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Big-Time College Athletes Don’t Get Paid


Feb. 4, 2021 Kellogg Insight

In 2018, they took in an estimated $14 billion. That amount has been steadily growing, driven primarily by TV revenue. Yet, unlike professional athletes, college players aren’t the beneficiaries of this windfall.

In professional sports leagues such as the NFL and NBA, about 50 percent of revenue goes to players. For college sports, however, players’ compensation is limited to covering the cost of attending the school and a modest living stipend.

So where does the majority of college-sports revenue go?

That’s the question Craig Garthwaite, a Kellogg School professor of strategy, tackled along with Nicole Ozminkowski, a graduate student in economics at Northwestern University, Matthew Notowidigdo, previously at Kellogg and now at the University of Chicago, and Jordan Keener at the University of Michigan.

They were intrigued by a combination of factors: the steep rise in revenue for college sports, the low percentage of revenue used to compensate players—only 7 percent, by their estimation—and the prevailing argument by universities that it isn’t feasible to pay players.

“They say compensation for players would destroy the nature of amateur athletics because people want to believe players are just like other students,” says Garthwaite, who calls himself a “pretty big college football fan.” He points out that no one makes the same argument for coaches, who are paid massive amounts by the highest-profile programs, even when their teams struggle. He cites the example of the 10-year, $75 million contract for Texas A&M football coach Jimbo Fisher, one of the largest in history.

But still, even generous coaching salaries can’t account for all that revenue. So, if it’s not going to the players, where is it going?

The researchers studied the flow of money from the high-revenue-generating sports of football and men’s basketball to answer that question. They found a large amount of the revenue generated by these sports was used to fund investments in other sports at the same schools. Importantly, there are stark differences between the players generating this money and those who are the beneficiaries of it.

“We find that the prevailing model rests on taking the money generated by athletes who are more likely to be Black and come from low-income neighborhoods and transferring it to sports played by athletes who are more likely to be white and from higher-income neighborhoods,” the researchers write in a recent Brookings Institution article.

This dynamic raises questions of equity.

“We’ve got kids who are playing sports that are known as more dangerous in general and still playing in the time of COVID—when we don’t know how the disease is going to progress—and they can only be compensated for the cost of attendance,” Garthwaite says. “But the money made from their sports goes to support other, non-revenue sports typically played by kids from wealthier backgrounds.”

A Tale of Two Clusters

Because they wanted to examine high-revenue-generating teams, the study initially focused on schools in the NCAA Division I Football Bowl Subdivision (FBS). The FBS comprises multiple conferences, including the “Power 5 conferences” such as the Big 10, SEC, and Pac-12, which house the best-known, highest-performing college football and basketball teams: University of Michigan, University of Alabama, University of Oregon, and others featured regularly on network and cable TV and other media.

They studied athletic-department finances based on data from two main sources: Equity in Athletics Data Analysis, to which schools must report sports-specific data in order to receive government funding, and the Knight Commission, an independent group that maintains a database of more granular university athletic-department revenue and costs.

They examined the data carefully to understand how money flowed within and between sports. Early analysis revealed two very different clusters of schools.

“Schools in the Power 5 conferences clearly operate under a different economic model than the rest of the schools in Division I sports,” Garthwaite says.

Schools outside of those conferences tend to have relatively low sports revenues, and much of the support for athletics comes from the university itself. Power 5 schools, on the other hand, have much higher athletics revenues and minimal institutional support.

Moreover, the study showed that while the average Power 5 school features about 20 different men’s and women’s sports, 58 percent of total athletic-department revenue comes from just two of them: men’s football and basketball. So the researchers focused the next part of their analysis on Power 5 schools. Their goal was to understand how the large amount of revenue from their football and men’s basketball programs was ultimately distributed.

They secured comprehensive revenue and expenses data from 2006 to 2019 for all 65 schools in the Power 5, then measured how money generated by the football and men’s basketball programs flowed to other men’s sports and women’s sports. To understand how athletes’ race and socioeconomic backgrounds figured into the picture, they traced all athletes from 2018 back to their high schools. They then collected data on those high schools to see if they tended to have, for example, a large number of Black or low-income students.

Where Does the Money Go?

Some of the money made by football and men’s basketball, the researchers found, is reinvested back into those programs, mostly to pay coaches’ sky-high salaries, but also via spending on facilities.

“People argue that spending on facilities is a way to recruit players, as a sort of fringe benefit,” Garthwaite says. “But we can question whether that’s the most efficient way of rewarding kids for the sacrifice they make for their sport.”

Other sizable portions of the revenue go to supporting less-lucrative college sports, such as soccer, golf, and baseball, in the form of scholarships, coaches’ salaries, and improvements to those sports’ facilities. Indeed, while football and men’s basketball brought in six times the revenue of all the other sports combined, on average, they represented only 1.3 times the spending of those other sports.

This is where it’s important to look at the economic dynamics through the lenses of race and class, the researchers say.

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