Five Sports Business Predictions for the 2020s
Jerome Miron-USA TODAY Sports
The 2020s are about to begin. What’s in store for the sports industry over the next decade? I have five predictions that envision more competition over labor and technology and the blurring of lines between pro sports and college sports.
1. College athletes will obtain NIL rights and the NCAA will eventually accept that
The ability of college athletes to license their names, images and likenesses is a focal point of American sports law. It will remain so for the next several years. College sports are going to change dramatically with respect to athletes’ abilities to control their identities.
Before turning to the future, let’s talk about the present. NCAA amateurism rules disallow college athletes from hiring agents or licensing their NIL to video game publishers, camps, trading card shows, clothing makers, sneaker companies, technology providers and other businesses. The NCAA’s opposition is grounded in concern that college athletes monetizing their identities would abrogate the distinction between college sports and pro sports. College athletes landing endorsement deals could also disguise pay-for-play. Boosters associated with businesses might inflate the value of endorsement deals in order to help their alma maters attract top recruits.
By enacting the Fair Pay to Play Act, the state of California jettisons these worries and emphasizes underlying fairness. The Act, which will go into effect on Jan. 1, 2023, makes it illegal for California colleges to deny their student athletes opportunities to hire agents or license their NIL. With college sports already commercialized in numerous ways, including through lucrative coaching contracts and multi-billion-dollar broadcasting deals, the Act empowers college athletes to profit for themselves.
To be clear, the Act doesn’t compel colleges to pay college athletes or high school recruits, nor does it have anything to do with athletes’ scholarships and financial aid packages. Likewise, and contrary to misplaced worries, the Act doesn’t convert college athletes into university employees or allow them to unionize. Remember, the “payer” of NIL rights isn’t the school, conference or NCAA. It’s the video game publisher, apparel company, trading card show, car dealership or other entity that wishes to pay for a commercialized connection to a college athlete.
About two dozen other states are in various stages of considering NIL legislation. They realize that if California schools permit their athletes to land endorsement deals, those schools would obtain major recruiting advantages. USC, UCLA, Cal, Stanford and other California colleges could promise high school recruits and their parents that if they play in California they can profit from their NIL.
The NCAA is poised to strike back. It can, and almost certainly will, launch lawsuits against states that adopt NIL laws. Attorneys for the NCAA would insist that these laws violate the Dormant Commerce Clause, an interpretation of the U.S. Constitution that forbids each state from unreasonably impacting the economies of other states. California’s Act is poised to impact commerce in other states. It will influence recruiting decisions made by high school athletes living in other states. Companies in other states will also sign endorsement deals with athletes enrolled at California colleges. The economics of college sports, particularly at the “big time” level, necessarily cross the territorial borders of states.
The NCAA would also contend that NIL laws illegally interfere with member schools’ contractual relationships with the NCAA, conferences and broadcast partners. A school compelled by state law to defy its obligations can argue that the state has caused undue interference. The NCAA would further charge that no one state has the legal right to compel a national change. To that point, the NCAA would struggle to apply national rules if some states are exempt. The NCAA might also stress that certain states’ NIL initiatives go well beyond the topic of NIL. In New York, for example, an NIL bill proposes that colleges set aside 15% of revenue from athletics’ ticket sales and fund “injured athlete” accounts.
States sued by the NCAA would be armed with key defenses. For starters, NIL laws arguably have nothing to do with the NCAA. They concern the economic relationships between college athletes and third parties, be they video game publishers, apparel makers and other companies. The NCAA also has a history of crafting exceptions to rules—a track record that suggests the NCAA could tolerate divergent states’ NIL laws. Despite the strictness of amateurism rules, the NCAA allows Olympic athletes to keep their prize money and stipends. It also permits tennis players to retain up to $10,000 in annual prize money. The NCAA also authorizes the Power Five conferences to recruit high school baseball players who have hired agents. The more persuasively states can construe NIL laws as between the athlete and third parties, and the more convincingly states can rebut the NCAA on the necessity of uniform policies, the more likely NIL laws would withstand NCAA legal attacks.
