional sports to claim a profit, and therefore no profit technically exists.
So, when you hear someone say “college sports aren’t profitable,” you shouldn’t be surprised. Non-profits don’t have profits. Really, this shouldn’t be that hard to understand!
All of this means that right now there is no money to meet a new expense. Whatever money the schools have earned from college sports in the past has been spent. For wages to be paid to athletes, different spending choices will have to be made.
Many athletic directors have made it clear what different choices they would like to make. In a recent article by Chase Goodbread in USA Today, athletic directors indicated they would like to cut sports played by men and women that don’t currently generate the revenue we see in football and men’s college basketball. In other words, if football players or men’s basketball players need to be paid more, schools can find that money by cutting women’s sports or men’s Olympic sports that don’t involve bouncing a basketball.
Goodbread noted that athletic directors seemed less willing to focus on a more obvious solution:
Power Four athletic directors who’ve been outspoken about revenue sharing threatening the subsidy of non-revenue sports haven’t been so quick to discuss the money that could be saved by curbing the spiraling cost of coaches’ salaries…
Although athletic directors may not want to talk about it, it does seem rather obvious that if players are going to get paid more, it is the coaches who should be getting less.
Let’s talk about the pay of football coaches in the professional and college ranks. According to Front Office Sports, the average pay of the twenty highest paid NFL head coaches is $8.98 million. And the average pay of the twenty highest paid NCAA football head coaches (again, according to Front Office Sports) is $8.99 million.
This result should strike everyone as very odd. At least, it is odd if we think about how women are paid in sports. This summer Nefertiti Walker and I published a book on women’s sports called Slaying the Trolls. In this book we discuss the pay of Dawn Staley. In her career coaching women’s basketball, Staley has led the University of South Carolina to three national titles. She has also coached Team USA to both a world championship and an Olympic gold medal.
In 2022, South Carolina signed Staley to a new seven-year contract that will pay her on average $3.2 million per year. As we note in Slaying the Trolls, this amount matched what Frank Martin was paid by South Carolina to coach its men’s basketball team in 2020-21. Martin was fired in 2021 after ten years where he never came close to winning any titles anywhere. As Nef Walker and I note, Staley works very hard to be paid as well as a mediocre man!
Of course, we know why Staley’s pay doesn’t seem to reflect how much better she is at her job. The revenues in women’s college basketball simply don’t match the revenues in men’s college basketball. And since revenue dictates pay… well, there is nothing anyone can do.
Right?
Apparently in the world of football, this story is very, very wrong. Revenues for the NFL and college football are most definitely not the same. According to Forbes, the 32 teams in the NFL in 2023 averaged $581 million in revenue. The average revenue of the top 32 college football program, by contrast, as reported to the U.S. Department of Education, was only $100 million.
So, an average NFL team has more than five times the revenue of the average college football team. But the top head coaches get paid the same in both places. How is that possible? Why don’t the rules that people apply to women also apply to men coaching football?
The highest paid people employed by the NFL are the players. Dan Campbell might be an amazing coach for the Detroit Lions. But if Jared Goff (the team’s $53 million starting quarterback) were replaced by Nate Sudfeld (one of the team’s back-up quarterbacks), Campbell would not look like a great coach anymore. Consequently, the Lions are never going to make Campbell their highest paid employee.
It’s a different story in college football. Once again, the NCAA has historically restricted the labor market for players. It has been a different story, though, for the coaches. For a century people been okay with schools monopsonistically exploiting athletes. But coaches have always been treated like they were in a free labor market.
That free labor market, though, was impacted by the exploitation of the athletes. Because athletes weren’t getting cash, there was always a much bigger pile of cash for the coaches. And that meant there has been enough cash for colleges to pay their football coaches like they were NFL coaches. To be clear, the revenues in college never justified those huge paychecks for the coaches. So, the coaches didn’t really “earn” this money.
Yet that never mattered. As we note in Slaying the Trolls, when it comes to sports, men really love men. And in college sports, because the players couldn’t be paid cash, the football coaches have historically been shown a great deal of love by athletic directors (who tend to be men!).
But now it should be a different story. Now that players can be paid, a school like Clemson University should be making very different choices. In 2022 (the latest year we have data), Clemson reported football revenues of $74 million. The same school paid Dabo Swinney, its head football coach, $11.5 million. Going forward, Clemson shouldn’t be giving 16 percent of its revenue to one coach. This is because Clemson will soon discover that Swinney isn’t really that great of a coach if he doesn’t have the very best players. And like the NFL has learned, those “very best” players really are worth more to the school than the head coach.
