The Feudal Economics of NCAA’s March Madness

The Feudal Economics of NCAA’s March Madness

So, why aren’t the players paid?

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No matter what team walks away with the NCAA basketball title next week, someone is going to make a lot of money. TV advertising from the tournament will generate more than a billion dollars in revenue, more than the entire NFL playoffs (including the super bowl). That is also more than all the ad revenue generated from Major League baseball playoffs, the NBA postseason and the NHL playoffs combined. That billion dollars fails to account for revenue from ticket sales, licensing or merchandising rights.

The NCAA clings to the entirely implausible argument that it’s Division I basketball and football athletes are compensated fairly through scholarships, education and access to top-notch facilities. The problem is, the NCAA business model has become so successful, raking in many multiple billions of dollars in broadcast and licensing rights, that the underlying premise becomes untenable. If you consider the tens of thousands of dollars in tuition and room and board as compensation, the scholarships afforded to many of these athletes are a drop in the bucket relative to the value they create for the NCAA, CBS, and all the various corporations profiting from their work. Contractually preventing them from capturing any of this value under threat of disbarment could work if the league itself was not so profitable. But given the size and sheer magnitude of wealth being created on the backs of un-paid athletes, it is only a matter of time before players start to capture some of the value they are creating. When you throw in the fact that 58% of college basketball players are black and 90% of the NCAA’s Executive Committee is white, the optics look even worse.

The NCAA’s exploitation of athletes is not slavery. The athletes are free to come and go as they please. And in many cases, athletes can get a great deal through free education and access to networks and notoriety they can capitalize on later in their lives. The problem is with elite athletes in big money college sports such as basketball or football that are not good enough to make it in the professional leagues; i.e. the vast majority of athletes on display during March Madness. The NCAA monopolizes the only venue where their skills can generate meaningful value. The economic relationship of these college basketball players with the NCAA is analogous to serfs of feudal Europe. Under the feudal system, serfs resided and worked on the land of a lord in exchange for protection and subsistence living. Many of them were previously free men, but entered into the contract out of necessity due to drought, war or other factors.

Certain college athletes are modern day serfs for three reasons: first, the NCAA is a monopoly. Like a potential serf with no options, there are no comparable leagues at the college level in which athletes can compete and demonstrate their talent. Should you be skilled enough to play Division I college basketball, you can either sign up with the NCAA or not play basketball. Second, similar to the serf, the contractual obligation of the athlete to the NCAA means he or she is prohibited from generating personal wealth from their skill set. Any revenue generated from their performances or their personal brand are directed to the university and the NCAA. In exchange for the privilege of playing basketball, the athlete is granted access to education and subsistence living. Given that most of their time is spent out of the classroom traveling and practicing, the education part is dubious. So in a sense, they are playing for subsistence living. Third, like a feudal land-owner, the NCAA has established a perception of benevolence. The NCAA would claim it is providing opportunity, life skills, experience, leadership and other intangibles that would benefit the athlete in life. While this may be true, the trade can become grossly unjust rather quickly.  Like a serf stuck in feudal bondage, the athlete can either play by the rules of the landowner, or not play at all.

The arrangement is fundamentally un-American. If a student receives a scholarship for excelling in mathematics or physics, that student is free to monetize his or her unique skills during their time at school without repercussion. If a student excels in basketball, the act of monetizing that skill bars him from the league, potentially ending his career. Why is athletic skill regulated in a drastically stricter, more draconian way than other skills like math, accounting or computer programming?

The only plausible reason is money. The NCAA, the universities, the coaches, the broadcasting companies and other corporations are capturing value that would otherwise be allotted to the athletes. While others are making money, it is the NCAA and its restrictions on “student athletes” that are the real issue.  The exploitative nature of the NCAA is at its worst when you consider the limited number of elite athletes who ever play professionally. About 1% of Division I college basketball players make it to the NBA. That means their ability to be compensated from their skill is at its peak during their college years. Cash-strapped universities may be wary to commit funds to pay players, but this should not be necessary.

One solution is athletes should be allowed to license their likeness, sell autographs, market T-shirts or whatever they can do to capitalize on notoriety they generate through their performance on the court. For some, this could mean the difference between poverty and a real chance at a better life. Unfortunately, the NCAA has assured they remain poor to ensure it captures all the profits.

Another solution is for federal regulators to break up the NCAA’s monopoly on big time college sports, allowing for competitive leagues to fuel competition for talented players and allow the market to decide how players can or cannot be compensated. While professional sports leagues like the NBA, MLB and NFL may also be monopolistic in nature, they at least compensate their athletes. In terms of revenue, the NCAA is as big if not bigger than professional sports. It should be scrutinized under anti-trust laws. Were the majority of the athletes it exploits white, and from upper-middle class backgrounds, this would have probably happened long ago.

Under the guise of benevolence, the NCAA has structured college basketball as a zero sum game where poor, mostly black, college athletes remain poor while the NCAA takes everything. It is a fundamentally unjust, exploitative and corrupt arrangement that essentially boils down to taking from the poor and giving to the rich. I enjoy March Madness, and the competitive spirit of its athletes. I abhor the NCAA and its institutionalized abuse of its players. I look forward to watching a tournament where the players benefit as much as the league’s management.

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