By David Mullen
Jason Lambert is president, CEO and portfolio manager of Northwest Financial and Tax Solutions and author of the upcoming book “The Retirement Trailhead.” He has believed that big money and big-time college sports have been entwined for some time. “If that [the NCAA] were a business, I would definitely invest in it. It’s a unique business model.”
That assumption may have changed recently when California passed a first-of-its-kind law that will allow student athletes to hire agents and make money on endorsement deals, something the NCAA actively opposes.
California’s new law, along with discussions about paying college players, may lead to fiery debates among sports fans, but there’s no denying that sports are a profitable undertaking for many universities. In fact, Lambert said that if college sports were a stock, a lot of people might add the NCAA to their portfolios.
“You have some top college football programs that bring in well over $100 million in revenue with a 50 percent profit margin,” said Lambert, who attended Auburn University. As a financial planner, he said, it’s also hard to miss just how big of a business college sports can be. “Some schools are making an insane amount of money on their sports teams.”
ESPN college football analyst, practicing attorney and longtime friend Rod Gilmore (who played football and baseball at Stanford) has long been a proponent of the NCAA recognizing a player’s right to be compensated for their likeness and their major contributions to the financial coffers of universities based on their play. Gilmore said “’Amateurism.’ We’ve move so far away from the original mission of athletics on campus that it’s silly to try and defend it now. CFB [major college football] is firmly a business and part of the entertainment industry.
“Personally, I believe that the amateur model is dead and the NCAA should stop trying to resuscitate it,” Gilmore said. “The courts have weighed in and criticized the way everyone makes money off this $14 billion per year industry except the players. One federal court wrote that the players are getting a bad bargain, and the NCAA’s definition of ‘amateur’ (no pay for play) means nothing since the NCAA already allows pay in certain instances and in certain sports, such as Olympians receiving hundreds of thousands of dollars for winning a medal in the Olympics, bowl gifts, payment of insurance premiums for players, etc. In short, ‘amateurism’ means whatever the NCAA wants it to mean when it suits its purpose.”
Two Texas teams are atop the Forbes annual list of the 25 most valuable teams in college football. The top 5 bring in
$1.5 billion in profits on revenues of $2.7 billion. Topping the list is Texas A&M, which had revenue of $147 million and a profit of $94 million, followed by Texas, Michigan, Alabama and Ohio State.
Television contracts have long been lucrative for college sports, but nothing like today when colleges and the NCAA don’t have to rely exclusively on the major networks. “Look at the top two teams on that Forbes list,” Lambert said. “The Texas Longhorns have their own TV network. Texas A&M is part of the SEC, which has its own TV network.”
Following the Olympics model, California governor Gavin Newsom recently signed a bill that would allow college athletes to hire agents and make money from endorsements. The law is due to take effect in 2023. Athletes applauded the move. Influential Duke head basketball coach Mike Krzyzewski (pictured) is siding with the players. “We must adapt,” Coach K said. Needless to say, the NCAA and major universities are firmly against it, believing that a college scholarship is enough compensation.
“Scholarships are valuable and great,” Lambert said. “But something is going to have to change when you see the money that is coming in to these programs.”
It appears that the change has come, when more investments will be in the student athlete and not all going to the NCAA and their high profile teams.