EP 139: Matt Brown (NCAA Expert) on Athlete Pay Drama, Realignment of Power, and Transfer Portal Chaos

27:13Number one and number two would actually go on the field and play one game against one another, which felt a little more fair. It was, I think, unquestionably superior to the previous system, where it would be very rare that you get a number one versus number two game. It would usually require both of them to be independent, and you would need a little bit of luck. Now, of course, what we found out is that it can be difficult to figure out who the two best teams are in the country. When you only play 10, 11 games, there's not a lot of intersectional play. Having beat writers vote on this stuff is difficult, because if you're a beat writer in Lincoln, Nebraska, why are you watching a game that kicks off at 11 o 'clock at night?

27:47You have to file copy tomorrow. You're going off of vibes, essentially. And they kept tweaking the formula for the BCS. Like, oh, everyone hates the team that popped out this year. Let's change the math so Virginia Tech never gets this invitation ever again. Or now we need to change it to make strength of victory matter more, get rid of the coaches less. It took a long time before we were able to actually create an on-the-field playoff, which is something everybody else has figured out in the 1930s. but for the greatest and dumbest sport there is. It was a much more modern invention. That's a great way of describing it.

28:23As this is happening, people start launching, conferences start launching their own television networks, right? And so the SEC network comes to be, the Big Ten network comes to be, which is kind of tied into all this media licensing rights and all that. But who was the pioneer of making that happen? I want to say that technically the Mountain West Conference was the first to actually put something to market. But in the industry, it's common. The Big Ten is just typically referred to as the real pioneer in this space. Big Ten Commissioner Jim Delaney, who previously has a deal with ESPN, doesn't like the deal that ESPN offers, decides, screw it, we'll do it ourselves.

29:02And we'll roll the dice. We'll do a partnership where Fox will have some stake of the enterprise and we'll build our own studios and we'll control some of this inventory for what we would call tier three rights. So not the Ohio State Michigan football game or the Purdue-Indiana basketball game that might be on CBS or ESPN or Fox, but all these other sports and all this other inventory that might not be on linear TV, it might be on local television or something else, we'll put that on our own channel. And the Big Ten Network struggled in the very beginning with distribution. I'll never forget it.

29:36Like I was living in Columbus at the time. The very first football game that was on BTN was Appalachian State at Michigan in 2007, which you're smiling here. I'll always smile. I think in case you didn't know about this, Appalachian State at the time was a 1AA FCS school. Michigan was ranked top five, Appalachian State one. I'll tell you in Columbus, that was very funny. You could buy Appalachian State shirts on high street for three years after that. But most places didn't have the game. It wasn't part of the standard collection. We had to go to a bar that had like a fancy satellite dish that had it.

30:10But in a year or two, distribution was standardized almost nationwide. And the Big Ten made so much money that almost everyone else tried to emulate that particular model to varying degrees of success. In the late 90s and 2000s, at least in my memory, it also starts to be when we start having a little bit of this arms race of facilities. And so big projects and the the lifting of college, the coaches' salaries as well. And then there starts to be more and more a booster involvement in sponsorships, be it, I think this is around the time Phil Knight started getting more and more involved with Oregon specifically and their football department and the facilities and all that stuff.

30:55But am I fair in sort of placing this around that time for the arms race that started to happen? You know, I would say on some level this dynamic existed. early even into the 1950s. But once we get into the 90s, you have all this more money coming in. And this is, I think, another, just from a business perspective, a major difference between this and pro sports, right? Like my favorite basketball team is the Cleveland Cavaliers. I grew up in Ohio. And if the Cavaliers have a really good year and they make a bunch more money from television and they sell a bunch of Donovan Mitchell jerseys, that money gets to go to Dan Gilbert and it gets to go to the Cavaliers ownership group and they can take profits.

31:34in college you can't really do that but you because you're not a for-profit enterprise and you also can't directly pay your labor because if you were to give some of that money to the football players that would be an ncaa violation and you'd be sanctioned to the moon but so if you wanted to compete and get the best athletes possible which you needed to do in order to win games and get all of this money you had to spend money on them but you couldn't do it like you would do for literally any other job. So then a lot of that money began to, because you had to spend it, would get spent on things around athletes.

32:09And so that would be facilities. It would go to coaches because quality coaching does matter a lot more at this level than it does with the pros. And so coaching salaries began to explode. And not just head coaches, but assistants and strength coaches and administrators began to make a lot more money in the 90s and early 2000s. And then also additional services. So if you walk into a locker room or a football complex in a place like Clemson or Tennessee or Ohio State now, it's not uncommon for there to be a barbershop in that facility, for there to be lots of video games where you can get virtually every meal and indefinite snacks within this area.

32:49It's kind of like what the tech era used to be during the heyday of tech companies where Google would do everything from do your laundry to be your personal chef. One, to keep the best engineers and two, to keep the best engineers forever going home so they feel comfortable continuing to do stuff. You would see that a lot for elite college athletics as well. The travel and side perks that you would get for Duke basketball or Michigan football in many ways are better than you'd get in the pros. And that's even true now. I think Clemson famously has like a slide from one floor down. I have run down that slide before.

33:23Yeah, a mini golf thing or something. Just that side, yeah. It just starts to be like a never-ending arms race of one-upping each other. And I guess, I mean, I think implicitly people listening hopefully know this, but there's a union that exists in the pros, and these are workers. And at this point in time, these are amateurs that can't be paid. And there's all the litigation that could come after you from the NCAA, disbarring you from being able to participate if you take this money. And so all these dollars are flowing around. And then there's also this weird element of because they're not professionals and they're not unionized in any way, there's still people that care very deeply about the winning.

34:08And so there's people hanging around the program that for modest sums of money can influence where the kids go to school or whether or not the kid gets rewarded for swearing the touchdown and they're going to stay around. And so there ends up being these hanger-ons that don't really exist in pro sports in the same way, both because, I guess, the unions, because the quantum of dollars that the people are making, because there's actually an ownership structure in place, and there's not the tampering and all this stuff that happens behind the scenes in college sports. There's very much that. And I would add there's a third dynamic that's very unique.

34:46When we look at, particularly for the biggest schools, where they actually get the money to run the department. Television money is very, very important. For a top-line Big Ten or SEC school, that's usually the single biggest line item. But it's not the only one. And the Tennessees and Ohio States and Alabamas, they depend on ticket revenue, absolutely. They depend increasingly on licensing and corporate sponsorships and intellectual property. But they also need donations. They have to have their handout to go fund the salaries and the scholarships and the administrative superstructure to run everything.

35:22So it's not just these boosters that are kind of hanging around to influence decisions for athletes. The dirty little secret in this industry is that it's really boosters who have an overwhelming influence in who gets hired as a coach, who gets hired as an athletic director, who gets this kind of parking, what sports do we sponsor? a lot of the level of influence that you might expect maybe some minority stakeholders or owners to have for larger professional sports franchises. When you have to depend on extra people to fund the operation, those people aren't just doing it out of the goodness of their heart or for the tax dodge.

35:58They want some influence as well. And that manifests itself all over college athletics. I think it's important to note maybe here, as we kind of move into the other element of the conversation, the rough profit that comes from the different sports and the split, if you're looking at a pie, I think these numbers are pretty publicly released. But my understanding today, the major universities in the SEC or ACC or Big Ten or whatever it is, I think the major ones, you might be able to correct me on this, are like generating 200, maybe 225, maybe up to 250 a year in revenue, roughly? Yeah, that's right.

36:37In the rough splits of profit that come from, and it's a little hard to disambiguate because the donations, as you highlight it, kind of, I think, go into a big bucket rather than be, maybe each school is different on this, but discretionarily called out. But roughly in my mind, I guess you have a breakdown of what the different splits tend to be from revenue? I do. Yeah, this is a major part of the coverage that we do. And one thing which might sound pendantic, but I feel like I'm obligated to say this out loud every time I get this opportunity, is that it's really difficult to conclusively state who's making a profit and who isn't, because these are nonprofits, which means that they do their auditing and their accounting differently than many of the tech companies that you might talk about or the companies where many of you folks listening might invest.

