Empirical Study on how NCAA and Member Schools Profit from Basketball Players

In second part his front-page examination of the NCAA for the Indianapolis Star, Mark Alesia studies the extent to which schools and the NCAA profit from star players (Alesia, "Tourney Money Fuels Pay-to-Play Debate," Indianapolis Star, 4/1/2006). Strikingly, according to Alesia, fewer than 1% of NCAA athletes generate more than 90% of the NCAA's money, which confirms the incredible economic value of hoop stars to colleges and universities. Alesia uses additional ways to expose the popular refrain, "these kids shouldn't complain, they are getting a free education," as profoundly unfair. For instance, he mentions how Scott Pollard, while a student-athlete at the University of Kansas, struggled with finances as he watched Kansas sell his replica jersey to fans. Alesia then reveals this nugget:

43 of the 50 public-school teams in last year's tournament generated a combined $267 million for their athletic departments, mostly in ticket sales, donations and TV revenue. Those schools gave out a total of $12 million in men's basketball scholarships. The rest was used to pay for coaches, administrators and money-losing sports -- basically, all others except football.

Pretty good deal for the schools with top basketball programs: they pay out a combined $12 million for the athletes who generate $267 million for them. Alesia interviews Ellen Staurowksy, a professor of sport management at Ithaca College, who contends, "the hidden part of the budget (in big-time college sports) is the artificial suppressing of the value of the people making this run." As a result, some argue that NCAA players should be provided with some kind of stipend. Pistons guard Chauncey Billups agrees:

"I've had the conversation with a couple of my teammates about this issue. Tayshaun (Prince) went to Kentucky and Rasheed (Wallace) went to North Carolina and Rip (Richard Hamilton) went to UConn. Those places make millions of dollars (in basketball revenue). You're telling me it's not fair to pay those kids a stipend? I'm not saying to pay them NBA money or $200,000 or $300,000. I'm not saying that. But at least a little stipend would be fair, without a doubt."

Duke senior J.J. Reddick, however, believes that the simplicity of the current system -- where players get nothing and the schools get everything -- justifies it (sort of like how people justify the flat tax idea on grounds that it's simple, without considering its fairness or desirability):

"I really don't think that college athletes should be paid a stipend. Should one player get more than another? Should a guy at a big school whose jersey sells for Nike be paid more than (someone) at a low D-I school? Doesn't make sense. I think the easiest way is to just have the system that's in place right now."

Possibly the most interesting part of Alesia's study pertains to research from Robert Brown, an economics professor at Cal State-San Marcos, who studies the value of college athletes. Brown's research shows that a basketball player who goes on to be drafted by the NBA is worth $900,000 to $1.2 million to his athletic department per year while he’s in college. Check out this chart, which, through assorted metrics, calculates the value of individual players in last year's NCAA Tournament championship game. Raymond Felton, for instance, generated $1.2 million for UNC, while Deron Williams brought in $970,000 for Illinois. The lowest value player on either team, Illinois' Shuan Pruitt, generated about $70,000 in revenue--or about 7 times the value of one-year of his 4-year scholarship. Gotta love simplicity in action!

A truly outstanding work by Mark Alesia, and congrats to the Indianapolis Star for publishing it. Related links:

Part I of Study: College Pays, Public Pays (3/30/2006)
Part II of Study: Tourney Money Fuels Pay-to-Play Debate (4/1/2006)
Interactive Database: NCAA Financial Reports (3/30/2006)
Chart: How Much Would College Players Be Worth? (4/1/2006)
Sports Law Blog: New Study on College Sports Finances and NCAA Tax Exemption (3/31/2006)
Sports Filter: Discussion of Alesia Study (3/31/2006)

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