How the O'Bannon Ruling Could Change College Sports

August 09, 2014

The victory for players in the federal antitrust case involving Ed O’Bannon could mark the end of an era for the National Collegiate Athletic Association.

Assuming the decision stands, it would offer big-time college football and basketball players a chance to be paid for the commercial use of their images—upending the association's long insistence on amateur ideals.

The NCAA, which is expected to appeal the decision, has enjoyed a history of success at the appellate level. But legal experts say the limits the judge put on player pay in her ruling give it a decent chance of surviving an appeal.

The ruling—by U.S. District Judge Claudia Wilken, in Oakland, Calif.—could lead colleges in the wealthiest conferences to set aside as much as $5,000 per year each for football and men’s-basketball players. Players could tap into the money after completing their eligibility.

The ruling does not prescribe payments for female athletes or men in lower-profile sports, but college leaders say that the decision raises questions about how they might be treated. The possible payments to football and basketball players alone could cost programs hundreds of thousands per year, a hefty sum for institutions outside of the 50 or so biggest programs. 

These potential increases come as the wealthy leagues were already considering new benefits for players. One proposal, made possible by a new governance system recently put in place by the association, would allow institutions in the five most powerful conferences to cover the full cost of attendance for players. That could cost some programs another $1-million a year.

Where would the money come from? And how might players receive it? Those are some of the questions raised by Judge Wilken’s ruling.

Budgeting for Change

Several college-sports experts said the opinion could throw big-time athletics into disarray. Exactly how is less clear.

“We don’t know what the answer is yet, but clearly there is going to be some change in college sports,” said Anil V. Gollahalli, vice president and general counsel at the University of Oklahoma. “It’s just hard to know what to plan for.”

He and others said their institutions are budgeting in anticipation of a variety of additional player benefits. But athletics leaders said the changes proposed in O’Bannon might not benefit players as much as the ruling suggests.

The NCAA has already stopped licensing video games that players said infringed on their rights. And after the O’Bannon trial ended, some colleges began discussing how they might curb the use of players’ names or likenesses in jersey sales and other licensed merchandise.

“I could see everybody going to, ‘We do a generic jersey,’” Gene Smith, athletic director at Ohio State University, said in an interview last month. Or some programs might make 80 or more football-jersey numbers available for sale, rather than just the star quarterback’s.

Another solution, Mr. Smith said: Colleges might get away from selling jerseys altogether.

Such a change could absolve colleges from paying players anything, said Gene Marsh, a lawyer with Jackson Lewis and a former law professor at the University of Alabama at Tuscaloosa. If athletics programs aren't making any money on something, he suggested, there wouldn't be anything to share.

But wealthy programs could go the opposite way. The ruling says the NCAA can't prohibit licensing payments to players, but does not mandate that colleges make such payments. But some college-sports leaders are agitating for that flexibility.

The Big 12 Conference's commissioner, Bob Bowlsby, and the athletic director at West Virginia University, Oliver Luck, both backed paying players for the use of their images during a forum the conference held in New York on Wednesday.

Mr. Luck, a former college and NFL quarterback, said college athletes have a “constitutional right” to govern the use of their own names and likenesses. And colleges, they and others suggested, should allow high-profile stars to be compensated.

But Mr. Luck said that, outside of a select few athletes such as Johnny Manziel, a former Texas A & M quarterback, there is not a “big pot of gold” available for payments.

The Role of Conferences

In her ruling, Judge Wilken said that colleges could choose to pay up to $5,000 per player for name-and-image rights, but that colleges as a group could not conspire to set prices.

That appeared to give conferences the latitude to decide what athletic departments should pay. Big-time conferences are known to follow the lead of their peers, but the ruling in this case could expose significant philosophical and financial differences, even among the five most powerful leagues.

In recent months, members of at least one major conference have discussed the possibility of compensating players for the use of their images. They also talked about what would happen if another conference chose to pay players and theirs didn’t.

“If someone else decides they want to take the shackles off and let players do what they want to do, will we have the principles for taking a different course if it’s going to compromise us competitively?” a top compliance official said recently, asking not to be identified. “If you do make that values-based decision, you stick to your guns and move on. But you still have to adjust to your competitors.”

The ruling did not clear the way for players to endorse products, but several athletics leaders see that as another concession programs might eventually make for certain elite athletes.

Ahead of the O’Bannon decision, some conferences were beginning to explore ways to allow players to exploit their likenesses, including selling autographs or cutting individual commercial deals.

The NCAA, which denies that it has violated antitrust laws, has strongly opposed any such deals.

A Shifting Legal Strategy?

The judge's ruling could also force NCAA leaders to reconsider their approach to defending big lawsuits. The association has already agreed to a tentative settlement in a series of concussion complaints. And the threat of further antitrust challenges could lead to more conversations about resolving differences before trial. Particularly worrisome, from the association's point of view, is a challenge by Jeffrey L. Kessler, a high-profile antitrust lawyer, alleging that colleges unlawfully cap compensation at the value of a scholarship.

In recent interviews with The Chronicle, several college presidents who have served on the NCAA’s Division I Board of Directors and its executive committee have complained about how little information they received as a group regarding the association’s strategy throughout the O’Bannon case.

Presidents were given periodic updates, one college leader said, but he would have liked to have understood more about the threat to colleges before the case went to trial.

Keeping current with such matters is among board members' responsibilities, said Josephine R. Potuto, a law professor and faculty athletics representative at the University of Nebraska at Lincoln.

“That’s your job. If you don’t do it and something screws up, you’re going to be on the line for it,” she said. “Even if they didn’t vote on it, they had every opportunity to call it off.”

That said, once the O'Bannon plaintiffs made it clear that they were seeking a share of television income, Ms. Potuto said, it was inconceivable that anybody on the NCAA staff or at any college would have argued against letting the case go to trial.