37:27We can't get a P &L statement from Ohio State Athletics. What they do, they're required by federal law and by the NCAA to produce a membership financial report, which is standardized. And you have a couple auditing firms that do it. But there's a lot of expenses that show up on paper that are maybe not necessarily real expenses, particularly for scholarships. And I say that because it's a common talking point that a lot of major schools will use to Congress or to judges or to regulators to get out of paying for stuff saying, but I, you know, I'm just a humble farmer that, that barely breaks even for everything.

38:01And like, well, if you had to show a profit or if you were incentivized to show a profit, you would. What I could tell you is like an individual one, we've got about around 350 or so institutions. I would say that if we make an, we acknowledge the kind of goofy accounting that they're incentivized to do, I would say the overwhelming majority of power conference institutions are generating more revenue than they're spending. Rutgers probably isn't. When Rutgers is pleading poverty, I believe them. They've got their own problems. There's a few of those. And then you have some schools at the bottom, your Wright States, your Maryland, Eastern Shores, your Utah Techs that are hilariously in the red.

38:45It might be actually generating$4 million and spending$26 million. And they might say, well, we're not here to turn a profit. Nobody asks if the English department's turning a profit, right? Like we're here for marketing and student opportunities and that's fine. As far as sports, what I can tell you is it is pretty uncommon for a sport outside of football, men's or women's basketball and baseball to generate close to the revenue it takes to be self-sufficient. There are a few examples of this. Utah's gymnastics program. The Oklahoma softball program is close. There are some college baseball programs that generate north of six figures from media rights and ticketing.

39:27But that's not the norm. The norm is football, some men's basketball, handful of women's basketball, and then a few exceptions. Everything else generally costs more than it brings in. Yeah. And I guess one of the concepts that we'll get into, but most of those profitable businesses, at least as I think how the universities account for it, profitable sports, at least how they account for it, are conceptually funding some of the other ones given the arrangement. I guess, is that a technical thing that they're actually literally funding or is that just a conceptual thing at the NCAA that the university thinks about?

40:09Well, I mean, if you've got a general athletic department bucket for that word you're going to use to pay out everything else, and 80 % of your revenues are tied to media rights or ticket sales or corporate sponsorships surrounding your football program, whether you want to conceptually or technically or explicitly, I think that might be a distinction without a difference. Like the money is coming in from football. There's one other quick wrinkle. I think I want to, if we're talking about profits and revenue and everything for the university, I think it's important to point out, which is athletics as enrollment management.

40:44What the athletics and finance world looks like for Ohio State or Tennessee, it's one thing, but there aren't very many Ohio States or Tennessees, right? We've got 350 or so of these institutions. A pretty common thing everywhere across Division III, very common in Division II, common across a lot of smaller Division I institutions, is to have large athletics programs that mostly exist to generate tuition rather than ticket sales or television. Nobody is going to pay to watch Youngstown State swim team. And I say this out of love, right? But there's a lot of people who are on the Youngstown State swim team who wouldn't be at Youngstown State if they weren't swimming.

41:23And if they're a collegiate swimmer, chances are they're probably not a Pell Grant kid. That's probably somebody who's paying closer to full tuition. And if you're an under-enrolled school, if you're facing demographic headwinds or you're struggling to recruit or retain students, then athletics can be a great tool for that. And so Youngstown, as an example here, might say, yeah, on paper, our swim team loses hundreds of thousands of dollars a year. But if we step outside the athletic department, it's profitable. And that calculus is the reason why a lot of smaller schools have stunt programs or rowing teams or 50 people on their track roster.

41:57And that's the direct enrollment for the sport itself. Then there's, I think, what people call the Flutie effect after Doug Flutie in Boston College back in the 80s. But I think Nick Saban in Alabama is a great example of it. I pulled the numbers. When Nick Saban was hired in 2007, Alabama received 14 ,000 applications a year. By the mid to late 2010s, that had grown to over 40 ,000 applications a year. It tripled in a decade. and even more striking in 2007, about 26 % of students were from out of state. Today, that number is over 60 % as well. And I think people probably understand that out of state, when you're a state university, you pay lower when you're in state than when you're out of state.

42:40And so if 60 % of your students are coming from out of state, you're not just getting a better caliber of student because of the application, but you're getting one that's willing to pay far more than the in-state one as well. Yeah. In a place like Alabama, that's mission critical because Alabama high schools don't produce enough high-level graduates to support seven public institutions like they have. Auburn and Alabama have to recruit out of state, just like West Virginia does, just like the Montana schools do or Delaware. There's not enough people to make it work. I will say we've written a lot about the Flutie effect on extra points.

43:17Nick Saban's Alabama is a great example of this working. There's academic literature to suggest that this was a real thing for Joe Paterno at Penn State before that story reached its different ending. And Gonzaga with men's basketball is an example here. All of those put together is they hired one of the very best coaches in the history of the sport, and they kicked ass for 15 years in a row. There is a temporary spike that happens if you are unexpectedly successful in a high-profile sport for one year, but then it goes away. St. Peter's is not continuing to dine out on beating Kentucky. They enjoy a huge spike, and then it goes away.

43:55Fairleigh Dickinson, when they beat Purdue in their 16-seed spike, and I've interviewed people at the school, it goes away. This is something that sometimes university administrators use to justify athletic spending. They say this is the front porch of our university, this is our best chance for earned marketing, but you only get that if you win. And when you're a low major and you win, your coach leaves and all your players hit the transfer portal. And it's very difficult to sustain it. For every Nick Saban in Alabama, there's a whole lot of people that are paying money like they hired Nick Saban and are hoping that they hired Nick Saban.

44:26But there's only so many Nick Sabans out there. Makes sense. Yeah. So to the 2010s, we're seeing increased, I guess, conference realignment to the point that it starts to make less and less regional sense. You see A &M and Missouri end up joining the SEC as well. You see some more conference realignment happening. I guess anything to call out in your mind through that period? Yeah, if I'm getting the years right, this is where you begin to see the cracks of the Big East, which was a made-for-television conference at first centered around urban Catholic institutions in the Northeast with a focus on men's basketball.

45:08and then they tried to build a dual identity where you would have your Georgetown's and your Providence's and your St. John's that need these basketball institutions, but you'd also try to bring in schools that cared about this and football, where you'd have West Virginia and Syracuse and Connecticut and Miami, Florida, who is a South Florida school that recruits very heavily in the Northeast for their student body. And that began to split But as the football schools began to join the ACC or to pursue other competitive options and the financial needs and interests of those schools were different, were harder and harder to square.

45:47And this is something that you began to see a lot at the tail end of the 2010s and is now a major issue. Now, if your conference isn't built around shared geography or shared institutional ties, shared religiosity, shared budgets, if you have less in common there, you have to make a whole lot of money to paper over those differences. And the second somebody thinks they can make more money somewhere else, they'll do that and it'll fall apart. And it's highly correlated with instability. And you begin to see this here and it's even more hilarious when you look at some of the smaller conferences.

46:18I think over that decade, it feels like every third school played at least one season in either Conference USA or the WAC. Like it was blown up. Nobody had any idea what kind of geography that was. It's just a bunch of musical chairs. We talked about the conference level of their poaching, but it does also start to play out that Texas is saying, well, I'm bringing all this value to the Big 12 and I have my own television network. Why am I carrying water for some of these other programs that don't have near the national recognition? And we're splitting this pie. And that doesn't feel stare in terms of how it's being allocated because we're we're this big independent brand.

46:54And I think that's always been kind of Notre Dame sentiment of why they stayed independent all this time as well. Sure. For them, USC was threatening to leave the Pac-12 since well before either of us were born. before they finally ended up doing it because it turns out there's a lot more economic opportunity in Los Angeles than Corvallis. And there were tensions existing in the 50s. They would only get worse moving on. What we have in pro sports, is every pro sports team equally valuable? No. Like the Dallas Cowboys are a bigger deal and worth more money and bringing more eyeballs than the Jaguars or the Browns or some of these other places.

