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TEACHING NOTE
CASE 29
NCAA Athletics
Overview
This newly written and highly interesting case comes straight from today’s headlines and top news stories
from universities across the nation. More than 450,000 student athletes at approximately 1,100 universities
participated in 23 National Collegiate Athletic Association (NCAA) sports in 2014. Although at least
150,000 of these student athletes participated in college athletics without any financial assistance, scholarship
athletes at NCAA Division I and Division II colleges and universities were awarded more than $1.5 billion
in scholarships in 2013. Scholarships typically covered the cost of tuition, books, and room and board, and
had an average value of $13,821 for Division I schools in 2013. Student athletes in some sports could receive
partial scholarships that provided less than the average $13,821 scholarship amount. The possibility of a future
collegiate athletic scholarship was a motivating force for many families and young athletes competing in Pee
Wee, Little League, middle school, and high school sports, who dreamt of a free or highly subsidized college
education, and the fame and prestige of a college athletic career.
The NCAA regulated college sports, which had revenues in 2013 of nearly $913 million and a budget surplus
of $61 million. In 2013, the NCAA also had net assets of $627 million, which included an endowment balance
of $326 million. The NCAA’s revenues were generated primarily from NCAA Division I men’s basketball
tournament marketing and broadcast rights and from ticket sales for other championship events. The NCAA’s
2013 expenses of $852 million included distributions to Division I member schools of $527.4 million. Some
observers argued that the NCAA exploited the student athletes whose performances made revenue-generating
sporting events possible, despite the financial support it provided to member universities. C
In 2014, the NCAA was fighting a unionization movement at Northwestern University, and it faced various
lawsuits challenging its amateurism and financial assistance policies, which barred student athletes from
receiving compensation for sports participation. In March 2014, the National Labor Relations Board (NLRB)
ruled that college players had the right to organize as unions to bargain with schools as employers. Northwestern
players voted on unionization in April 2014, but ballots were to remain sealed until an appeal of the NLRB ruling
was resolved.29
Also in 2014, the NCAA defended a lawsuit filed in 2009 by Ed O’Bannon and Sam Keller in which the
Association was charged with illegally preventing players from receiving compensation from universities while
their names and identities were used to generate billions in revenues for the universities, the NCAA, video game
producers, and broadcasters. Keller was a former quarterback at Arizona State and the University of Nebraska,
and O’Bannon played basketball at UCLA. The NCAA settled the Keller case in June 2014 and agreed to
: Are Its Amateurism
and Financial Assistance Policies 2014*
*This teaching note reflects the thinking and analysis of Professor David L. Turnipseed, University of South Alabama. We are most
grateful for his insight, analysis and contributions to how the case can be taught successfully.
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pay $20 million to current and former college athletes whose images and likenesses were used in EA Sports
video games. In September 2013, EA Sports and Collegiate Licensing Company, the nation’s largest collegiate
trademark licensing firm, had agreed to a $40 million settlement in a similar case. In July 2013, the NCAA had
ended its licensing agreement with EA Sports, which had produced NCAA football video games since 1998.
O’Bannon’s lawsuit differed from the Keller suit in that it asked the judge to force the NCAA to change its
amateurism and financial assistance rules that prohibited college athletes from receiving compensation for use of
their names and likenesses in broadcasts and video games. The NCAA’s defense during the 2014 trial centered
on the long-term economic value of a college education. The plaintiffs’ case was summarized by an expert
witness, Stanford economist Dr. Roger Noll, who testified that “the NCAA is a cartel that creates a price-fixing
agreement among the member schools.” The NCAA’s chief legal officer, Donald Remy, commented to reporters
outside the courtroom that “by [Noll’s] definition, every amateur organization would be a cartel.” After 15 days
of testimony, on July 24, 2014, the NCAA and the O’Bannon plaintiffs were required to wait for Judge Claudia
Wilken’s decision. Regardless of the outcome of the trial, the NCAA was forced to evaluate the ethics of its
amateurism and financial assistance policies.
Suggestions tor Using The Case
This NCAA case is ideal for beginning the module on Ethics, Corporate Social Responsibility, Environmental
Sustainability, and Strategy, Chapter 9. The very high-interest case teaches well because all students will be
aware of the increasingly contentious situation surrounding college athletics, and there will likely be some
student athletes in your classes who are directly affected. The case will certainly elicit a large amount of class
discussion with strong opinions on various aspects of the pay-for-play issues.
