The Next Step for NIL: How a New Lawsuit is Promising Shared Broadcasting Revenue for Student-Athletes

by Jared Yaggie, Associate Member, University of Cincinnati Law Review Vol. 91

I. Introduction

Starting in 2024, every member school of the Southeastern Athletic Conference (“SEC”) will receive $300 million annually until 2034 through the SEC’s TV contract with ESPN.¹ The deal with ESPN only covers men’s football and basketball games, but all the Power Five Conferences have their own broadcasting network that airs other sports competitions like women’s volleyball. All those athletic conferences have deals with media giants to broadcast those sporting competitions. Another example is the six-year deal the Big Twelve signed in October 2022 that is worth $380 million per year.²

With the advent of name, image, and likeness (“NIL”) deals in college sports, the question of when college athletes will get their fair share of that money from TV contracts becomes more reasonable. By opening the door for college athletes to cash in on NIL deals, the NCAA, conferences, and institutions are beginning to feel the pressure of such a movement. Athletes are who put in hours of effort and hard work throughout the year only to serve as the means through which universities secure TV contracts that drive not only athletic department expenses but academic expenses too.

The success of a university’s athletic program, more specifically men’s football and basketball, directly affects student applications year after year.³ Schools admit they believe this to be true, and that college athletes are necessary for their marketing schemes.⁴ The NCAA Manual (“Manual”) even alludes to this idea stating that “intercollegiate athletics programs shall be maintained as a vital component of each institutions broader educational program.”⁵ Moreover, it’s clear that athletic conferences benefit from their members academic and athletic success. For example, the University of California Los Angeles is leaving their conference, the Pac-12, for money purposes, as the university needed more revenue.

Section II of this article introduces how other student-athletes have attempted to break through the wall of NCAA Bylaws that prohibit broadcast revenue sharing. Then, Section III analyzes those arguments and discusses why ongoing litigation may conclude in a favorable result for student-athletes. Section IV concludes the article offering other sources of revenue sharing that may result from a positive decision.

II. Background

On October 26, 2022, the NCAA Division I Board released a document providing clarifications of the Interim NIL Policy (“Interim Policy”) dated July 1, 2021.⁶ This document highlights existing NCAA Bylaw 12.5.1.1-(f), which states an institution may not compensate a student-athlete in exchange for the use of their NIL.⁷ Further, the document clarifies that conferences and student-athletes participating in revenue sharing for TV broadcasts or other NIL revenue is impermissible.

The idea that college athletes are entitled to TV broadcast revenue is not new and people have been attacking the NCAA and athletic conferences legally for over a decade. Former college football and basketball players attempted such with a case filed in 2014 in the U.S. District Court Middle District of Tennessee, but the case was dismissed in 2016.⁸ The athletes in that case claimed that the common law theory of the right of publicity gave them control over their name, image, and likeness.⁹ Therefore, television broadcasters could not commercially benefit from using their NIL.¹⁰ The court rejected this argument because Tennessee courts and the state legislature, despite recognizing the right of publicity as a property right, did not recognize the right of publicity for sports broadcasts.¹¹ The district court further rejected the athletes’ antitrust claim by relying on the United States Supreme Court ruling in NCAA v. Board of Regents that the district court interpreted as meaning that when an NCAA Bylaw promotes amateurism, it is presumed procompetitive.¹²

In the same year as the Marshall case was decided, the 9th Circuit in O’Bannon v. NCAA affirmed a lower court decision that subjected NCAA compensation rules to the rule of reason under antitrust scrutiny, resulting in the NCAA having to allow schools to award grants-in-aid equal to the full cost of attendance.¹³ The athletes in that case sought broadcast revenue sharing through a group licensing market where student-athletes sell group licenses.¹⁴ The court found such a market had demand and thus the NCAA compensation rules potentially restrained competition.¹⁵ However, the court stopped the rule of reason analysis finding that the NCAA’s compensation rules did not have an anticompetitive effect on the licensing market.¹⁶

Then, in 2021, the Unites States Supreme Court released its decision on National Collegiate Athletic Association v. Alston.¹⁷ That decision historically opened the door for the NIL market flourishing today. As noted by Justice Kavanaugh in his concurring opinion, the Court laid the foundation that the NCAA’s compensation rules “should receive ordinary ‘rule of reason’ scrutiny under antitrust laws.”¹⁸ Justice Kavanagh continues confirming that the comments from Board of Regents about amateurism are not binding and cannot be used by the NCAA to justify their gross price fixing as presumably procompetitive.¹⁹ As a note, Justice Kavanaugh doubts the NCAA has a strong procompetitive justification for its compensation rules including the rules denying broadcast revenue sharing.²⁰

