The place School Soccer is Now and The place it Goes within the Future: The Enterprise Issues

What is Collegiate Athletics For, Exactly?

As we finalize this series (There will be one more article after this one.), we really need to take a hard look at what is occurring and what effects that it might have on more than a few issues. There are still many misconceptions, misperceptions, and misunderstandings about college football, as well as college sports and their relationship with the University/College education system.

The first thing to understand is that all collegiate sports are currently regulated by the National Collegiate Athletic Association (NCAA). The following is the actual mission statement from the NCAA and the page is linked here: Mission and Priorities – NCAA.org

Mission and Priorities

The NCAA is a member-led organization focused on cultivating an environment that emphasizes academics, fairness and well-being across college sports.

Academics

To get the most out of college, student-athletes have to suc­ceed on the court and in the classroom. The NCAA provides opportunities to learn, compete and grow on and off the field. The ultimate goal of the college experience is graduation, and college athletes are graduating at rates that are higher than ever.

Fairness

With so much changing in college sports, rule changes are focused on improving the student-ath­lete experience. The NCAA is committed to providing a fair, inclusive and fulfilling environment for student-athletes and giving them a voice in the decision-making process.

Well-Being

In 1906, the NCAA was founded to keep college athletes safe. The Association is still working hard to protect them physically and mentally. Through its Sport Science Institute, the NCAA provides recommendations and guidelines to ensure college athletes are getting the best care possible.

The words, winning, championship, and boatloads of money do not appear in the organization’s basic foundational goals. Simply put, it’s about providing schooling, a level playing field, and student health/safety.

There are no mentions of Name, Image, and Likeness remuneration. There isn’t a word about winning records, championships, or athletic glory. Most of all you don’t see anything regarding huge monetary deals for media buys and distribution of said cash among the members. Many of those regulations are in place as a matter of reactivity and necessity, but the mission statement of the NCAA is not about any of those things, period.

What we are now seeing is a rapid and disorganized dismantling of a 116-year-old organization that governs all of college sports. It is occurring at the upper levels, and mostly in the football related revenue generating sports (for most programs, anyway) and it has also crept into the thinking for men’s basketball programs as well.

The current iteration of college sports and the NCAA cannot survive the onslaught of “professionalization”. At some point in this process something will have to give, and few people who are set on the thrill of the change are considering the implications and the possible results of such change.

Structurally, there are several realities that the “collegiate” programs are going to have to square with their current operational design. Professionalization means many things more than “making bilious amounts of money”. Let’s look at three basic problems that are not going to be solved, easily; a professional organization means profit making status, professional players must be employed, legally, and corporate liability for labor practices will be required.

The “Business” Becomes a Business

First, going pro cannot be done under the current NCAA rules and regulations. It also cannot be done under the current tax codes and federal laws and regulations for non-profit organizations. This means that Congress will need to be involved to sort out and regularize the league’s corporate structure and for the first time TAXATION at the federal, state, and local levels. Professional leagues don’t get to operate as non-profits, and professional players don’t get fisted six-figure checks without the governments sticking their hands out and demanding a share of the wealth (and as those numbers climb, so does that share demand). The organizations will have to employ their players and assistants under some form of labor contract much like the professional sports leagues.

They’ll have to negotiate contracts and pay salaries and benefits for full time personnel. The players will likely unionize to maximize the base level of compensation, so it won’t be just one or two players out of 100 on a roster. It will be the entire 100+ players just for football. (There are nearly 900 student-athletes at Tech during any one academic year. Some institutions make us look tiny by comparison.) Who then, is going to represent the players when negotiating and signing such contracts? The old deal with the LOI with the standard scholarship or partial scholarship offers, dealt with between the Athletic Department and the School, since the player had to be registered to attend classes at the school, full time, in order to be eligible for the scholarship and or grant.

There are models and examples for this, but how many Athletic Directorates have the financial and legal wherewithal to negotiate contracts for and employ 100 players, every year? Who sorts out what? And at what point does the university or college simply walk away since their involvement and monetary rewards for hosting the sports evaporate as players choose not to attend school, but merely play for a shot at the pros?

The NCAA and college sports Athletic Departments are currently tax exempt under chapter 501(c) (3) under the Internal Revenue Code. For a good summary have a read of this paper from John D. Columbo of Penn State Law, The NCAA, Tax Exemption and College Athletics (psu.edu). The reality stands that if these programs go professional, there will be serious issues with the current tax status of the organizations operating in a tax-free environment.

The result is more than likely to be a confused mess that will require congressional sorting, new legislation, and new tax law at both the federal and state levels to sort out. That is not an easy proposition and there might very well be some serious court challenges to go with the various contractual fights regarding conference membership. The federal level is one thing, but each of the programs exist in a state with different codes and regulations on the books. The NCAA has been running in a tax-free environment long enough that its ecosystem/economy evolved over time. The long-term effects of the sudden change will not be immediately understood.