The class discussion of the case will likely center on whether NCAA amateurism and financial assistance policies
reflect greed motives on the part of university administrators or financial constraints. The class will likely be
divided on the topic as the pros and cons of compensation for student athletes are developed.
The purpose of this exercise is to provide an opportunity to examine a multi-faceted ethical issue in which there
are several differing points of view. Three is a “moral free space” for each of the concerned parties. It is your job
to assess the ethical position of each of these groups.
What to Tell Students in Preparing the NCAA Case for Class.
To give students guidance in what to do
and think about in preparing the NCAA case for class discussion, we strongly recommend that you provide class
members with assignment questions and insist that they prepare good notes/answers to these questions before
coming to class. Our recommended assignment questions for the NCAA case are presented in the next section
of this TN. You may wish to have the class concentrate their attention on a subset of these questions, depending
on how you want to handle the class discussion. Covering all of the assignment questions will likely require two
class periods, largely because there will be much class discussion and heated debate over the pro and cons of
pay-for-play.
In our experience, it is quite difficult to have an insightful and constructive class discussion of an assigned case
unless students have conscientiously used pertinent core concepts and analytical tools in preparing substantive
answers to a set of well-conceived study questions before they come to class. In our classes, we expect students
to bring their notes to the study questions to use/refer to in responding to the questions that we pose. Moreover,
students often find that a set of study questions is useful in helping them prepare oral team presentations and
written case assignments—in addition to whatever directive question(s) you supply for these assignments.
Hence, we urge that you provide students with assignment questions—either those we have provided or a set of
your own questions—for all those aspects of a case that you believe are worthy of student analysis or that you
plan to cover during your class discussion of the case.
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Utilizing the Guide to Case Analysis. If this is your first assigned case, you may find it beneficial to have
class members read the Guide to Case Analysis that immediately follows Case 31 in the text. The content of this
Guide is particularly helpful to students if your course is their first experience with cases and they are unsure
about the mechanics of how to prepare a case for class discussion, oral presentation, or written analysis.
Video for Use with the NCAA Athletics Case. There is an accompanying 3:03 CNN video that you
might want to show the class (or have students watch on their own). It is titled “Judge Rules Against NCAA
on Compensation.” The link to the video is http://www.cnn.com/2014/08/08/ sport/ncaa-student-athletes/index.
html?iref=allsearch.
You’ll find that this case works well for oral team presentations and for a written assignment outside of class. Our
suggested assignment questions for class presentations are:
n You have been hired as a consultant by the NCAA to assess the feasibility (from a university point of view)
of increasing the payment to football players by $2,000, above their scholarship amount. How much would
n You have been selected as an intern to assist a law firm defending the NCAA to provide an analysis of the
ethics of paying football players and excluding other sports. Develop an ethical argument (regardless of your
personal beliefs) that:
Assignment Questions
1. Which school of thought on ethical standards is relevant to the NCAA case? Why?
2. What were the drivers of the unethical strategies and behaviors in college sports?
3. Why was football the only sport being seriously considered for pay-for-play?
4. What were the sources of revenue for universities to fund athletic scholarships?
5. What was the cost to universities, and what was the value of pay, in the form of scholarships, that was being
provided to Division I and Division II athletes?
6. Can universities afford to pay football players (beyond the present scholarship amount) for their services as
athletes?
7. In your opinion, based on the case and on the materials in Chapter 9, are the amateurism and financial
assistance policies of the NCAA ethical?
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Teaching Outline and Analysis
1. Which school of thought on ethical standards is relevant to the NCAA case? Why?
Integrative Social Contracts Theory appears to be the most suited ethics theory from which to examine the
NCAA case. The ethical standards that should be upheld have two facets: first, there are a limited number
of universally applicable norms that put legitimate boundaries on behaviors (such as player safety) in all
situations, which are never compromised by any party. Second, in addition to the universal norms, there are
2. What are the drivers of the unethical strategies and behaviors in college sports?
The two drivers of unethical activity can be illustrated in college sports. These are heavy pressure to win
(institutional driver) and personal financial gain (individual driver). Of course, winning from the institutions’
point of view brings both prestige and financial gain. The several “pay for play” scandals had their roots
in the desire to win, and the payments were an attempt to increase the probability of winning by the team
3. Why is the focus of pay-for-play on possibly paying football players at the exclusion of
other sports?