One suspects that highly paid football coaches will object to this story. In fact, Mike Gundy recently asked his players to stop asking for more money now that fall practices have started. But despite Gundy’s objections, the players will keep asking for more money. And that money should eventually come from the coaches.
The revenues from college football simply don’t justify the salaries currently paid to the head football coaches. So, when it comes time to add that wage expense for players, athletic directors should start looking at the pay of their coaches. And if the coaches say they want to keep getting paid like they are NFL coaches, schools should tell them to actually go work for the NFL.
On Thanksgiving Day in 1971, the number one ranked Nebraska Cornhuskers faced the second ranked Oklahoma Sooners in a game that is today known as “The Game of the Century.” On that day, Nebraska proved victorious over its archrival and secured the Big Eight title. Across the years, these two teams frequently met in November and frequently that game decided a conference title. Consequently, this rivalry goes far beyond one game in 1971. The rivalry between Nebraska and Oklahoma was arguably one of the most important rivalries in the history of college football.
Or so it was until conference realignment.
Today a game between these two teams wouldn’t mean much at all. In 2011, the University of Nebraska left the Big 12 for the Big Ten. And next year, Oklahoma will leave the Big 12 for the SEC. Although Nebraska and Oklahoma may play each other in this century, it is a safe bet the “Game of the 21st Century” will not be between Nebraska and Oklahoma. The desire to play in bigger and more financially successful conferences effectively killed this rivalry.
For many people, Nebraska and Oklahoma fleeing the Big 12 is part of the inevitable decline in college football. This alleged decline has been hastened by the implosion of the Pac-12 in recent weeks. But it is important to put these moves in some perspective.
According to the Department of Education, in 2010—the last year Nebraska played in the Big 12—the football team reported about $55 million in revenues. In 2019, Nebraska’s revenues reached $108 million. Adjusted for inflation, its football revenues increased by over 50 percent in just ten years.
A similar story can be told about Oklahoma. In 2010, Oklahoma reported $58 million in football revenue. In 2019, that number had increased to $115 million. Again, adjusted for inflation, this is about a 50 percent increase in revenue in one decade.
Yes, ending the rivalry likely disappointed some fans. But in terms of revenue, both teams did quite well after Nebraska left the Big 12. And that was true despite the fact Nebraska has fallen from the ranks of dominant college football powers.
From a business perspective, neither the University of Nebraska nor the University of Oklahoma appear to be impacted much by what has transpired since the Cornhuskers left the Big 12. And that story is consistent with what we see in general in college football. According to the Department of Education, the average team in the Football Bowl Subdivision (formerly known as Division I-A) has seen its revenues grow from $22.4 million in 2010 to over $40 million in 2021. Adjusted for inflation, that’s about a 44 percent increase. In sum, college football has attracted substantial audiences since the 19th century and continues to do just fine!
It is important, though, that we put that business in some sort of perspective. The University of Nebraska Lincoln reports that the total revenue for the school in 2023-24 was about $1.5 billion. And if we look at the entire University of Nebraska system (they have multiple campuses), the reported revenue is $3.3 billion. Yes, that’s billion with a “b”!!
It’s possible that when people around the nation think about the University of Nebraska, they think about their football team. But athletics are a tiny part of the business of the University of Nebraska. And that is essentially the story wherever you look at higher education. Yes, people may know more about the exploits of a school’s athletics than they do about the accomplishments of a school’s economics professors, but academics—as was argued by Charles Davidson of the Federal Reserve Bank of Atlanta—remains the primary business of colleges and universities in this country.
So college football can be thought of as a thriving but relatively small business. Some fans of your school may live and die with the exploits of their favorite team on Saturday afternoon. But the university continues regardless of what is on the scoreboard.
Growing Revenues Mask a Larger Problem
The thriving nature of college football might suggest that there are no problems. Unfortunately, that’s definitely not true. In fact, it has never been true. College football has a problem. In fact, all of college athletics has a problem. And this problem has always needed to be fixed.
Back in the 19th century, a decision was made at American universities that tickets would be sold at athletic contests involving university students. Soon after, those contests became a thriving small business. By the 1880s, thousands of fans were showing up to watch college football and those fans gave the schools hosting the games thousands of dollars.
