Would Paying College Players Really Destroy Competitive Balance?

(Photo: Roger Smith)

March Madness is in the air. Over the next few weeks the nation will be focused on the fortunes of 68 college teams.  And all this focus on a supposedly amateur sport generates tremendous amounts of money.  For example, in 2010 CBS and Turner Broadcasting agree to pay the NCAA $10.8 billion to broadcast these games for fourteen seasons. This money represents more than 90% of the NCAA’s revenues.

Since colleges and universities tend to be non-profit, who gets all this money?  One person who seems to benefit is John Calipari, head basketball coach at the University of Kentucky.  Last summer, Kentucky extended Calipari’s contract, with a new deal that will pay him $36.5 million across the next eight seasons. Contracts like this – which seem comparable to what an NBA coach might command — are somewhat surprising. As economist Andrew Zimbalist has observed, the revenues of college sports – although apparently immense – pale in comparison to what we see in professional sports. And that leads one to wonder how a coach in college can command such a salary.

To understand why Calipari is worth this kind of money, consider the seedings for the NCAA tournament. Calipari’s Kentucky team is not just a number one seed in 2012, this team is the overall number one seed in the tournament. What’s amazing about this accomplishment is that Kentucky lost three prospects to the NBA draft in 2011 (four if you count Enes Kanter, a Calipari recruit who never had a chance to play for Kentucky).  This talent drain, though, was offset by players like Anthony Davis, Michael Kidd-Gilchrist, and Marquis Teague; three freshmen who might be selected in the 2012 NBA draft.  Yes, Calipari has an amazing ability to attract high school players who are capable of playing in the NBA at a very young age.  Given such talent, it’s not surprising that Kentucky under Calipari is consistently a contender. 

John Calipari. (Photo: Tennessee Journalist)

One might note, though, that Kentucky’s contender status – which contributes to the revenue generated by the Kentucky program – is created by the playing talent Kentucky puts on the floor.  And in a free market, this talent would be compensated for their economic contribution.  The NCAA, though, is not a free market.  The NCAA has passed a rule preventing NCAA members from compensating their workers (beyond a scholarship – that one-and-done players will never be able to use to complete a college education).

How does the NCAA justify such a rule? One of the big arguments offered is that paying the athletes will disrupt competitive balance.  The thinking is that if colleges could pay players, only the richest schools could afford the top talent and competitive balance in college basketball would be destroyed.

There is only one flaw with this argument: the NCAA really doesn’t have much competitive balance. 

 A few years ago, Jim Peach – a professor of economics at New Mexico State – offered a relatively straightforward analysis of competitive balance in college sports.  For NCAA basketball, Peach looked at how many different teams advanced to the Final Four over time.  He found that from 1950 to 2006, thirteen schools accounted for 50% of all Final Four appearances.

Let’s update this analysis by looking at Final Four teams from 1979 to 2011.  Across these 33 seasons there were 132 Final Four teams.  And of these, twelve schools — North Carolina, Duke, Kansas, Michigan State, Kentucky, Louisville, UCLA, Arizona, Florida, Georgetown, Indiana, and Connecticut – accounted for 72 of these slots.  Division I-A has 344 members.  And just twelve members – or 3.5% of the population – account for 54.5% of all Final Four appearances. 

What’s surprising about this result is the nature of the NCAA tournament.  As a single-elimination contest, one would expect a great deal of randomness with respect to outcomes.  And yet, the top schools are consistently able to navigate the tourney and reach the Final Four.

Part of this reflects the dominance of the #1 seeds in the tournament.  Since 1979, 40.9% of Final Four slots went to a number one seed.  And 82.6% of slots went to teams seeded in the top four. 

So if a team can assemble a collection of future NBA players, the odds of a high seed in the tournament – and a Final Four appearance – are dramatically improved.  Calipari seems to have the magic touch with future NBA players.  Consequently, we should not be surprised if Kentucky reaches another Final Four. 

What seems amazing – from the NCAA perspective – is that teams can achieve such consistency without paying their players.  And for the rest of us, we have to wonder how paying the players would change this outcome? 

Yes, Calipari would end up with less.  But it doesn’t seem like the dominance of the top teams would be impacted.   Teams like Kentucky, North Carolina, Michigan State, and Syracuse – the number one seeds this year — would still be great.  Teams with less money would probably not be as great.  And the NCAA – even with paid players – would probably look about the same.

Let me close with two more observations.

First, I think there is a sense that colleges don’t have much money to pay their players.  Last fall, I addressed that very same issue. Quick summary… I don’t buy the story the college are telling.

