To follow up on Warren's and Rick’s informative posts, I thought I’d add a couple of somewhat countervailing thoughts to the discussion (I haven't had a chance to fully digest the expert reports linked to in Warren's post, so some of these points may be addressed in those filings).  I’ll preface this by stating that I completely agree with the critics of the NCAA that the organization is woefully in need of significant reforms, and also agree as a matter of fairness that college athletes deserve a greater share of profits they generate. 

Sports Law Blog is publishing a 5-part series on the practice of sports law.  The series is co-authored by Peter Jarvis, a legal ethics and professional responsibility attorney with Hinshaw & Culbertson, LLP in Portland, Oregon and Jason Davis, a California attorney currently residing in Seattle, Washington.  These posts will appear on Saturdays.   The first one is available at this link and the second at this link.  Here is the third one:

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Furthering the discussion of the topic of Warren's post yesterday, the economics of college athletics calls into question the exclusive right of universities, conferences and the NCAA to sell and license the broadcast rights.  This purported exclusive property interest in college sports has never been challenged.  The rationale for protection of the right to exploit game broadcast rights is presumably based upon the professional sports broadcast licensing model and the underlying rationale set forth in the Pittsburgh Athletic case, which is that protection provides an economic incentive to make the investment required to produce a performance of interest to the public (which is essentially the underlying rationale for copyright protection) as well as the prevention of unjust enrichment due to the substantial investment required to produce the event.

But college and professional sports are not at all similarly situated in terms of the extent of the investment made or the incentive to make it, which makes recognition of the exclusive property right less compelling.  First, the extent of the investment made in college sports is much less because the producers do not compensate the players who make the live event possible.  Indeed, in justifying a professional team's property right in Pittsburgh Athletic, the court specifically mentioned the substantial expense of professional team owners in paying the players whose performances are what drive consumer interest and demand and thereby contribute substantially to the monetary value in the broadcast for which networks are willing to pay substantial rights fees.  Additionally, professional team owners, unlike the producers of college sports, make a substantial investment in the purchase price for their ownership interest in the club. 

Second, the for-profit/not-for-profit distinction between professional and college sports changes the economic incentives to make the investment, in that professional team owners put their personal funds at risk for the prospect of earning a profit and return on their investment.  In college sports there is no expectation of return on investment in an ownership sense.  The individuals who support and make monetary investments in a university's athletic program are taxpayers, students, and private donors.  However, unlike professional team owners, the investment of these individuals is certainly not based or dependent upon the university's ability to exploit game broadcast rights.  Moreover, universities, unlike for-profit professional teams, do not need an economic incentive to produce a game of interest to the public.  Indeed, according to the NCAA and its member institutions themselves, athletics is an integral part of the university's educational mission and the purpose of intercollegiate athletics is not to profit but to enhance the educational experience and the student body.

In my view, the economic reality of Division I college football and basketball presents a classic unjust enrichment scenario in which the exponentially increasing rights fees the NCAA, conferences, and universities continue to engorge at the players' expense is increasingly becoming more unjust.

As the O'Bannon v NCAA litigation progresses, ever so slowly, through our legal system, there is one defense that gets tossed around quite a bit--very few football or men's basketball programs actually make money.  The argument, ergo, is that schools would be unable to compensate these athletes their fair market value without jeopardizing the existence of their entire athletic departments.

Recently, the NCAA released their latest "Division I Intercollegiate Athletics Programs Report on Revenues & Expenses" which can be accessed here.  John Infante on the Bylaw Blog, an expert in NCAA issues, summarizes this report as follows:

• 23 athletic departments operated in the black last year, same as in 2011. By the NCAA's definition, this means the school's athletic department generated revenue exceeded expenses, and the athletic department needed no allocated revenue (i.e. subsidy) from the school to break even.
• While revenues are going up, expenses are rising faster. Expenses in FBS were 10.8% in the last year, while revenues increased only 4.6%.
• The median negative net generated revenue (generated revenue minus expenses) was a "loss" of over $12 million while the median positive net generated revenue was a "profit" of $8 million.

Not surprisingly, there is another opinion.  Expert witnesses for the plaintiffs in the O'Bannon case submitted a document that describes a far different economic reality within Division I athletics.  Dr. Daniel Rascher, a partner at OKSR, LLC, an leading economic consulting firm specializing in applying economic analysis to complex legal issues, submitted this document supporting the plaintiff's claim.  While you are welcome to download this entire submission, and if you do pay careful attention to pages 59 through 99, Rascher argues a few main points:

1. The NCAA's financials are intentionally inaccurate:
2. Athletics departments operate within non-profit universities, thus there is less of an incentive (and mechanism) to show a profit;
3. That "athletic deficits" reflect the accounting practices of universities or the flow of revenues back into expenses rather than the inability of revenues to meet costs.....Within athletic departments it can flow into salaries for athletic staff (coaches, athletic directors, support personnel) or into facilities;
4. And finally a market in which all but a dozen or two programs out of 340-plus are losing money does not experience the sort of entry we have seen in Division I sports since the Board of Regents case ended the NCAA's television cartel in 1984.

Bottom line is we all know the quote "Lies, damn lies, and statistics...."