47:32But you have an almost socialized system of revenue sharing and a shared media contract and some universality to prevent the Cowboys from saying, actually, we're going to go join the Premier League or we're going to start our own NFL with just the NFC East or something. That doesn't exist in college sports. And when you add that dynamic to the provincialism and elitism that's part of higher education, you end up with, I think, some pretty explosive and personal results. Yeah. So 2014, we have the college football playoff finally gets to be a thing. I think it was rumored at the time. What did I have here?

48:10Contract was reportedly about$7 billion over 12 years. So we're starting to get significant money being passed around. And I see also, was it 2014 that Obamon case popped up? I think that's right. You've got two dynamics happening during this decade. We've been trying to get a college football playoff going since 1950. Finally happens. It's four teams. And we had a bunch of fighting about who those four teams should be from the very beginning. An improvement over two, but still lots of arguing. And then you began to see more lawsuits puncturing the historical protection that the NCAA had enjoyed.

48:58So we could talk about O 'Bannon here for a second. Ed O 'Bannon was a former excellent basketball player at UCLA. And throughout the 2000s and 2010s, you could buy video games where you could play college basketball and college football. The most popular series for college football was the NCAA series produced by Electronic Arts. There were a few different basketball series produced by 2KE Interactive, by EA, by Sega Studios, and a couple other places. And those video game companies would pay licensing fees for the intellectual property of the universities. And sometimes with ESPN or broadcast partners or to the NCAA itself to use their marks and everything.

49:42So, because it's a lot more fun to play a video game as the University of Washington than Seattle that just happens to be purple. I think I have a Sega Genesis game here in my office in the beginning, where you could play college football without those licenses. And it's just like, you're now playing Columbus and it's red and gray and it's a coincidence. So you could do all of that, but they didn't have the real players. When you play Madden, you could play as Patrick Mahomes and there's his haircut and there's his number and everything. But when you would play a college football game, it would be like QB number seven because you couldn't pay the athletes for use of their IP in these games.

50:15that would break amateurism but ed o 'bannon happened to notice that when you would play one of these college basketball games and there'd be like the old ucla teams in there that there'd be a gentleman who was the exact same height and weight as ed o 'bannon and was as you know the the same handedness as ed o 'bannon it played like ed o 'bannon and even looked like ed o 'bannon and it's number two same number same haircut um and but it wasn't ed o 'bannon and his kid was like look dad you're in the game and that and i was thinking like well but if i'm in the game i should to be paid for being in the game right and be clear at this time ed o 'bannon was an early 90s uh maybe late 80s basketball player and this was they were doing legacy teams right and so he was appearing in the game as a as an adult now but it was a version of himself way back when yeah you know an actual basketball game made when ed o 'bannon was in college would have been like on the uh the commodore 64 and it would have sucked i bet like it's just one pixel so and then he he leaves the suit.

51:10And then over the course of discovery, turns out that, I mean, of course it was based on Ed Abandon. And like people at EA were saying, yeah, in order for us to kind of make sense of the variables during development, like we would call Tim Tebow, Tim Tebow, and we would change him to Florida QB7 right before launch. Of course it's based after him. And at the same time, you start to be able to connect your system to the internet, the console. You could go on and download updated rosters. that actually had the names themselves. So it also gave you the ability, day one, you plug it in, you go online, you download the updated rosters, and you have all the players' names in the game for you.

51:51Yeah, I mean, I don't know if you did this. I was a sicko in college. But before I got an Xbox 360 that could connect to the internet, when I was just playing on the PlayStation 2 era, what you used to be able to do is take your little memory card that you paid 25 bucks for at EB Games or whatever, and you can mail it somewhere where somebody would manually change all the names on your memory card to the real players. I used to do it on eBay was where I would go do it. Yeah, and they'd send it back and we would do this. And this was a cottage industry and it became way easier, you know, come 2012, 2013, 2014 with DLC and internet capability.

52:30And that also led to the growth and the profitability of these titles. you know the the you might you might sell 200 000 units in 2007 of a playstation 2 game now that the the the consoles became more developed they became bigger more flexible and you could you can now have dlc they might sell 1.3 1.2 so there's a lot of money out there and if you look and say well they're getting a lot of money to be a madden they're getting a lot of money to be a fifa and nba 2k why why am i not getting anything and the court system eventually would say, we agree. And, you know, in my world, this is a major story.

53:10EA said, okay, we'll pay. That seems fair. If anything, we'll probably sell more copies if we can use the real names, if we can dispense with this ridiculous pretend. And the NCAA said, no, if you pay them, they'll lose their eligibility. And then multiple schools, including my alma mater, Ohio State, Notre Dame, Washington, a few other places said, not only that, we don't want to be sued. We're going to pull our license and that led to the death of the college football franchise college basketball games that and that they weren't especially profitable but we went a decade without any of those games and that ed o 'bannon case uh and the appeals afterwards began to chip away at some of the uh the benefit of the doubt that that the ncaa enjoyed from the court system and i don't know if this was the first time but in 2014 as well northwestern's football players tried to unionize And so now there's more of these cracks showing up.

54:02I think ultimately that case wasn't successful, but I think more and more people are starting to recognize like we're essentially employees that are being paid. Yeah, the Northwestern case, it didn't work. That vote failed. And part of that was because of a huge effort from the Northwestern business community to stamp that out. I would say in 2014, the idea that a college football player should be an employee and treated as such was probably still considered a little radical. That was at the beginning of my reporting career. And a lot of sports writers who tend to be more progressive, like, I don't know if I'm ready for that.

54:40But it is clear that they're being economically exploited. But that was, I think, an example of the Overton window shifting dramatically between video game licensing, between between between that aborted situation, between rights fees for conferences exploding. And if coaches are making four and five million, which they were around this period, now they're making some of them in excess of nine and ten. It became harder to justify not paying people laundry money. Is there anything that happens between kind of the O 'Bannon case that's of note or that you would call out all the way up to Alston?

55:17I think in this terms, the biggest thing is you're beginning to see an awareness of athlete activism on campus. Sometimes activism wasn't just about employment, right? Shavaz. Napier, a former basketball player for UConn, the year that UConn wins the national title, would go on to have a nice career in the NBA. It had this viral quote talking about how he went to bed hungry, even though he was a star basketball player at a star basketball program. People are like, what are you talking about, Shavazz? You get a full athletic scholarship. He's like, yeah, but the dining hall closes at 9 p.m. And I get back at midnight or one o 'clock in the morning from some of these things.

55:57and I still have to use my money to fly home to go see my family or all these out-of-pocket expenses. And yeah, there are times when we go hungry. Shortly after that, the NCAA says, all right, we're going to approve unlimited snacks. And we're going to, you know, because enough athletes were saying, Shabazz has a point. I know that you guys may not want to believe that, but there are some real holes in what we're getting right now. And speaking to the Overton window, I remember Arian Foster came out in 2013 and said something similar. or Aerie Foster, the future Texans running back, or maybe at the time, I guess, Texans running back.

56:31And a Tennessee grad said he used to, you know, he was contemplating stealing something because he didn't have money for food in college. And I just remember the backlash from the Tennessee fan base to him saying that, what are you talking about? Why are you spitting on your school? You know, like you're now making millions, billions in the NFL. Why are you calling attention to this and makes the university look bad and all that? And I think what he said at the time, the over to window shifted so much that flash forward six or seven years and everyone's like, well, of course, that's crazy. Like he's generating, you know, tens and tens of millions of dollars for the school for his performance.

