NCAA News Market Analysis: Navigating Revenue Streams, Challenges, and Future Opportunities

The landscape of college sports is undergoing a seismic shift, driven by evolving revenue models, legal challenges, and the increasing financial power of student-athletes. This article delves into the NCAA news market, examining revenue generation, financial challenges, and future opportunities, with a focus on how these factors impact the overall landscape of college athletics.

Introduction: The Evolving Financial Ecosystem of College Sports

College sports, once governed by strict amateurism rules, have transformed into a multi-billion dollar industry. The NCAA, conferences, and individual schools generate substantial revenue through various avenues, including television broadcast rights, ticket sales, merchandise, and donations. However, this financial success has also led to increased scrutiny and legal challenges, particularly regarding the compensation and rights of student-athletes. The primary financial artery in college sports has become the symbiotic relationship between athletic conferences and television networks, relationships governed by a free market economy.

Key Revenue Streams in College Sports

Television Broadcast Rights

The largest single source of revenue for college sports has become television broadcast rights. The value of television dollars and the percentage of revenues it accounts for has grown significantly since the late 2000s. Television broadcast rights are a cornerstone of college sports revenue. After the 1984 Supreme Court Decision, conferences stepped into the position of negotiating television rights on behalf of their member schools. Each Power 5 Conference secures its own television rights deals. These agreements, negotiated by conferences on behalf of their member schools, generate substantial revenue that is then distributed among the institutions. In 2020, the SEC signed an exclusive 10-year media rights deal with ESPN that runs from 2024-2034 at an estimated total value of $3 billion. Power 5 Conference revenue has consistently grown by 10% per year between 2013-2022 with television rights generating nearly two-thirds of that revenue in 2022.The rest of the revenue was generated from postseason bowl games (21.2%), distributions from the NCAA (8.9%), and other sources (4.2%).

Supreme Court Ruling: A pivotal moment in the evolution of college sports revenue occurred in 1984 when the Supreme Court ruled in NCAA v. Board of Regents (of the University of Oklahoma) that the NCAA’s control of television deals represented a restraint of trade. This landmark decision ushered in a free market system for revenue generation, in lieu of an NCAA-regulated system. Subsequently, the Bowl Championship Series and the College Football Playoff (“CFP”) led to large television deals for post season competition. The NCAA managed to retain media rights to basketball’s March Madness tournament and as a result, the majority of the NCAA’s revenues are derived from this highly popular basketball championship tournament.
Conference Power: After the 1984 Supreme Court Decision, conferences stepped into the position of negotiating television rights on behalf of their member schools. Each Power 5 Conference secures its own television rights deals. The conferences amass revenues from television contracts, sponsorship deals, and ticket sales, distributing a substantial portion to member schools.
Pac-12's Financial Troubles: In 2022, facing expiration of its 12-year, $3 billion television rights contract in 2024, the Pac-12 Conference unsuccessfully sought a new television rights contract with ESPN and Fox but ultimately ended up with a riskier proposal from Apple TV. As a result of the television revenue uncertainty and the need to address losses incurred during the Covid-19 shutdowns, UCLA and USC announced their departure from the Pac-12 conference in 2022. As a result, Oregon State’s athletic department anticipates an 84% decline in conference and media revenue, plummeting from $42.7 million in fiscal year 2024 to $6.7 million in fiscal year 2025, raising significant concerns about the future of its athletic program.

NCAA Championships and Tournaments

The NCAA, a non-profit entity, regulates amateur sports competition for its 1,100 member schools in the United States, categorized into Divisions I, II and III, based on size and financial resources, with Division I including the largest athletic programs. While the NCAA regulates athlete participation in sports for its member schools, it does not control the athletic conferences, or post-season football games, and has no control over conference television contracts. Originally, the NCAA controlled the television deals and appearances for each school. The NCAA generates its own direct revenue from championship tournaments, distributing the surplus to schools.Big football schools wanted freedom to broadcast their games on major television networks, which led to lawsuits between major college football schools and the NCAA. The NCAA generated a record $1.22 billion of revenue in 2022 and more than 93% of that came from March Madness ticket sales, merchandise and television broadcast rights.

Postseason Bowl Games and the College Football Playoff (CFP)

The college football postseason bowl games and the College Football Playoff (CFP) inject big money to the conferences and schools, as television networks have paid substantial sums for broadcast rights. During the 2022-2023 season, there were 43 postseason bowl games, including the three-game[16] CFP, with payouts to the conferences ranging from $225,000 for the less prestigious bowls to upwards of nearly $100 million for inclusion in the three game CFP. The CFP will expand in 2024 from three games to eleven games.

Ticket Sales, Merchandise, and Donations

Schools generate direct revenues from ticket sales, merchandise, donations and other sources. These sources, while significant, are often overshadowed by the massive revenue generated from television deals and postseason events.

