What does a home settlement mean for college sports?

Over the past few days, various news outlets have revealed that each of the Power Five college sports conferences and the NCAA have approved terms of a proposed settlement to resolve the antitrust dispute in House v. NCAA. Much like we did here at Last Word on Sports regarding the myriad changes that have brought us to this point, we’re now taking a closer look at how the settlement could impact the landscape of college athletics. In short, we try to answer the question: what does it do? House a means of settlement for college sports?

What does he do? House Settlement average for college sports?

Settlement Terms

In general, House the settlement resolves several ongoing antitrust lawsuits brought against the NCAA by current and former athletes. These athletes allege that the NCAA violated federal antitrust laws by implementing and maintaining a model that imposes rules that prevent student-athletes from profiting from the use of their names, images and likenesses. The settlement consists of former student-athletes who competed from the 2016 calendar year forward.

The settlement requires the NCAA and its member conferences to pay $2.77 billion over 10 years to more than 14,000 former and current student-athletes. The NCAA will pay 40% of the settlement from its own sources, while the remaining 60% will be paid through reductions in NCAA revenue distribution to the 32 Division I conferences over the next 10 years. In total, the NCAA will reduce revenue distribution to its conferences by $1.6 billion over 10 years, or an average of $160 million per year. Of that amount, Power Five conference teams (plus Notre Dame) will cover 40% of the reduction. The Group of Five conferences will absorb 17% of the reduction and the FCS conferences will absorb 23% of the reduction. Meanwhile, First League conferences not related to football will absorb another 20% reduction.

Going forward, the NCAA will allow (but not require) member schools to share revenue with student-athletes up to a maximum of $20 million. The cap is 22% of the annual revenue generated by Power Four schools (due to the dissolution of the Pac 12 this summer) and may increase or decrease based on revenue fluctuations. The settlement covers a 10-year period and should substantially resolve antitrust concerns, particularly regarding student-athletes’ ability to receive compensation and whether schools can pay them for the next decade after the settlement is finalized. The NCAA will also replace scholarship caps with limits on roster sizes.

Settlement date

Although the NCAA and its major conferences have approved the settlement, its terms require approval through a lawsuit. The settlement originates from House v. NCAA antitrust class action lawsuit. The procedure for resolving a class action lawsuit requires clarification. First, the signature must be signed by counsel for the lead plaintiffs, who represent the entire class of potential plaintiffs.

Second, the settlement must be presented to the panel judge for preliminary approval. The hearing requires prior notice, giving other parties the opportunity to object. The judge checks the terms to consider whether they seem fair. The judge also reviews the form and timing of the proposed notice to class members. If the court preliminarily approves the settlement, the attorney sends a notice to class members. These members have the option to withdraw from classes. They also have the right to oppose the proposed solution. Generally, class action settlements require at least 35 days notice.

Third, the court holds a settlement hearing after the waiver and objection period has passed. At this hearing, the court considers any objections and receives a report on the number of potential plaintiffs who have opted in and opted out. Assuming the court approves the settlement at this point, there would still be an appeals period during which an objecting class member could request a rehearing.

The parties acknowledge that the current terms do not resolve all issues, meaning that the parties will negotiate a proposed settlement over the coming weeks to complete the formalities. In other words, nothing is final. Indeed, nothing will be final for at least four to six months. As a result, the terms of such settlement will not change significantly until the 2025-26 academic year.

Can anything speed up timing?

What does he do? House a means of accountability for NCAA governance? Will she want to start setting some new rules earlier than the effective date of the settlement? Theoretically, he could vote to immediately allow revenue sharing up to a certain cap. He could now vote to lift scholarship limits. He could create a series of rules to govern the distribution of income in a manner consistent with Title IX. The NCAA could also develop a series of rules regarding NIL collectives. Outside of the schools he manages, there’s little stopping the NCAA from moving up its schedule.

What does he do? House Average billing for revenue?

