Part 1: Pay to Play Laws Threaten DU and Mid-Majors

The State of California unanimously passed its Pay to Play law allowing college athletes to receive compensation for the use of their name, image, and likeness and hire agents, effective in 2023. Ohio passed a similar law last Thursday and a host of other states are contemplating the passage of similar laws. The NCAA pleaded with the California governor to wait on the passage of the law pending a more uniform solution but California moved forward with the passage.

Lawmakers in Colorado are working on introducing their own bill next year that would allow college athletes to profit off of their name and likeness, reports The Denver Post. According to the Post, two senators, Owen Hill (R.) and Jeff Bridges (D.), are “all in,” along with House Majority Leader Alec Garnett (D.). The lawmakers said a bill would allow student-athletes to accept endorsement deals and sign with agents, which is similar to the California Fair Pay to Play Act. Hill said the potential Colorado bill would give athletes the right to sue if the NCAA pushed back.

While the law is targeted at football and basketball, all athletes and sports will be eligible under the new regulations. And, the powerful trend to professionalize collegiate athletics continues.

So, exactly how will this impact the University of Denver?

While it is still early, the recent moves to monetize playing college sports may benefit a few, select athletes and large Power-5 schools (Big 10, Big 12, SEC, ACC, Big 12). While the law seems directed at men’s basketball and football, this decision has far-reaching implications on secondary sports as well.

The University of Denver, like most of their mid-major peers, will suffer as the Power-5 conferences continue to consolidate power and leverage their financial advantage driven by scale, conference affiliation, and media revenue. There is already a two-tier system in college football with the FBS and FCS. Expect the same division in hoops with the eventual breakup and creation of a two or three tier college basketball division. The NCAA’s current March Madness basketball tournament which includes all Division I members and funds the NCAA and other NCAA sports tournaments will eventually disappear, similar to the FBS – FCS football split.

When it comes to Pay to Play, DU and other mid-majors will not be able to compete against Power-5 institutions with their phalanx of car dealers, shoe companies, and large media and alumni business interests. The Power-5 will use this advantage to entice top collegiate talent in basketball and other sports stars to attend their institutions. And expect an even greater exodus of top tier players who emerge from mid-major teams and excel in the first several years of play to transfer without penalty. The gap will continue to widen as the Power-5 already provide their top athletes with more lavish cost-of-attendance stipends.

As for agents, college hockey players have worked with family ‘advisors’ (i.e. agents) for quite some time and the system has, well, it’s mostly worked. Universities, agents, coaches and professional clubs can actually work together to develop athletes and effectively manage the timing of departures.

In the longer term, it seems there will be a 3-tier system in collegiate basketball. The Top 5 conferences will break away from the NCAA to form their own championship, similar to football’s BCS. This will include Big 12, Big 10, ACC, SEC, and Pac-12. The next tier of high mid-majors will have the visibility, lure and drawing power to form their own alliance, negotiate media rights and host their own tournament. This group might include the Big East, West Coast Conference, American, Mountain West, Atlantic 10 and Missouri Valley. Then, there is a third group, “all the rest”. This final group will have little negotiating power and media strength. Denver would currently fall into the third tier as a member of the Summit League. Each of the three basketball tiers would negotiate their strongest deal with cable/TV networks for their end-off season tournaments. To win in the new environment, Denver must move up to the second tier for the visibility and financial stability.

But, remember, the new laws would apply evenly to all sports. For Denver, this could impact hockey and draw top recruits away from the NCHC to the larger, revenue heavy Big Ten. Lacrosse could be impacted, too, as well-heeled Ivy league and East Coast business interests fall behind some of the blue blood programs. Schools like Notre Dame and Johns Hopkins are likely to have the ability to draw better recruits with these newly allowed incentives as well. And Denver, losing money in athletics like most mid-majors, is likely not going to be able to make up the athletes payment difference in cost-of-attendance athletic stipends. Plus, there will no longer be shared March Madness revenue across D1 athletics with the dissolution of the large profit-sharing March Madness tournament. Thus, the best move for DU is to try to move into the second tier where they can benefit from a strong conference affiliation and enhanced TV rights and ticket revenue to fight the tide of rising costs. Or, resign themselves to the third tier group of schools in athletics.

The gap between the haves and have nots will grow even wider as star athletes select the best opportunities which would now include larger cost-of-attendance stipends and greater name, image and likeness earning options. Like it or not, the next logical step, despite the objections of University Presidents and the NCAA, are paid, professional Division I athletes. The only group that can reasonably afford to go there will be the Power-5 schools and a handful of other schools who have the financial wherewithal and ability to pay their student-athletes. And, in our view, it is unlikely that DU has the ability, interest or willingness to go there.

Part 2 Thursday: What are the unforeseen complications of implementing these new Pay-for-Play laws?

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