In the realm of professional sports, the NFL and NBA stand tall as financial juggernauts. TV revenue share deals have transformed these leagues into billion-dollar powerhouses. As millions of fans tune in to watch games, the athletes themselves reap substantial financial rewards from the television money pot. In both the NFL and NBA, players receive around 50% of all revenue from the leagues, which annually amounts to hundreds of millions of dollars. As college sports continue to evolve, the interplay between TV revenue sharing and NIL policies will reshape the financial dynamics of college athletics.
In college athletics, TV license revenue sharing agreements typically take shape through collaborative efforts between athletic conferences, universities, and broadcasting networks, resulting in substantial financial gains for athletic departments and conferences. As networks vie for broadcasting rights to showcase popular collegiate competitions, the revenue generated from these deals can be immense and serves as a crucial source of income for colleges and universities. The advent of Name, Image, and Likeness (NIL) policies has added another layer to the financial equation, empowering student athletes to capitalize on their personal brands and endorsements, further reshaping the financial landscape of college sports.
These revenue share contracts often span several years and involve significant financial commitments from the networks. The broadcasting networks generate revenue through various means, including advertising sales, sponsorships, and licensing fees. The specific revenue sharing model varies between conferences and universities, and it depends on several factors such as the terms of the broadcasting contracts, the conference’s distribution policies, and the number of appearances by each team on television.
CNBC. (2022, August 18). Big ten lands $7 billion, NFL-style TV contracts. CNBC. https://www.cnbc.com/2022/08/18/big-ten-lands-7-billion-nfl-style-tv-contracts.html
Current college sports television contracts. Business of College Sports. (2023, August 28). https://businessofcollegesports.com/current-college-sports-television-contracts/
The revenue generated from TV license agreements is primarily distributed to the member institutions within the conference. It’s divided among the universities based on predetermined formulas that often consider factors such as the number of appearances, conference performance, and equal distribution among all members. For example, the new Big 10 Contract, earning 1 billion a year, will be split equally between member institutions (CNBC). TV license revenue sharing plays a significant role in the financial stability and competitiveness of athletic programs in college sports. It helps universities maintain and enhance their athletic programs, attract talented athletes, and provide a high-quality experience for fans through exposure on television.
The revenue sharing model in professional sports can vary depending on the league’s structure and agreements.
Nath, T. I. (2021, September 10). The NBA’s business model. Investopedia. https://www.investopedia.com/articles/investing/070715/nbas-business-model.asp
Tretter, J. (2021, October 27). NFL Economics 101. NFL Players Association. https://nflpa.com/posts/nfl-economics-101
Williams, B. (2022, February 13). MLB teams will receive at least $100 million annually from TV rights contracts. Dodger Blue. https://dodgerblue.com/mlb-teams-receive-at-least-100-million-annually-from-tv-rights-contracts/2022/02/12
So, if we treat college football like the NFL, theoretically how much would players be making?
Below is an illustration of what the distribution might resemble if Power Five college football players were to receive a share equivalent to 48% of their respective conference’s football revenue as Broadcasting NIL – also referred to as BNIL. However, we’ve opted to base this calculation on 48% of the conference’s football-specific revenue, rather than the overall revenue, as college athletic departments must allocate funds to support various sports teams. To compute the distribution, we took 48% of the football revenue and divided it by the estimated number of players in the conference, assuming an average of 100 players per team. Below are the projected figures based on this approach.
Revenue information found from https://www.collegefactual.com/colleges/
What is the industry saying?
Coach and athletic director sentiment regarding revenue sharing and broadcasting NIL in college athletics is gradually evolving as the discussion gains momentum. While some states have seen bills aimed at requiring state schools to share a portion of their television revenue with athletes, it’s become apparent that the financial landscape of college sports is changing. Indiana’s coach, Tim Allen, for instance, has been an advocate for NIL reform, drawing a distinction between NIL and a revenue-sharing model akin to the NFL’s salary cap structure. Allen said at Big10 media days he sees revenue sharing as the “direction we have to go.” He believes that NIL is market-driven and shouldn’t be earnings-restricted, but if collectively bargained, revenue sharing could work under a cap, enabling teams to allocate funds directly to athletes through such a framework.
Oklahoma Athletic Director Joe Castiglione, Mountain West Conference Commissioner Gloria Nevarez, and AAC Commissioner Mike Aresco are among those who have expressed the need to explore what a revenue-sharing model could entail. While revenue sharing remains a substantial topic of debate, it’s clear that college sports leaders are increasingly open to the idea and recognize the necessity of studying its potential impact.