Financial Challenges and Disparities

Despite the overall financial growth in college sports, significant challenges and disparities exist.

Revenue Concentration

For all the money that college sports bring their universities, most of that money is from one of two sports, football and basketball. They’re the “revenue generating” sports in common parlance. That’s not a very diversified revenue situation. If something happened to college football-and I don’t even need to mention what that could be-all of college athletics could suffer. Could college baseball be the solution for a third revenue generating sport? Or should it be another sport? Or some other venture entirely? A significant portion of revenue is concentrated in football and basketball, leaving other sports and smaller institutions struggling to compete.

The Pac-12 Implosion

If you’re a college sports fan, you’ve likely felt concerned by the implosion of the Pac-12 conference that will likely devastate Oregon State University and Washington State University’s athletic program. The Pac-12 Conference’s 2022 operating expenses equaled 20.4% of revenue compared to an average of 6.7% of revenue for the other four major conferences. A key difference in spending was on salaries, compensation, and benefits, in which the Pac-12 Conference spent $36.6 million in 2022, or 6.3% of revenue, while the other four major conferences spent an average of $11.5 million, or 1.7% of revenue. The collapse of the Pac-12 conference serves as a stark reminder of the financial vulnerabilities within college sports. The conference's inability to secure a lucrative television deal led to the departure of key members and a significant decline in revenue for remaining institutions like Oregon State and Washington State.

Rising Expenses

Division I public-school athletic departments (232 schools) generated $12.4 billion in revenue in 2022, with radio and television rights providing the largest revenue source, primarily distributed from conferences and the NCAA. We consolidated financial data for all of the layers of entities and found that of the $13.6 billion revenue earned in 2022, the entities spent $12.9 billion. School athletic departments spent $11.9 billion in 2022, spending the most on coaching and staff salaries as a single expense category at $4.3 billion. The schools spent $1.9 billion on facilities and overhead, $1.8 billion on athletic scholarships, and $3.9 billion on all other categories of expenses. The amount schools have spent on coaching, particularly in college football, has ballooned in recent years. Athletic departments face rising expenses, including coaching salaries, facilities maintenance, and scholarships. The amount schools have spent on coaching, particularly in college football, has ballooned in recent years. These costs can strain budgets, particularly for smaller programs.

Read also: Crafting Your NCAA Profile

Athlete Compensation and NIL

In stark contrast to the 35% of total revenues spent on coach and staff salaries, and outsized individual coaching salaries, student athletes have historically received minimal benefit from the revenues generated from college sports due to the NCAA’s amateurism rules. According to our data, student scholarships totaled 15% of revenues in 2022. However, athletes generating television viewership, namely football and basketball athletes, receive a much smaller percentage than average because schools use profits from football and basketball to fund scholarships in other sports. In 2021, the NCAA responded to pressure to improve athlete benefits and introduced the concept of NIL, which allows college athletes to profit from their “name, image or likeness” - their personal brands, endorsements, and social media influence. In 2023, its second year of existence, NIL revenues are estimated to total $1.2 billion. Currently 80%[25] of NIL money is raised by “NIL collectives”. Collectives are typically non-profit entities loosely affiliated with a school. These collectives receive donations from boosters, alumni, and fans of a particular school, then pay the funds to student athletes. Corporate sponsors pay the remaining 20% of NIL money for brand endorsements. The long-standing debate over athlete compensation has led to the introduction of Name, Image, and Likeness (NIL) rights, allowing student-athletes to profit from endorsements and sponsorships. While NIL has created new opportunities, it has also raised concerns about competitive balance and the potential for an uneven playing field.

Legal Challenges and the Future of Amateurism

The tension between the two models appears to be on the verge of breaking, with money generation as the winner. Significant new legal challenges to amateurism, such as the College Athlete NIL Litigation, Johnson v. NCAA, and Hubbard et al v. NCAA could lead to a massive shift in the financial landscape of college sports. The free-market financial relationships sanctioned by the Supreme Court in NCAA v. Several legal challenges are questioning the NCAA's amateurism rules and the status of student-athletes.