And because I wish to embrace my inner hypocrite, if you still need help filling in your brackets (and technically, since the games started on Tuesday, this should already be done), let me recommend the following three stories at The Wages of Wins Journal:

The Ultimate 2012 NCAA March Madness cheat sheet

More March Madness help

Arturo’s NCAA March Madness Tournament Bracket Buster

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  1. Alex says:

    Destroy competitive balance? No probably not. Destroy women’s sports? Almost certainly yes. The incentives to cut women’s sports programs are already there: Less want to participate than men, less revenue, less booster interest, etc. Is it really possible to pay NCAA Mens Football/Basketball players while still using the revenues from those sports to finance the remainder of your sports teams? Maybe, but it certainly isn’t easy.

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  2. rationalrevolution says:

    While I agree that the revenue generated shouldn’t be going to the people it is currently going to, it shouldn’t go to the players either.

    Consider this, why is COLLEGE sports so much more popular than other amateur sports or even minor league sports? Because of the COLLEGES associated with the sports.

    If you took the same players, took them out of college, and put them into some minor league, then you would discover the REAL VALUE of their “labor”.

    What you would find is the same thing we find in minor league baseball and arena league football, these folks would have to wait tables in their off time just to put bread on the table.

    The money generated from college sports shouldn’t be going to the coaches nor the players specifically, it should be pooled and used to reduce the cost of tuition for all students, because without the student bodies there would be no colleges at all.

    Talk of paying the players is talk of paying students subsidizing athletes…

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    • FrankGrimes says:

      Rationalrevolution is SPOT ON. This is always the missing “X” factor that is lost in discussions of paying college athletes. Once you remove the “college” from the equation, the value in college sports goes away. Outside of Alabama and a handful of other states without significant NFL franchises, the value in a college program is instrinsically connected with the college and university experience… once these players are reduced to nothing more than hired hands with little to no connection with the average everyday college student (or the alumni that glorify their experience at such institutions) you will interest in college sports reduced to the levels of minor league baseball and arena league football… inferior products with inferior value.

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    • method1220 says:

      This (rationalrevolution’s) is the point that so many miss. In a large part of the country (especially the south), essentially transforming college sports into university-affiliated minor leagues (which is what paying players would amount to) would destroy the product itself. People who advocate paying players often don’t seem to realize that in so many cases the rivalries and collegiate affiliations come first, and the athletics programs are simply an expression of that. As such, the enormous popularity of college sports is both because of the enjoyment of the game as well as because of some affiliation with the schools involved, and so the whole thing is largely based on the image of the student-athlete and the idea that the players are part of and representative of the student body. Naturally, this idea has become almost a fiction in many cases, but actually paying the players would (I think) finally stretch it beyond the breaking point.

      The other mistake is to discount the value of what the players do get. If you’re already good enough, there’s no need to go to college (Lebron). If you’re not, or if you’re just not well enough known to jump straight into the NBA, then you go to college, where you can get a degree for free (if you work for it), but more importantly for those who intend to become professional athletes, you get one to four years of coaching, training, nutrition, and experience to help develop a higher level of play, which you then take away with you. I think of it more as an apprenticeship, honestly. Now, if there were a minor league where one could go, get all that, and get paid, would that be a better deal? Of course! The problem is, one doesn’t exist, and likely won’t exist. Who’s going to buy tickets or advertising space in some local minor league basketball team? Not nearly as many as will for the team that represents their alma mater.

      With that said, I think the article is correct that equity isn’t really a problem with paying players, considering the lack of equity now, and especially once you consider how much coaches are paid. The real issue is that the source of the revenue depends upon an at least a pretense to an ideal that is incompatible with paying players.

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  3. Mike B says:

    It might actually bring more competitive balance because all schools would have the option to buy their way into a great team in the same way the Florida Marlins bought a world series. Sometimes people forget that even if free markets lead to high prices, a non-free market will often remove the ability to obtain something at any price. Just like Russians queued up in vain at the state run stores so too do colleges queue up in the NCAA tournament, unable to advance in the face of structurally advantaged opposition.

    Anyway, it is entirely likely that player compensation would simply result in a fragmentation in the NCAA. Those 13 teams that account for 50% of Final Four appearances would be most likely to snap up all the top talent shutting the other teams out. However nobody will force the shut out teams to continue to be the top teams’ foils. They will simply form their own NCAA division IAA that doesn’t pay basketball players and continue on like before and the IA schools will effectively be running a school related professional sports franchise. I see nothing wrong with that as the current model of “student-atholete” is nothing but a sham. Just come right out and have top sports schools run what would be effectively an NFL and NBA minor league. They get the revenue, the real students get some entertainment and everyone is happy.

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  4. JPB says:

    OK, here’s my plan……

    first, give up on the student athlete ideal! Yes, there are some teams getting player by the quality of the academic programs at their schools, but most of the upper tier kids with D1 talent are passing over schools better suited to the major to play for the best program for their ‘game’. Many of these kids aren’t college material at all, but are forced into academic programs only to remain illegible for sports. Add this to the ‘one and done’ players, and you have a system programmed to induce cutting corners and all out cheating to meet academic standards.