Meanwhile, the NCAA hopes that Congress will propose federal NIL legislation that preempts state NIL laws. Although a federal solution would avert the potential chaos of up to 50 different state NIL laws, the likelihood of such a solution coming to pass is dubious. A group of Democratic and Republican members of Congress are genuinely receptive to federal NIL legislation, but it’s not clear that there is a critical mass of them—particularly in this era of hyper partisanship and particularly during an election year. Also, the views of President Donald Trump on NIL rights aren’t known.
So, what is going to happen? First, several states are contemplating legislation that would take effect in 2020. Should any of those bills become law, the NCAA would be poised to file lawsuits in each and every one of those states. The NCAA would petition for court-ordered injunctions to block these laws’ implementation. This would set off a legal fight as discussed above. Litigation would likely last several years, particularly since this area of law is relatively unsettled.
As litigation plays out in the early 2020s, the NCAA would continue to request Congressional assistance and explore potential compromises. The NCAA has formed a NIL working group, which is expected to recommend policies that would allow college athletes to “benefit”—an ambiguous word, especially in this context—from NIL rights. Also, NCAA president Mark Emmert recently spoke last week at the Aspen Institute’s Future of College Sports Forum. Although in vague terms, he signaled support for the concept of college players gaining from NIL rights.
The NCAA probably sees the writing on the wall. Sometimes the best insight into an unsettled debate is to look at the arc of history and see where it bends. In both a trial and on appeal, the NCAA recently lost to former UCLA basketball star Ed O’Bannon on the subject of NIL rights. Multiple federal judges ruled that the NCAA and its member schools violated federal antitrust law by setting the value of college players’ NIL to $0. While the NCAA could absorb the ultimate remedy in the O’Bannon case—the NCAA was ordered to permit member schools to offer the full cost of attendance—the larger takeaway from the O’Bannon litigation is that federal judges found the denial of NIL rights to be highly problematic.
Public opinion polls also suggest that most Americans support college players being able to license their NIL. That isn’t surprising. For one, college athletes signing endorsement deals probably wouldn’t impact fans’ interest in a particular program or school. For another, NIL rights appeal to different ideologies. These rights draw on longstanding American values of entrepreneurism and economic freedom. The U.S. generally allows exceptional young people to profit from their abilities. Child actors can earn income for appearances in movies, TV shows and commercials and then go on to college and participate in drama programs. The same idea is true with young musicians and the blending of their professions and educations. Other countries are also comfortable with young athletes profiting from their NIL. Basketball players in Europe, for instance, can turn pro as teenagers and sign endorsement deals. U.S. college players being able to do the same would hardly be unique or unprecedented.
Others support NIL rights on account of civil rights and racial and gender justice. African American college students disproportionately comprise the two NCAA sports—football and men’s basketball—that generate the most revenue in college sports. Women athletes, some of whom play sports that lack pro leagues, would also stand to benefit from the ability to profit on their identities.
While it won’t happen overnight and while it might arise through litigation settlements, the NCAA will relent and permit athletes to profit from their NIL and also allow them to hire agents. The NCAA will likely demand and receive some types of control, but once the NIL market starts, it will take its own form. Yes, college sports will never be the same. But don’t expect fans to lose their fandom over college athletes gaining the same set of intellectual property rights enjoyed by other athletes, entertainers and public figures.
2. A new frontier nears for compliance officers, parents, agents, trade associations and college sports video games
Colleges and their athletic compliances officers should prepare for the eventuality of student athletes profiting from their names, images and likenesses. Those officers will need to develop policies and enforcement strategies for becoming aware, and understanding the implications, of NIL deals signed by players. From the vantage point of compliance officers, those deals must not cause their schools to violate the terms of university contracts with sponsors and broadcasters. Compliance officers will also scrutinize endorsement deals offered by businesses associated with boosters to confirm that these endorsements aren’t disguising pay-for-play or other illicit forms of recruiting.