Johnson v. NCAA: The Employee Status Debate

An ongoing federal case could change all of that. Johnson v. Led by former Villanova football player Ralph “Trey” Johnson and other male and female athletes from Division I programs, Johnson argues that student athletes are employees within the meaning of the Fair Labor Standards Act (FLSA) and accompanying state minimum wage laws. Division I colleges and the NCAA, as a membership organization, are depicted as joint employers, meaning they together control and share responsibility for athletes’ scheduling, supervision and other workplace-like conditions. Through Paul L. McDonald, Michael J. Willemin and other attorneys, the plaintiff athletes maintain that college athletes are student employees, in the same vein as work-study students who are paid to perform tasks in campus offices, dining halls, libraries and bookstores. Student employment is legally distinguishable from professional employment. As the athletes point out, some work-study students have jobs in athletics, such as student ticket takers, seating attendants and food concession workers at NCAA contests. The federal minimum wage is $7.25/hour, though some states require higher amounts and some universities set a campus minimum wage higher than the law requires. The case has enjoyed a favorable trajectory to date. District Judge John Padova denied the NCAA’s motion to dismiss. He reasoned that the NCAA possesses substantial employer-like powers, including with respect to “hiring” in the form of recruitment rules and “firing” by rendering athletes ineligible. Padova also stressed the NCAA’s system for “Countable Athletically Related Activities” or “CARA,” which limits time student athletes can devote to athletics, is consistent with an employment schedule. Padova found the element of control to favor student employment, too. He underscored how athletes’ time is controlled by athletic obligations and how schools, pursuant to NCAA rules, can restrict and discipline student athletes in more substantial ways than they can non-athlete students. Court of Appeals for the Third Circuit denied the NCAA’s appeal of Padova’s order and returned the case to Padova. At the same time, the Third Circuit instructed Padova to apply a different test for employment. In court filings, the athletes maintain they meet this test. They point out that interscholastic athletics aren’t part of any academic curriculum or course, and aren’t conducted for academic credit. Further, the life and career skills obtained through college sports are depicted as the kind found in work environments. Supreme Court Justice Brett Kavanaugh detailed in NCAA v. The athletes additionally underscore how colleges provide the “tools and means,” such as training, equipment and preventative care, needed for them to play NCAA sports. Represented by Todd A. Noteboom, Tracey Holmes Donesky, Steven B. Katz and other attorneys, the defendants draw from a concurring opinion by Third Circuit Judge David Porter in Johnson. The NCAA and colleges also insist the athletes should explain how college athletics interfered with their studies.Since Padova forcefully denied the defendants’ previous motion to dismiss, there’s a good chance he’ll issue another denial this time around. Remember this is an FLSA case, not an antitrust case. NCAA antitrust litigation has involved big money topics often protected by trade secrets, including billion-dollar broadcasting deals. That matters, because FLSA discovery is more public-facing and would necessitate college officials, coaches and staff having to share time sheets, practice schedules, on-field activities notes and other materials relevant to student employment. It’s not just the athletic department staff that would be put to work should Johnson advance. Like House, Johnson could settle at some point, with a settlement paying many thousands of former and current college athletes and changing rules to acknowledge them as student employees. The alternative is to gamble the courts will side with the NCAA. The Johnson v. NCAA case, argues that student-athletes are employees under the Fair Labor Standards Act (FLSA) and should be entitled to minimum wage. The outcome of this case could significantly alter the financial structure of college sports, potentially requiring institutions to pay athletes as employees.

Potential Implications of Employment Status

“I don’t understand why everyone’s so afraid of employment status,” Tennessee athletic director Danny White told ESPN in December. “We have kids all over our campus that have jobs. … We have kids in our athletic department that are also students here that work in our equipment room, and they have employee status. If student-athletes are deemed employees, colleges and universities would face new financial obligations, including minimum wage requirements, workers' compensation, and potential collective bargaining. This could lead to significant changes in how athletic programs are funded and managed.

Exploring New Revenue Opportunities

To address financial challenges and ensure the long-term sustainability of college sports, the NCAA and its member institutions are exploring new revenue opportunities.

Expanding the Appeal of College Baseball and Other Sports

I bleed blue and gold. To clarify, that means UCLA Bruin Blue & Gold. It also means that when football and basketball end, I don’t fret. UCLA is, after all, a softball, gymnastics and beach volleyball school. I’m the type of fan who watched the NCAA playoffs for each of those sports. And I’m watching the college baseball series too. They asked me what I thought about college baseball. I answered, “Not much, unless it’s the post-season.” But that right there says a lot about college baseball’s (and softball) status in the sport’s landscape. Colleges could explore strategies to increase the revenue-generating potential of sports beyond football and basketball. This could involve increased marketing efforts, improved broadcasting deals, and enhanced fan engagement.

Esports and Gambling

Should the NCAAs adopt eSports as a new type of sport? Or what about gambling? Is that something the NCAA should sanction or is it too risky? The NCAA could consider sanctioning esports and exploring opportunities in the gambling market to generate new revenue streams. However, these ventures would require careful consideration of potential risks and ethical concerns.

Global Growth

Am I being too US-focused? How should the NCAAs think about global growth? Do they have the capabilities and where could they go? Europe? Asia? The NCAA could explore opportunities for global expansion, potentially tapping into new markets and fan bases in Europe and Asia.

