On Thursday, former Nebraska football quarterback Sam Keller was involved in a court hearing that could radically change the face of college athletics. Keller’s lawsuit against the NCAA was consolidated with a suit brought by former UCLA basketball star Ed O’Bannon, alleging that the NCAA has been benefiting from using the likenesses of college athletes without providing those athletes with proper compensation.
The basis of these lawsuits is a challenge to NCAA form 08-3a, which all athletes must sign to compete in an NCAA event. You can see a copy of the 2008-09 form for University of Kentucky athletes here. That form gives the NCAA (and its subsidiary company, the Collegiate Licensing Company otherwise known as the CLC) permission to use the student-athlete’s likeness and image.
The lawsuit says that requiring student-athletes to sign this form is a conspiracy among the NCAA, the CLC and the video game manufacturer Electronic Arts (EA), which violates federal antitrust statutes. The lawsuit also alleges that the NCAA, CLC and EA have damaged the student athletes’ right of publicity, which is a property right all people hold.
A federal district court judge heard arguments to declare the student-athletes’ case to be a class action during the hearing Thursday. Already a number of prominent former student-athletes, including Oscar Robertson and Bill Russell, have joined in the lawsuit. But if the judge declares the case to be a class action, it would make it much easier for any student-athlete to join in the lawsuit.
If the judge does certify the case as a class action, you can expect a floodgate of current and former student-athletes to join in the case. That dramatically increases the potential financial damages the defendants (the NCAA, the CLC and EA) could be facing, and therefore increases the risk for those organizations to take the case to trial. It also dramatically increases the negotiating power of the student-athletes in any settlement negotiations.
How damaging? Well, consider all of the revenues that the NCAA brings in from college athletics. The student-athletes in this case have proposed that they should be entitled to half of those revenues (according to Andy Staples of SI.com). That’s right, 50 percent, off the top.
So let’s take a look at how the student-athletes being successful in their lawsuit might affect Nebraska. According to businessofcollegesports.com, for the 2010-11 the Nebraska athletic department had $5,170,608 in profit. That number is based on $83,679,756 in revenue and $78,509,148 in expenses.
Pretty good, right? Even in an economy still reeling from the financial collapse of 2008, the University of Nebraska athletic department made a profit of over $5 million in 2010-11.
Now let’s add in the 50 percent that the student-athletes are claiming they are due for the use of their likenesses and images. If that was the case in 2010-11, the expenses of the Nebraska athletic program would jump from $78,509,148 to $117,763,722. That would turn the athletic department’s $5 million profit in 2010-11 into a loss of slightly more than $34 million.
Put into context, it would mean the athletic department would have to increase its revenue by 40 percent, start dramatically cutting costs, or some combination of the two. B1G commissioner Jim Delany has already floated the idea, if the student-athletes are successful, of looking at a “Division III” model for athletics going forward.
So the stakes for the NCAA as a whole, and Nebraska in particular as an NCAA member, are massive. The judge’s decision about whether to certify the student-athletes’ claims as a class action will go a long way in determining how much is at stake, how much negotiating leverage the parties will have, whether a settlement is likely and what it might look like.
For those interested in Nebraska athletics—including Nebraska football, which should include just about everyone who got this far in the article—watch for how the judge rules on the class action question. If the judge does not certify the case as a class action, the likelihood is that little will change within the NCAA structure. If the judge partially certifies the class action (like, for example, allowing former players but not current players to form a class), or if the judge certifies the entire case as a class action, then we could very well see a settlement that could blow a huge hole in the budget of the Nebraska athletic department and others around the country.
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For more details about this case and its possible ramifications, check out the excellent primer on SI.com by Michael McCann.
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