Mit Winter, Kennyhertz Perry NIL attorney, discussed the future of college sports financing and BNIL. According to Winter, the allocation of revenue in college football will largely depend on negotiated agreements between conferences, the NCAA, and the media outlets. He foresees a scenario where a subset of Power Five teams may break away from the NCAA to form a new organization, akin to the NFL for college football. Under this structure, athletes could have their own players’ association to collectively bargain for their rights.
Winter also anticipates various revenue-sharing models to emerge, with conferences or schools directly providing compensation to athletes. While broadcast agreements with major networks like CBS and ESPN are expected to play a central role, Winter emphasizes that ticket sales could also be a significant component of revenue.
However, the shift towards more direct payments to athletes raises questions about the continued necessity of collective bodies. Winter suggests that some collectives may be concerned that if schools or conferences can directly compensate athletes with BNIL, it might diminish the need for collectives. The role of collectives in this evolving landscape remains uncertain, as some schools may choose to incorporate their infrastructure, while others may not.
These insights from Mit Winter shed light on the complex and dynamic future of college football financing, where negotiations, agreements, and the potential reconfiguration of governing bodies will shape the distribution of revenue and the role of athletes in the sport.
Potential Implications
There are several watchouts when dissecting the TV rev sharing model, particularly when considering its impact on football players and athletic departments. One significant impact is that individual football players may not be able to fully capitalize on the potential earnings from their NIL rights. With the revenue being distributed equally, star players who could have commanded higher endorsement deals may have their earnings diluted to benefit all players, regardless of their marketability. This might discourage certain players from actively pursuing endorsement opportunities, knowing that their individual efforts won’t be fully rewarded.
Additionally, the redistribution of TV revenue to fund athletic departments can lead to a disparity in budgets across different schools. While major athletic programs from Power 5 conferences might have substantial budgets even after the redistribution, smaller schools and non-Power 5 conferences could see further financial strain. This could result in reduced funding for other sports programs, facilities, and scholarships, affecting the overall competitiveness and growth of college sports.
Moreover, the division of TV revenue by the total number of athletes raises questions about how the funds would be used. Notre Dame athletic director Jack Swarbrick raised concerns, saying “I’m open to anything that expands the value for students. But I don’t hear a lot of ideas that have Title IX at the forefront. They need to. That’s important.”
Title IX requires colleges and universities to provide equal opportunities for both male and female athletes. If the funds are solely divided by the number of athletes, this might lead to inequities in support for women’s sports, potentially hindering their development and preventing them from gaining equal footing with men’s programs.
Another inevitability that will arise will be the impact on schools’ financial stability. Some schools rely heavily on TV revenue to support their entire athletic department and maintain the viability of their sports programs. A reduced share of TV revenue could force these schools to make tough decisions, such as cutting certain sports, reducing staff, restructuring their organization, or eliminating scholarships – all of which will have a lasting impact on student-athletes’ opportunities.
While the concept of TV revenue share as NIL aims to ensure fairness and equal opportunities for college athletes, it also presents new and unique challenges to the athletic departments that will have their business models and operations dramatically impacted. The redistribution of funds will likely have an outsized impact on smaller schools and women’s sports programs. To strike a balance, it is crucial to find solutions that promote athletes’ rights while also defining a path to bring financial sustainability and growth of college sports as a whole.
Sources:
CNBC. (2022, August 18). Big ten lands $7 billion, NFL-style TV contracts. CNBC. https://www.cnbc.com/2022/08/18/big-ten-lands-7-billion-nfl-style-tv-contracts.html
https://www.collegefactual.com/colleges/
Current college sports television contracts. Business of College Sports. (2023, August 28). https://businessofcollegesports.com/current-college-sports-television-contracts/
Nath, T. I. (2021, September 10). The NBA’s business model. Investopedia. https://www.investopedia.com/articles/investing/070715/nbas-business-model.asp
Tretter, J. (2021, October 27). NFL Economics 101. NFL Players Association. https://nflpa.com/posts/nfl-economics-101Williams, B. (2022, February 13). MLB teams will receive at least $100 million annually from TV rights contracts. Dodger Blue. https://dodgerblue.com/mlb-teams-receive-at-least-100-million-annually-from-tv-rights-contracts/2022/02/12/#:~:text=Each%20team%20pools%2048%25%20of,and%20given%20to%20each%20team.