Do NCAA Licensing Deals Exploit Student-Athletes?

It’s a debate this isn’t likely to end anytime soon, but a recent event once again stirred up questions about whether collegiate student-athletes should be paid.

Talented University of Georgia wide receiver A.J. Green violated NCAA rules by selling his game jersey from last year’s bowl game to a person the NCAA recognizes as an agent. As a result, Green has been suspended for the first four games of this season.

For those on the “pay the players” side of the argument, a column by Andy Staples of Sports Illustrated made some strong arguments that players such as Green are being exploited by their universities, apparel corporations, and the NCAA.

Green reportedly sold his jersey for less than $150, but the violation of NCAA rules cost him four of the Bulldogs’ 12 regular-season games. As Staples points out, the University of Georgia sells Green’s No. 8 jersey (see image) for between $60 and $150, of which Green receives nothing.

Staples argues that it’s a double standard that the NCAA preaches about amateurism, maintains a tax-exempt status, and then earns millions of dollars courtesy of the athletic achievements of its “student-athletes,” who are punished for the slightest overstep of the NCAA’s Britannica-like rulebook.

The sale of jerseys adorning popular players’ numbers is just a small portion of the licensing revenue the NCAA reaps from the performances of its amateur athletes. A more recent phenomenon has been the use of players’ “likenesses” in video games, which produces millions of dollars of additional revenue for the NCAA and video game creators such as EA Sports.

Some of these issues have moved into legal battles, as described in a column in the September 2009 issue of Sport Marketing Quarterly (Vol. 18, No. 3, pp. 160-164) by Anita Moorman and Marion Hambrick. In their column titled “To License or Not to License: That is the Question for Professional Sport Leagues and the NCAA,” Moorman and Hambrick describe how three recent court cases are intertwined with regard to licensing. Two of those cases directly involve the NCAA.

In Keller v. Electronic Arts, Inc., former football player Sam Keller filed a lawsuit against EA Sports, the NCAA, and the Collegiate Licensing Company (CLC) for the video game maker’s use of players’ likenesses, mannerisms, and distinctive appearances without the players’ permission. In O’Bannon v. NCAA, former basketball player Ed O’Bannon filed a lawsuit against the NCAA and CLC on behalf of himself and former student-athletes, who he claims, since their eligibility has expired, should no longer be bound to the amateur status form (Form 08-3a) that the NCAA requires all student-athletes to sign.

“As these cases wind their way through the legal system, the NCAA must revisit the delicate balance it has achieved between preserving amateurism, and avoiding exploitation and over-commercialization of student-athletes and maintaining its vital revenue-producing activities, including licensing student-athletes’ names, image, likeness, or other aspects of identity.” (p. 163)

While there is currently no clear-cut answer to the question of whether collegiate athletes should be paid, things are slowly trending toward the point in time when deeper discussions among decision makers must take place.

Examining the Importance of the ‘Official Beer of the NFL’

Fans of Coors Light’s “press conference” commercials involving National Football League coaches will have only one more season to enjoy the spoofs. That’s because beginning in 2011 Bud Light will replace Coors Light as the official beer of the NFL.

The deal between the NFL and Bud Light is reportedly a six-year deal costing Anheuser-Busch $1.2 billion. It’s a significant bump from Coors’ initial four-year, $300 million deal in 2002 and its five-year, $500 million extension with the NFL in 2005.

While Anheuser-Busch will be paying a significant bump in sponsorship rights to the NFL, a leading scholar of sport sponsorship told Fitness Information Technology that Anheuser-Busch’s calculated risk will still most likely produce a financial gain, even with a heated labor dispute between players and management leading to a possible work stoppage.

“Deals this size and length are always a financial risk, since there are many variables, including the possibility of a work stoppage by the NFL down the road,” said Steve McKelvey, an associate professor of sport management at the University of Massachusetts. “I assume their contract addresses this possibility, but this can’t overcome the potential fallout in terms of goodwill and incremental sales if a work stoppage were to occur. That said, I suspect A-B has crunched the numbers to understand how the investment will pay dividends financially. I think the days of buying a sponsorship just so a competitor doesn’t get it are over.”

Interestingly, research has shown that fewer than half of fans cannot properly identify official sponsors. In March, the SportsBusiness Journal released the results of a survey in which fans were asked to identify the NFL’s official sponsors in a variety of categories. Coors Light was correctly chosen by 30.2% of “avid” fans, while 38.1% of the same group believed Anheuser-Busch was the official beer sponsor of the NFL.

