Colleges could soon pay student-athletes directly. How will Oregon colleges be affected?

Big changes could soon be coming to the way college athletes can profit off their name, image and likeness, or NIL. Since NIL legislation was first passed in 2021, student-athletes have had to pursue deals independently of their universities. But under the terms of a legal settlement announced last year, colleges could devote up to $20.5 million in athletic revenue to directly paying athletes for use of their name, image and likeness. The agreement still needs final approval from a federal judge, but is expected to be resolved in the coming weeks.

Lauren Anderson is the director of the Warsaw Sports Business Center at the University of Oregon. She joins us with more details on the settlement and its implications for college athletic programs in Oregon.

Note: The following transcript was transcribed digitally and validated for accuracy, readability and formatting by an OPB volunteer.

Dave Miller: This is Think Out Loud on OPB. I’m Dave Miller. Big changes could soon be coming to the way college athletes can profit off their name, image and likeness, or NIL. Since NIL legislation first passed in 2021, student athletes have had to pursue deals independently from their universities, but under the terms of a legal settlement announced last year, colleges could devote up to $20 million in athletic revenue to pay athletes directly. The agreement still needs final approval from a federal judge, but it’s expected to be resolved in the coming weeks.

Lauren Anderson is the director of the Warsaw Sports Business Center at the University of Oregon. She joins us with more details on the settlement and its implications for athletic programs in Oregon and around the country. Welcome back to the show.

Lauren Anderson: Hi, thanks for having me.

Miller: Can you tell us about the lawsuit that started this? What were the student athletes arguing?

Anderson: Well, the biggest thing is that the student athletes are arguing that in a very general sense, the universities are making money off the fact that they are the product on the field. The athletic departments in the universities were getting very large amounts of money from TV rights, right? So, the big sports networks are paying the universities for the product, for the right to air it, and that money was all just going back to the university and the actual athletes on the field were not seeing any of that money in terms of compensation.

So that’s really just the very basis of the way this started – for professionals, ultimately the money goes into a system, into a team from a media deal, and then it comes out in terms of player salaries. Not happening in college athletics currently, pending the results of this settlement.

Miller: One of the things that’s confused me a little bit, as I’ve been trying to wrap my head around this, is if we’re entering a totally different way to think about compensation of athletes from name, image and likeness … I mean, what you just described to me didn’t sound like a name or image or likeness. It sounded like an athletic product. It sounded like the work that these student athletes are doing, that’s directly leading to a ton of TV revenue. Is there a difference or am I misunderstanding this?

Anderson: No, you’re correct. It is a very murky situation. Last year, some athletes from Dartmouth College, some basketball players, their take on this was, we’re employees and we should be paid like employees, and it’s a slippery slope with unionization, and is that really what would be best for student athletes?

The athletes wanting a piece of the pie for the money that’s coming in, on the one hand, makes a lot of sense. They do also get scholarships, medical, supplementary like housing, other income. There are other forms of income that student athletes are getting. So it’s not like they are being taken advantage of. It’s just there are other forms of compensation. But as the media rights have increased, I think that’s where student athletes feel that if they weren’t putting the product on the field, the money wouldn’t come to the university, and then they are deserving a portion of that.

So it is complicated. It does seem like a pay for work product. But then the university has the right to determine how to distribute this however they want.

Miller: What did the judge decide then? So the university has the right. What are the basics of the so-called House settlement, and House is one of the student plaintiffs?

Anderson: Yes. So, the basic tenants are a university would have up to $20.5 million to distribute to student athletes however they see fit, that there would be a cap on roster limits. So every roster, there wouldn’t be variation amongst the schools. So, I think that was in an attempt to kind of set a level playing field.

Then the third part is in regards to whether that money is used straight for scholarships or just paying students directly. So, for example, a sport like lacrosse, which I’m familiar with, currently has 12 scholarships that they’re allowed to give and rosters that are typically 30 to 40-plus people. When that’s capped, some schools will be able to say that they’re going to give full scholarships to 20 people. They may be able to give full scholarships to everyone up to that 36, 38 person roster limit. Not every school is going to be able to do that. Other schools might make different programs. Ohio State has twice as many Division One programs as the University of Oregon does and they still have $20.5 million to go into a pot to give people.

So you can see how it’s very complicated.

Miller: Where is this money going to come from? So it’s $20.5 million at most for every school in the NCAA. Where will they get this money?

Anderson: It’s a great question of what the ongoing income stream is. I mean, certainly the Power Four conferences are getting it from media deals. The others are not. Other conferences don’t have as big of a media rights payout. It’s likely going to come in the form of donors. A lot of these collectives that formed a couple of years ago to try and raise money for student athletes and also broker NIL deals, those might change how they look and feel in terms of just being a fundraising arm to get to this $20 million.

Miller: How do you think this might play out differently for two flagship Oregon universities: the University of Oregon and Oregon State University?

Anderson: I think the first thing is, off the top, if you just look at the media rights deals, what Oregon stands to make from media rights deals versus Oregon State, from whatever comes of their Pac-12 status, that league and those media rights deals coming … So that’s gonna be the first thing, where is that money coming from to begin with? And then just, how are they going to distribute it?

Miller: Do you have a sense for whether a volleyball student, who is not well known or the 7th best cross country runner at Stanford … are they gonna get money from this? Or, is it just the people whose names are known within their particular sports, if those particular sports generate a lot of money?

Anderson: It’s hard to say. This is a sport, but a school by school decision. So some schools may decide every athlete who’s putting in time deserves a little bit of something. Others may say everybody on the team deserves something, but only for the revenue generating teams. I’ve seen some things early out, a couple of the SEC teams were very public in saying 75% of the money is going to go to football, 15% is going to go to men’s basketball, 5% is gonna go to women’s basketball and then the last 5% will be split amongst all the other student athletes.