More recently in 2020, a complaint was filed in the U.S. District Court Northern District of California.²¹ The complaint, as amended after the NCAA released the Interim Policy, argues that the NCAA and Power Five Conferences—Pac-12, Big Ten, Big Twelve, Southeastern, and Atlantic Coast—have concerted unreasonable restraint of trade practices acting as a cartel that fixes the amount of compensation student-athletes may receive for licensing the use of their NIL.²² The complaint mentions that every person has a property interest in their public personality (the right of publicity) and should have the sole right to benefit from and restrict its commercial use.²³ However, the argument is not based on the existence of this right as the antitrust violations exist separate to the violation of that right.²⁴

III. Discussion

So how will the antitrust argument fare in the new lawsuit? Due to the rapid development of the NIL industry and its relatively massive success after the Alston decision, the NCAA will have a difficult time arguing its limitations on broadcast revenue are procompetitive. There is not a great deal of difference between the In re College Athlete NIL Litigation case and O’Bannon. Thus, the new lawsuit needs to first succeed where O’Bannon could not by being able to show an anticompetitive effect on a market where student-athletes are compensated for their contribution to the value of TV broadcast revenue. The athletes in In re College Athlete NIL Litigation have the benefit of recent events in their favor. At the time O’Bannon was decided, no court had access to any economic data on the competitiveness of a college athlete NIL market. Now the court can see clear demand in the market and the degree of competition that exists and could exist absent NCAA compensation rules.

The O’Bannon court ruled on a group licensing market where student-athletes sell group licenses for the use of their NIL.²⁵ The court said this type of market would lack competition if there were no NCAA rules regulating revenue sharing for TV broadcasts because student-athletes would not compete to sell their NIL rights.²⁶ This is because the value of an NIL license for a live game broadcast is dependent on obtaining the NIL license of every athlete.²⁷ The District Court decision in the Alston litigation, however, shows that such a theory is not completely accurate.²⁸ The District court in Alston found an anticompetitive effect where the NCAA’s price-fixing practices led to an inadequate valuation of a student-athletes’ value.²⁹ In other words, a market is burdened by anticompetitive effects when the seller of a service is compensated significantly below its value to the market—in the case of student athletes, that compensation is set at zero. Therefore, the value of an NIL license is not determined by the ability to obtain all the available student’s licenses. The value of an NIL license is better calculated by the student-athlete’s contribution to their own personal brand.

The NIL market today is the perfect example of how such value and competition can and does exist. Student-athletes have been learning how to profit off their NIL, either on their own as an entrepreneur of their personal brand, or with collectives that sell a student-athlete’s NIL to businesses on an open market. Removing restraints on student-athletes from sharing broadcast revenue would allow athletes to further determine their own value to a broadcast contract too. Student-athletes are not employees, nor is it beneficial for them to be employees for tax and employment law issues, so they cannot bargain with schools or athletic conferences, but athletic conferences and schools would need to recognize the value student-athletes bring to their broadcast contracts. The In re College Athlete NIL Litigation complaint alludes to a similar argument and further points out that evidence will be presented to show the exact economic value student-athletes bring to broadcast contracts and how that value has been completely left uncompensated.³⁰

The next step after finding anticompetitive effects in a rule of reason antitrust analysis is to weigh the NCAA’s and athletic conference’s procompetitive justifications for its restraints.³¹ Alston has established the foundation for this step as the NCAA will likely struggle finding a way to apply its beloved amateurism justification using Board of Regents.³² The last step is for the athletes to propose a less restrictive alternative (“LRA”) for the NCAA to implement.³³ The athletes in Alston proposed an alternative that removed all NCAA compensation limits or just those that are education related and place caps on benefits.³⁴ The District Court rejected those alternatives and allowed limits on grants-in-aid but the limits had to meet the full value of attendance.³⁵ The complaint does not include an argument for the rule of reason analysis, but a potentially successful LRA in the new lawsuit is that the NCAA is allowed to continue to limit broadcast revenue sharing, but not less than the true value of the student-athletes’ NIL.

IV. Conclusion

With the NCAA and athletic conferences taking in billions of dollars of revenue from TV broadcasts, the next step for the NIL industry is for student-athletes to get their share of this revenue. However, this will never happen until the NCAA Bylaws limiting this type of compensation are taken down, because amidst its loosening of NIL restrictions, the NCAA remains firm on limiting broadcast revenue sharing. Pending the results of In re College Athlete NIL Litigation, the world of college sports can only be optimistic for a successful result. The NIL market post-Alston has changed college sports forever and provided student-athletes an opportunity to develop their personal brand and profit by meeting their entrepreneurial goals, but TV broadcast revenue sharing would truly resemble the value of student-athletes for their schools, athletic conferences, and the NCAA.