57:10But at the time, it was a little, you know, he's attacking something that was sacrosanct. You're right. And I think we would be neglectful if we didn't point out that in many of these cases, there's a racialized dynamic. right with there's there's white fan resentment like you already get all the social capital you're already famous you know i had to pay to go to college how dare you be so ungrateful and and i also i you know i think a misunderstanding of what the college athletic experience is like and and if you are playing division one football or basketball at a premier institution you don't have the same college experience that you and i did you can't tell your coach hey i'm going to go study in italy this summer i'll see you later no you you you have to be on campus and you have to be practicing and lifting with your team.

57:54You don't get to pick what you major in. You have very little autonomy. You don't get to join the same clubs or work the same jobs that maybe we had. And I think a lot of the athlete advocacy during these couple of years to put that in a more human touch eventually shifted some minds among reporters, among some fans, and then ultimately to the activists and lawmakers that pushed for some pretty meaningful changes. So 2021 Alston case, can you give a little bit of a history of how this came to be and then ultimately what the ruling was? Yeah. So there are beyond a scholarship and beyond some other very limited cash disbursements, there was a movement to allow universities to pay the full cost of attendance, which might include laundry money or some other incidentals or books that might not fall under an athletic scholarship.

58:48And then there was a policy of being able to provide a level of educational awards, right? Like, can we buy somebody a laptop? Or if they get really good grades, can we pay lab fees or something like this? And you had an antitrust case in Austin about whether the NCAA could impose a cap on what those educational awards might be. And there was a judge in California said, like, we can't cap it at zero. oh, let's cap it at like 5 ,600 or something. And the NCAA said, no, no, no, we're going to appeal to the Supreme Court. We've won in court before, talking about the student athlete experience and our ability to impose limits on athlete compensation.

59:32This will be our tool to defeat activist judges and everything, especially as the conservatives begin to take on more of the Supreme Court. And of course, in Austin, they lose 9-0. You have Brett Kavanaugh's famous concurring opinion where he basically says, that the entire NCAA model right now would be illegal. I pulled it up here as we were talking. The NCAA's business model would be flatly illegal in almost any other industry in America. Nowhere else in America can businesses get away with agreeing not to pay their workers a fair market rate on the theory that their product is defined by not paying their workers a fair market rate.

1:00:07Yep, yep. Pretty scathing. And not many, I don't know. You don't hear about too many Supreme Court cases that has such consensus these days, especially. It was, it demolished everything. And it's a misnomer that this is what led to NIL. Like NIL and paying athletes for recruiting compensation or performing labor, athletic labor, was not part of this case, did not change the NCAA's immediate ability to regulate other kinds of compensation. But when they got destroyed that thoroughly, one, this opened up precedent for other lower courts to consider additional antitrust claims against the ncaa and some you know many of which went went against them uh and it completely changed how activists and state lawmakers looked at athlete compensation too and that once once they they got to smash that thoroughly stopping nil stopping a lot of the things that are happening now became impossible um nearly i guess i didn't appreciate that point so narrowly what did alston allow if not uh name image and likeness.

1:01:13I thought it led directly to it. It really was just about the limits of educational bonus awards. Like this allowed schools to buy laptops for people or to cut checks that are tax-free for really good grades if they wanted to opt into all of that. But once people saw that, then they realized, well, if they can't stop me from doing this, they probably can't stop me from prohibiting NIL. And then state lawmakers in California and in Florida, in particular, put enormous pressure to force the NCAA's hand, realizing that if you lost this badly in Alston, you don't want to pick another legal fight over this principle.

1:01:51It's better to abdicate ahead of time. So name, image, and likeness really came to be, I think of it as July 21. I don't know if that's the right timing. Officially. Officially July 21. And so what did that then entail? What ultimately changed, at least by the letter of the law at that moment in time? Yeah. So it's funny. When you talk about NIL, even in the 2021 era, I would say there's really two different NIL marketplaces. By the letter of the law, we're talking about publicity rights, something that you and I enjoyed in college and that everybody outside of the armed forces and some other very specific circumstances everyone else is presumed to enjoy.

1:02:34You can do an endorsement deal. You can profit from somebody using your own IP for something else. Previously in college, like we talked about, you couldn't do that. You'd lose eligibility, even if that had nothing to do with your identity or performance as an athlete. So if you were, as an example, a cross-country runner and you had a YouTube channel about gardening and you wanted to turn on monetization for that YouTube channel in 2020, you could not do that before. You would lose your track, your running eligibility, even though those two things really don't have much to do with each other.

1:03:05So by permitting athletes to take advantage of these deals, it allowed athletes to, you know, play guitar at a bar for money, to hold other jobs, and then to sign endorsement deals, to give paid instruction at camps, and to participate in group licensing or individual licensing. You also have a different NIL market that I like to colloquially call the bag man market, which is essentially money laundering through corporate or partnerships or nonprofits or charities, a talent acquisition or retention fee. Where somebody might say, this left tackle was very important to us athletically. He might have 60 Instagram followers and his posts are terrible, but we're gonna pay him$100 ,000 to go speak at the Boys and Girls Club here.

1:03:51It's not because he's famous. it's not because he actually has a name image and like this marketability rights it's because you want to pay him to play left tackle for us um and that was something the ncaa would look at and go whoa whoa whoa whoa whoa that's pay for play and the agents and economists and and and collectives and fans would say try and stop me and and it really they couldn't legally speaking they've lost a couple of those fights so you have you have both markets who are you to say um i i'm Walmart or Tyson's Chicken and I'm in Arkansas? And who are you to say what I'm paying him for?

1:04:28Maybe I think him doing this commercial or him stopping by the local Walmart and shaking hands. Maybe I think fair market for that, for this running back who happens to be a five star and, you know, I think could be a stud. Maybe I think that that's worth$100 ,000. And you would say, well, are you paying anyone else to shake hands to sit outside of Walmart for$100 ,000? And you're like, well, who are you to meddle in my business? I control marketing and I want to pay them that. And rightfully so, in some ways, there's not a lot of industries outside of collectively bargaining. There's not a lot of industries that you could limit what people actually are able to make if someone wants to pay him that?

1:05:13Yeah, there's a lot of public sector employees that do have some of these restrictions and you have to document and report outside income. But the key word there is that they're employees. As of right now, and certainly as of 2021, college athletes were not employees. And so to have a document that would have that kind of restriction would, in many cases, trigger an employment test. As we go back to what the courts have said previously, you designate somebody as an employee, which is a thing that the universities have desperately not wanted and have fought against since Denison way back in the 50s.

1:05:47And that's one of the major legal tensions we have here still today. And you mentioned this in passing, but the concept of collectives come to be around this time. What is collective? What are they doing? We're rolling their minds. So let's go back to that Arkansas example, right? You know, in Arkansas, you could theoretically have Tyson's Chicken or Walmart or Dillard's or a couple of other companies that have lots of money do marketing spends to go to pay athletes. No, directly the BP of marketing, Ram partnerships at Walmart is saying, OK, I'll go call up this running back and say, you know, here's one hundred thousand dollars.

1:06:23Sure. Or I'll call up the associate athletic director in Arkansas and you tell me who you need and we'll do a deal with them. But in Arkansas, not blessed with the gigantic corporate culture. You've got five or six really big companies and some resource extraction and not a lot else. What if I am a partner at a law firm or if I'm a dentist for a hospital or I don't own a string of car rental places, but I'm highly employed, I make a lot of money in this space, and I can't hire somebody to individually do marketing for me? Well, I can't just give somebody a check for 100 grand, but if I pay this new 501c3 I established,$50 ,000, and I get 30 of my high-income buddies to do the same, well, then that group could sign an athlete to a marketing deal or to set up some kind of charitable partnership or something.

1:07:11And that's called a collective. And I would say, think of it as a college sports super PAC. The comparisons between that and campaign finance loopholes are very apt. Is this what the spirit of the law says you should be able to do with the super PAC? No, but there's a letter of the law says you can. And so almost everybody began to do that. And that starts to be the central entity that dollars are going in. But at the time, I guess, based on state laws, there has to be arm's length relationships between the university and the entity itself. And then that starts to break down certain states, pass laws that you can actually coordinate together.

