The benefits

First, let’s consider the pros. There are benefits for the athletes (scholarships, character building, career opportunities, etc.), benefits for the fans (entertainment), benefits for the university (income, prestige, etc.), and benefits for the community (economic stimulation, bringing the community together, etc.). These things are not to be disregarded. As we proceed to consider the problems, we should ask ourselves whether the problems are avoidable or unavoidable consequences of reaping these benefits.

The drawbacks

Scholarships

It has long been the case that sports have provided an opportunity for underprivileged and marginalized people to get a college education. However, this is a positive born out of a negative, and it isn’t a fair way to distribute resources. We should find different ways to enable people to pursue education.

Athletic achievement should be rewarding. But why should that reward be education, specifically? The reason why it is education is supply and demand for labor. Colleges essentially hire these student athletes. Importantly, they don’t actually hire them. This is part of the problem. Colleges (and the NCAA) have created a loophole to avoid the responsibilities of employment.

In 2021, this problem was partially ameliorated by the NCAA allowing student athletes to profit off their name, image, and likeness. Based on polling, most Americans agreed with this decision and think college athletes should be paid a wage. (Kraft 2023.)

Fedlam said the amount of money being poured into and flowing from collegiate sports has made it clear they are no longer purely about amateurism and love of competition. That means the move toward paying college athletes is an inevitability, not a debate.

“If college sports were solely about education and the benefits that could come from that, college sports would look entirely different,” Fedlam said. “Do we ruin college sports when we pay tens of millions to schools for broadcast rights, when March Madness makes $1 billion, when schools on the West Coast are aligning with Midwest and East Coast conferences to earn more compensation? That’s where sports have come.”

Kraft 2023

The more high-profile a sport is, the more likely it is that student athletes are in college to play sports rather than to learn. Anecdotally, I personally met people in my undergraduate career who were in school to play football. They were not interested in getting an education and were not academically qualified for college. Now, perhaps such people are exceptional, but I think this does occur (to varying degrees) in many college athletics programs. Part of the problem with this is that a college only admits so many students per year, and athletic scholarships may push out students who otherwise would have been admitted.

Finances

Sports programs are expensive. In 43 out of 50 states, college sports coaches are the highest paid public employees in the state. Many of these coaches have multimillion dollar salaries. (Calabrese 2024.) Granted, some of these coaches are for sports programs that are profitable, particularly Division I football and men’s basketball. Most sports programs are not profitable (Zimbalist 2023).

One question to ask is, to what extent is revenue generated by the coach and to what extent is it generated by the athletes? Does a coach work hundreds or thousands of times harder than an individual athlete? Coaches are expensive because they can be. Athletes are cheap because they’re required to be by the NCAA.

The highest-grossing college athletes reap only a very small share of the revenues they generate during their college careers. Of the $15.8 billion in revenues that went to the NCAA’s Division I athletics enterprise in 2019, only $2.9 billion — 18.2 percent — was returned to athletes in the form of athletics scholarships and 1 percent spent on medical treatment and insurance protections. In contrast, 35 percent was spent on administrative and coach compensation and 18 percent on lavish facilities.

Zimbalist 2023

Part of the problem is that, wherever large sums of money are involved, corruption seems almost inevitable. We saw this with the 2017 men’s basketball corruption scandal. It was a scheme “to compel coaches to push recruits toward specific schools and financial advisers in exchange for money” (Medcalf 2023). Unfortunately, both the FBI and the NCAA handled the investigation pretty poorly.

“Corrupt FBI agents spearheaded a misguided investigation where the real bad guys slid out the back door like cowards.”

Steve Haney, quoted in Borzello 2023

The investigation highlighted the NCAA’s inability to manage schools or streamline the investigative process. Even with access to an FBI investigation, the NCAA, in the end, did little beyond vacating wins and handing down lesser Level II and III penalties and other slap-on-the-wrist punishments.

Medcalf 2023

Economically speaking, sports leagues are cartels. This is a situation in which companies, individuals, or organizations are in the same business (and thus would be competitors) but collaborate to do various anti-competitive practices like revenue sharing and price setting. The NCAA is a cartel.

The NCAA receives most of its annual revenue from two sources: television and marketing rights for the Division I Men’s Basketball Championship and ticket sales for all championships. That money is distributed in more than a dozen ways — almost all of which directly support NCAA schools, conferences and nearly half a million student-athletes.

NCAA

There are two arguments that can be made here. First, cartels are undesirable for workers (read: athletes) because they prevent competition for labor from bringing wages up. Cartels are undesirable for consumers (read: fans) because they prevent competition for viewership from bringing prices down.

The other argument that can be made is that sports leagues are “natural” cartels in the same sense that a utility company is a natural monopoly. There are some cases in economics where competition in inefficient. It can be argued that for sports to operate successfully at scale they require this kind of financial regulation.

The NCAA is facing at least five antitrust lawsuits, which challenge rules regulating recruiting, athlete transfers and compensation for athletes.

House vs. NCAA was recently class certified and could put the association on the hook for a potential multibillion-dollar payout to former and current college athletes.

Associated Press 2024

Another question to consider is how sports affect colleges indirectly. As it turns out, there are fewer clear benefits to the college than one might expect.

It is possible that participating in big-time Division I sports also brings colleges returns beyond those captured by traditional revenue streams including boosting the image of the school, increasing student applications and enrollment, and increasing alumni donations. However, research finds the effect of participating in high-profile athletic contests on private donations range from no impact to a modest increase, or negative impacts when a team performs poorly.

Zimbalist 2023

Solutions

I don’t have the answers, but there are a few ways I could see college sports being improved. First, student athletes should be paid wages. Second, the NCAA should pay student athletes to use their name, image, and likeness. These things would go a long way towards addressing the problems above. Additionally, the NCAA’s cartel activities (profit sharing, price setting, etc.) should be closely monitored and regulated to prevent exploitation of either workers or consumers.

References

Associated Press (2024). NCAA generates nearly $1.3 billion in revenue for 2022-23. ESPN. https://www.espn.com/college-sports/story/_/id/39439274/ncaa-generates-nearly-13-billion-revenue-2022-23

Borzello, J., M. Medcalf, et al. (2023). The FBI, IARP and corruption in men’s college basketball, explained. ESPN. https://www.espn.com/mens-college-basketball/story/_/id/38642236/the-fbi-iarp-corruption-men-college-basketball-explained

Calabrese, M. (2024). It Pays To Be The Head Coach: Highest Paid State Employees In The US. OLBG. https://www.olbg.com/us/blogs/it-pays-be-head-coach-highest-paid-state-employees-us

Kraft, N. (2023). Why The Public Strongly Supports Paying College Athletes. Forbes. https://www.forbes.com/sites/nicolekraft/2023/08/21/why-the-public-strongly-supports-paying-college-athletes

NCAA. Finances. https://www.ncaa.org/sports/2021/5/4/finances.aspx

Zimbalist, A. (2023). Who Wins With College Sports? Econofact. https://econofact.org/who-wins-with-college-sports