Now that football is over and we are comfortably distant from opening day, it’s time to get into my offseason project. I wrote the preamble a few weeks ago. I have embedded a navigation link at the bottom of this page. Given the complexity of this topic, embedding a table of contents seems the best way to organize the series. Without further ado, let’s talk about the problem.
I mean problem here in the context of a word problem or optimization problem–more as an unsolved set of inputs and less a bramble in the proverbial side. College football paying players is an economics problem. So, let’s start looking at it as one.
Setting the Table
In order to determine how best to view the issues facing college athletes, we first have to figure out how to view it economically. Is it a service industry where value comes from the skill plied by tradesmen? Yes. Or, is it a production industry where the end user consumes the product that is football? Yes. So, if both apply, which do we pick?
It may help to first consider comparable industries to give us an idea of which view would be more appropriate. Service industries include electrical contractors, plumbers, welders, etc. We pay these people for their skills and the cost of materials, which is typically low. Production industries, on the other hand, see workers paid a set price by a company, where the consumer pays for a tangible product.
The argument could be made that college football is akin to a service industry and the revenue is derived from the application of the players’ skills on the field. This is not a bad argument, but it’s harmed by the fact that people do not have the same willingness to pay to go watch these players participate in a combine. Athletic skill is not universally valuable within the loosely defined industry of college athletics. In a service industry like electrical work, the electrical contractor is equally valuable wiring a new house as he is repairing a short circuit. It is for the preceding reason that the best way to look at this industry and the connected markets is through the lens of a production market. Consumers pay for the end product–the games and attribute less individual value to the individuals.
I am willing to stipulate at this point that the industry of college athletics is more of a hybrid of both a service industry and a production industry. However, for the purposes of this evaluation, we will presume it to be about creating the product of college football until such a time that it is overwhelmingly obvious that the facts no longer support this premise. A final note on this part is that the National Football League is far more akin to a service industry. (This has a lot to do with branding, but more on that later).
The Problem of Payments
Starting with the obvious stumbling blocks, I will attempt here to “empty my pockets” of all of the issues an analysis needs to resolve in order to be reasonably complete. My goal is to have a piece that cannot be defeated on the grounds that the argument is critically lacking in completeness.
So, let’s presume for a moment that we want to pay the players–we have to take this as a premise since taking the opposite position would make this whole thing a nonstarter. What objections or logistical hurdles would we have to overcome?
Here’s what I have so far:
Determining Fair Market Value for Players
The main issue is figuring out what to pay these kids. Brand recognition in collegiate athletics is school-centric. Excellent players build their brand, but the turnover rate is so high that the best players only have a couple years to create a following. On the other hand, great players at great schools can win championships and that builds new brands or furthers the established brands of the top schools. Figuring out how much of that is owed to the players weighs heavily on the problem.
Establishing a Free Market within the Framework of College Football
Even as a free market apologist, I know that it’s wishcasting to pretend that a for-profit football market would be able to function independent of the confines of the NCAA’s rules system. But, figuring out how to shoehorn it into the general framework is no small undertaking.
This is not meant to be the formation of a NFL D-league, though that is the easiest solution. Revenue athletes (football, basketball) would be the most responsible for increments to the schools’ brands. However, as long as they are at the school as student-athletes, they are due the exact same as non-revenue athletes. It’s better stated as the complementary truth that non-revenue athletes are due the exact same as revenue athletes under the law. Additionally, this creates another problem because the most valuable sports are men’s sports, so there is inherent iniquity unless you also pay the female athletes who do less to help the brand. Spare me the feigned outrage here, it is a matter of fact that female sports do less to boost revenue for schools than male sports. This is not to say that excellent female programs (gymnastics, track, softball) do not have an impact, they do. However, men’s basketball and football are in a different weight class. The inability for a school to treat all athletes evenly threatens to bring down the whole system. To implement this, however, we would be asking the highest value players to champion pay for athletes who can’t pull near their weight That’s socialism. Socialism is devastating to free markets.
I am taking it as a given that green lighting pay for players will fundamentally rearrange how the pay is viewed by the IRS. In the current arrangement, the athletes are paid in tuition and ancillary benefits relating to their education. Flipping the switch on pay would fundamentally alter this arrangement–think about it, would schools really keep absorbing hundreds of thousands of dollars in tuition fees if the players were also collecting a check? I will cover this separately, too.
A switchover to a salary would lead to a consolidation of talent at the richest and most successful schools. This makes sense because in a competitive free market, the leading edge goes to the companies that can do it the best or for the best price. In sports, the most capable teams win titles and the best price teams can pay the most to players. This is fundamentally uneven in the current framework of things, assuming that the current framework really does provide a fair shot for the little guy (spoiler: it doesn’t). Recruiting would turn into an HR practice with players going to the schools with the highest pay and best benefits. Granted, there would be different elements of the “job” that motivates players, just like now. However, the process would be much more like a career fair.
This is often the most overlooked issue when talking about pay for players. But, it’s important. Once you make the game for-profit, you completely remove the teeth for compelling teams to play regional games or attend bowl games. Why would a team like Florida State play Miami every year when the Seminoles could go get an easier game with an average team with a massive fan base, like Notre Dame, to maximize earnings? Conference game value has eroded significantly with the advent of the College Football Playoff, this would only serve to make conferences more irrelevant.
Each of these elements is a component of the large, multifaceted issue of paying players. The list above is unlikely exhaustive and I’ll be fleshing out these and others in the coming weeks. It’s all very fascinating stuff. It will be interesting to see if we can get to a comprehensive economic solution to this, or if we have to move the goalposts in order to make it work.
It’s safe to say that paying players faces significant economic, social, and logistical issues. There’s certainly no switch we can throw to solve this problem.
Up next, figuring out how much we can pay these guys.