Wednesday, November 30, 2011

Money Doesn't Talk, It Builds Luxury Boxes

Jon Chait has an interesting piece up regarding the question of paying revenue-generating college athletes.  In response to Taylor Branch and the chorus of writers who have used the Sandusky scandal to attack college sports in general, Chait makes the point that football and basketball players from high-revenue programs are subsidizing non-revenue athletes:

Branch's article, like most arguments for paying college athletes, focuses in great detail on the profits of television networks and apparel companies. But paying players wouldn't affect that revenue – the networks' cut is the networks' cut. The question is how to allocate the money that the university receives in ticket sales and television dollars. The sums are non-trivial: A big-time program like the University of Texas football team can generate more than $90 million a year in revenues, and still have nearly $70 million left after expenses. But even a glance at where the money goes shows the absurdity of this notion. The big-time sports programs that bring in more than they cost (usually football and men’s basketball) use the surplus money to fund sports that don’t (swimming, track, etc.) To the extent that there is “profit” in this arrangement, the man in the top hat and monocle who’s siphoning it off is … the gymnastics squad.

This is an excellent point and one that Branch does not address in his lengthy piece in The Atlantic.  The counter would be that a progressive like Chait should have some misgivings about football and basketball players subsidizing country club sports.  At major schools, the football and basketball players are more likely to be minority students from lower socio-economic strata.  They are also more likely to come from weaker high schools and are therefore less able to take full advantage of the free college educations that they receive in return for their labor.  In constrast, players from non-revenue sports tend to be more like regular college students in terms of their SES.  Thus, college sports resemble state-run lotteries, i.e. a system where poorer individuals subsidize middle class and upper middle class families, albeit through voluntary means.  One doesn't have to be Ron Paul to have an issue with this reality.

Additionally, Chait's explanation as to where the money goes is a little incomplete.  The millions of dollars that players in revenue sports generate do not just go to fund non-revenue sports.  There are at least two other outlets for that revenue other than the pockets of the individuals who generate the money.  The first outlet is coaching salaries.  If you can't pay the players who make the difference between winning and losing, then you pay the coaches who do.  Chait addresses this later in the article and advocates a cap on paying players, a position that Blutarsky notes would present antitrust issues.  (Question: if a cap on coaching salaries violates antitrust law, then why doesn't the prohibition on paying players, as well?)  To me, this seems like piling a second artificial cap on a market that is already distorted by the prohibition on paying players.  We already have a situation where the money generated by revenue sports teams cannot go to the players who are the biggest reason for the revenue.  Thus, the money flows to ancillary locations.  Chait suggestion is that we should divert the money away from one of the most natural ancillary destinations for the revenue. "Let's stick out finger in a second hole in the dyke" is usually just a good way to cause a third and fourth crack.

The second outlet is construction of palatial sports facilities.  Major college sports programs are engaged in a facilities arms race and they are using the revenue that would otherwise go directly to the players.  Now, one can view this as a form of compensation to the players.  Branch complains about players not getting paid, but he doesn't mention the fact that they play in beautiful stadia, they dress in locker rooms that rival anything they'll see in the NFL, they study in buildings specially built for them, they work out in million dollar weight rooms, and they eat at deluxe training tables.  I suspect that the players would rather take the money in their pockets, but it's hard to take the position that players are being exploited when the revenue they generate is used to treat them like royalty.  In the end, I come out pretty close to Chait's position, which is that Branch overstates the plight of revenue athletes, but there are potential reforms that would address the fact that college football and basketball players should see more of the money that they generate.


Anonymous said...

Good rebuttal to a terrible effort by Chait. 2 points:

1) A third beneficiary, in addition to coaches and construction companies, is compliance employees. Tens of millions of $$ are siphoned from revenue athletes to support the John Infantes of the world. Notice that they are *always* against deregulation; it's in their self interest to be.

(Question: if a cap on coaching salaries violates antitrust law, then why doesn't the prohibition on paying players, as well?)

Answer: Because one federal judge allowed an antitrust suit brought by assistant coaches against the NCAA (challenging Bylaw 11.02.3) to go to a jury. If one judge allowed a similar suit brought by players to survive dispotive briefing, that cap would be eliminated too.

