Should College Athletes Be Paid to Play?

This is a simple answer to a very complex question, but I have to say: Absolutely not. That's my final answer, Regis.

Let me give you three reasons why it's a terrible idea to pay college athletes:

1. The vast majority of college athletes are not at school to parlay their sport into a money making enterprise, so it's not really a relevant issue.
2. The average college athletic department loses enough money already.
3. College athletes are already paid for their work.

The big business of sport
When we talk about college sports, we immediately think of glitzy uniforms, rabid spectators, big-league advertisers, and national television audiences. With various mega sponsors like FedEx (NYSE: FDX  ) , PepsiCo (NYSE: PEP  ) , Citigroup (NYSE: C  ) , Allstate (NYSE: ALL  ) , and Walt Disney (NYSE: DIS  ) , the Bowl Championship Series is, perhaps, the finest example of this stereotype around. Heck, look no further than the Geico halftime report to confirm that the distinction between the NCAA marketing machine and any major professional sport is not at all obvious. It's all one giant sales campaign.

This, however, is not the real NCAA; it's just it's highly profitable cousin. In fact, the picture painted above completely misrepresents college sports for what they mostly are. As a former collegiate athlete involved in a sport that had approximately zero attention paid to it (I was a heavyweight rower), I can safely say that most college sports are a lot more about what a player gives up to participate versus what he can expect to get in return. For most of us who competed in relative obscurity, it's so far away from big business, it's laughable.

The math that supports this point is fairly overwhelming. There are roughly 400,000 athletes competing in NCAA sports today. Between the MLB farm system, the NFL, the NHL, and the NBA, there are only 2,000 or so new positions available every year in the majors. Throw in a few, alternative professional opportunities and, let's say, there are 3,000 available professional positions every year. Of the 100,000 college athletes that graduate every year, perhaps an extremely generous 2.5% go on to become pros in their given field.

When you boil it all down, college sports are really about getting a good education and doing what you love to do for just a few more years before you have to knock it off and get a real job. So, before we consider anything else, why should anyone reform a system and attempt to cater to a tiny minority when it is generally working for the other 97%? If it ain't broke, don't fix it.

Show me the money
If the average college athletic department delivered some kind of regular revenue boon to the university that financed it, I might be somewhat inclined to support a compensation plan for the athletes that fueled it. I might even be willing to swallow my philosophical concerns about maintaining the sanctity of amateur athletics. Fortunately, this is not much of an issue. For the vast majority of schools (regardless of division), athletic programs are loss centers. College sports equal big business? Not really. Most universities have to work to keep them alive.

According to the NCAA, in 2008, a mere 25 schools reported net positive athletic department revenues. From 2003-2008, only 18 schools consecutively reported positive net revenues. Based on this data alone, is a compensation structure really even necessary? What money is there to share?

Even in the only two collegiate sports where profitability is a more realistic expectation (football and men's basketball), only about 55% of teams have been able to sustain profitable teams over five-year periods (this is in the premier, Division I-A, bowl-eligible group -- the percentage would be much lower if it included all universities). Unimpressive, isn't it? A closer examination of the numbers reveals that the average football team (in the premier, bowl eligible division mind you -- this is the best of the best) only nets out about $4.2 million annually, while the average basketball team delivers only $1.1 million to the bottom line. This is not a whole lot of money. The rest of the so-called big sports, including ice hockey and baseball, are perennial money-losers.

This all makes a person wonder why this discussion is even on the table to begin with. While universities clearly derive some indirect benefit from having strong athletic departments, these departments and their athletes are generally not related to any kind of widespread money-making enterprise, directly at least. Why pay for it? I really have no idea.

The outliers
You can't talk about college sports without considering the outliers, the schools that are making a killing selling their teams to the masses. The NCAA failed to disclose which specific school it was (I have my guesses), but some school's football team grossed about $73 million in 2008 and took home about $46 million of that, which is simply ridiculous. One basketball team grossed about $24 million and netted about $9 million, a similarly impressive figure. Do a little math here and that number equates to about $1.1 million in revenue per roster spot on the football team and about $1.8 million per player on that basketball team. Now, that's some serious money-making ability. So the question is: Do these players deserve to be paid?

No, the logic that trumps all others is this: College athletes are already paid for their work. Think about it. Players perform on the field and, in return, they receive scholarships, top coaching, alumni support and various other opportunities, including exposure on a national level. The value of the scholarship alone is something worth serious consideration, but there's a lot more than that. 