Parents of athletically gifted children also face a new world. Their kids will not only be recruited by colleges but businesses will pursue them for sponsorships. Parents will evaluate and hire agents to guide them through this process and negotiate on their behalf. On that point, there will be new opportunities for sports agents, particularly those who understand the business of college sports and its unique qualities.
Meanwhile, many consumers will watch these developments with keen interest. Gamers who enjoy college sports videogames will be in luck. College athletes gaining NIL rights would lead to group licenses. This means that an entity—most likely a trade association—will negotiate on behalf of all or many college athletes from a sport or conference. A trade association is not a union, which collectively bargains on behalf of employees. A trade association more narrowly represents a group of individuals or businesses on matters of common interest. Here, a trade association would negotiate on behalf of college athletes for inclusion of their identities in video games and other goods and services. As a result, college athletes who by themselves wouldn’t attract endorsement opportunities—think of benchwarmers and backups—would still benefit from group licenses.
A trade association (or multiple trade associations) for college athletes would likely surface soon after NIL rights became certain. There are clear signs that organized efforts to assist college athletes would swiftly emerge. The College Athlete Players’ Association (CAPA) already exists and could facilitate dealings on behalf of groups of college athletes. There were plans for a “Former College Athletes Association” following the O’Bannon case. It would have been led by renowned mediator Kenneth Feinberg and negotiated on behalf of former NCAA athletes who appear on classic broadcasts, trading cards, video games, apparel and other products. An entity of its type could resurface since former NCAA athletes may prefer to join a group negotiation. There are also attorneys who have launched websites and related businesses aimed at helping college athletes navigate endorsement and licensing opportunities. For example, Dustin Maguire has established Marketing Service for College Athletes while Zachary Segal has established Student Player. This is a market that will quickly take shape.
Video game publishers, such as EA and 2K, will no doubt embrace the chance to publish games that feature college players’ avatars with their real names and likenesses, as well as the intellectual property of schools, conferences and the NCAA.
To put it bluntly, video game publishers don’t care about amateurism. They care about making video games that sell, and the more realistic the game the better. Those games would be attractive additions to the next generation of video game consoles, which include the forthcoming PS5 and Xbox Series X.
3. Playing college sports will become more of an option than an expectation, and the Power Five conferences will demand more autonomy from NCAA
As it grapples internally with the name, image and likeness debate, the NCAA also faces formidable external pressures. Professional leagues—some of which are improving, others of which are new—will gradually compete with colleges for the recruitment of high school superstars. The competition won’t always be direct, but it will be present.
Take men’s college basketball. The G League has become a more attractive option than any previous U.S.-based minor basketball league. Armed with the financial and brand support of the NBA, the G League has significantly raised players’ salaries and benefits and secured broadcasting contracts for games to be aired on Facebook Live, NBA TV, ESPN+, ESPNU and Twitch. The G League also welcomes players straight out of high school, some of whom are eligible to earn $125,000 over a five-month period. NBA players are also trying to help G Leaguers unionize, a step that would further legitimize the G League as a true developmental league for prospective NBA players.
The NCAA should take the G League seriously. While the G League probably won’t attract players recruited by the very best D-I programs anytime soon, that eventual possibility is not far-fetched. Younger basketball fans, including future basketball stars, will grow up viewing the G League as much more legitimate and more closely linked to the NBA than do older generations.
High school recruits have also seen top-ranked players, such as LaMelo Ball and R.J. Ball, skip college to play pro abroad. These players have developed their games in a professional environment, which is appealing to NBA scouts when assessing talent and maturity. High school recruits will also see the Historical Basketball League’s inaugural season in June 2020. The HBL will feature college teams in eight cities and the players will receive guaranteed scholarships as well as the ability to earn between $50,000 and $150,000 based on their athletic talents and marketability. HBL players will thus play top-level college basketball, pursue an education and be paid for their basketball talents and hire agents—all without worry of NCAA rules.
