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Brooks Wilson's Economics Blog: The Market Structure of the NCAA

Saturday, September 24, 2011

The Market Structure of the NCAA

As I prepare to watch the Men of Troy take on the Sun Devils, I reflect on a broad based misunderstanding of the economics of college sports expressed by most fans including my students.  We love the product and perhaps this affection causes us to accept the way that product is brought to market.  My analysis will be descriptive rather than numerical.  Examples are taken from Huma and Staurowsky, "The Price of Poverty in Big Time College Sport.” 

The NCAA is a monopoly producer of college athletics.  It is probably a complement to both the NFL and the NBA meaning that as a fan consumes more NCAA sports he or she is more likely to consume NFL or NBA sports as well.  The NCAA is big business and highly professional organization.  In 2008, more than 100 million people attended a college sporting event.  Broadcasting contracts are in the billions of dollars.  CBS and Turner Sports will pay $10.8 billion over 14 years to broadcast NCAA division I men’s college basketball. 

The NCAA is virtually a monopsony buyer of 18 to 24 year-old football and basketball players.  Although estimates vary, college football and basketball would be paid in excess of $150,000 annually.  Top players would be paid more than $1 million annually.  My guess is that most players will never command such a value in their “professional” careers if they are not drafted into the NFL or NBA and I am somewhat mystified by suggestions that such valuable employees are somehow “amateurs” when their value over a four year period greatly exceeds the median household income.

They are amateurs only because the NCAA has branded them as amateurs to suppress their wages.  Michael Rosenberg reports the following conversation with former NCAA President Myles Brand.  Brand begins

They can’t be paid.


Because they’re amateurs.

What makes them amateurs?

Well, they can’t be paid.

Why not?

Because they’re amateurs.

Who decided they are amateurs?

We did.


Because we don’t pay them.

Their wages (the scholarship money) fall short of covering college related expenses by approximately $3,222 and more than 85 percent live below the poverty line of $10,890 for a single individual.  The NCAA recognizes the penury the scholarship system produces advising students on the acceptability of food stamps, forcing taxpayers to subsidize a multibillion dollar industry.

Food Stamps.  A grant-in-aid recipient who lives and eats off campus may use the money provided for his or her board to obtain governmental food stamps, provided the stamps are available to the student body in general.  Additionally, the student-athlete must be eligible for such stamps without any special arrangements on the part of athletics department personnel or representatives of the institution’s athletics interest. 

NCAA rules make it difficult to take advantage of the educational opportunity that scholarships are claimed to provide.  In 1973, the NCAA changed scholarships from four year contracts to one year renewable contracts.  If you do not live up to your expected athletic value, it’s one and done.  The NCAA surrendered basketball game scheduling to television broadcasters for larger television contracts.  Broadcasters predictably spread games throughout the week reducing time that athletes could spend in class.  The NCAA rules limit practices to 20 hours per week during the relevant playing season but allow “voluntary” practices.  Athletes who do not attend these practices are not physically ready to play and are frequently dropped from teams.  The average football and basketball player works over 40 hours per week.  Given the rigors of athletic training, it is amazing the graduation rates of a little less than 50% are not lower. 

I believe that colleges should bid for athletes just as the bid for faculty staff and students but Huma and Staurowsky make a more modest proposal that would dramatically improve the welfare of students.  I believe that their most important recommendations are

1. Support legislation that will allow universities to fully fund their athletes’ educational opportunities with scholarships that fully cover the full cost of attendance.

2.  Lift restrictions on all college athlete’s commercial opportunities by allowing the Olympic amateur model.  The Olympics’ international definition of amateurism permits amateur athletes access to the commercial free market.  They are free to secure endorsement deals, get paid for signing autographs, etc.

3.  Promote the adoption of legislation that will allow revenue-producing athletes to receive a portion of new revenues that can be placed in an educational lockbox, a trust fund to be accessed to assist in or upon the completion of their college degree.   

As a reminder, students are free to disagree with my normative values.  Students who wish to disagree the ideas expressed in this post may start with my characterization of NCAA sports as a monopoly and a monopsony.  They may also believe that NCAA sports products are a substitute for rather than a complement of the NFL and NBA.


  1. I'm going to disagree with your statement that NCAA is a complement to the NFL or NBA. I would much rather watch college football than the NFL any day, but that may just be a personal preference. Regarding the rest of your post - I was unaware that athletes college scholarships did not fully cover their college expenses. No, I dont think they should be given moeny to eat out every night, but necessary expenses should definitely be covered. On one hand, it seems as if its only fair to pay college athletes, but on the other, how are we going to pay them? Thats where my hesitation comes in. If their pay was generated by tickets and merchandise sales, then the NCAA and the schools would take a loss on items where they may have been profitting. Do you think they should be paid? If so, how will they be paid?

  2. The NCAA is a multimillion dollar business that makes huge earnings off these same athlete's that they so call amateurs, with that being said when a university recruits an athlete and offers a scholarship it should be for a full ride and if that particular athlete is putting fans in the seats he's upheld his commitment to the university. if endorsements should happen to fall upon that athlete and he or she is on scholarship, he or she can pay back any money received through scholarship funding that way its a win, win for both parties.

  3. Randy Novak30/9/11 2:42 PM

    I do not think that college athletes should get paid. A lot of money does get made off of the athletes play, but I would like to believe that revenue gets cycled back into the school for items like weightrooms, labs or dormitory upgrades. An athlete makes a choice to play, and if would be almost impossible to pay for talent like the professional try to do. In addition, would you now begin paying the band? What if the college has a theater production, do you now pay the students as actors? I think paying athletes lead down a road that does not have a positive outcome for the college environment. I do, however, believe many of the rules in place need to be reviewed and revised. The interpretation or intent of the rules seem to have the common sense factor eliminated when being investigated by the NCAA.

  4. Brooke Moore2/10/11 6:55 PM

    I think college athletes getting paid is kind of imoral and wrong of all things they are usually there on a scholarship any ways so for them getting more money then the rest of the student body and getting a full ride education is not right

  5. Calin Baban said...

    As schools are allowed to make huge profits of their student-athlete’s work, I believe that student-athletes should also be rewarded for their hard work and the revenue they bring to their institutions. From my prospective, student-athletes should receive full scholarships and monetary compensation for their athletic services. Again, since schools are allowed direct access to the free market to promote their teams and are allowed to receive huge amounts of money from TV deals and ticket selling, in my view, part of the revenue should be directed to the talent making these deals possible.

  6. Steven Drake Kennett2/10/11 8:42 PM

    I feel like college sports offer alot that the pros can not. They have a true passion to win, they are not on the field to just get a paycheck. Now as for if they should get paid or not i have to side against it. I know that they don't have everything paid for but neater does any kid going off to school. As far as them saying sports is their full time job then that's fine they should get paid as such, what i mean is if the going wadge is 7.25 then give them a little more say $9.00 an hour and say its a full time job so they will get paid 9 dollars an hour for a 40 hour work week. This way they can get some spending money the right way and know what its like to work and get payed like everyone else.

  7. Great article! It seems it's time college athletes should be paid. The NCAA has held down this racket for a long time. If they don't change, more than $2,000 per year, they're going to fall. The debate over at TC Huddle got me thinking about this. I wondered what other people were saying and found your opinion.

    Thanks for the post! Enjoyed it. Here's the article that led me here if you're curious: