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Antitrust Lawsuit Pivotal For College Athletics

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IOWA CITY, Iowa - The most important development in college athletics this year won't happen on the football field or basketball arena.

Instead it will occur in a federal courtroom.

Ed O'Bannon, a former All-American basketball player at UCLA, field an antitrust suit accusing sued the NCAA, its licensing company, all NCAA schools and conferences of engaging "in a price-fixing conspiracy" to deprive college football and men's basketball players from earning revenue based on their likeness.

A hearing is set for June 20 to determine whether the lawsuit should certify as class-action and include current student-athletes. A trial is scheduled for July 2014. Should O'Bannon's case ultimately prevail damages are trebled in federal antitrust cases it could vault damages into the billions for the NCAA and schools and trickle down to local communities.

"It changes the nature of college sports," Big Ten Commissioner Jim Delany told The Gazette. But Delany also said, "Our people have no interest in settling. It will go through the court system, and it's probably many, many years away."

The questions are as immense as the potential ramifications. If O'Bannon wins, who gets paid? O'Bannon's filing stipulates football and men's basketball players deserve half the revenue from video game look-alikes and classic game rebroadcasts to lucrative television rights package. That could set back athletics departments financially five or more years.

Another question is how and with what means would the schools pay its athletes?

"I've noticed economists who said this will redirect revenue from coaches to athletes, but I think that's misguided," said former NCAA compliance officer John Infante, who authors the "Bylaw Blog" on NCAA-related issues. "I think what you will see if they lose a significant judgment ... nonrevenue sports will be the first to feel the cuts, whether that's eliminating the individual sports or defunding across the board, getting rid of all of their scholarships and working with the NCAA to eliminate its minimums."

Northern Iowa is a midlevel Division I program with a $12.3 million athletics budget and boasts maybe one marketable moment Ali Farokhmanesh's 3-point shot in 2010 NCAA tournament that shocked top-ranked Kansas. UNI Athletics Director Troy Dannen said his school is in "reactive mode" on this case.

"If the class is certified, it's so hard to speculate, particularly with a school like UNI," Dannen said. "What is the financial harm? What is Ali's financial interest? I don't know. There's so many tentacles to this thing."

For Northern Iowa and other NCAA schools in Iowa, cutting sports is one option, as is decreasing both the funding and the amount of scholarships per sport. The subject is sensitive for athletics departments. Iowa State Athletics Director Jamie Pollard declined to comment, while Iowa Athletics Director Gary Barta answered questions through email.

"I'll be very interested to see how the courts decide this particular case," Barta wrote. "I won't begin to speculate how it will or will not affect college athletics or the Iowa Hawkeyes until I see what direction the legal decision heads."

The greatest stakeholders are both the NCAA and major conferences, such as the Big Ten. According to its most recent tax filing, the NCAA earned nearly $815 million from Sept. 1, 2010 through Aug. 31, 2011. Its expenses totaled more than $773 million and it listed assets exceeding $506 million. The non-profit organization generated $690 million that year in television rights alone.

The Big Ten's 13 public schools (counting future members Maryland and Rutgers) earned nearly $300 million from the league and NCAA sources in the 2012 fiscal year. Those figures, which were obtained by The Gazette through the Freedom of Information Act, also show the schools combined to spend more than $149 million on athletic scholarships that year for 6,146 athletes.

"Some people say they (athletes) should get half the media dollars," Delany said. "Half the media dollars do go to aid. They happen to go to aid for men and women in lacrosse and basketball and baseball and football. Some people say that's not fair because most of the money comes from football and basketball. Hey, where do you think the money's been coming from since 1906?"

Athletes sign away their likeness as part of form release 08-3a, which grants their universities and leagues the right to "publish, duplicate, print, broadcast or otherwise use in any manner or media, my name, voice, photograph, likeness or other image or descriptors of myself for any purpose ... without limitation uses in promotional and marketing materials (by the league's television partners)." The release also states that "I agree that neither I nor my heirs shall be entitled to any compensation for the use of my name, voice, photograph, likeness or other image of descriptors of myself."

An athlete refuses to sign is ruled ineligible. O'Bannon's suit seeks to strike that form as "void and unenforceable."

Athletes have complained for years about exploitation by their universities. Former Michigan star Chris Webber complained to author Mitch Albom that his jersey was sold in a campus bookstore for $75 and he didn't have enough money for lunch.

Current Big Ten schools earned anywhere from $21.4 million (Michigan) to $4.44 million (Penn State) in licensing and royalties in 2012. Much of that revenue is from jersey sales from numbers currently worn by popular football or men's basketball players. Texas A&M merchandise sales jumped a reported 53 percent after quarterback Johnny Manziel won the Heisman Trophy.

"Texas A&M is an institution that's been around for 130 years," Delany said. "If Johnny Manziel was playing arena football, what's the uniform worth?"

Officials counter that athletes earn scholarships at prestigious institutions. The average cost for an out-of-state student to attend one of the Big Ten's 13 public schools is $37,129. For a red-shirt athlete, the five-year value approaches $200,000. Plus athletes receive academic tutoring, access to top-notch personal trainers and medical care that would cost a regular student tens of thousands of dollars over a college career. Many athletes see little game action, and their marketability has little value outside of the uniform.

"Student-athletes are provided an unbelievable opportunity competitively, academically, and financially," Barta said. "I don't support an approach that pays student-athletes for playing."

In conversations with other league officials, Delany said the message was, "There should be no compromise on this. This is not something you can negotiate about."

In a declaration filed in March, Delany wrote the Big Ten might consider a Division III model without athletic scholarships O'Bannon ultimately prevails. He later told The Gazette, ""We don't want to go Division III. We want to (stay) Division I." But the impact of such a shift however unlikely would devastate communities like Iowa City.

Josh Schamberger, president of the Iowa City/Coralville Area Convention and Visitors Bureau, said Iowa football's economic impact is $105 million per year in the community. He called Iowa football games "basically seven Christmases for these businesses."

"It's such an integral part of quality of life that anything that would come about jeopardizing that is certainly would have a big impact here in community," Schamberger said.

While Infante cited some of Delany's examples, like the Division III model as "illogical," he also said the threats are not empty, either.

"That sort of tells you the stakes that are out there," Infante said.

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