The economy may be tanking and our pocketbooks are slimmer, but we can rejoice in one thing: March Madness is here and we can watch our favorite teams participate in the annual NCAA college men's basketball tournament. Behind all the hoopla, however, is the reality that the players who entertain us receive compensation that amounts to only a very small percentage of what they would have earned if they sold their services in a competitive market.
Take Kevin Durant, for instance. After a stunning freshman season with the Texas Longhorns in 2008, Mr. Durant elected to forgo his final three years of college and entered the NBA draft. Selected by the Seattle Supersonics (now the Oklahoma City Thunder), he agreed to a contract paying $3.5 million in the first year. By contrast, his yearly compensation (in the form of room, board, books and tuition fees at Texas) amounted to about $33,120, less than 1% of what was offered by the Supersonics.
Football is the other major revenue generating sport. In 2006, Heisman Trophy winner Reggie Bush skipped his senior year at the University of Southern California and entered the NFL draft. Selected by the New Orleans Saints, he agreed to a six-year contract guaranteeing $26.3 million with the possibility of huge performance bonuses. The compensation package of about $44,000 offered by USC paled in comparison to Mr. Bush's true market value.
Top-level college sports is big business, but very little of this flows to the student-athletes. Ohio State, for example, receives about $110 million in revenue each year from ticket sales, television rights, concessions, parking, logo sales, etc.--over one-fifth of what it receives in tuition revenue from its more than 50,000 students. And its basketball players are paid about $29,500 each.
In a competitive market, companies cannot exploit workers in this way for long, as rival firms will hire them away at higher salaries. In basketball, however, the NCAA cartel prevents that, dictating limits on pay (essentially college costs) and even penalizing transfers to other schools. Strict rules also prevent college athletes from signing lucrative endorsement deals or accepting gifts beyond a certain amount. Soon after entering the NBA, Mr. Durant further augmented his earnings by signing a $72 million deal with Nike; he inked other endorsement contracts with Gatorade, EA Sports and Upper Deck.
If all of that money from ticket sales and television rights isn't going to student-athletes, where does it end up? In 2006, salaries for coaches and administrators accounted for nearly 32% of total athletic-department expenses. Many head football coaches at top universities earn five times the salary of their university president. At a time when most schools are tightening their belts with salary freezes, staff layoffs and the like, the University of Tennessee just announced it was going to start paying two assistant football coaches $650,000 or more each (the head coach makes $2 million). Jim Calhoun, head coach of the University of Connecticut men's basketball team, recently made headlines when he launched into a tirade at a blogger who questioned his $1.6 million annual compensation. Those high salaries are financed from the talents of unpaid student-athletes. (Talk about income inequality.) So not only are the young being exploited, but the exploitation is being committed by their adult mentors.
Maybe it's time the players did something about this situation. Usually when workers think they are getting a raw deal, they form a labor union. For example, to preserve their current amateur status, football and basketball players (and perhaps even all college athletes) might demand that they receive 25% of gate receipts and television revenues, to be placed in escrow to finance annuities for them payable beginning with college completion.
But should we really feel sorry for the players? In a sense, college football is like the minor leagues in baseball--a steppingstone to the top. But top-flight AAA minor league players typically get a "living wage" of about $50,000 and sometimes considerably more a year, none of which need be spent on classes they don't have time to show up for.
Of course, for the students who go on to the pros, putting off their financial bonanza won't be a big deal. But most college athletes do not make the pros. They may not even end up with the basic skills necessary to succeed in other workplaces, since only a minority of student-athletes in major sports even graduate (25% in top-ranked University of Connecticut men's basketball, for example). Long practices and missed classes make it difficult to succeed academically. A recent study funded by the Andrew W. Mellon Foundation shows the academic performance of athletes is lower than non-athletes even at Division III schools.
So why haven't players unionized already? First, the "workers" are around for only three or at most four playing seasons, making it hard to build up much of a movement. Second, coaches control playing time and enormously influence career success, so it is the rare college kid who will incur the coach's wrath to form any kind of insurrection. Finally, most players don't have a lot of contact with the members of other teams. But if you see them whispering before the tipoffs this weekend, you'll know why.
Richard Vedder is a visiting scholar at AEI. Matthew Denhart is a research associate at the Center for College Affordability and Productivity.