1:07:58And there's also laws that the concept of inducement where you can't monetarily incentivize someone to come to your university for discussions ahead of their enrollment, that is a theoretical thing that's obviously happening in practice across the university landscape. But there's these distinctions that get tested in court or NCAA keeps pushing on thin lines, trying to wield some power and they keep losing. I think, again, the comparison between this and super PACs is pretty apt, right? Like for a super PAC, there is supposed to be some independence between who's running that group and the candidate.

1:08:41But you and I and God all know that these are coordinated spending campaigns that happen hand in glove with the candidate and these associated PACs. And that would happen by and large with collectives. Not always. And sometimes you'd have tension between the guy running the collective and the school. They might not like each other. They might not trust each other. But they are fundamentally working for the same principles. And then state laws would change quite a bit, particularly in the South, where football recruiting is a civic religion of some sorts. And there is a long tradition of the state being willing to put its thumb on the scale to help out old state you.

1:09:20And so you would see a lot of regulations change. And if Georgia changes something, well, by God, Texas and Mississippi and Alabama have to as well, even if no one's really read the law yet. You know, for a lot of these part time lawmakers didn't really understand, I think, what they were creating. But you did have that dynamic. And so by 2024, the functional difference between school and collective was really broken down. Were you analyzing through this, like what the buckets between the two, the bag man, as you described it, and actually the true sponsorships? Do you have like a swag of how those dollars kind of broke down for some of these programs?

1:09:55Yeah, we were able to get some of this information through some of the software companies that process these deals. But I don't want to tell you, like part of what kind of shaped my thinking about this was my own experience. 2021 and 2022, I did a bunch of these NIL deals. I figured, well, I run a business. I'll pay some athletes to endorse extra points or I'll pay some athletes to be interviewed or to just share their thoughts and stories here. I did that for a wider swath of institutions. I'm an Ohio State graduate. I did pay a couple athletes at Notre Dame and Michigan. And it wasn't because I'm secretly a gigantic fan of Notre Dame pole vaulting or BYU cross country or Ohio football.

1:10:30I looked at this and thought, I think by participating in this market, I can report about it a little better. And maybe I'll stumble into somebody who's a good affiliate marketer. And what I found is that none of those deals came close to breaking even financially. And what I began to see as I would reach out to other brands that did larger ad spends or engaged in this world is that the value you'd get would be from the earned media announcing the campaign, not from the campaign itself. And so when the campaign no longer had a novelty factor about it and every university was announcing some of these deals, there was no point in renewing.

1:11:12Because if you want to get into influencer marketing, it's better to hire a mom blogger or a fashion influencer or somebody who's been doing this for a while who understands what CPM is and campaign deliverables and has owns a ring light and knows how to track some of this data versus a 20 year old who just happens to be good at volleyball and knows more about call of duty than she knows about actually doing this work. Um, and I began to kind of see that anecdotally through many of the other, you know, people on the university side or collectives or, or brands that I talked to. There are some exceptions.

1:11:46There are some legitimately marketable athletes, and there's a couple of industries I think did a good job spending into this, but the, the people that work in university compliance, The people that work in compliance software that process these deals, they don't tell you the same thing, that the overwhelming majority of NIL activity was centered around talent acquisition and retention rather than marketability. And that's because they're not good. Generally speaking, 20-year-olds aren't really great and dependable campaign partners. I mean, does that equate in your mind to 95.5? Is that 90? I mean, it sounds like the ROI was low, but in terms of the dollars themselves, where the intention behind them was, do you have any perspective on that?

1:12:29I think we're looking at 80, 85 of the total marketplace. And it's different depending on the sport. For a lot of women's sports, it's probably closer to 70, 40 or 70, 30 in line of marketing. And that's just because there's not as much fan demands to bribe your way into a great volleyball program. And by and large, young women tend to be better at social media from a brand marketing perspective than young men are. but on the totality of the market, which is dominated by football and basketball money, yeah, 80, 85, perhaps more are concentrated in the bag man world. And then there's also the transfer portal come to be a thing around this time, which exacerbates all the tension that I think was kind of a powder keg here.

1:13:14Can you speak a little bit about that? Sure. So when you or I, if we're an undergrad and we decide that we don't really like our program or where we're going to school, generally speaking, we could transfer to any other school that will accept us and take our credits and go. We don't owe our previous institution anything and our old schools has limited opportunity to block us as long as we can get into the other place. And in order to defend itself against these employee accusations or classifications, NCAA and university leaders would constantly argue in court that college athletes are college students and should be treated like college students.

1:13:51Well, if that's true, then they should be able to transfer. And what used to be the case for football and men's basketball and a lot of other major sports is if you decided to transfer, you were ineligible for a year before you could go play again, which was something that athletes and their advocates and some lawmakers thought was an unfair restraint of trade and clearly demonstrated that these are not like regular college students. So eventually that rule gets rescinded. And so everybody then can transfer. You can't play for more than one school in one season, but you can leave at these designated times to go wherever you want if somebody will accept you.

1:14:27We had something called the Transfer Portal, which is essentially a gigantic spreadsheet that tracks people who are looking for a new school and schools who are then looking for somebody else to fill in these gaps. So when you mix that with this growing bag man market, what you have now created is perpetual free agency and a cottage industry of agents and agencies and marketers that will try to get somebody at one school to jump into the portal and go play somewhere else for potentially more money. And there's tons of brokers around these people now that are popping up, acting as middlemen of who knows what.

1:15:08I think famously there was the example of Cam Newton and his parents and what Maybe his dad knew about potential payments that were offered for him to go to Auburn. So this has always been kind of a history of who knew what and the complicit nature of behavior and all of that. But now you actually have these people that can be doing the outreach on the behalf of the students saying, hey, you know, Mr. and coach, I would be interested. I'm finishing up my sophomore year and I'm going to enter the portal potentially in a few weeks here. Would you be interested in me? And so all this stuff is going on both ways through social media, through handlers.

1:15:49And so it's perpetual tampering, I guess is the term that gets used a lot, but meddling in other people's rosters. Yes. And I think there's an important distinction. And the example of Cam Newton, I think is particularly apt, right? If we're talking about, say, the NFL, just about everybody in the NFL has an agent who helps negotiate salaries, helps procure and negotiate and set up licensing deals and sponsorship opportunities and everything else. If you want to represent somebody in the NFL as an agent, you have to be certified by the NFL Players Association. And that generally requires you to have a graduate degree or a law degree, some element of professional experience with negotiations, passing an ethics exam, or in some way certifying that you are a competent professional.

1:16:36Same thing's true with the NBA, Major League Baseball, most other major sports. But there's no union in college athletics because they're not employees and they've never organized or sought for one of those things. And most of the laws on the books that regulate sports agencies at the state level or the federal level have no enforcement mechanism kicked in. So there's basically, there are not really any rules. So what that means in practice, Logan, is that you and I could hang up the phone when we're done with this conversation, change our LinkedIn bios and become college athlete NIL agents today.

1:17:07There's no form we have to fill out. I don't have to go register with any secretary of state. I don't have to prove that my, you know, I know my butt from the hole in the ground. I can be that, which means that the handlers that we talked about a lot in the 70s, 80s, 90s, 2000s. They're sometimes referred to as uncles in the college sports world, right? Now they're agents. And now as agents, they could say, you got to give me 20 % of what you're getting. And especially because in the pros, you might only get 3 % of a salary. There's no salaries in this world. They're all marketing deals, even if they're actually salaries.

1:17:40So the agent could charge a much higher percentage. So now you have an incentive from the handlers to get people to transfer as much as possible because they probably can't legally represent them in the pros, but they could get paid every time someone hits the portal. And so you have a lot of economic incentives to push for constant turnover. And because these aren't contracts and they technically can't be pay to play in nature, I guess maybe they're contracts, but they're marketing contracts. There's no enforceability around. You can't have incentives for performance at all. There's no, hey, you must appear in these number of gains or whatever to get this.