As a related challenge to college basketball’s control over top American talent, the NBA and NBPA are expected to lower their age eligibility rule in their next CBA. The current CBA runs through the 2023-24 season, with a mutual opt-out clause after the 2022-23 season. Under Article X, an American player must be at least 19 years old and at least one NBA season must have elapsed since when he graduated from high school or, if he didn’t graduate, when he would have graduated. Article X forbids the career path taken by a number of recent NBA stars who joined the league prior to 2006. They include LeBron James, Kobe Bryant, Kevin Garnett and Tracy McGrady. It is a path that other high schoolers will take in the 2020s.
As to college football, the NCAA doesn’t presently have competition for attracting premier players whom the NFL and NFLPA have decided are too young. The NFL and NFLPA have collectively bargained Article 6, which instructs that players are only eligible for the NFL draft after three years have passed from when they graduated from high school or, if they didn’t graduate, when they would have graduated. As a pragmatic matter, this usually means that players can’t jump from college to the NFL until they are juniors or redshirt sophomores. That is even true for running backs whose careers might not last very long due to wear-and-tear.
The NFL, however, isn’t the only pro league for football. The XFL will launch in February. It is financially backed by billionaire Vince McMahon and is led by Oliver Luck, a highly respected sports executive. The XFL doesn’t use the NFL’s eligibility rule. In the inaugural XFL draft held in October, West Virginia safety Kenny Robinson Jr. was drafted with the 39 pick. Robinson, who played two seasons for the Mountaineers and isn’t NFL draft eligible until 2020, will play for the St. Louis BattleHawks.
Initial player salaries for XFL players might not lure many college stars but could net some. The average XFL salary is expected to be around $55,000. This figure covers roughly six months of work (December to May) and carries health care benefits. Some XFL players will earn considerably more—as much as $600,000—while others will be paid less. If the XFL is a success, players’ salaries will likely climb.
Meanwhile, the Pacific Pro Football League (PPFL) is expected to launch in July 2020. The PPFL is led by Donald Yee, a prominent sports attorney who represents Tom Brady. This league will recruit players who are not yet eligible for the NFL, thus making it a potential rival to college football. PPFL players are expected to earn about $50,000 on average. As pros they can sign endorsement deals, too.
To the extent these new pro leagues compete for players, the Power Five conferences might demand greater autonomy from the NCAA when determining the values of player scholarships and in offering flexibility on NIL rights. All it would take is for a star quarterback or running back to sign with a developmental league for the college sports industry to be shaken. The NCAA won’t be going away anytime soon, but a more plausible outcome is that conferences become more autonomous and set their own preferred rules for compensating student-athletes.
4. Cord-cutting and a la carte programing will complicate labor relations
Massive revenue from TV deals is the main reason for the recent surge in player salaries and franchises values. TV revenue is the largest source of revenue for the leagues, which also profit from gate receipts and the sale of intellectual property in merchandise, apparel, arena signage and video games.
Owners and players share revenue through collectively bargained formulas. In the NBA, owners and players more or less evenly split TV revenue and other components of “basketball related income” (BRI) as that term is defined in the CBA. When BRI increases year-to-year, the salary cap for each team also increases. That, in turn, leads to higher player salaries.
This model works well when TV revenue climbs, as it has done in recent years. In the NBA, revenue has grown as a result of nine-year TV deals between the NBA and ESPN and TNT. These deals, signed in 2014, pay the NBA (and, in turn, players) $24 billion.
Yet a key industry concern is “cord-cutting.” Aggravated by the high price of cable TV and the presence of cheaper options, many cable subscribers have dropped their subscriptions and obtained programing through other ways, such as streaming apps.
