College athletic departments are bracing for an “economic earthquake” with direct pay to athletes looming

Iowa State has already canceled plans for a new wrestling facility. Texas A&M has laid off a dozen or so athletes…

Iowa State has already canceled plans for a new wrestling facility. Texas A&M has laid off a dozen or so athletic employees. This could be the tip of the iceberg when millions in college revenues start going directly to athletes and away from escalating coaching salaries, facilities and increased athletic department staffing.

The revenue-sharing model outlined in the $2.8 billion antitrust settlement proposal filed by the NCAA and the five largest college conferences last week would allow schools to offer up to $21 million annually to athletes, or up to 22% of average revenue. Annual League of Power School. That means budget controversies and a myriad of potentially difficult decisions loom for athletic departments across the country.

“Ultimately, this is an economic earthquake within the system,” said Andrew Zimbalist, professor emeritus of economics at Smith College. “The system is in a very uncertain, risky and volatile state right now.”

The realignment, the transfer portal, and the explosion in name, image, and likeness (NIL) compensation have changed almost everything about college athletics. The settlement of antitrust lawsuits over the next decade brings further turmoil and signals the end of a model of amateur athletics that dates back to the founding of the NCAA in 1906.

The football and basketball companies will continue to generate huge annual revenue numbers, but they will now be allocated differently; Where and how will be determined in the coming months.

“When you have a 22% shift in revenue, things are not going to stay the same,” SEC Commissioner Greg Sankey said at the association's spring meetings in Destin, Florida. “This predicts that people will have to make decisions. This is probably a wide range of issues that I haven't even begun to consider, some of which I can imagine, and some of which I'm sure I will consider this week and in the following weeks.”

Some of the money going to donor-supported NIL groups “will theoretically trickle down to the athletic department” to raise revenue, Mississippi State athletic director Keith Carter said. Carter also said schools must find ways to cut costs, including putting facility projects on hold even as new money arrives this year from ESPN's latest SEC contract and a new $7.8 billion deal between ESPN and the College Football Playoff.

“It's going to be a combination of creating new revenue and eliminating some expenses,” Carter said. “It will definitely be different in each organization and how they do it.”

Make changes

Schools like Iowa State and Texas A&M have already proactively made changes.

Iowa State athletic director Jimmy Pollard canceled plans for the new wrestling facility, which was scheduled to open in the fall of 2025. He cited the “$20 million question” of how direct compensation to athletes would be calculated.

“It's going to be a radical change, and it's not going to happen overnight,” Pollard told reporters in early May. “We have a budget of $100 million. We don’t have a budget of $120 million.”

Texas A&M's new athletic director, Trev Alberts, has laid off about a dozen employees. Alberts clarified at the time that the layoffs were not related to the $76.8 million buyout of fired football coach Jimbo Fisher, instead saying they were “a reorganization related to current and emerging threats to our business model.”

Mega buyouts and huge coaching contracts — like the $13 million annual salary recently awarded to two-time national champion Georgia coach Kirby Smart — mean there will be no pity party given the long battles athletes wage for a piece of the economic pie.

“I think it's easy to justify $10 million for a top coach if you're not paying the athletes, but a few extra million for a coach might be money that you're not paying the athletes,” said Richard Paulsen, a sports economist at Harvard University. University of Michigan. “In the NFL and NBA, athletes are paid much more than coaches.”

Times really started to change once athletes were allowed to start making money from endorsements in July 2021. Big-name coaches like the now-retired Nick Saban at Alabama and flashy facilities were no longer necessarily the biggest draw for recruits, and therefore the most important investments for them. Sports programs.

“Now, if the question is you can get $X from one school and $Y from another school, those things might not matter as much,” said Paulsen, whose school lost coach Jim Harbaugh to the NFL after a national championship.

Discounts on the way?

Zimbalist said athletic departments could face further staffing cuts and changes in the amount of money they can continue to spend on facilities.

“Some of the larger programs have staffs of 250 to 300 people, have very modern facilities and are building more,” Zimbalist said. “Now there's no way they can afford it.”

These are the richest college athletic departments. The impact on programs with more modest budgets remains to be seen, but Charlotte athletic director Mike Hill and his Montana counterpart, Kent Haslam, have serious concerns. After all, the G5 leagues (where Charlotte plays soccer) and the FCS leagues (home of the Grizzlies) combined are on the hook for nearly a quarter of the settlement.

“Having served at the SEC, Conference USA, and AMERICAN, I realize this is a complex issue for our institution to solve,” Hill said. “However, I cannot reconcile Charlotte and similarly resourced programs losing millions in revenue that should be used to support our current student-athletes, so our former student-athletes — 90% of whom come from Power Five leagues whose revenues outpace everyone else’s — can be compensated.

“There is a reason the home-rule conferences were specifically named in the lawsuit and not the other 27 Division I leagues. As members of the NCAA, which was also named in the lawsuit, we knew there could be an impact on us — But it is disproportionate and frustrating.

Hossam agreed.

“Early numbers show we lost nearly $200,000 in our distributions from the NCAA, and that's important to us,” Haslam told MTN Sports last week. “That has to be offset by ticket sales, by donations, by cost cutting. So it's real and it affects everyone and it's definitely frustrating.”

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AP Sports Writer Steve Reed in Charlotte, North Carolina, and AP College Football Writer Ralph D. Reed contributed to this report. Russo in Destin, Florida.

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AP College Sports: https://apnews.com/hub/college-sports

Copyright © 2024 The Associated Press. All rights reserved. This material may not be published, broadcast, transcribed or redistributed.

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