Cover Photo by Norbert Braun on Unsplash

Jared Yaggie

Jared Yaggie was born in Philadelphia but raised in Western New York. Before law school he attended Texas A&M University majoring in Urban and Regional Planning. Jared’s background in planning gives him an understanding of land use and real estate law. In addition to real estate law, Jared’s contributions to the Law Review will be a mix of his other interests such as sports law and copyrights and trademarks. Jared enjoys exercising and watching sports in his free time.

References

1
ON3 Staff, Here’s a Look at all the Current Conference TV Deals, ON3 (Aug. 8, 2021), https://www.on3.com/news/conference-tv-deals-current-status-college-football/.
2
asey Lundquist, Report: Big 12 Reaches New Media Deal, Increases Annual Payout, MSN (Oct. 30, 2022), https://www.msn.com/en-us/sports/ncaafb/report-big-12-reaches-new-media-deal-increases-annual-payout/ar-.
3
Kristi Dosh, The Future of NIL and Compensating Athletes with NCAA President Mark Emmert, Bus. of Coll. Sports (Sept. 10, 2022), https://businessofcollegesports.com/name-image-likeness/the-future-of-nil-and-compensating-athletes-with-ncaa-president-mark-emmert/.
4
Id.
5
See NCAA, Division I Manual Article 1 (2022), https://web3.ncaa.org/lsdbi/reports/getReport/90008.
6
NCAA Division I Institutional Involvement in Student-Athlete’s Name, Image, ad Likeness Activities, NCAA (Oct. 26, 2022), https://ncaaorg.s3.amazonaws.com/ncaa/NIL/D1NIL_InstitutionalInvolvementNILActivities.pdf; see also Interim NIL Policy, NCAA (July 1, 2021), http://ncaaorg.s3.amazonaws.com/ncaa/NIL/NIL_InterimPolicy.pdf.
7
See NCAA, DIVISION I MANUAL Article 12.5.1.1-(f) (2022), https://web3.ncaa.org/lsdbi/reports/getReport/90008.
8
Marshall v. ESPN Inc., 111 F. Supp. 3d 815 (M.D. Tenn. 2015); see also Marshall v. ESPN, 668 Fed. Appx. 155 (6th Cir. 2016).
9
See Marshall, 111 F. Supp. 3d at 825.
10
Id.
11
Id.; accord Tenn. Code Ann. § 47-25-1101.
12
See Marshall, 111 F.Supp. 3d at 832-34; see Nat’l Collegiate Athletic Ass’n. v. Bd. of Regents of Univ. of Okla., 486 U.S. 85 (1984).
13
O’Bannon v. NCAA (O’Bannon II), 802 F.3d 1049 (9th Cir. 2015).
14
Id. at 1057.
15
Id.
16
Id. at 1058.
17
141 S. Ct. 2141 (2021).
18
Id. at 2167 (Kavanaugh, J., concurring).
19
Id.
20
Id.
21
Consolidated Amended Complaint, In re College Athlete NIL Litigation, No. 4:20-cv-03919 (N.D. Cal. July 26, 2021).
22
Id. at 107-11.
23
Id. at 5:12-17.
24
Id. at 5:18-24.
25
O’Bannon v. NCAA (O’Bannon II), 802 F.3d 1049, 1057 (9th Cir. 2015).
26
Id. at 1058.
27
Id.
28
In re National Collegiate Athletic Association Athletic Grant-in-Aid Cap Antitrust Litigation, 375 F. Supp. 3d 1058, 1068 (N.D. Cal. 2019).
29
Id.
30
Pl.’s Notice of Mot. and Mot. for Class Certification at 9, In re College Athlete NIL Litigation, No. 4:20-cv-03919 (N.D. Cal. July 26, 2021).
31
NCAA v. Alston, 141 S. Ct. 2141, 2160.
32
Id. at 2167 (Kavanaugh, J., concurring).
33
Alston, 141 S. Ct. at 2160.
34
In re National Collegiate Athletic Association Athletic Grant-in-Aid Cap Antitrust Litigation, 375 F. Supp. 3d at 1086-87.
35
Id.

I. Introduction

II. Background

III. Discussion

IV. Conclusion

Author

References