Payments to players through the Name, Image and Likeness (NIL) deals and the transfer portal are roiling college sports. Some commentators claim that bills in Congress constitute socialism. Is socialism needed to save college football?
Two main bills are pending in Congress. The SCORE Act, backed by some Republicans, would override state laws and give the NCAA an anti-trust exemption to impose rules like a salary cap. The Democrat-backed SAFE Act would establish Federal control over college athletics, including media rights and player compensation.
Karl Marx described communism as from each according to ability, to each according to need. Government doling out revenue to schools seems to fit Marx’ description. But as Lee Corso might say, not so fast!
Sports competitions involve interdependence. Teams must be free to try to win to have a legitimate competition. One team cannot pay for its opponents or stage a league championship by itself.
Sports economists consider whether the team or the league serves as the firm. Because of interdependence, the league could effectively be the firm, competing with other leagues for entertainment and advertising dollars. Or the teams could be the firm.
Pro sports leagues employ franchises like McDonald’s and many other chains. Each McDonald’s restaurant is independently owned but operates under corporate rules. League must determine which teams can participate, making the franchise model appropriate.
Teams have an interest in competitive balance, which basically means every team has a chance to win. Revenue affects the ability to field a competitive team through players, coaches, and facilities. Teams need their opponents to be good.
This differs from most business. Ford does not benefit from a strong lineup of GM vehicles. Car buyers benefit, but people will still buy cars if Ford’s vehicles beat GM’s by the equivalent of a 50-0 score every year.
Teams will want smaller market teams to be competitive. The collective interest of teams could lead to revenue sharing. Sharing revenue while maintaining teams’ incentive to spend money to win is challenging.
College sports involve joint production because universities also produce education and research. The Atlanta Falcons came into existence to play in the NFL; the University of Alabama started playing football years after its founding. In addition, the competing institutions are public or private not-for profit.
The NCAA regulated college sports for about a century before the Supreme Court’s ruling in NCAA v. Alston in 2021. Alston unleashed NIL, an unregulated transfer portal, and changes in junior college player eligibility. Every player is effectively now a free agent after every season.
Pro leagues do not have universal free agency because they established rules through collective bargaining deals with players and their unions. Baseball’s reserve clause tied players to the team first signing them for almost a century. When this broke down, players and owners agreed on free agency after six MLB seasons.
Differences in revenue generation across schools complicates setting new rules for college sports. Football stadium capacities illustrate the differences. Top teams play before 100,000 fans, while some power conference schools have fewer than 50,000 seats.
Differences in fan bases affect media contracts. Big 10 and SEC schools receive $40 million more per season than Big 12 and ACC schools. Group of Six schools receive less than $10 million annually.
The Big 10 and SEC share revenue among their members. Equalizing all FBS or even just the power conference schools will require sharing revenue across conferences. The Big 10 and SEC seem unwilling to give their revenue to others.
Revenue disparities are hardly new. But prior to paying players, paying coaches more or building nicer facilities only moderately boosted performance. Now schools with more money hire the top players.
Most major football schools are state universities, owned ultimately by state taxpayers. State governments could order their universities to share revenue. Or Washington could require revenue sharing for Federal student loans and research grants. Ways exist to level the playing field.
Socialism privileges the collective over individuals. But pursuing individuals’ common, collective interests through contracts represents markets at work, not socialism.
Daniel Sutter is the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University. The opinions expressed in this column are the author’s and do not necessarily reflect the views of Troy University.