Since oftentimes even diehard fans can’t correctly identify the official sponsors of leagues or events, why do companies continue to dole out nine- and in this case 10-figure deals to become official sponsors? McKelvey, who had a case study that detailed the NFL sponsorship program in a 2006 issue of Sport Marketing Quarterly (Vol. 15, No. 2, pp. 114-123), said official sponsors receive greater leverage in other avenues, such as dealing with retailers.

“While enhancing brand awareness is a nice added value for league sponsorships, it’s not exactly necessary for A-B,” McKelvey said. “Large scale sponsors on the level of A-B care less about how many consumers can identify them as official sponsors, as opposed to how much increased sales will be generated by leveraging their official sponsorship status at retail locations. A-B will be able to leverage its official association with the NFL to incentivize and motivate its sales staff, garner bigger and better in-store displays, open new retail accounts, etc.”

While Bud Light will become the official beer of the NFL in 2011, that doesn’t necessarily mean Coors Light will discontinue marketing its beverage to football fans. Bud Light actually had a “tailgate approved” infomercial theme to its campaign last football season, and with similar creativity Coors Light could continue to use football in its campaigns, although it will no longer be able to specifically utilize the NFL brand in its marketing.

“When I was negotiating league-wide sponsorship deals at Major League Baseball, we included stipulations in our contracts that if a company ceased to be an official sponsors it could not, for a period of some years, engage in promotions to ‘give the appearance that it’s continuing its official sponsorship’ (or language to that effect),” McKelvey said. “The enforcement of a clause like this proved tricky in terms of defining ‘gives the appearance.’ Unless the NFL has such a clause with real teeth in it, Coors will no doubt be able to cleverly design promotions that utilize a football thematic without infringing any NFL trademarks.”

NCAA Wins in Long Run with Legal Settlements

An interesting guest column was published in the most recent issue of SportsBusiness Journal by a couple of prominent sport management scholars regarding the NCAA and its ability to evade court rulings like Adrian Peterson evading a linebacker.

Mark Nagel and Richard Southall, co-authors of the forthcoming second edition of Sport Facility Management: Organizing Events and Mitigating Risks, published by Fitness Information Technology (FiT), wrote about some recent settlement agreements by the NCAA. In the Nov. 30-Dec. 6, 2009, issue of SBJ, they describe how the NCAA has successfully implemented a legal “four-corners offense,” ending lawsuits with settlements and thus eliminating the potential for a judge or jury to force the NCAA to change portions of the model it uses to run the most powerful organization in college athletics.

Nagel and Southall primarily detailed the NCAA’s settlement agreement with former Oklahoma State pitcher Andy Oliver, who received $750,000 from the NCAA in October, just two weeks before their trial was scheduled to go to a jury trial. Oliver was initially suspended by the NCAA in 2008 because in 2006 his adviser had contact with the Minnesota Twins, which drafted him out of high school.

Oliver certainly shouldn’t be blamed for settling the case out of court, because $750,000 is a big figure, although it’s rather small compared to the NCAA’s 2008 income believed to be in the neighborhood of $614 million. As Nagel, an associate professor of sport and entertainment management at the University of South Carolina, and Southall, an assistant professor in exercise and sport science at the University of North Carolina, write:

Within this landscape it remains to be seen whether there is a potential plaintiff sitting on a metaphorical legal bench who cannot be induced to play the NCAA settlement game. Most of the business-related cases against the NCAA have been settled because plaintiffs have had vested financial interest in settling rather than engaging in protracted legal battles whose outcomes were not assured. However, if this potential plaintiff does not need to protect a future career and is already financially secure, then the NCAA may be unable to hold the ball indefinitely.

Nagel and Southall conclude their guest column by stating that, “Perhaps Ed O’Bannon or Sam Keller is such a plaintiff …”

The "EA Sports" Sam Keller

That leads to a law column written by Anita M. Moorman, JD, an associate professor of sport administration at the University of Louisville, and Marion E. Hambrick, a doctoral candidate in the same program, in the September 2009 issue of FiT’s Sport Marketing Quarterly. They write about three pending court cases involving the business activity of licensing, two of which involve O’Bannon and Keller, who have received plenty of press for their lawsuits against the NCAA.

O’Bannon’s case filed against the NCAA and Collegiate Licensing Company (CLC) focuses on former student-athletes and the fact that the NCAA and third-party commercial entities, particularly the CLC, have benefited financially from merchandise sales while the former athletes have been prevented from receiving compensation.