The organization is scrambling in the face of potential bankruptcy.
The NCAA has a deadline of Thursday to reach a settlement to avoid the House vs NCAA lawsuit going to trial, and risking bankruptcy.
As you would anticipate with a lawsuit this big, there are a massive number of lawyers and minutiae. The articles linked at the bottom of the page discuss the most recent details. (in detail!) But it is still changing as settlement nears, and some aspects may not be included at all. Here’s a high-level overview drawn from those articles.
What is the lawsuit? House v. NCAA seeks back pay for Division I college athletes who were barred from earning name, image and likeness (NIL) compensation prior to the NCAA changing its policy in summer 2021, while also pursuing a cut of future broadcast revenues for athletes at power-conference schools
Anticipated outcome? The consensus is that the NCAA is likely to lose the lawsuit, and based on a document circulated to the NCAA member institutions, “The estimated $20 billion in damages would likely be payable “immediately” after final judgment and “not over 10 years,” the document notes — a reality that would, in all likelihood, result in the NCAA and leagues filing bankruptcy.”
What is in the proposed settlement?
The settlement, which has been in the works for nine months, has been circulated in parts to the memberships and is “ in the final stages of adoption, and consists of three main concepts: back damages owed to former athletes ($2.77 billion); revenue-sharing for current and future athletes (upward of $22 million annually per school); and an overhaul of a variety of NCAA elements, including scholarship and roster limits, governance structure and enforcement arm.”
Back Damages – The settlement proposes compensation to former athletes of $2.77 billion. “Over a 10-year payback period, the NCAA is responsible for paying 40% of the $2.77 billion with the other 60% coming from a reduction in school distributions. To determine how much each of the 32 Division I conferences contribute, the association created a formula based on the amount of distribution that a league earned over a nine-year period starting in 2016, according to separate documents shared with commissioners. Most of the distribution that the NCAA divides among leagues— more than $700 million annually — is derived from revenues of the NCAA men’s basketball tournament.” To clarify, the NCAA’s formula for sharing the damage compensation “is calculated on basketball-related distribution and not total athletic budget.” “The power conferences are responsible for about 40% of the school reductions for damages and the other 27 conferences are responsible for the rest. Power league schools, with a median athletic budget of about $130 million, are expecting to see a reduction of $1-$2 million in distribution annually for 10 years — potentially as low as less than 1% of a school’s budget.” However, for the other schools, their share of the damages represents a much larger percentage of their budget. Hence the Big East’s objection – “While we support the goal of a settlement, which would be to avoid a trial [and the risk of a treble judgment] and allow for a flexible payment schedule for the damages penalty, we have taken issue with the manner in which the settlement amount would be paid,” (see full article linked below)
Revenue Sharing for Current and Future Athletes – ” The new model, expected to be implemented in fall 2025, will permit schools to directly compensate athletes for their name, image and likeness (NIL) in a revenue-sharing concept that includes a quasi-salary cap. The cap could start as high as $22 million annually per school. The revenue-sharing element is permissive. While schools are not required to do so, those in the power leagues are expected to at least aggressively work to hit a cap amid a competitive recruiting landscape.” “The settlement leaves open the possibility of athletes being deemed employees.” “In what would be a significant element in the settlement, the court is expected to reaffirm the NCAA’s remaining rules around compensation, “including the prohibition on booster payments if they are not true NIL,” the document notes. While a settlement would not eliminate collectives, it will provide schools with “economic incentives” to bring them inside the university. The settlement, as well, develops a new “enforcement infrastructure” specifically targeting pay-for-play rules around booster-led NIL collectives — an infrastructure supported by the court’s affirmation of NCAA compensation restrictions.
Scholarship limitations – “As part of the new model, officials plan to lift scholarship limitations and implement roster limits, permitting schools to offer scholarships to an entire roster. “ Currently, many sports do not allow scholarships for the entire team (Ex. Baseball), if agreed, this would allow [but not require] schools to offer as many scholarships as they are allowed players on the roster. “The move is rooted in legalities. Permitting scholarship expansion is a way to avoid future antitrust lawsuits related to athlete restrictions. It also affords schools more freedom to strike a balance with the federal Title IX law requiring equal benefits to women and men athletes.” Specific roster limits have not been proposed, this aspect of the settlement is still being debated.
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