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While we are talking about the never ending legal case of O'Bannon v NCAA, documents were filed in court last week in anticipation of the June 20th class certification hearing.  For those of you captivated by the arguments, or writing semester ending analyses of this case, I wanted to provide two important documents for your review.

1. Here is the "Reply Brief of Antitrust Plaintiffs in Support of Motion for Class Certification."  This document supports the O'Bannon plaintiff's efforts for class certification.  You can download this document here.

2. Please find the "Rebuttal Report of Dr. Robert McCormick in Support of Antitrust Plaintiffs' Motion for Class Certification.  You can download this document here.

Reprinted with permission from The Delaney Report

Junior Seau (photo courtesy of Dave Sizer/Creative Common)

Junior Seau's suicide last year traumatized a family, a community, and a nation.  Recently emerging evidence indicates that Seau suffered from severe brain damage in the years that preceded his death.  Researchers found late stage chronic traumatic encephalopathy (CTE) when his brain tissue was analyzed in 2012.  In fact, in dozens of cases where former National Football League (NFL) players (and their families) have consented to brain tissue analysis following death, an alarming percentage have been found to have been suffering from CTE before they passed away.  Momentum continues to grow for the NFL and tackle football organizations throughout the United States to begin to minimize the incredible amount of head trauma that most football players subject themselves to.

My article Junior Seau, Head Trauma, and the NFLs Concussion Problem has just posted to SSRN.  It will appear soon in the University of Mississippi Sports Law Review.  The article is based on my remarks at the NFL Concussion Litigation symposium that was hosted by the Ole Miss Sports Law Society on November 9, 2012.  A simulcast of the symposium can be accessed here.

From the article abstract:

"By all accounts, Tiaina 'Junior' Seau was an extraordinary professional athlete. Seau’s career in the National Football League (“NFL”) spanned two decades as he battled furiously as a linebacker for the San Diego Chargers, Miami Dolphins, and the New England Patriots. His performance on the field of play was exceptional; he was selected to the Pro Bowl twelve times and will most certainly be voted into the NFL Hall of Fame when he becomes eligible in 2015. Despite Seau’s unparalleled career, athletic accomplishments, and financial rewards, he committed suicide on May 2, 2012, at the age of 43, just two years after his retirement from professional football. While newspaper accounts in the immediate aftermath of Seau’s suicide recounted an impulsive man who became disconnected, volatile, and erratic following his retirement from the NFL, his family speculated that this erratic behavior and disconnectedness were uncharacteristic of the man that befriended thousands, and was unfailingly committed to representing the Seau name with honor. Upon his suicide, some speculated that repeated concussive head trauma and brain disease led to Seau’s devolving behavioral changes and ultimate suicide.

During Seau’s twenty-year NFL career, he was never diagnosed with a concussion, nor did he miss a game because of concussion-like symptoms. This single fact alone is stunning because following Seau’s suicide, the National Institute of Health (NIH) conducted neutral/blind examinations of his brain tissue and found widespread evidence of “chronic traumatic encephalopathy [(“C.T.E.”)], a degenerative brain disease widely connected to athletes who have absorbed frequent blows to the head.” According to reports, Seau had privately complained that in the final five or six years of his life, he endured a headache that never relented. Indeed, at age forty three, Junior Seau’s brain was found to contain “abnormal, small clusters called neurofibrillary tangles of protein known as tau” which are found “in the brains of those with Alzheimer’s disease and other progressive neurological disorders.” Junior Seau was afflicted with late-stage chronic brain disease when he committed suicide.

Emerging medical evidence confirms that Seau is not alone. Recent studies conducted by teams of researchers led by both Dr. Julian Bailes at West Virginia University and Dr. Ann McKee at Boston University have uncovered jarring evidence that an overwhelming percentage of former NFL players, those who have allowed their brains to be autopsied and studied, are afflicted with C.T.E. The issue of brain disease and traumatic head injury has become so clamorous, that President Barack Obama recently speculated that if he had a son, he would most likely not let that son play tackle football. To that end, the NFL and the sport of American football seem to be quickly approaching a crossroads. A strong probability exists that many of the athletes that have played tackle football, at all levels, but particularly those that played for many years, are at some level of risk of serious brain disease. Questions abound.

This article seeks to answer a few of those questions. Will American football continue its meteoric rise in popularity as a cultural phenomenon in the United States as more is learned about the damage that its athletes are enduring? Did the NFL incur liability by ignoring and actively discounting the seriousness of head trauma to thousands of athletes that played in the league, as alleged by a class of former players currently suing the NFL for damages (including the Seau family)? Will a player of Junior Seau’s magnitude bring the kind of attention to traumatic head injuries in football that will require determined action by pee-wee, middle school, high school, college and professional football organizations to protect its players? Can American football continue in its trajectory of rising popularity or will it eventually decline in relevance and become a relative afterthought, much like boxing or horseracing, because of its insidious dangers."

I look forward to giving a talk at the Harvard Club in Boston this Thursday at 7:30 am.  It is for my alma mater, St. John's Prep, which I'm proud to say is also the alma mater of Notre Dame head football coach Brian Kelly (Class of 1979) and Penn State head football coach Bill O'Brien (Class of 1988).

I'll be discussing breaking issues in sports law, including the Boston Marathon bombings and the impact on stadium security.

Even if you are not an alum, but are interested in sports law, I hope you consider attending ($25/person):