Players as Employees, NOT Student-Athletes

Currently players are student-athletes, or simply students. The “compensations” provided to them are strictly limited and untaxed because they are provided in the way of scholarships, and coaches’ grants. Some players are not even compensated via scholarships. Also, scholarships are the sole provider of funds from the Athletic Department to the university or college. There is no revenue or trademark sharing. The Hokie Bird is a registered trademark of the Virginia Tech Athletic Department. If you want to know why the big change in the university’s branding to the “swirly flying VT” from the pylon shield, one need only look at the AD’s “Flying VT” to understand that the school didn’t own that symbol and they needed something close to but acceptably different to at least have some symbolic connection between the revenue generating sports and the school. Although Athletic Departments have actual employees, those 100 odd salary and benefit packages will add a very large overhead to the organization. In that overhead will be the usual functions of health and life insurance for the employee, workman’s compensation insurance, Social Security and Medicare taxes, along with federal, state and local tax withholdings. This doesn’t even account for management of premium contracts that contain Name, Image, and Likeness compensation which is often handled by 1099 reporting and in need of self-employment taxation and withholding. Huge contracts are also going to need regulated guidance, legal, and business functions of agents, lawyers, and accountants. Who is going to provide those services when even the thought of an agent lurking in the background can get an athlete banned, and a program sanctioned?

There is currently an 85-player scholarship cap on conforming, unsanctioned, programs in the FBS. That number was limited by the NCAA during a prior reform era, but rosters are often in excess of 100 players and those relatively uncompensated “walk-ons” will have to be paid. All of that takes into account the football programs but remember the conferences and amateur status stretch to “non-revenue sports”. There are the scholarships for every other sport the Athletic Department supports, and those non-scholarship or partial scholarship student-athletes who will also be involved in the payroll. Are the spirit squads, bands, and support staff also going to be compensated? The Hokie Bird is considered a student-athlete.

Finally on the note of compensation, how does it all fit with attending school and the entire “student-athlete” concept. We all know that there are lots of “winkers and nodders” about the big star players and the accusations of phony degrees, leaving early for the pros, fake jobs, and fast-food bags of cash delivered to friends and relatives. Some of that corruption will be addressed but given the potential amount of money involved, and the huge tax burden that it imposes, the under-the-table stuff is likely to get worse, not better.

Corporations have Liability and Labor Contract Obligations

Let’s get to the big deals in all of this. The new conferences/leagues that seem to be forming are not going to be configured or incorporated as they are now, with the NCAA providing the organizational stability and overarching regulation for each wholly owned subsidiary Athletic Department. There will have to be a new corporate marketplace built that would look similar to all of the other professional leagues. That means all of the liabilities and regulations necessary to answer to will have to be in place for the organization of organizations to function. There are currently similar functions being conducted within the amateur association relationships, but the entire structure will be different with different laws and regulations to be constructed. That also leads to the big question mark of Labor practices, regulation, unionization, and contract negotiation.

The questions to answer will be similar to all such organizations, but there are special circumstances that will have to be dealt with in the context of collegiate based athletic organizations. The following practical implications will have to be solved in the employment and corporate relationships:

  • What is the relationship between the Athletic Department and the University?
  • What sort of league affiliation will there be between teams, conferences, and the main governing body?
  • Does the requirement to be enrolled at the school stand and why if the player is a professional?
  • Does the employed-athlete (formerly student-athlete) have time limits placed on their term of service as in limited eligibility, red-shirt, gray shirt, and other rules?
  • Do only revenue generating sports operate under the professional organization?
  • What sort of revenue sharing arrangements, luxury tax rules, player recruitment (draft) regulations are there?
  • Who indemnifies the athlete’s potential claims against the organization/AD?
  • How does legal and agent representation of the athlete change?
  • Will agents and legal representatives be certified and regulated?
  • How is high school recruiting conducted and talent distributed within the league?
  • What sort of labor contracts and negotiation are to be conducted with a group of 17 to25 year-olds having major interstate commerce implications and therefore federal labor law applying?

The list goes on. These are not unsolvable issues, but they are just a few of the considerations that suddenly present themselves. The most important being the relationship between the post-Secondary educational organization (most notably their foundations). If the teams are professional and the players are not students, then what, exactly is the purpose of the relationship between the two entities? With no scholarships the schools don’t get any money at all out of the deal. So, what is the entire point of the exercise of having a university host a football or men’s basketball team?

Wrapping the Business into Something Rational

This isn’t all about “YEAH! GREAT IDEA! COOL! LET’S DO IT!”

The point of this is to identify some of the major issues that are being presented by the rapid change. Currently, the chimera of the NCAA and Amateur sports are still in effect, but that skin is thinning rapidly as the massive differences between Athletic Departments, Conference configurations, revenue generating and non-revenue generating sports become sticking points and even conflicting interests. Do Hokie Football Players continue to generate the revenue to support Hokie Softball and Baseball under the same rules and regulations? Some folks think that’s easy stuff to answer with a “just do it” sort of response.

Well, it isn’t going to be all that easy, and it isn’t going to turn out the way most fans are going to like or understand. The snowball started rolling nearly a decade ago with the NIL lawsuits and will likely end up with a completely different picture of collegiate sports in the very near future.

The next article will be the absolute last in the series and take a look at the potential fall out for all of this explosive re-organization. We’ll sort of ignore the business and academic relationships and stick with the potential new structures as various pontificators of sports are discussing. Just remember, the business of college sports is very quickly becoming a real business and that means real change not just deck chair and conference shuffling.

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