Assuming details are approved, House The settlement means that from 2025 all schools will experience a reduction in revenue. For Power Four conferences, each school will receive about $1 million less per year. For the Group of Five conferences, each school will receive about $425,000 less per year. FCS schools will receive approximately $285,000 less from the NCAA. Finally, non-Division I football schools will receive about $300,000 less per year from the NCAA.

Power Four teams receive approximately $55 million in annual NCAA, conference and media revenue shares. As a result, the reduction is likely to harm these schools the least. That said, the total revenues earned by Power Four schools fall within a larger range, with Ohio State having over $250 million in total revenue in 2020-21 and Oregon State having over $83 million in total revenue this year . The $1 million cut likely won’t significantly impact any of these schools, but the $20 million revenue share cap will be much more difficult for schools earning less than $100 million than for schools earning less than $200 million. The salary cap works similarly to a salary cap, so no school can share more than the amount agreed with all student-athletes combined. Nevertheless, it creates a burden of variable scale.

The remaining NCAA conferences, however, will face a much greater burden. In 2020-21, no school other than Air Force generated more than $70 million in revenue. How these schools adapt depends on many factors, which we will continue to explore in a series of in-depth articles.

How will changes to scholarships affect revenues?

Removing the scholarship cap likely has a greater impact on income disparities than limiting income distribution. Consider this: Currently, each school has a set number of scholarships, and schools have designed their budgets over the years to accommodate these limits. Removing the cap in favor of limiting roster size in each sport could double the total number of scholarships a school must account for. This alone limits the resources available to lower-income schools. Even increasing the amount of scholarships by 50 per year (adding 15 for football, 15 for baseball and 20 for all other sports combined) adds about $3 million to the expenses page of the school’s athletic department’s ledger.

This means that schools will face $4 million in budget constraints from day one (new scholarship expenses and lower revenues). This compounds the problems that schools with smaller budgets face when coupled with revenue-sharing decisions. The NCAA obviously won’t do that to require any school to participate. That said, when dozens of schools decide to share revenue, what meaningful choice will reluctant schools have? If a school does not have a NIL collective group that can make up the difference in order to compete, it must pay an amount close to the cap. This means school budgets will ultimately be reduced by $24 million. For Four schools that are currently net neutral or net loss, this new reality will have serious consequences.

What about Title IX and non-revenue sports?

What does he do? House billing average for non-revenue sports and Title IX? Ironically, House The case names the former Arizona State swimmer as one of two main plaintiffs. With higher demands weighed against relatively flat revenues for all programs except the SEC and Big Ten, schools will face difficult decisions in the future. Title IX generally requires a school to offer scholarships and other aid in amounts commensurate with the number of student-athletes of each gender. In other words, if women make up 50% of a school’s student-athlete population, then 50% of available scholarship aid must be allocated to women. In addition, a school may not offer sports participation to a disproportionate number of students of either gender.

When schools begin sharing revenue with student-athletes, one question naturally arises. Must these schools distribute this revenue evenly by gender, regardless of which program generates the most revenue? If so, will participants in more visible programs raise their own complaints about the distribution model? We wrote about some of these problems five years ago when we first anticipated this problem. We discussed these again when we discussed the process for student-athletes to decide to become employees. The House the settlement adds a new dimension to an existing issue.

Schools will need to carefully balance the representation required by Title IX with their interests in reducing costs to cover potential budget shortfalls. We have no doubt that schools will cut back on nonprofit sports over the next few years. How they do this will certainly vary, and some of it will depend on what facilities already exist. For example, if a school recently invested capital in an Olympic diving facility, it likely will not abandon the program.

More to come

Simply, House the settlement means that many aspects of college athletics will evolve over the next few years. Schools need to make difficult decisions, and quickly. The effects of settlement will also impact several areas that we haven’t covered yet. Will schools include NIL collectives in their competences? Will the NCAA require it? Should the NCAA more stringently regulate how NIL collectives can give money to players? What will happen to Group of Five schools? Will they break away from the Power Four? How will this impact high school athletes and their ability to compete for available roster spots? Can schools adapt to budget constraints by engaging private capital? We will explore these and other questions as part of our thorough analysis of the disaster’s impact House settlement.