1:18:22And so you have this perverse incentive structure at play where people constantly want to renegotiate, constantly want to transfer. And there's not a ton of recruitment or capability that the people paying ultimately have around if it's this bag man incentive structure at play. it's, it's tough luck. Uh, it's the, you know, whatever. And the person doesn't want to do what you want them to do. There's, there's a lot of truth to that. There's a couple of ways that, that more savvy organizations to try to protect themselves. They might say like, you still have to be a university, a student in good standing at this school or for your, your marketing make goods, they have to be done in this zip code.

1:19:07And so if you transfer to a different state, are you going to go drag your butt every July 1st to come here and go cut an ad, even though you're playing in Oklahoma? Probably not. But you can't really protect yourself if they suck or if they get hurt, only if they get a DUI or if they somehow get suspended from the school. And so that did happen. And that's part of the reason why there's some donor fatigue in this world because not only are donors asked to pay more to support this ecosystem, there's a lot of dead money. Yeah, it's kind of a heads I win, tails I lose thing where if you have a five-star recruit coming in as a freshman and you gave them a certain amount in their first year, let's say it's a three-year contract or whatever it is, that's the minimum you're paying them because if they perform really well, they're coming back and renegotiating with you for more money.

1:20:04If they don't perform well, then they're going to keep taking what they gave that you agreed to early on. And so it's this it's this weird thing that the contract you sign in the NBA or the NFL or whatever other organization, there's some enforcement of fulfilling the job that you signed up for. And this, that's a minimum you're sort of agreeing to. And then if you outperform it, you better bet that they're coming back and asking for more or going to a different school to try to get it. That's definitely a part of it. But I would say that risk really does run both ways, right? Because if you sign up and say, OK, the collective is going to pay me X, Y, or Z, then that collective goes bankrupt.

1:20:46You're often SOL. Well, we've had a lot of examples publicly of people saying, I did not get what I was promised because the organization folded with somebody else. I've had a couple of AEDs tell me, and I haven't publicized these examples, that are like, our collective was funded by two guys and they found themselves not as liquid as they were before. And so all the payments came in late. This happens. And you don't have a meaningful recourse. So over the last couple of years, I would say there is a meaningful consumer protection angle and a buyer protection angle because there's no FDIC of the bag man world, right?

1:21:22Like this is all existing outside of traditional support infrastructure. The Messy's example, I guess, was the Jaden Rashada example in Florida where a high school senior enrolled at the University of Florida under – or I guess – did he ever actually enroll? He was there for like three days. He showed up on campus under the pretense that he was going to get some amount of money. And there was a lot of finger pointing about who signed off on the amount of money and what the deal actually was. And so ultimately, he withdrew from the school and went to Arizona State subsequent to that. I mean, the numbers that were reported was he signed, I think, a$13 million deal on the way into Florida.

1:22:04And then at Arizona State, I think he got a couple hundred grand at max. So if that and then he leaves Arizona State after one year for Georgia, he's left Georgia. He's currently still suing Florida. I want to say he's now I think I like Western Kentucky. Yeah. Or or a story of, you know, I mean, some probably bad advice, some miscommunication and probably some malice on, you know, participants side of things. This happens. I would not say this is frequent, but it does happen and it happens more than ultimately gets reported. generally not, the numbers generally aren't as big as they were for Jaden Rashada, who is a top five quarterback recruit in that class, but it does happen every year.

1:22:48And so as we move forward to today and start looking to this future, so we're coming up on universities themselves actually getting involved in paying student athletes. So how did that come to be? How is that playing out in Congress? And I guess, what are the derivative implications for that? Yeah. So we should probably talk about the House settlement then here real quick. So over the last couple of years, there were multiple antitrust lawsuits filed among different classes of athletes against the NCAA. Some of them were wanting damages for missing out on nil opportunities because they played before 2021 uh some were were complaining about uh missing out on abilities to monetize nil associated with broadcast deals for you're playing on tv and then for the ncaa continuing to artificially limit what they might be able to earn and uh these cases were combined that's it's called house fee ncaa after a swimmer at arizona state but there were lots of other uh athletes involved and uh the power conferences and the NCAA negotiated a settlement that would have paid back damages north of a billion dollars and would allow universities to pay up to, I think the cap is like 20.5 million for this year, will grow from there directly to athletes.

1:24:13So essentially say, I'm going to buy your NIL rights. I'm going to pay you$200 ,000 if you're playing basketball at my school and I can use you in billboards and I can use you in radio ads or something, but I'm going to pay you rather than you know bob chevrolet in mesa arizona necessarily going to pay now this settlement has not been completely finalized yet there was there was a hearing on april 7th it's likely to be finalized this month universities are acting like it's going to be finalized and and they'll be paying outwards they wanted to do it because if they if they this goes to court and the ncaa loses and they have to pay treble damages it will literally bankrupt the ncaa we will be looking at damages is north of five, six billion dollars.

1:24:55Nobody can afford to pay that. And that's that's the end of the game. So the hope here is to let some steam, you know, out of the kettle a little bit, regain some control over this ecosystem, pay some back damages to previous athletes. And then the hope is from the NCAA and power conferences that they can get Congress to give them a limited antitrust exemption to allow this to function essentially as a collective bargaining agreement. Because if they don't, someone else is going to sue them three days after the settlement is approved and you're right back at square one. And so the implications for that, then there's there's this 20 million dollars that I think is it in July that is supposed to July, July one, assuming this is approved this month.

1:25:37And so the way that that will play out is each school theoretically, but ultimately each conference gets to decide how they're going to allocate those dollars. And it's 20 million. Is it across? Like, who does that include? It includes everybody, not just the football team. It's your whole athletic department. Oh, sure. But school-wise, is that just football programs or is it all 350 programs? No, well, it's so everybody that's in one of the power leagues is mandated to opt in. Everybody else in Division One can opt in if they want to. And so what you're seeing from a lot of the schools that don't have football is they'll say, we're going to opt in.

1:26:18We don't have to pay$20 million. We could pay four. And we're just going to we're going to spread that smaller amount of money among a smaller amount of athletes. There are some schools saying we're going to opt in and we'll pay we'll pay a basketball only, which for the other schools that have a football program, there's kind of this allocation decision of how do you split the pie? And I guess as you think about like the revenue, we sort of talked about high level, the different components and the profit associated with it. But revenue generation, do you have a rough back of the envelope of how this is going to break down?

1:26:53So actually, I think this is a fascinating conversation because the motivations really do vary a lot from school to school. There is a kind of rough back of the napkin formula that a lot of power schools are using, which is we're going to do roughly 75 percent for football, roughly 15 percent for men's basketball, roughly five for women's basketball and five for everything else. Which generally tracks, as I understand, directionally, that's the revenue split-ish. Yeah, but I'll give you an example not far from my neck of the woods, right? University of Wisconsin does not have a women's basketball tradition of note.

1:27:36And they're in a very, very competitive women's basketball conference. However, Wisconsin has a dynamite women's volleyball program. Will compete for national titles, sells 9 ,000 tickets plus. It will be on Fox, it will be on FS1, it will be on linear television. Very big deal. They're also the current defending national champions in women's hockey. And they've been a top two, top three program for the last five, six years. That's very important to Wisconsin as a school. So do you look at this and think, maybe I give my women's team, my women's basketball team, almost nothing. because I could give them 5 % and they'll still get turned into hamburger by Iowa, Ohio State, Indiana, and UCLA, but I could take that money where it could go further towards my championship aspirations in volleyball or hockey.

1:28:25Iowa has a wrestling program that generates revenue, that's on pay-per-view, that's on linear television, wins national championships, and is a culturally very important thing there. Iowa's going to have to spend a million bucks on men's wrestling if they want to be successful. And I think another kind of money ball angle to all this would be some schools out and say the Big West, your UC Irvines, your Riversides, your Long Beach states. And these schools have basketball, and sometimes they're okay. Every once in a while, they win a tournament game, but you're not likely to make the Sweet 16 out of the Big West.