A huge amount of work and talent were required for an athlete to be successful in each sport. Student athletes
in university-sponsored sports gave maximum effort for their team, both on and off the field. However, there
were several reasons that the compensation issue focused on football players:
nFootball was the most profitable sport in college athletics by a wide margin for most schools. Although
nNFL did not allow players to enter the NFL draft unless they were three years out of high school. The
NBA required that players spend only one year out of high school before entering the NBA draft.
This essentially meant that college basketball players were required to spend only a semester or two
nThe dream of every college football player was to play in the NFL; however, the odds of that happening
were very slim. According to the NFL Players Association, out of the roughly 9,000 football players
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nThe risk of a long-term injury in football was much higher than that in any other sport. Although there
was an injury risk for any player who played a sport at a competitive level, the risk of injury, specifically
head injury, was much higher in football. Concussion awareness had greatly increased in recent years at
all levels of football as head injuries had greatly changed the way the sport was perceived. Measures had
been taken, from penalties for targeting the head to improved helmet padding, to limit concussions, but
“It is hard to justify paying student athletes in football and men’s basketball and not recognizing
the significant effort that swimmers and wrestlers and lacrosse players and track athletes all put
in. Football and basketball players don’t work any harder than anybody else; they just happen to
4. What were the universities’ sources of revenues to fund athletic scholarships?
Universities obtained the revenues required to support athletic programs through state appropriations to their
budgets, ticket sales, and NCAA revenue distribution. NCAA revenues were generated from television and
marketing rights fees, primarily from the Division I men’s basketball championship, and from ticket sales
Revenue generation from football averaged 44.3 percent of total athletic department revenues for FBS
programs and 24 percent of total athletic department revenues for NCAA Division I FCS programs. Revenues
to support university athletics programs varied widely: Division III schools relied almost exclusively on
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5. What was the cost to universities, and what was the value of the pay, in the form of
scholarships, that was being provided to DI and DII athletes?
Scholarships for student athletes in NCAA Division I and Division II schools totaled over $1.5 billion in
2013. Athletic scholarships typically cover the cost of tuition, books, and room and board. Scholarships
may be either full or partial, and the number of scholarships that a university can offer varies with the type
of NCAA membership held by a university. For example, Division I Football Bowl Subdivision (FBS)
Title IX of the Education Amendments Act of 1972 required the dollar amount of athletic scholarships
offered in men’s and women’s sports to be proportional to the undergraduate enrollment. For example, a
university with a 50-50 proportion of men and women undergraduate students was required to provide equal
scholarship dollars and other benefits to men and women student athletes. Title IX implementation at many
There were 346 Division I, 291 Division II, and 439 Division III NCAA member schools in 2014. Division
III schools did not provide athletic scholarships or other athletics-based financial aid. In 2013, the average
number of athletic scholarships awarded by each Division I FBS school was approximately 600, and the
average value of a full scholarship for NCAA Division I schools was $13,821: consequently, the average
total cost of athletic scholarships to a DI university was approximately $8.3 million. In the same year, the
6. Can universities afford to pay football players for their “services” as athletes?
There is no doubt about the ability of the powerhouse athletic programs’ ability to pay football players.
