College Athletes Get Paid (Part II)

For Part I look here.

One argument in favor of paying college student-athletes observes that players in basketball and football generate millions of dollars for their respective universities. It concludes that fairness or equity demands that they receive a substantial portion of that revenue.

Obviously, athletes do not alone generate the revenue. Many factors, including stadium design, concessions, alumni associations and state pride, all contribute to producing the sellout crowds and television contracts. With that said, clearly the athletes are the entertainers on the stage, and in other fields usually the on-stage performers receive the largest compensation.

But even if we ascribe the lion’s share of the total revenue to the athletes, it is not always clear which players actually produce the revenue. For example, consider a top basketball program, like Duke’s. Duke attracts the finest players each year in part because the athletes from previous seasons created the athletic powerhouse. Basketball stars who enroll at Duke can be assured that their teammates will also be high-level players who can complement them, and that they will play in a highly competitive league in front of a national audience. It is the Duke name and tradition, a product of the efforts of past teams, coaches and others, that create that opportunity for the next top high school athlete and assure the continuation of the revenue stream.

If, however, we were to pretend that nothing else matters and that all of this year’s revenue were produced by this year’s team, even then it would be difficult to say which players produced the revenue. Basketball and football are quintessential team sports, where wins are the product of the joint efforts of teammates. In technical terms, there is a high complementarity of inputs. A star quarterback is worth little without effective blockers and receivers who can get open; even a decent running game enhances the quarterback’s performance indirectly. As a result, it is very difficult to determine a particular player’s contribution. If we assume that wins are the product of a top collegiate program, it is difficult to decide how much each player, even star players, matter to the product, at the margin. How many more wins does Player X produce, as compared to his replacement?

Wins in baseball, by contrast, appear to be much less a joint product (less complementarity of inputs). Therefore, if a pro team were to hire the league’s best first baseman, best second baseman, and so on, the odds are high it will having a very successful team. To put it another way, the teams with the highest payrolls in Major League Baseball usually are the best teams. (Bet on the Yankees.) In basketball, where teamwork is much more important, the size of the team’s payroll is not a good predictor of win totals. (So don’t bet on the Knicks, with the league’s highest payroll and near-fewest wins.)

Pro basketball and football teams in deciding whether or not to sign (or re-sign) a free agent struggle mightily in trying to measure the value of a player, and that’s despite having years of performance data and even experience in coaching the player. Imagine the difficulty of pricing the marginal product revenue of a nineteen-year-old college freshman?

So, my point in this installment is not to say that star college athletes don’t matter in producing wins and revenue; of course they do. My point is that the claim that “fairness” demands that the team’s revenue be distributed to the players is a bit too simple; it avoids the multiple inputs that produce revenue, and also begs the question about exactly what contribution a particular player makes to that revenue. Perhaps a lock-step system that distributes some portion of the revenue to the players equally would work; perhaps arguably that is what we have now.


Coming in Part III: What would a free wage market in college sports look like? It wouldn’t be pretty.

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