1:29:01But they have great college baseball. They host regionals. In our lifetime, Big West teams have won national titles in baseball. Do I expect Long Beach or Fullerton or Santa Barbara to have a bigger baseball budget than Penn State or Ohio State whose baseball sucks ass because it's winter until late May here in the Midwest? Yeah. So you have this written out in pencil, but every school has to then figure out beyond, do I have the infrastructure to pay this to the right people? But how do I move it around? Yeah. The SEC is mandating, I think. I think they all agreed to a certain split as I understood it, or maybe not, maybe I'm wrong.

1:29:44As I understood it, what the SEC said was, we're all going to offer the same number of football scholarships. You can offer up to 105 for this year. They're all going to stay at 85. And I expect very, very few schools to go to 105. But the SEC schools also offer different sports. And so some like LSU, for example, might decide we're going to spend more on women's gymnastics. Arkansas will probably spend a little bit more on baseball. Who knows what Vanderbilt's going to do, right? And it'll move around a little bit, and there will be marketing dollars and stuff outside the cap to fill in some of those gaps.

1:30:18I don't think this is going to look exactly the same everywhere, but I can't imagine anybody, certainly in the Power 4, saying, we're only going to give 20 % to football. There's just too many people on the roster. You have to allocate a disproportionate amount of your salary cap, because you got to pay 85 guys. And how does the bag man world play into this as you sort of look forward and there's the concept of an NCAA clearinghouse? Like, how do you think that world ends up evolving? Logan, it's a great question. And here's my honest to God answer. Anybody who tells you they know exactly how it's going to work is trying to sell you software.

1:30:56We don't really know. We know that there is a clearinghouse that's going to be administered by Deloitte. And that's empowered by the major conferences. That's supposed to track every single NIL deal over$600. Make sure it lines up with fair market value and potentially invalidate deals that do not. And to give this specific example we talked about, there's a$20 million pool that's getting broken up however we decide through the university directly. And university needs to come up with ways of paying that. Theoretically, they should be able to do it because they have television rights. And some people are putting logos on fields and whatever.

1:31:29There's a bunch of different ways to get that. Then there's this true marketing, but that's essentially a pay to play plus or minus. And I think at an individual level, the schools get to allocate that both within the sports, but then within the players as they, however they want. There's no fair market value analysis for anything that comes directly from the school. The quarterback will probably end up making, yeah, you know, whatever, 50 % or 30 % or something akin to the NFL. Maybe, who knows how that's going to end up playing out, at least within the football. But people will make different decisions there.

1:32:00Then there's still this concept of traditional name, image and likeness deals and actual marketing rights. If people have ever seen Heisman House or Dr. Pepper commercial or whatever those things are. And the enforcement of this is going through this Deloitte clearinghouse entity, which theoretically will go back to Tyson's Chicken or Walmart and say, hey, you know, you signed here for one hundred thousand dollars for this running back to show up and shake hands and kiss babies. and that's not fair market value based on his social media followers. And we're sort of back to limiting the earning potential of an individual in some ways here.

1:32:41That's right. So here's the question. On one hand, what you described, I imagine the second that clearinghouse goes to Walmart and says, hey, couldn't help but notice you paid Bruto Mars$90 ,000 to give a concert and you're paying$125 ,000 for this running back to sign autographs. like I call BS, as soon as they flag that deal, there's a lawsuit. And it's entirely possible that a judge will say, yeah, that is an unfair restraint of trade. Like there's no CBA here, throw this whole thing out. Or Congress might say it's okay. And they might basically turn that house settlement into federal law. Congress could pass a law that says, I don't care what the court system says, college athletes aren't employees.

1:33:25And the NCAA doesn't enforce this stuff. Now the Federal Trade Commission does. And the NCAA has been asking for that for a couple of years. It wasn't possible in split Congress, but Republicans control everything now. And I don't think I'm being particularly partisan when I say this particular Congress, not big fans of organized labor, not big fans of parliamentary procedure. So if the White House says this is a priority, or if Ted Cruz says this is a priority, that could really happen. And then the clearinghouse is empowered somewhat by the federal regulatory state, and it becomes a thing. We really don't know.

1:33:59I think that adds to some of the frustration of risk management here on behalf of schools or agents or anybody else. Whatever the rules are now might not necessarily be the rules in four or five months. It would be like trying to run a business where you're doing import and exporting out of Vietnam right now. I don't know what the rules are going to be. And in looking forward to that, I mean, there's the decisions on how much the players are going to make. And you still have examples of there's this$20 million pool, but XYZ person who is worth a couple billion dollars, if they want to pay to have the best running mat on the team, it's still back to this concept of who is the NCAA from an enforcement body to limit this.

1:34:42And as you're making these decisions or recruiting these players, as we sit here in April of 2025, people are promising deals under some mix. Some people are totally by the letter of the law saying, hey, we're going to pay out exactly those$20 million and then what we can actually get to in terms of true marketing deals as well. And you know some people, Phil Knight at Oregon, are saying, who are you to tell me what Nike can spend on these players? And they're saying, well, that$20 million number is great, but here's another$10,$50,$20 million on top of this to fulfill the rest of the roster. And so we're sort of headed to this.

1:35:30And who knows how to play out? Maybe these players will be ruled in eligible. Maybe there'll be staled payments that end up coming through. It's just we're sort of back to, in some ways, the opacity of the grayness that we had over the last couple of years, at least the chaos was free market. And now we're sort of heading back to some more control. But there's going to be weird distortions that end up playing out. I think I think that's exactly it. We've shifted to post-Soviet economy, right, where it's there's some of its planned. some of it, it depends what the state ends up doing a lot of uncertainty.

1:36:06And, you know, I joke, I didn't have some of this gray hair when I started getting on this beat. And half of what I do is, I'm talking to athletic directors or coaches, I joke that part of what I do is serve as an unlicensed therapist. We'll turn off the recorder. And if you want to just yell for an hour, because you're trying to make policy when you have no idea what the regulatory rules are going to be, it's very frustrating. And I think people that have covered other industries where that's been the case are frustrating that that's where we are in college sports right now are we having to a world of um athletes no longer being students in your mind i don't think that's as likely but i i i don't think it's an impossibility you know at some point we all kind of have to sit and be really honest with ourselves about what are the red lines that make college sports college sports a fundamentally different product from the NFL.

1:37:01And for a while, you would hear people say, like, no, it's because they're playing for the love of the game or for all state U, rather than for money. Now they're playing for money and people still seem to like college football just fine. I don't know if they're no longer students at any level, if that changes things. Or Florida State becomes, you know, the Florida State Football Club as part of this BlackRock-sponsored Super League that just pays a licensing fee to Florida State University for the IP and playing at Bill Campbell. I don't know. Maybe fans won't care. Maybe that becomes a red line, and if we evaluate the football in just a pure quality of product, they'll find it inferior to the NFL, and you have a decline.

1:37:45I don't think anybody knows the answer to these questions yet. The other one that is an obvious one that keeps coming up is there's eligibility limitations or a number of years that you get to play on a given team. And traditionally it was four and then it became four plus one. And then it became, you know, some of the COVID years. And then you end up with some injury exceptions and medical red shirts and all that stuff. And you can make a very easy intellectual argument that like, hey, Diego Pavia, the quarterback at Vanderbilt this past year is a probably objectively 85-10 quarterback who happens to be a very good college quarterback, but has no potential to go in the pros.