    Have players sign with a school with the intention of fulfilling a set athletic tract, in route to completing his or her eligibility with in a given period of time, while maintaining a very liberal and targeted academic load, finding out a player’s goals and weaknesses, but with the primary focus being sports. For the top level players, that leave early for a paycheck, a couple semesters of fiance classes will serve them well. Students who were prepared to take on more advanced course loads would be allowed (and hopefully, encouraged to!).

    For the players who complete their athletic obligation, they are given a free ride to complete their degree at the school, or better yet, establish an agreement among schools that would allow students to move to a school that best fits their needs.

    You will still get schools that a ‘sports factories’ (see Kentucky) that do the most to attract players with the most talent, and in turn could now give up on the smoke and mirrors that these kids, only in the program because of a flawed rule by their future employer, are are there to learn, and are also getting the same quality of education as any traditional student at the same school. Your schools that establish programs that best fit the needs of the ‘full term’ athlete, will be rewarded with players that stick around. In both cases, you make the players better stewards of the sport and the universities.

    Is this expensive, sure! But in turn it takes many of the costs of academic oversight off the table. Each year we have players who are made ineligible for academic reasons when they have no real interest in school to start with. Give them an earned pass to come back, when they are ready to be students, be it the next year, or 15 years.

    (there…. got my rant out! thanks!…… oh yea….. ROCK CHALK!)

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  5. Quinton says:

    “Ye$, Calipari ha$ an amazing ability to attract high $chool player$ who are capable of playing in the NBA”

    Not to be too big a cynic but the man has already had two final fours vacated. His talent is he’s an excellent cheater (maybe the best).

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    • Dwight K Schrute says:

      In fairness to Calipari, every player that he has put on the court was cleared by the NCAA to play.
      I’m not a fan of his, per se, but he is a great recruiter but mediocre game tactician.
      Further investigation by the NCAA indicated issues with the players backgrounds, such as Derrick Rose.
      I think the issue is that most of the top high school/AAU players will have something in their past that violated NCAA regulations prior to college.
      A rule violation sounds serious until you look at some of the rules NCAA has.
      So they are guilty of rules that didn’t apply when the acts occurred?
      And the people that pay for it are players after the exceptional player departs to the NBA/NFL (witness Reggie Bush and USC football penalties)
      My personal view is that scholarship plus room and board is adequate compensation for their play. If you put in payment for some players, it will break down team play.
      If they are exceptional players, they can parlay that into a pro contract. Otherwise, they can get a free education.
      What the players need to get is the ability to market their names while they are relevant off the field/court.
      Just my humble opinion.

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  6. Anthony says:

    Your discussion misses on many aspects. Basketball is not always a revenue producing sport in that they sometimes just break even. When they are producing money (revenue for the school) it is true that that money (some) goes to support other sports that are not revenue producting such as baseball, golf, tennis, and ALL the women’s sports. There are rarely any women’s teams that generate any revenue and most operate at a loss. You will have a team like UCONN women’s basketball who can produce some revenue or Tennessee’s Lady Vols who used to in the past.

    Now not only does the revenue need to go from REVENUE producing sports such as football and basketball to the other sports in the school, but if you pay basketball and football players money you have to also pay all athletes money for play. You can not provide a financial benefit to one group of athletes and not to others. Specifically you would have to pay for salaries etc for the women’s teams (see TITLE IX- No person in the United States shall, on the basis of sex, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any education program or activity receiving Federal financial assistance…—United States Code Section 20, [1] ).

    Title IX in my opinion has done great things for women’s sports at the cost of men’s sports and also the possibilty of actually paying the players what they are worth financially to the school/institution. It creates a system by which great athletes like Anthony Davis can’t be paid their fair market value.

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  7. James says:

    “…the nation will be focused…

    The nation? I think not. The small part of the nation who are basketball fans, perhaps, but most of us just don’t give a damn.

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    • Alex in Louisville says:

      BOOOO to you buddy. Almost everyone I know watches and loves the tourney. Three of my co-workers even took off work to watch the games thursday and friday. My wife who rarely watches college sports goes crazy every march madness.
      Go Cards.

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  8. Aaron says:

    The NCAA could pay the players directly or otherwise set universal rates for all players. Students with on-campus jobs get paid, after all, whether or not its a market wage.

    And schools don’t have to take that money away from women’s sports. When you have college coaches making tens of millions of dollars, and the NCAA head likewise rolling in dough, I’m sure they can find the money to pay players something while still adhering to Title IX.

    At the very minimum, student athletes should retain the rights to their image, instead of the NCAA also expropriating that for marketing purposes.

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