The NCAA's Billion Dollar Problem

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Friends,

At this point, I think 99% of sports fans agree — there needs to be a comprehensive set of rules and regulations established to allow student-athletes to profit off their name, image and likeness.

Agreed, but why am I bringing it up today?

I read an NCAA breakdown on revenues over the weekend, which is produced and distributed by the NCAA themselves, and a few things stood out to me.

Let’s take a look and break it down.

( 📸 / ABC)

In 2019, NCAA schools across all three divisions brought in $18.8 billion in athletic income — with about 85%, or $15.8 billion, coming from Division I schools alone.

The breakdown of incoming money looks like this:

(Source / NCAA)

The total amount of money shouldn’t necessarily surprise you, we know college athletics bring in a lot of revenue, but the percentage breakdown of income generating sources might.

Here’s a few things that surprised me (Source):

• 36% of incoming money, or $6.78 billion, is delivered to NCAA schools via institution and government support — that number unsurprisingly drops to 28% when you look at Division I alone, as they (typically) need less financial assistance.

• Regardless of division, NCAA schools generate less revenue from ticket sales, royalties, and licensing than they do from donor contributions & endowments.

• Media rights, which are the biggest source of revenue for almost every major professional sports league in the world, ranked as the second largest source of income at $2.8 billion — dwarfed by the $6.78 billion in institutional and government support.

Perhaps the most interesting way to look at it is like this — in 2019, almost 50% of the NCAA’s $18.8 billion in income came from non-sports directly related sources like institution/government support and donor contributions & endowments.

Interesting enough, but let’s look at the flip side — with all of this money coming in, where’s it all going?

Considering NCAA schools brought in $18.8 billion, but spend $18.7 billion, that’s the billion dollar question.

The typical argument against allowing student athletes to profit off their name, image and likeness revolves around one concept — that student athletes are appropriately compensated by receiving an athletic scholarship.

To be fair, I don’t but want to minimize the importance and significance of that — a large percentage of athletes wouldn’t be able to attend school without it and the student debt crisis in America is no joke.

But at what point do we question the fact that almost 2x more money is being paid out in athletic related administration and coaches compensation?

Or why 2x more money is spent on recruiting an athlete to attend your school than the financial worth of medical care they’ll receive over their 4 years?

Don’t believe me? See for yourself.

Here’s a breakdown of where the NCAA’s $18.8 billion in income was spent last year (Source):

(Source / NCAA)

Point being — with everyone from administration, fans, coaches, students, business owners, etc. able to profit off the exploitation of a student-athletes athletic ability, why can’t they?

I think we all know that’s about to change.

The real question is how fast?

It’s still unclear — the NCAA has voted to allow players to be compensated in a manner that they are “treated the same as non student-athletes”, but is ultimately leaving the rules and regulations up to individual divisions.

With states like California, Florida, Georgia, Colorado and others putting up proposals or passing state-wide bills, it appears to be coming sooner than many expect.

But as the median revenue for Division I schools continues to grow at at 7.25% CAGR, don’t expect the NCAA and its affiliates to rush the change anytime soon.

If you want to read the full report, you can check it out here.

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Extra Credit

The NBA Finals came to an end last night with the Los Angeles Lakers winning their 17th NBA championship, officially tying the Boston Celtics for the most all-time.

I plan to dedicate an entire newsletter to breaking down the financial side of the NBA bubble, but in the meantime, here are a few of my favorite photos & videos from the celebration last night.

First up, Nike — obviously they came through with an amazing advertisement.

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