Miller: The other ones can have one pizza party every other year?

Anderson: Exactly. Well, it might be like $1,000.

Miller: Yeah, exactly. [Laughs]

Anderson: So maybe …

Miller: I think that’s a pizza party … as opposed to $100,000 that might go to an individual athlete who’s maybe going to win the Heisman or something?

Anderson: Yes. And that’s the other thing, how that chunk of pie that goes to football or men’s basketball is distributed, is gonna be up to the coaching staff, right? So there’s gonna be some discretion there.

Then you mentioned Stanford. Stanford’s really unique. They’ve won the Sears Trophy for so many years and they’re seen as a great academic as well as athletic university. They’ve just had one of their star softball pitchers leave Stanford to go to Texas Tech and it was because of NIL money. You would think, why would you give up Stanford? That’s a great school with a great degree, with a great cachet and alumni base, but there was a lot more money down in Texas Tech for this athlete. So she left and transferred.

So that’s gonna be an opportunity or a potential opportunity for a very small percentage of people, but it’s gonna be something that’s gonna happen.

Miller: I was struck by a quote that our business reporter got from Jason Belzer, the founder of Student Athlete NIL and also a professor of sports business at Rutgers. He said that this will be the largest redistribution of wealth in the United States, aside from Social Security and Medicare. Is that true? Are we talking about that much money here?

Anderson: Yeah, I mean, it’s a lot of money. There’s back payment. I mean, when the original NCAA ruling came out, this House settlement is sort of in response to that. And I can’t off the top of my head remember the number, but it’s billions of dollars to be paid out in damages, essentially, and it would go back 10 years. So there’s some back payments.

If you think about it, and [I’m] not as an economist, but from a business standpoint, you think about $20 million coming in … like you mentioned, Oregon and Oregon State. So that’s now $40 million that is coming in, it’s taxable income. It’s money that student athletes can be spending, so it goes back into the economy. And multiply that by all the number of schools around the country. It is a huge amount of cash about to be infused into our economy.

Miller: I want to turn to the news of the last couple weeks because just last week, the federal judge who has been overseeing all of this, put this settlement on hold because of the elimination of roster spots. What’s her concern?

Anderson: I think the concern is just that there are student athletes that are here and made a decision to come to a college for the opportunity to play a sport. Now, the elimination of spots comes at the sense of a roster limit conversation that I had mentioned earlier. So on the one hand, it’s leveling the playing field for some people. But for others who have been able to carry larger rosters, because they have more students willing to … they’re not gonna be getting scholarships, they’re just there in their bodies and the team budget allows them to absorb travel costs, or whether they have travel rosters or whatever. It’s not a conversation about, you’re cutting somebody who’s on a full ride to a college and you’re taking the chance for them to be away at college, away from them.

So, it’s interesting. I mean, I think it’s a conversation about [the] numbers of people who have access to sport. I do think that that’s also where you may get into some potential Title IX issues, which is a whole other piece that nobody knows what this House settlement is going to look like in terms of NIL numbers on college campuses, potential elimination of sports, addition of other sports and how the college landscape changes just at a funded-through-a-university level.

Miller: The NCAA wrote this in a statement last month: “The proposed settlement would facilitate meaningful opportunities for student athletes to further benefit from their participation in intercollegiate athletics, while establishing a robust system of oversight and controls to ensure fair competition and protect the integrity of collegiate athletics.”

What do you see as the most likely areas where a school or, say, a rich booster could game this new system?

Anderson: Oh, that’s a tough one. I think the rules haven’t necessarily been written, so I think how they’re going to sort of robustly monitor this is going to be interesting. There is also the piece … if there’s some booster who has a lot of money, who has a company who wants to do a traditional NIL deal with athletes, and that is proven to be at fair market value, that’s certainly a way that money could come in.

I don’t know, I think there’s gonna be some creative accounting happening and I truly don’t know what it’s going to look like. I think that’s what all of us who sit and look at it, and talk about, and think about are really curious about, because it seems like a very daunting task. I don’t know how anybody’s going to monitor what’s actually happening.

Miller: What does fair market value mean? I mean, if that booster owns a car dealership, and as a way to entice some football prospect to join the team, says, “if you are in this ad, I’ll give you a million dollars,” is that fair?

Anderson: I think the concept that is in motion is if everybody has to report and two people get a million dollars for being in one billboard for a car dealership, as an example, and 100 other people do it and they get a lease for a car for two years that’s worth a total of $30,000, you’re gonna look at that and you’re gonna say, the two people who got a million dollars and the 100 people who got a $30,000 value lease, the fair market value for the same marketing exposure is closer to $30[,000] than it is to a million.

Miller: Unless that quarterback is so good that he’s worth it.

Anderson: Right.

Miller: I imagine that’s what the car dealership owner would say.

Anderson: Right. It’ll be very subjective and I think it’s trying to keep the outliers from being an outlier. But then, right, you could argue, OK, then the quarterback who’s gonna make a million dollars, maybe that million dollars comes out of the $20 million and the car dealership dollars somehow are more evenly distributed to other people. Again, this is something that athletic directors, that’s why they’re hiring general managers. There are a lot of smart people trying to figure out how this is going to come to life. I’m merely an armchair quarterback.

Miller: Lauren Anderson, thanks very much for your time. I appreciate it.

Anderson: Thank you very much. It was great being on.

Miller: Lauren Anderson is the director of the Warsaw Sports Business Center at the University of Oregon.

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