The schools decided that all those dollars were not going to be shared with the students the fans were watching. Athletes in these contests were labeled “amateurs,” a word that came to mean “you ain’t getting paid.”
Okay, there was some payment. Universities often agreed to give the students a scholarship to the school. But the pay to the athletes in college sports was tightly controlled by the universities.
In economics we have a word for such a system. The word is “monopsony.” More specifically, an employer has monopsony power when they have substantial power to set the wages of their employees. For more than a century, colleges and universities have made millions of dollars from the students playing the games we watch. And the monopsony power of the college and universities allows them to greatly restrict how much compensation the athletes generating these dollars get to receive.
At least, that is the story we were told. For years we suspected that many athletes were receiving additional benefits from boosters of athletic programs. Such benefits violated the rules of college sports. Nevertheless, schools that wanted to employ specific individuals would use boosters to help recruit that talent.
Now this has all changed. The efforts boosters had made to recruit talent under the table in the past can now be made in the full light of day. Starting in 2021, college athletes could be compensated for their Name, Image, and Likeness (NIL). And this means, a booster can now just give money to the athletes they want to see compete for their favorite team.
Of course, this is not the intent of NIL deals. An NIL deal is supposedly about an athlete being hired to do something like pitch a product. Certainly, such deals are being made. And it certainly makes sense that an athlete whose NIL qualities are worth something in the marketplace should be compensated. To use a person’s NIL without paying that individual is, as the courts have ruled, very, very wrong.
Right?
Well, there’s one obvious exception. Consider this scenario. An athlete—with a universities’ name clearly advertised on their uniform—is featured on a highlight on ESPN. Just like an athlete advertising Wendy’s, that highlight advertises the school. And that athlete’s NIL is clearly part of that advertisement. But it seems few people think that athlete is entitled to any compensation for appearing in this highlight. Certainly, the universities don’t think so. Once again, universities have monopsonistic power and they have decided to restrict the payment of athletes to the cost of attendance.
Of course, college athletics aren’t just about advertising a university. College athletics also directly generate revenue for the school. For example, the University of Oklahoma reported in 2021 to the Department of Education that its athletic teams generated $157 million in revenue. The athletic program had 596 participants. Imagine the Sooners did what professional sports in North America generally do and gave 50% of their revenue to their players. If they did this, the 596 athletes would split nearly $80 million. Or to put it another way, each athlete would get more than $260,000 to play for the Sooners. Yes, an education at the University of Oklahoma is worth quite a bit. But it is not worth $260,000 per year.
Should the schools split the revenues equally across all athletic teams? One could argue that teams and players that generate more revenue on the field should be paid more. For example, consider a study of the men’s basketball team at Duke University in 2014-15. For that season, Duke University told the Department of Education that the men’s basketball team generated $33.7 million in revenue. If half of that revenue went to the players, then those players would receive about $16.9 million. Spread equally across 15 basketball players on the roster, that would come to $1.1 million per year. Alternatively, if that $16.9 million was allocated in terms of on-court productivity, Jahlil Okafor would have received $4.1 million for the one season he spent with the Blue Devils. It was estimated four more players were each worth more than one million dollars.
To put it simply, if the men’s basketball team at Duke University operated in the same market we see in the NBA, many of their players would be paid millions of dollars. The fact they were not means they are very much exploited.
Exploitation Is Not Just a Man’s Game
One might think that we would only find such exploitation with respect to college football and men’s basketball. A similar study found, however, that women in college basketball also could generate more revenue than what they were paid by their school. The same was found with respect to some athletes in college softball (study forthcoming at the Journal of Sports Economics) and women’s gymnastics (study presented at the Western Economic Association). In sum, exploitation is not simply a man’s game in college sports.
Of course, because revenues are currently much higher in college football and men’s college basketball, the wages we would see in a competitive labor market would be predicted to be much higher in these two men’s sports than what we might see in women’s college sports. It is important to understand why those differences exist. Title IX became law in 1972. Prior to this law, colleges and universities were under no obligation to offer and invest in women’s sports. Due to the prevailing discrimination, women’s college sports very much lagged behind men’s college sports.
After Title IX became law, the investment gap between men and women’s college sports closed. But as the USA Today’s investigation into Title IX revealed, the gap most certainly didn’t vanish. Consequently, it is reasonable to infer that the revenue gap we see in college sports is really about discrimination. And that means, there is a good argument to be made that athletic revenues should be evenly distributed across men and women’s sports. Or as the economist Stefan Szymanski put it in a discussion of U.S. Soccer, there is a good case to be made that men’s sports should pay reparations to women’s sports to overcome decades of discrimination.