Universities such as Alabama, Ohio State, Oregon, Stanford, LSU, Notre Dame, Texas, and several others
In 2012, even with revenues from football, the budget shortfall for Division II schools was between $3.5
million and $4.5 million. Although many universities generated significant and increasing revenues from
their athletic programs, primarily football, expenses often increased at a greater rate than revenues. Tables
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Although the top 25 and probably a few more DI universities could afford the additional expense of pay-
for-play for football, for the majority of universities, the added expense would increase the losses in their
athletic program budgets which are already running large deficits. Therefore two huge questions emerge:
TABLE 1. Increase, Compound Average Growth Rate (CAGR):
Revenues, Expenses and Net Revenues (Loss) for
NCAA Division 1 Athletic Programs, 8 Periods, 2004–2012
Football Bowl Subdivision % Increase CAGR
Total Revenues 7.44
Total Expenses 8.64
Median Net revenue (loss) – 2013 $(12,272,000)
Increase in loss amount 2004: $(5,902,000) to 2013 $(12,272,000) 108% 9.58
TABLE 2. Compound Average Growth Rate (CAGR): Revenues,
Expenses and Net Revenues (Loss) for NCAA Division II
Athletic Programs, 8 Periods, 2004–2012
Football Programs % Increase CAGR
Total Revenues 6.27
Total Expenses 7.84
Median Net revenue (loss) – 2013 $(4,521,600)
Increase in loss amount 2004: $(2,359,700) to 2013 $(4,521,600) 92% 8.47
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7. What was the state of the pay for play controversy from the NCAA’s point of view in
2014?
Although the Northwestern University football players had formed the College Athletes Players Association
(CAPA) and filed a case with the National Labor Relations Board in which they argued that they were
employees of the University and thus could form a union, the Northwestern suit did not request pay, rather
only the right to unionize. The local branch of the NLRB ruled that the Northwestern players did have the
right to unionize, which supported CAPA’s assertion that football players were employees of the university.
Mark Emmert, the NCAA president commented on unionization of college athletes during his 2014 State
of the NCAA annual news conference, saying, “To be perfectly frank, the notion of using a union employee
model to address the challenges that exist in intercollegiate athletics is something that strikes most people
as a grossly inappropriate solution to the problems.” Although it was clear that Emmert and the NCAA
leadership did not agree that players’ unions were appropriate, they didn’t seem to be overly worried about
Another issue being addressed by the NCAA in 2014 that would possibly effect the players was the
Association’s consideration of an overhaul of its governance system. It introduced an initiative that would
give conferences autonomy the use of certain portions of their TV revenue. The initiative essentially said,
“It’s really this simple: If Ohio State wants to provide its athletes with a full cost of attendance scholarship—
8. In your opinion, and based on the case and material in Chapter 9 of the text, are the
amateurism and financial assistance policies of the NCAA ethical?
Students will have several conflicting ideas about the ethics of the NCAA’s amateurism and financial
assistance policies. One almost certain division will be between student athletes in the class and non-athletes.
Of course there is no one answer to the issue of whether the amateurism and financial assistance policies of
the NCAA are ethical, and you should expect a wide and vocal range of responses to the issue in this case.
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nThe majority of universities (D I and DII) were having financial problems with their football programs.
Over the long-term, any additional increases in expenses, such as pay-for-play, must have offsetting
nNet revenue losses were large in all D I and D II athletic programs, and growing at CAGRs of 7.09
percent to 9.58 percent. These increasing losses cannot continue: universities, their Boards, or state
nThe myriad of student responses to this question will illustrate the difficulty of attempting to solve
problems involving divergent point of view. None of the involved parties can be shown to be wrong, or
to have unreasonable points of view, when examined individually. Yet when the parties’ positions are
nWill the long-term good of college athletics be served by pay for play? What will be the likely outcome
of altering the NCAA amateurism and financial assistance policies? Obviously there is no right or wrong
nIf schools that can afford to pay student athletes are allowed to do so, what will be the effect of the
NCAA or intercollegiate competition? Will that system (pay if you choose) create a disequilibrium
Epilogue
The NCAA’s appeal of the unfavorable ruling in the Ed O’Bannon case that allowed football and men’s basketball
players to be compensated beyond the value of their scholarships was scheduled to return to court on March 17,
2015.
The main point of the NCAA’s appeal was that Judge Claudia Wilken erred by not adhering to a 1984 United
States Supreme Court ruling in Oklahoma v. Board of Regents that the NCAA is allowed to protect amateurism
in college sports. The judge dismissed the relevance of the Board of Regents ruling by commenting that “the
college sports industry has changed substantially” since 1984.1
1As quoted in “O’Bannon vs. NCAA: A Cheat Sheet for NCAA’s Appeal of Paying Players,” CBSSports.com, March 13, 2015,
http://www.cbssports.com/collegefootball/writer/jon-solomon/25106422/obannon-vs-ncaa-a-cheat-sheet-for-ncaas-appeal-of-
paying-players.