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Sunday, April 02, 2006

Empirical Study on how NCAA and Member Schools Profit from Basketball Players

In second part his front-page examination of the NCAA for the Indianapolis Star, Mark Alesia studies the extent to which schools and the NCAA profit from star players (Alesia, "Tourney Money Fuels Pay-to-Play Debate," Indianapolis Star, 4/1/2006). Strikingly, according to Alesia, fewer than 1% of NCAA athletes generate more than 90% of the NCAA's money, which confirms the incredible economic value of hoop stars to colleges and universities. Alesia uses additional ways to expose the popular refrain, "these kids shouldn't complain, they are getting a free education," as profoundly unfair. For instance, he mentions how Scott Pollard, while a student-athlete at the University of Kansas, struggled with finances as he watched Kansas sell his replica jersey to fans. Alesia then reveals this nugget:

43 of the 50 public-school teams in last year's tournament generated a combined $267 million for their athletic departments, mostly in ticket sales, donations and TV revenue. Those schools gave out a total of $12 million in men's basketball scholarships. The rest was used to pay for coaches, administrators and money-losing sports -- basically, all others except football.

Pretty good deal for the schools with top basketball programs: they pay out a combined $12 million for the athletes who generate $267 million for them. Alesia interviews Ellen Staurowksy, a professor of sport management at Ithaca College, who contends, "the hidden part of the budget (in big-time college sports) is the artificial suppressing of the value of the people making this run." As a result, some argue that NCAA players should be provided with some kind of stipend. Pistons guard Chauncey Billups agrees:

"I've had the conversation with a couple of my teammates about this issue. Tayshaun (Prince) went to Kentucky and Rasheed (Wallace) went to North Carolina and Rip (Richard Hamilton) went to UConn. Those places make millions of dollars (in basketball revenue). You're telling me it's not fair to pay those kids a stipend? I'm not saying to pay them NBA money or $200,000 or $300,000. I'm not saying that. But at least a little stipend would be fair, without a doubt."

Duke senior J.J. Reddick, however, believes that the simplicity of the current system -- where players get nothing and the schools get everything -- justifies it (sort of like how people justify the flat tax idea on grounds that it's simple, without considering its fairness or desirability):

"I really don't think that college athletes should be paid a stipend. Should one player get more than another? Should a guy at a big school whose jersey sells for Nike be paid more than (someone) at a low D-I school? Doesn't make sense. I think the easiest way is to just have the system that's in place right now."

Possibly the most interesting part of Alesia's study pertains to research from Robert Brown, an economics professor at Cal State-San Marcos, who studies the value of college athletes. Brown's research shows that a basketball player who goes on to be drafted by the NBA is worth $900,000 to $1.2 million to his athletic department per year while he’s in college. Check out this chart, which, through assorted metrics, calculates the value of individual players in last year's NCAA Tournament championship game. Raymond Felton, for instance, generated $1.2 million for UNC, while Deron Williams brought in $970,000 for Illinois. The lowest value player on either team, Illinois' Shuan Pruitt, generated about $70,000 in revenue--or about 7 times the value of one-year of his 4-year scholarship. Gotta love simplicity in action!

A truly outstanding work by Mark Alesia, and congrats to the Indianapolis Star for publishing it. Related links:

Part I of Study: College Pays, Public Pays (3/30/2006)
Part II of Study: Tourney Money Fuels Pay-to-Play Debate (4/1/2006)
Interactive Database: NCAA Financial Reports (3/30/2006)
Chart: How Much Would College Players Be Worth? (4/1/2006)
Sports Law Blog: New Study on College Sports Finances and NCAA Tax Exemption (3/31/2006)
Sports Filter: Discussion of Alesia Study (3/31/2006)

-- Posted by Michael McCann @ 4/02/2006 12:06:00 PM -- Comments (9) -- Post a Comment

9 Comments:

"The rest [$255 million of $267 million] was used to pay for coaches, administrators and money-losing sports -- basically, all others except football."

FINALLY!! Someone actually says that the revenue-producing sports like basketball--and football--supports most, if not all, of the other sports.
That has been implied for a long time; here is the first time I've seen someone say that in a study and seem to back it up.

Ok, now before the Title IX, Women's Sports Foundation, and AAUW crybabies jump in about how unfair this is, please answer these:

(A) WIthout football or men's basketball, how many women's sports that are supported by the monies would exist, even with favorable court rulings and laws? (For that matter, how many MEN'S sports would exist?)

(B) Please explain to me how "fair" it is (or was) when D-I basketball schools have 13 men's scholarships . . . and 15 women's scholarships?

(C) For those advocating stipends for college athletes: Who should get them, who should not, and how much? And, how would you get around or work with Title IX?

(D) And finally, does anyone know how much money the NCAA D-I women's teams are getting for their tournament this year?

Anonymous -- 4/03/2006 9:27 AM

"Other" sports add revenue by helping to restrict supply. Without a requirement for other sports, any school could (and probably would) compete in basketball, which would potentially break the NCAA monopoly.

"Values" based on current revenue are contingent upon the monopoly system. If you're going to estimate value from specific sports, then do so based on an open and competitive market.

Anonymous -- 4/11/2006 10:26 AM

Look I played basketball for a small D-2 school in florida and we generated plenty of money for our school because we made it to the tournament every year. Most of the money from schools like mine was generated from radio deals and tv deals with the conference. The crooks at the NCAA can't side with us(athletes) because they didn't live in an era when they needed to be paid. The NCAA back then could not charge 5,000 for Final four Tickets which is roughly the norm for decent seats at the championship venue. These idiots at the NCAA have forgetten what got them to this point, the athlete's themselves. For instance, College Football, they have made CFB so commercialized that it's no longer about the competition, it's about who sells out the stadium tickets. How many 6-6 football teams were in CFB this year, all of them could not be selected so it comes down to who can fill the seats. When the NCAA first started, cost of living was cheaper and the enconomy was practically nothing to what is is today. We will probably never see our athlete's being paid in our time, however something needs to change. Centainly, you have to look at the committee's that are putting these policies in place. How many minorities are on these committee's looking out for our athlete's. If you look at the top 3 sports(football, basketball, baseball) at each major D-1 University, you will notice one trend. IT IS DOMINATED BY MINORITIES, especially young black males. Until we can somehow get more representation in those board rooms that are implementing these policies nothing will be accomplished in terms of paying these athletes.

bryant -- 1/08/2007 3:33 AM

this is really good but how do i know that your information is accurate??

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