The Pooling of Media Rights: A Contentious Debate

A study commissioned by the Southeastern Conference and the Big Ten concluded that allowing conferences to pool their media rights - a key proposal among some looking to solve money problems in college sports - would generate less revenue than if the leagues continue the decades-old practice of selling their own games. The idea of pooling media rights has been touted by some lawmakers and sports leaders as the best way to supercharge revenue and ensure college sports remains solvent in a new, more-expensive era brought on by name, image and likeness (NIL) payments to college players. Campbell responded to the release of the study on social media, calling college sports “broken, and those who first made the mess and profit handsomely from the status quo do not want to fix it.” Campbell has acknowledged that the unspooling of TV contracts that have varying expiration dates between the league and broadcasters would take years. The SCS proposes creating an independent entity charged with maximizing revenue, with options to sign on to what could be a reworked Sports Broadcasting Act within 12 years. In his post, Campbell criticized SEC Commissioner Greg Sankey and Big Ten Commissioner Tony Petitti, who called for the study. Sankey and Petitti hired the FTI Consulting Firm, which said the basis of its review was “certain … information provided to it as well as publicly available information.” The relatively small number of NBA (30) and NFL (32) teams compared to the 136 that would be part of a college pool (if every school agreed to participate) makes those deals more manageable, according to FTI.Some propose pooling media rights among conferences to increase revenue and ensure the solvency of college sports. However, studies suggest that this approach may not generate as much revenue as individual conferences selling their own games.

Rewriting the Sports Broadcasting Act

Both Campbell and a Democrat-backed bill in the Senate, called the SAFE Act, have proposed rewriting the 1961 Sports Broadcasting Act, which bars the conferences from combining their TV rights. Rewriting the Sports Broadcasting Act could allow conferences to combine their TV rights, potentially increasing their negotiating power and revenue.

Strategic Frameworks for Evaluating Opportunities

In a previous life, I used to explore new business opportunities for an entertainment company. Let’s start by defining the question. A lot of times, our disagreements-political, philosophical, business strategy-stem from trying to answer different questions. Before we go too much further, I understand the NCAA is not a business in the traditional sense of having shareholders and being relentlessly focused on profitability. Yet, for a non-profit, the NCAA does pretty well for itself. Like a billion dollars in revenue well. Their member institutions make tens or hundreds of millions more. With this quick categorization, we can brainstorm all sorts of specific opportunities for college athletics. For expanding current lines of business, should the NCAA try to build out college baseball? Or lacrosse, which has expanded rapidly in the last decade? Or how about women’s athletics like women’s beach volleyball, women’s basketball or women’s gymnastics? Of course, sometimes expertise in one area could help build a brand new business. That’s true growth. My goal is to take the tools, techniques and learnings I developed and apply them to college athletics. Hopefully, I can learn more about this fun industry while teaching Athletic Directors a bit more about business.Various strategic frameworks can be used to evaluate new opportunities in college sports.

SWOT Analysis

SWOT is probably the most common of the strategic frameworks. It stands for “strengths, weaknesses, opportunities and threats”. People like it because they can pretty much fit any idea they have into it somewhere. For that reason, it’s essentially a glorified pro/con list. The SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis is a common framework for identifying potential opportunities and challenges.

Marketing Framework (3Cs and 4Ps)

The Harvard-taught marketing framework aligns the strategic situation (3Cs) to the marketing mix (4Ps) This is my favorite framework and inevitably, I find fun insights while using it. The marketing framework aligns the strategic situation (3Cs: Company, Customers, Competitors) to the marketing mix (4Ps: Product, Price, Place, Promotion).

POCD Framework

Ultimately, I needed a better tool. I have one in mind, but it isn’t perfect. It’s usually used by venture capitalists to evaluate investments. The best way to identify new opportunities is to use the oldest metric: money. What can drive the most revenue (and/or profit) growth for the NCAA? So that’s the numbers we should get to. For that, I use the POCD framework. People, Opportunity, Context and Deal. - Who are the people involved? - What is the size of the opportunity? Unlike the SWOT analysis, the price of the deal is always mentioned. Unlike the marketing framework, this deal emphasizes the size of the opportunity. And unlike the Five Forces, the people involved in the opportunity matter. To see this framework in action, consider how a venture capitalist would have evaluated AirBnb in 2010. (In 2010, Airbnb raised its first series of venture capital.) If you could disrupt the entire hotel industry, the opportunity is valued in the billions. Easily. The founders seemed pretty focused on customers, which helped drive early growth. Meanwhile, the deal terms may have looked cheap (they received $7.2 million in their first Series A round). This brings us to the numbers. The reason we use a framework is to get to the “Net Present Value” of any opportunity. The POCD (People, Opportunity, Context, Deal) framework is used by venture capitalists to evaluate investments and can be applied to assess new opportunities in college sports.

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