If fewer people subscribe to cable, fewer people will subscribe to ESPN, Turner, regional sports networks and other channels that pay massive amounts of money for the right to broadcast games. Those networks, which also net lower advertising revenue with fewer subscribers, might be less able or willing to offer as lucrative TV deals the next round of bargaining. If other revenue sources don’t increase to make up the difference, the franchises’ values and players’ salaries would be poised to drop.
There are already warning signs. Broadcast TV ratings are down across the board due in part, according to The Hollywood Reporter, from a “shrinking number of people with cable or satellite subscriptions.” Sports TV ratings, however, remain fairly positive. While TV ratings for NBA games broadcast on ESPN and TNT were down 16% during the first month of the 2019-20 season, TV ratings or NFL games were up 5% after the first month of the 2019 season. Also, MLB’s three national TV partners–Fox, ESPN and TBS–reported increased viewership in the 2019 season, and NHL games on NBCSN were up 24% through the first 15 games of the 2019-20 NHL season.
North of the border, Canada has made “a la carte programming” the law. A la carte programing empowers consumers to buy only the channels they want, rather than—as is commonly the case in the U.S.—bundles of TV channels, including unwanted ones. League and sports TV networks disfavor a la carte programing since it would lead some subscribers who currently subscribe to ESPN, NBC Sports Network, FS1 and the leagues’ own networks to not buy them. In a scenario where a la carte programing was mandated by U.S. law, networks would presumably offer less money to leagues (and players) to broadcast games.
None of this necessarily foretells doom and gloom for leagues and players. As mentioned above, most of the leagues are doing well with respect to TV ratings. Also, ESPN has adapted to streaming apps, including through bundling with the new Disney + steaming service. That type of approach is available to other sports networks. Live sports also have a distinguishing feature from other programing. While we can generally watch our favorite shows when we want, we want to watch sports as they happen.
Still, leagues will surely address the topic of industry trends and TV revenue in their next round of CBA negotiations. The CBAs for the four major leagues will all expire over the next few years. Leagues could demand protections by shifting risk of diminished TV revenue onto players. For example, leagues could request that broadcasting revenue be removed from the definition of “related income” and shared between owners and players under a different formula. This could spark debate and tensions with players.
5. Increased interactivity of sports and related business opportunities
With esports and virtual reality gaming becoming increasingly popular among Gen Z and Millennials, there’s a greater need for leagues, the NCAA and conferences to make fans feel as if they are active participants. The growth of daily fantasy sports and the gradual legalization of sports betting across states—and the embrace of those trends by leagues—is consistent with leagues making fans feel like they have a stake. Expect these trends to only amplify during the 2020s.
Leagues might eventually embrace ways to more actively involve fans. Your Call Football (a technology company I advised on legal matters during its formation) offers a professional football league where fans vote on which plays are called. More recently YCF has licensed its app technology to the AutoZone Liberty Bowl. Viewers will be able to vote on predicting plays during the New Year’s game between Navy and Kansas State.
Athletes are also using their creativity and entrepreneurial spirit to involve fans. This is perhaps best seen through Brooklyn Nets guard Spencer Dinwiddie’s plan to convert his employment contract into a tradable financial asset. I detail that plan in a The Crossover legal story. In short, Dinwiddie hopes to sell the rights to his future payments. Tonya Evans, a former professional tennis player who directs the Blockchain, Cryptocurrency and Law certificate program at the University of New Hampshire Franklin Pierce School of Law, told SI that Dinwiddie’s plan would “truly disrupt an industry laden with intermediaries standing between the athlete and the fan.”
With new innovations come new concerns. Pro leagues, the NCAA and conferences will need to carefully monitor how new types of interactions with fans—and bettors—impact the integrity of games and trigger additional types of legal risks. Still, the sports industry, like every other industry, must evolve and adapt to the changing times.
Michael McCann is SI’s Legal Analyst. He is also an attorney and Director of the Sports and Entertainment Law Institute at the University of New Hampshire Franklin Pierce School of Law.