1:38:29And so he can come back and make a million dollars a year playing at Vanderbilt and running around and helping them win games. And who's to say that he shouldn't be allowed to play when he's 24, 25, 26, 27, 28, 29. Like, where is the bright line of what we're talking about here? Because you literally are limiting his earning potential by saying, hey, you can no longer play college football. Yeah. And in the past, the courts would say that there's some pro-competitive benefit for having some of these eligibility rules and would give the NCAA some deference. That's been shift away a little bit. Part of Diego specifically, his argument is, I played part of my career in juco that's not even an ncaa thing nothing else just don't count that year um just like you know we wouldn't count uh playing in like oak park or a military prep school or something necessarily yeah and then if okay we're gonna do that what about division two where you know i had to paint the lines on the baseball diamond before i got to go play and and that's that's clearly not the same thing i can't predict what a future judge would say but but what your argument here is not dissimilar from what many of those athletes are saying, where this is the peak of their earning potential and you might be missing out on hundreds of thousands of dollars.

1:39:48The way you solve this, or one way that I'm aware of that you can solve this, I'm a reporter, I'm not a labor attorney, but the most common way is through a CBA. Like the NBA has, the NFL has, that's why you have age limits and eligibility standards and everything, but then you need to be able to negotiate. And if you want to have that kind of protection and that antitrust exemption for college, you need federal legislation either that allows them to unionize or that doesn't allow them to unionize but but gives you the benefit of a cba one way or the other um whether they get that or whether this particular crop of lawmakers are up to the task of doing that i think is an open question because i i don't think i'm going to be accused of being too partisan here if i admit this the kind of people we have in the senate right now are not typically the kind of people that live and die with Tennessee football.

1:40:38They are not single issue voters that are responsive here. This is not an industry that by and large, with some exceptions, that they really care about that much, which can make for some bad policy. And so do you have any idea, I mean, does it feel like we're on the precipice of something in the next couple of years, we're moving to the more widespread antitrust exemption with CDA, like if you were forced to pick a timeline, in my mind, at least, I don't know if you agree, like that feels like the only solve for the sport to have some guardrails and some agreement. Otherwise, it's going to keep getting legislated and different state courts and, you know, it's going to keep bubbling up with XYZ.

1:41:24And ultimately, as I think people are well aware, there's 50 states who don't necessarily agree on different laws. And so now you have different conferences across the country with different political leaders in different political environments. And so it's pretty hard to keep everyone marching to the same drum. And so I guess, one, do you have a timeline of thinking about when something like this could happen? And two, do you think that this is the only solve ultimately, and we're kind of putting a band-aid on the bullet hole until we get there. Yeah, I differ from some of my colleagues in that I actually think the single most likely outcome is in the next 18 months, Congress gives the NCAA a limited and conditional antitrust exemption.

1:42:09I actually don't think that's the best policy. I think that that will end up hurting economic prospects for a lot of elite athletes. But Ted Cruz is in charge. and this is something that's really important to him. Is Ted Cruz literally in charge? Ted Cruz is the ranking member of the Senate Commerce Committee that will be taking the lead on drafting this kind of legislation and getting it down to the House. And he has flat out said, I do not think athletes should be employees. I am using my intellectual gifts and energy to get very deeply involved in this issue, which he has, and wants to provide the best, the most success for the highest number of people, which like in his view and his staff's view is a conditional limited antitrust exemption.

1:42:53He asked Republican lawmakers who would love to go back to 1983, probably in a lot of different ways, but particularly on college athletics. Right. And you had a lot of Democratic lawmakers who were really adamant about allowing for employee status and that softening a little bit. I could be wrong. Right. The House is as a three seat Republican majority right now. and depending on who's dead or who's traveling or who's sick or something, it's difficult to corral that group into doing anything. If the House and Senate and this White House don't pass an antitrust exemption, then in the next 18 months, I believe we will see a federal court, probably in Pennsylvania in the Johnson v.

1:43:37NCAA case rule, that some college athletes should be employees. And if not, then after this House settlement, when they're clearly getting million dollar checks from the universities to provide labor, it will be harder to say that they're that they're contractors or that they are employees. So either. Yeah. Whether whether Congress is proactive one way or the other or the courts make this decision for them, you can't keep kicking the can down the road forever. Like eventually somebody is going to force the issue. Do you think we head to a world of of breaking off in some way at some point, either with super conference for college football, maybe?

1:44:19I guess there's different considerations for NCAA basketball because of the tournament. But what's your perspective on that? You know, I think it's possible. I'm not ready to say it's inevitable or even the most likely outcome. And I think part of that is we've now had a couple of private equity groups and institutional investors kind of kick the tires on this. And I've listened to some of their pitches and I've floyded some of their pitches and read those. But part of the challenge is if you're going to make this kind of investment into a super league or to buy a chunk of the assets of an athletic department, you're doing this to make money, unless you're the Saudis, when you're doing it for sports washing.

1:44:58And then it's pretty hard to buy a U.S. state asset the same way. But if you're BlackRock or somebody, you're trying to make money doing this. And then when you look at the actual balance sheet of some of these athletic departments and you really look at the real numbers and you go, oh, my God, this is worse than I thought. And then can I flip this? What's the liquidity of this kind of investment? Who can I sell this to? Because you can't buy 15 % of Florida State football. You could buy 15 % of a new LLC that Florida State spins off that contains its media and ticket and sponsorship assets. And that can get complicated.

1:45:30I think the intellectual idea of institutional investors fronting a Super League and then actually doing it are two different things. If I was an institutional investor and I was interested in getting into the sports market, I would think that buying a fractional share of an NBA team or potentially doing this for the NFL once that becomes allowed, or European soccer, where American investors have flooded over the past couple of years, I think that's an easier investment than trying to force the issue in college sports. Could it happen eventually? Sure. Could happen eventually. I know the American athletic has been very aggressive in trying to lock down institutional funding and splitting off a share of their assets.

1:46:13And maybe that's where things go. I think that that raises a lot of operational concerns for college sports. But they've done dumb things before. I found that what can be sold off and collateralized in some way ultimately will find a way. At least once. Yeah. Yeah. And it seems crazy to me that you would buy into the annuity that is, you know, Florida State's TV rights deals. But in some ways, they have a unique set of circumstances that they want out of their conference. conference and, you know, they have a bunch of, it's not dissimilar to a SaaS contract in some ways. They have long-term locked-in contract.

1:46:58And if they can take 90 cents on the dollar or 80 cents on the dollar today versus waiting for it to pay out over the course of the next 10 years, they might be willing to do it. Yeah. And because specific to Florida State, which might be different from a SaaS investment, maybe not, you know that better than I would, but it might be a 40-year deal. In four years, the president of that school is gone. The athletic director is gone. All of the coaches are fired. Anybody that had any semblance in crafting the deal on the university side is gone. The people on the other end, they're still there. And you might get all the glory for cutting the ribbons and doing the SEC press conference, and then you bounce.

1:47:37And then your predecessor sits in there and realizes like, oh my God, what have I done? And I think about this a lot because in Chicago, we did this with our parking meters where we sold everything for like a 99 year lease to the to the UAE and then once we spent the upfront money and now we're stuck forever and and and you can't close down the street or if you do street parking it goes to somebody in a foreign country or we have that with toll roads didn't stop the lawmakers in the beginning might not stop Florida State now anything else that you're thinking about right now uh that we didn't hit on yeah I think I think we got to a lot over the last two hours, right?

1:48:15Like this is, I would say it can be frustrating if you're in this industry or if you're reporting on it and covering it because things change so much. And because the financial and accounting rules are very different from some of the other industries that you might be familiar with, you might be covering. But like with anything else, when there's a lot of chaos or changes, there's also some potential opportunities. I think in the investing world, there's a lot of people that are now trying to create software to help schools navigate some of these specific problems. If you're an investor or a developer or a company that can help with revenue generation, that can help with customer data, that can help with front or back office player evaluation solutions, many of the kinds of things that everybody in the NFL has been doing to make money for the last 20 years are still completely novel to the college world, which is kind of still run like a mom and pop shop.

1:49:06so it could be very frustrating to be an ad right now but it might be a very good time to be in say the ticket sales software solution world and and and maybe some people from outside of college sports can help fix some of these problems well matt thanks for doing this this was a lot of fun it was my pleasure thanks for having me Thank you.