Serious athletes that attend schools with premier athletic programs (University of Florida, University of Southern California, etc.) should consider their contribution to the school "tuition" for which they receive world-class coaching, a chance to market their brand on a national level, and a valuable education in big business sports. These athletes are "renting" the university's high-quality distribution channels to get noticed. Let us not forget this is precisely what some of these athletes are there for -- to get bid up in the selection process. As far I can tell, the exchange of services is pretty damn equitable.

The Foolish bottom line
So that's it. Forget about the mind boggling complexities of implementing such a system and the unhappiness it would be likely to cause, for a number of reasons (several of which have not been captured here), the college athlete is best left unpaid. No doubt about it.

You've heard from me. Now, I'd like to know what I've missed. It's time to hear from you. What do you think colleges should do? Chime in below with your thoughts.

Fool Nick Kapur is proud of his Cornell basketball team -- Go Big Red! He owns shares of Walt Disney and Pepsi. Walt Disney is a Motley Fool Inside Value pick. Walt Disney and FedEx are Motley Fool Stock Advisor recommendations. Pepsi is a Motley Fool Income Investor pick. Motley Fool Options has recommended a diagonal call position on Pepsi. Try any of our Foolish newsletters today, free for 30 days. The Fool has a disclosure policy.


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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 25, 2010, at 1:13 PM, Turfscape wrote:

    Agreed.

    Student athletes should view their collegiate athletics as an internship...an unpaid internship.

  • Report this Comment On March 25, 2010, at 1:46 PM, smikey055 wrote:

    They already get paid to play; it's called an athletic scholarship.

  • Report this Comment On March 25, 2010, at 1:52 PM, catoismymotor wrote:

    Ditto Ditto smikey055 smikey055

  • Report this Comment On March 25, 2010, at 2:05 PM, ElvinVillalobos wrote:

    heck yea, the schools make money from them, more then the cost of the scholarship, why not pay them extra!

  • Report this Comment On March 25, 2010, at 2:23 PM, Cubbob wrote:

    Many, if not almost all college athletes are paid to attend Division I Universities via scholarships. Considering full-ride athletic scholarships are averaging about $30 to $50K per year, why should they be paid more? The payment already received is greater than the average family income in the US. Additional payment is ridiculous.

  • Report this Comment On March 25, 2010, at 2:50 PM, WKE14 wrote:

    No way! I went to Clemson. Do you know the quality of housing, meals, and tutoring that is made available to these people? It blew me away. I think they should have no problem graduating with all the help they have at their disposal. Many student athletes as many have stated are already all expenses paid on scholarship. I can't express enough that they live at a completely different level from the rest of the student body. Any Div. 1 NCAA school is already treating these students like kings.

  • Report this Comment On March 25, 2010, at 3:05 PM, SMScom wrote:

    Nick:

    I respect what you're saying particularly when viewed through the prism of student athletes attending Division III programs. However, a fistful of Division I powers have become little more than minor leagues for the professional teams. Recruiting is the name of the game for coaches at these schools and classroom fitness/graduation rates be damned. For athletes, it's about minutes played and getting to the next level, not securing an education. Too many of these kids become "free agents" and change schools when they're not afforded the superstar role they believe is deserved. Let's not forget the NBA's Rent-a-Player Program whereby at least one sham year must be spent in college prior to being drafted. These games within the game are disgusting and tragi-comic. The NCAA and member schools have abrogated their responsiblities to their charges and the students themselves (often with parental blessing) are cheating themselves; all to feed the beast of professional sports. Thus my conclusion that student athletes should be paid. After the pro draft and contracts are inked, the pro employer should send a check to the NCAA representing 10% (or whatever fair number) of the contract value. The NCAA would then distribute the funds to their member schools to support the "minor leagues". Then we can end the charade of class attendance, GPAs and diplomas.

  • Report this Comment On March 25, 2010, at 3:22 PM, mjdutmers wrote:

    please do not call 'paddling' a sport. i don't think the argument is that all college athletes should be paid or at all universities or conferences, just those in the major sports that generate money: division I football and basketball. those sports generate far more money for their respective schools than they cost. their coaches and athletic dept officials draw huge salaries off their product and sponsorships, they should get a share of that revenue.

  • Report this Comment On March 25, 2010, at 4:14 PM, matt43452 wrote:

    Athletes should not be compensated any more than what they receive already.

    The explosion of money being poured into this field is concerning. Coaches and athletic departments are more and more solely concerned about the W's and not the students. In a way, it's understandable given the size of the paychecks involved.

    However, these programs all began under the guise of being a part of an institution of higher learning. We have strayed from that and many of these students are being short changed as a result.

