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The Dawn of Fair Compensation: N.C.A.A. Agrees to Pay College Athletes, Part 1

In a landmark decision that will forever alter the landscape of American college sports, the N.C.A.A. reached a $2.8 billion settlement in a class-action antitrust lawsuit, signaling the possible dawn of a new era in college athletics. This settlement, if approved by a U.S. district judge in California, would establish the first revenue-sharing plan for college athletes, allowing schools to directly pay their athletes for their participation in sports.

Historically, the N.C.A.A. has maintained a business model that classified college athletes as amateurs, which restricted their ability to profit from their athletic performances. This model persisted even as college sports grew into a multibillion-dollar industry, generating massive revenues from television contracts, merchandise, and ticket sales. The growing perception of this system as exploitative, particularly in revenue-generating sports like football and men’s basketball, has led to numerous lawsuits and labor actions challenging the status quo.

The case at the heart of this groundbreaking settlement is House v. N.C.A.A., named after former Arizona State swimmer Grant House, a plaintiff in the lawsuit. The settlement comes as a response to the mounting pressure on the N.C.A.A. and major conferences, including the Big Ten, Southeastern, Atlantic Coast, Big 12, and Pac-12, which faced a potential judgment that could have exceeded $4 billion had the case gone to trial.

By agreeing to the settlement, the N.C.A.A. aims to avoid the catastrophic financial impact that a court ruling might have brought and to fend off a slew of antitrust lawsuits that have hindered its ability to govern college sports effectively. This settlement, although seen as a significant concession, raises several critical questions about its implementation and broader implications.

One major concern is the equitable distribution of funds. Critics argue that ensuring fair compensation for female athletes and those from smaller conferences remains a contentious issue. Additionally, there are worries about the influence of booster-funded collectives, which might exploit the new system to lure players from one school to another with lucrative offers. “It’s both a historic and deeply flawed agreement,” said Michael H. LeRoy, a law professor at the University of Illinois. “The idea that schools are paying millions of dollars to the people who are selling the TV contracts and filling the seats — that’s good. But it closes one Pandora’s box and opens four or five others.”
Over the past few years, college athletes have gained significant ground in their fight for compensation. In 2021, they were granted the right to profit from their name, image, and likeness (NIL), marking a monumental shift in college sports. Additionally, in March 2024, the men’s basketball team at Dartmouth voted to form a union after a federal official ruled that players were employees of the school. These developments reflect a broader trend towards recognizing and compensating the contributions of college athletes.

The settlement’s terms include back pay for name, image, and likeness revenue that players were previously denied, as well as a framework for future compensation. The exact details of who will receive payments and how much they will receive remain unclear. The $2.8 billion in damages is primarily tied to revenue from major conference football and men’s basketball, but it also includes women’s basketball and other sports to a lesser extent.

Schools will have to decide how to distribute these funds, balancing between different sports and ensuring compliance with Title IX, which mandates gender equality in educational programs, including athletics. For example, the University of Michigan might need to consider whether to spread the funds across various sports teams or focus primarily on football and basketball.

In December, N.C.A.A. President Charlie Baker proposed that schools allocate at least $30,000 per year in educational trust funds for at least half of their athletes, marking the first time the N.C.A.A. suggested uncapped compensation. This proposal hinted at a potential settlement and the creation of two distinct classes within Division I: those who could afford it and those who could not.

The settlement is set to be subsidized mainly by schools not participating in major football programs. The 27 Division I conferences not named in the lawsuit are required to contribute $990 million of the settlement through N.C.A.A. distributions from the men’s basketball tournament over ten years. This decision has frustrated many smaller conferences, who feel they are unfairly bearing the brunt of the costs.