However you think the revenue should be distributed among the athletes in college sports, one issue should be clear: The current system, which dramatically limits the compensation athletes receive for the revenue they directly generate for their schools, is wrong. The revenues earned by colleges and universities come from the efforts of the employees at these institutions. Currently these institutions pay the university administrators, faculty, staff and coaches wages that are negotiated in a labor market. Like these people, college athletes are employees and they should also be paid for their efforts in a labor market that isn’t controlled by the monopsony power of the NCAA.
Countering the Arguments Against Payments
Not surprisingly, not everyone likes this idea. More specifically, those who benefit from the NCAA’s monopsony power and others who simply don’t understand the economics of college sports often raise the following objections to this plan.
- Football and men’s basketball pay for all the other sports. If millions must be paid to athletes in these sports, that money won’t be available for every other sport. Rod Fort and Jason Winfree demonstrated over a decade ago that, per the numbers released by football and men’s basketball teams, this is simply not true. In the book “15 Sports Myths and Why They’re Wrong,” these two economists noted the gap between reported revenue and expenses for these men’s teams wasn’t generally large enough to support the remaining sports. In other words, most of the revenue generated by most teams was often just being spent by these specific teams.
- Most college sports teams don’t make a profit. So, there is no money to pay the players. When we look at the revenues and expense data for college sports teams, most don’t report a “profit.” Of course, colleges and universities are often “non-profit.” That means there is no “owner” to claim any excess revenues. Or to put it differently, non-profits tend to put all excess revenues back into the program. Consequently, we should not expect to see a “profit.” They are called “non-profits” for a reason!
- If college players have to be paid, then only a few college sports teams will exist. Schools with less revenue will simply shut down their athletic programs. It is not hard to see that this story can’t be true. For most people, college sports are what we see at programs like the University of Nebraska and the University of Oklahoma. But most college sports teams exist at much smaller institutions, where revenues clearly are much smaller. Despite a lack of direct revenue, my school, Southern Utah University, still offers a collection of college sports teams. Again, sports have been found to be a good way to advertise your institution. The Salt Lake City Tribune is far more likely to report on the exploits of the Southern Utah University football or gymnastics team than they are to report on my latest book or article. I know that sounds crazy. But it’s true!
- If schools start paying college athletes, then college sports become a minor league sports business. No one wants to see that happen. There is a sense that if players are paid a wage and also given the right to choose their employer (via the frequent use of the transfer portal), then the college sports will lose their appeal. That seems unlikely. We saw this story in Major League Baseball in the 1970s, when players were given the right to free agency and salaries skyrocketed. Fans didn’t lose interest because ultimately fans want to see their favorite team succeed. If a fan’s college football team wins with a collection of players the school just hired, fans will be thrilled. The University of Colorado this year clearly illustrates that point!
Unfortunately, this is likely just a sample of the many objections people have to treating college athletes like employees. Those who object to this idea seem quite adept at predicting the payment of college athletics would have catastrophic consequences!!
But the current system we have has already resulted in catastrophic consequences for more than a century. The monopsony power of college and universities has resulted in millions of dollars being transferred from the workers (i.e., athletes) who generate much of this revenue to other people employed by these institutions (i.e., coaches and other administrators).
We are now moving to a system where athletes can get paid by boosters. Of course, that can’t be thought of as a good system either. More specifically, why would any institution think it is a good idea to have the payment to their workers controlled by individuals and groups not associated with their institution?
At this point it should be obvious there is a better way. College sports has done quite well for over a century, and the coaches and administrators associated with these programs have enjoyed most of the benefits from these programs. It is time to end the monopsony power of the NCAA and start treating college athletes like any other college employee.
That doesn’t mean replacing the NCAA’s current system that restricts compensation with another system that controls athlete compensation. What I am advocating is replacing the current system of monopsonistic control with a system where college athletes are treated like any other employee. In other words, we should bring the free labor market to college sports. Yes, that will mean coaches and administrators will likely end up with less. But the people we are watching play the games should be fully compensated for their efforts promoting the institutions that hired them.
David Berri is a professor of economics at Southern Utah University, lead author of the books Wages of Wins and Stumbling on Wins, and author of the textbook Sports Economics.