  • Report this Comment On March 25, 2010, at 4:17 PM, catoismymotor wrote:

    I have one for you:

    I strongly believe if a NCAA scholarship student leaves school to persue a professional sports career before graduating with four year degree he/she should have to repay the all money spent of him/her. I do mean ALL: uniforms, pads, helmets, transportation, dorm fees, food vouchers...When a college/university brings in a player they are counting on said player to go the distance, represent the school and the program. They invest hundreds of thousands of dollars in each player and should be repaid if he/she decides they have something better to do other than honor their commitment.

  • Report this Comment On March 25, 2010, at 5:36 PM, plange01 wrote:

    they are paid to play just not in the open...

  • Report this Comment On March 25, 2010, at 6:04 PM, bzhayes wrote:

    What some people fail to realize, is how paying athletes would affect the business of college sports. Compare the revenues of the major college sports to any minor league sport. Over 100,000 people show up every Saturday to watch some of these college teams (Michigan, Tennessee). No other professional team is able to draw that kind of audience much less a minor league team. Much of that draw comes from the fact that they are unpaid college kids. To think you can take a college sports team and turn it into a honest minor league team and still draw 100,000 people is deluded. These kids are much better off than the average minor league athlete out there.

  • Report this Comment On March 25, 2010, at 8:11 PM, Cantillon88 wrote:

    Smikey055 said it all.....most of these kids get their tuition paid - absolutely no need for more.

  • Report this Comment On March 26, 2010, at 5:30 AM, Br0oklyn wrote:

    Long Story Short? No.

  • Report this Comment On March 26, 2010, at 11:22 AM, police12345 wrote:

    Are they students or pro athletes? The only pay they should have is the scholarship with a guarantee that they leave having met the same educational standards as required of the rest of the student body.

  • Report this Comment On March 26, 2010, at 12:06 PM, UncleDaniel wrote:

    My brother was fortunate to receive a first rate education through athletics. His scholarship was half academic and half athletic; he had to keep a 3.0 average to maintain the academic part. (For the athletic part of the scholarship, only a 2.0 is required to remain eligible.) I think that if more athletes had to maintain a 3.0 average, then they would be better prepared to succeed after college. And no, I do not think that athletes should be paid. They are receiving the generous compensation of a college education; if they don't take advantage of it, then they disgrace themselves.

  • Report this Comment On March 26, 2010, at 1:30 PM, petermoon23 wrote:

    I believe your missing a few things here. The first thing is something that you wont see on the bottom line, when these teams do well in tournaments and/or bowl games the schools are getting free marketing exposure. Of course they have to spend the money to put the athletes up in hotels, food, etc. But this is something that you can't really put a value on. Generally speaking, when a team wins a championship the number of applications that school receives the next year jumps significantly. I do not have the hard data but I do know that this occurs. And of course with more applicants gives the school the ability to be more selective, ie better students, higher paying jobs when they graduate, more money coming back to the colleges. Also if you look at the amount of time some of these athletes are giving to these sports teams paying them has to be considered. When you look at college football players and the amount of time they put in, its far more than most student athletes. I played lacrosse in college and we definitely put in a lot of time but it is nothing compared to college football and basketball. I think the athletes that have to put in so much time that it prevents them from getting a job, I believe they should get some sort of money so that they can live on.

  • Report this Comment On March 26, 2010, at 4:56 PM, FoolishMacBeth wrote:

    Smikey055 and others are just dead wrong. Just because people are getting something for "free" doesn't mean they don't deserve compensation for the value add they provide. The truth is that college football stars are, in terms of real dollars, the most exploited or any group of workers. Typical compensation would be well under 6 figures for one of these boys, where their value could be well over 7.

    The NCAA is essentially an oligarchy that continues this exploitation, and while there are several young men that do make pro, several don't. In other words, there is no "free market" that competes for college athletes. The point is, just because it "Works" for 97% of us doesn't mean its right. If the "vast majority" of programs lose money, "Ok" don't pay those athletes, but for those who add value, I believe, like a good capitalist, that they should be compensated rather than exploited.

  • Report this Comment On March 26, 2010, at 4:57 PM, MyDonkey wrote:

    Yes, I think college athletes should be paid.

    But only if their team has a winning season.

    And only after a 4-year waiting period has elapsed.

    And the currency of payment should be food stamps so that the athletes don't go hungry after the next market crash.

  • Report this Comment On March 26, 2010, at 5:14 PM, MyDonkey wrote:

    Yes.

