Show Them the Money - OZY | A Modern Media Company

Show Them the Money

Show Them the Money

By David C. Drummond

November 23 2012: Iowa Hawkeyes tight end C.J. Fiedorowicz (86) stiff arms Nebraska Cornhuskers linebacker Alonzo Whaley (45) after a reception during the first half of the NCAA football game between the Nebraska Cornhuskers and the Iowa Hawkeyes at Kinnick Stadium in Iowa City, Iowa on Friday November 23, 2012. Nebraska defeated Iowa 13-7 in the Heroes Game on Black Friday.
SourceStephen Mally/Icon SMI/Corbis


It’s no longer a question of whether student-athletes should be paid; it’s a question of when.

By David C. Drummond

Editor’s Note: Since Thanksgiving and college football go together like turkey and stuffing, OZY revisits a recent story about paying college athletes and finds the story has only heated up.

Thinking about the role of athletics at universities is not something I do for a living. But as a former college football player, I’m fascinated by the growing commercialization of college athletics.  

I sympathize with those who argue that college sports, particularly football and basketball, have become commercial entertainment ventures that have undermined the core academic mission of universities. But while the argument for preserving the amateur ideal may be principled, it is increasingly impractical. As  Time magazine’s cover recently declared, ”It’s time to pay college athletes.” 

Not paying athletes may even be illegal soon, thanks to the ongoing lawsuit brought against the NCAA by former UCLA basketball star Ed O’Bannon. The case recently took a big step forward when a judge partially certified O’Bannon’s class action suit , which has 16 plaintiffs, including six current college players. O’Bannon wants athletes to receive a fair share of the revenues they help to generate, and unless the parties settle, it’s headed for a trial next June.

Houston Texans running back Arian Foster certainly thinks college athletes should be paid. According to ,Foster says he received money when he was at the University of Tennessee, and he doesn’t see anything wrong with it. ”100 percent, I see student athletes as employees,” said Foster.

What I have come to realize is that commercialism is not the real issue. There is, in fact, a principled way for universities to pursue the revenue and status offered by big-time athletics — and universities are not only aware of it, they are already doing it.

Universities have confronted how best to monetize their unique assets in the marketplace, and one area of commercial activity has attributes that might sound familiar to NCAA sports fans. This activity has:

  1. Generated billions of dollars in unrestricted revenue for colleges.
  2. Led to millions more in alumni contributions, marketing and prestige value.
  3. Created an uneven landscape of haves and have-nots as more schools attempt to get in on the action.
  4. Been criticized for undermining the institution’s core values.

Sound familiar? The activity I’m describing is called “university technology transfer,” and it’s practiced by virtually all the research universities. It’s the process by which the university takes inventions created by students, faculty or staff and licenses them for financial gain, often to start-up companies founded by the university-affiliated inventors. It’s big business: In 2011 research institutions took in about $2.5 billion in royalty revenue, not including the equity stakes acquired in start-up ventures. We’re well acquainted with that system at Google, a company formed as part of a university technology transfer.

The business of college sports is similar to technology transfer.

One of the first things I did for Google 14 years ago was to negotiate a patent license with Stanford University, where Larry Page and Sergey Brin worked on search engine innovations. Stanford’s policy is to encourage the creation of start-ups based on technologies developed at the school, with the university receiving an equity stake in return. It’s no secret that things worked out pretty well for Stanford — its original holdings in Google are worth about $1.2 billion today.

The business of college sports is similar to technology transfer in several ways. Both are large commercial enterprises that provide an opportunity to monetize a university’s assets and a chance to serve broader social purposes, whether by disseminating inventions for public use or promoting a community beyond the institution. As with college sports, critics were concerned that technology licensing would undermine the academy by skewing research toward commercial interests. But my Google experience tells me that such issues are manageable and that the marketplace is a very effective way to get technology out to the world. 

There is one crucial difference between these two multibillion-dollar industries. While the architects of technology transfer arrangements realize that their commercial interests must be balanced by the social and academic norms of the university, the people running big-time college sports operate largely outside those norms and cover their excesses under what civil rights historian Taylor Branch has called the “false sanctity of amateurism.”

Imagine if the conditions we see in college sports prevailed in university technology licensing. We would have “student inventors,” who because of their amateur status would receive a scholarship but no more, and who would be constantly monitored lest they accept a ride to Burning Man with an alum or receive some other “inappropriate” benefit.

Yes, it sounds absurd, but no more so than college sports today, and this absurdity is not caused solely — or even primarily — by the big money that pervades athletics. People think we can do better , and they are saying so. There’s no reason universities can’t run big businesses, even entertainment businesses, where the output creates social value. 

Compensating athletes is clearly part of the answer, but it’s not the whole answer. The first norm that technology transfer managers know they must respect is that people who contribute to a commercial endeavor should be compensated in a way that is commensurate with their contribution. For licensed inventions at Stanford, this means one-third of the royalties go to the inventor, one-third to the inventor’s department and one-third to the inventor’s school.

It is not hard to imagine a responsibly managed system in which the NCAA and universities would provide student-athletes with a similar piece of an increasingly large pie of television contracts, royalties and merchandising revenues. Student inventors seldom realize the fruits of their labors for a number of years, and for those concerned about the corrupting influence of money on 18- to 21-year-olds, one solution might be to put the student-athlete’s share into escrow, payable only upon graduation. Such a deposit would not only serve to encourage student-athletes to complete their studies (consistent with the school’s core mission), it would also benefit the wider community, as fans could enjoy their favorite players for longer than the year or two that is common today. 

College Business

Louisville Cardinals vs. Michigan Wolverines in the NCAA men’s Final Four game in Atlanta.

Source Chris Steppig/Reuters

Would the prospect of a paycheck at the end of four years compromise anyone’s integrity? Would it alter how hard the athletes play, or how they are seen by fans? Star athletes already play in the shadow of future endorsement deals and professional contracts. For many athletes, knowing they will receive a school-sanctioned royalty for their performance may make them less likely to engage in the sort of conduct that has been the subject of many recent NCAA scandals. And athletes like Louisville basketball player Kevin Ware who see their careers cut short by injury could also benefit from the added financial security.

In short, version 2.0 of the college sports business means recognizing that it’s a business like any other. If universities admit that they are engaged in commerce, are careful about how they conduct it and are prepared to set limits, then they can run the business of sports responsibly and with positive results for society — as has largely been the case with technology licensing.

It’s a tall order for sure, but as we like to say at Google, sometimes really good things come from having a healthy disregard for the impossible.

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