With over 400 consultants and staff at Aegis Capital Corp., it would be fair to say that many of us have a broad range of interests outside of the office. Many of us here are huge fans of college sports. Anthony Lapadula, managing director at Aegis Capital, presents us with some of his thoughts, insights, and questions regarding the recent development regarding NCAA student-athletes receiving compensation for their participation in school athletics.
In the later end of October 2019, the NCAA Board of Governors unanimously voted to permit amateur athletes to, according to the press release, "benefit from the use of their name, image, and likeness." In other words, college athletes will now be permitted to accept some form of payment for participating on an NCAA sanctioned sports team. The vote took place at Emory University in Atlanta, after which, a press release was issued stating that the Board of Governors realize they "must embrace change to provide the best possible experience for college athletes."
One question that many people are asking is why, exactly, the NCAA Board has decided to hold a vote on this topic in the first place. There are two primary reasons for why this topic and decision have come into the spotlight: First, California has recently passed a law that would not allow NCAA schools to stop athletes from making money on endorsements, participating in autograph signings, or partaking in social media advertising. This law is expected to go into effect in 2023. There are other states looking to pass similar laws as well. Second, there is a federal bill being built by North Carolina Republican U.S. Rep, Mark Walker. The law would not allow the NCAA or member schools from restricting student-athletes from making income on the open market by selling the rights to their names, images, or likeness.
This entire scenario now raises multiple questions for how these "benefits" or "profits" should be distributed for the athletes while also maintaining rules regarding amateurism and sportsmanship. The NCAA board has asked each of the three divisions governed by the NCAA to draft their own sets of rules and have them established no later than January 1, 2021. It seems as though it will take some time for the new rules to take effect, and the process could become even more dragged out if debates or conflicts of interest arise in the new rules put forth. Michael V. Drake, the board chair for the NCAA said, "The board is emphasizing that change must be consistent with the values of college sports and higher education and not turn student-athletes into employees of institutions."
This raises even more questions as to how these benefits would be defined. Will student-athletes be forgiven for a portion of their tuition to the school? Will the players be paid a stipend or income that is not commingled with funds owed to the school for tuition? If so, can these new sets of income be taxed by the state and federal government? Is an athlete allowed to sell the rights of his likeness or image to third party content creators on the open market (such as the video game company EA, for creating an NCAA football based video game)? These are all questions that are now being asked by those who will be affected by these new rules. There is a current task force of NCAA administrators in place for exploring these options. They have been doing so since May. The task force is being headed up by Ohio State athletic director Gene Smith and Big East Commissioner, Val Ackerman. It seems safe to say, however that the new rules will not affect athletes expected to graduate within the next two years. If talks or execution of the new rule sets become halted or delayed it could take even longer.
The final popular question that seems to be arising from this vote would be whether or not the decision to allow student-athletes to profit is ethical. It's clear that student-athletes participate in their respective sport because they are good at what they do. College sports is also a big industry, and is a big money maker for colleges that participate. Some would argue that this alone is reason enough to allow athletes to be compensated for their participation. Others would argue that the student body and the schools overall income is made up of far more than just the sports programs. What about the science graduate student that makes a breakthrough medical discovery that impacts the medical industry and the schools notoriety. Should this student not be compensated for his contributions, while the athlete is compensated?
These are all questions raised that we can look forward to active, and possibly heated, debate over as this current event progresses. This event is one that will impact large populations of people and it seems that many people, whether they are directly affected by this situation or not, will have varying opinions on it. Is this a situation that might soon impact close friends or loved ones? If so, be sure to tell us about it! As a company that takes a keen interest in the lives of our clients, we would love to hear your thoughts.