  • Report this Comment On March 26, 2010, at 8:07 PM, Chromantix wrote:

    On March 25, 2010, at 1:46 PM, smikey055

    ... beat me to the proper answer

  • Report this Comment On March 27, 2010, at 3:43 PM, greenwave3 wrote:

    Scholarships, free room and board, and the opportunity to participate in an advanced level of athletic competition are enough for student athletes. Colleges are in the business of education. They are not mini sports franchises.

  • Report this Comment On March 29, 2010, at 1:08 PM, TMFJebbo wrote:

    If athletes are not allowed to be paid by their universities, then there should be no restrictions on when they are allowed to become professional. A talented athlete should not be forced into indentured servitude because someone wants to make money off him without compensation for a year.

  • Report this Comment On March 29, 2010, at 1:18 PM, FleaBagger wrote:

    I missed the part of your article where you explained why it's any of your business who gets paid what.

    The "mind boggling complexities" could be easily be solved the same way all other mind boggling economic complexities are solved: by the individuals involved deciding for themselves whether or not they want to agree to something.

    The upshot to reform is that it would make the money-losing programs (i.e. heavyweight rowing) more expensive for the participants, or likely eliminated altogether, and remaining athletic programs would have to be much more careful about their spending, because the profitable athletic programs would no longer be subsidizing the unprofitable ones.

  • Report this Comment On March 30, 2010, at 11:05 AM, Research1st wrote:

    "No Pay or Perks", till you graduate and get a real job. Playing for a University or college is not a job unless you are an employee and pay taxes on the earned wages.

  • Report this Comment On March 31, 2010, at 11:56 PM, FutureMonkey wrote:

    No the athletes shouldn't get paid AND NCAA and broadcasts/media associated should be run as a non-profit. Nobody should profit from student-athletics.

    Additionally, the schools need to be held accountable for degree completion rates of student athletes. For instance, no NCAA tournament or bowl berths for programs that don't graduate 50% of scholarship athletes. Coach Wooden should be freaking out at the NCAA for it's shameful graduation rate for 2010 Men's tournament participants.

    I'd love to go further and eliminate professional athletes from Olympic competition but that is another article.

  • Report this Comment On April 28, 2010, at 11:09 PM, BREA316 wrote:

    I'm a current student at a small, private, division I institution in southeast New England and I could not agree more with your opinion Nick. I have spent the past 4 years watching the athletes here be treated as though they're capable akin to walking on water. Not only are they afforded benefits like priority course registration, preference during the selection and award of work/study employment, choice housing and certain other intangibles (class attendance/behavior/grading standard leniency), they also enjoy preferential treatment from the university's disciplinary committees. An interesting example can be drawn from the actions of a drunken football player in the fall of 2007 on this campus. The individual took it upon himself to assault another student (non-athlete), unprovoked and broke the victim's nose. This school preaches a "zero tolerance" policy for physical violence, and this policy has been implemented on more than one occasion when the individual at fault had no connection to the school's athletic programs. But mysteriously, this individual finished his degree and graduated last May (2009) despite being convicted of assault. I was shocked to hear the individual's name called to receive a diploma from this institution (which I assume went to great lengths to paint the incident as isolated and far removed from the character of ordinary athletes here). It's just nice to know that part of my tuition money goes toward providing opportunities for individuals who exploit those opportunities every chance they get.

  • Report this Comment On October 21, 2010, at 9:49 PM, Cameron20 wrote:

    The fact of the matter is, college football is one of the largest sports revenues in the world. Millions and millions of dollars are made every year because of these high class athletes and the hard work they put in. Yes, they get an athletic scholarship, but this does not cover every major expense they must account for, including the needs of their family. Half of these college athletes can barely afford their clothing and were raised in a family that cant even put food on the table, while the NCAA makes a hundred bucks by selling that same kids jersey. I say that you put a cap on the small salary these kids make which in no way could have a negative side effect.

  • Report this Comment On March 01, 2011, at 5:01 PM, IT5M3 wrote:

    I disagree the amount of money the players make for there school is much more than the amount of the average scholership

  • Report this Comment On March 29, 2011, at 4:28 PM, kkgirl9 wrote:

    I am researching this topic for our school debate. For our debate we need many resources of where we found the information. If you happen to know where to find more information about this topic (showing both sides of the topic) please let me know!

    Thanks!

  • Report this Comment On April 05, 2011, at 10:31 AM, College15 wrote:

    It may seem that having their euducation paid for would be enough pay, that may be the case in some situations, but when coaches like Saban are making 4 million dollars a year because his players show up to playeveryday, that is rediculous. 50K may seem like a lot of money for the players, but when you look at the amount of revenue they bring in(billions), 50K is nothing.

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