One huge problem though is that most of the players who would have cognizable damages don't want to bring a claim because they know they will be blackballed afterward. The blackballkers themselves did not have a similar constraint.

Jack said...

I am curious for your take on Joe Posnanski’s quibbles with the central premise of the "college athletes need to get paid" argument, i.e., that the athletes themselves generate the revenues. Posnanski argues that in college athletics, unlike most professional sports, it's the ancillary stuff (tailgating, traditions, hate for the opponent, etc.) and the games themselves that actually drive the revenue. He essentially argues that Michigan fans in 2008 didn't show up to watch Nick Sheridan play; they showed up to hang out with fellow alumni and attend a Michigan game. Duke students don't pack the house for every single basketball game to watch the individual players; they show up to watch the event that is a Duke home basketball game (even in 1995, when Coach K was sick and the team was awful). Penn State students don't camp out in Paternoville to watch Matt McGloin; they show up to go to Penn State football games. Obviously you need people to actually play the games, but his point is that the players themselves may in fact be the fungible part of the equation, as even when particular teams (and players) listed above have been terrible, people still packed the house and revenues sure didn't seem to dip. Maybe it's the pomp and circumstance and the fact that the game itself exists that draws people, rather than the individuals actually participating. As I said, just interested in your thoughts on that line of reasoning.

Anonymous said...

Not surprising that southern whites sympathize with a cartel that robs young black men of their market value. Odd to see Chait do it, but it's probably the manifestation of Chait's reconciliation of his hero-worship of Michigan football coaches with the reality of their exploitation.

The Branch article was ridiculously easy to understand, but Chait and others seem to miss the points:

1) Any meaningful (and historical) definition of "amateurism" prohibits athletic scholarships (Grant in Aids). True amateurs receiver *NOTHING* in return for their athletic pursuits. Club sports (and maybe some Division III sports, but not most) are probably the last vestige of amateurism. Division I-II NCAA sports are not "amateur" pursuits at all. Thus, any argument against the "professionalization" of college sports is wrong from its inception. They are already "professional;" but the level of compensation (for the athletes) has been wrongfully capped (the NCAA tried to cap coaching salaries too but lost in court).

2) The NCAA does not care about the welfare of athletes. It cares about its revenue. The entire process by which the wholly artificial "student athlete" myth was created was the product of conscious efforts to avoid institutional responsibility for athletes' welfare. Thus, any argument centered on the NCAA's love for, or care of, "student athletes" is wrong from its inception.

3) If schools were allowed to bid up the price of revenue athletes, many/most of the athletes who would make a drastic amount more than they do now are very poor and very black. Because of that, people don't think of them as "market participants" and wrongly assume that they lack "marketable rights."

Here's a question I would like you (or other usually reasonable cartel-supporters) to answer: why not just propose the most simple fix? Deregulagion. Why have all sorts of gimmicky, complex schemes that could unreasonably restrain trade? Why not just open the market up? Don't the people who would be hurt by deregulation (coaches, compliance stooges, women's "athletes") deserve that "hurt?" Wouldn't their detriment merely be the removal of rent?

Anonymous said...

Sorry, your article starts good then goes in the wrong direction. The facilities where players toil and work aren't a form of compensation. The things that players do in those beautiful weight rooms is terrible for their long term health. The "beauty" of modern stadia is mostly accouterments for corporate fans. Most of them "study" things like kenisiology in bits and pieces because they work 40 hours per week (at a minimum) at their "non-job" jobs. The antis will say, "study something more valuable!" but none of them worked as hard in undergrad as football or basketball players work.

And it's very weird that writers like Chait have no problems with the hardships that players like Terrel Pryor and AJ Green face; treated like outcasts who have "entitlement attitudes" for doing nothing immoral, nothing illegal; for acting wholly consistent with our entrepreneurial system of free enterprise.

Michael said...

Jack, I don't buy Posnanski's argument because I don't think that you could put any old player in a winged helmet and 110,000 people will pay to watch. There has to be an understanding that the players in uniform are the best of their class, in this case, the best 18-21 year old basketball and football players. Take that away and the games lose their luster.

Anon1 and 2, your comments are both very good. I need to think about them and then do a separate post.

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