A guest post from a reader, LAG. Please do respond in comments...
A Simple Solution for Compensating College Athletes
By Leonard A. Giuliano
The question of paying college athletes has long been a favorite area of debate, but recent events have brought the issue into sharper focus. College football and basketball generate enormous sums of revenue and it seems only natural for the athletes to receive some of this windfall as compensation. But closer and informed analysis reveals the issue is not so simple. How much to pay the athletes? Should the fifth string left guard who rarely sees game action be paid the same as the star quarterback? Should swimmers, wrestlers and other athletes competing in non-revenue generating sports also be paid? Does Title IX require all female athletes to be paid if any male players are compensated?
With the overwhelming number of schools losing money on athletics (only 23 out of 340 Division I athletic departments posted a profit in 2012), from where would the money come to pay the athletes? If only some schools could pay athletes, or could pay more than other schools, how would that affect competitive balance? Finally, with the cost of college education skyrocketing to upwards of $60k per year, is a free ride plus all the perks that come with college athletics not sufficient compensation? A simple solution could address all of these concerns and protect the value individual college athletes have accrued and risk each time they enter the playing field or arena: draft insurance.
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At the end of each college season, every player with draft hopes (NFL, NBA, MLS, WNBA, etc) gets evaluated and projected for where they will be drafted. This evaluation could be done by a special committee of league personnel directors. If the athlete remains in school for the following year they get insured for the difference between that projected slot and where they actually get drafted. For example, Jadeveon Clowney is universally projected to be the top overall pick in next year's NFL draft (which earned over $22m guaranteed in the 2013 draft). If for any reason (injury, underperformance, closer scrutiny, etc) he drops to, say, the bottom of the first round when he is actually drafted (which earned nearly $7m guaranteed in the 2013 draft), the insurance policy would pay him the difference in projected vs actual value (roughly $15m using 2013 draft numbers).
This would protect the stars like Clowney, Johnny Manziel and Matt Barkley (who potentially lost $10m dollars by forgoing the 2012 draft in which he was projected to be a top 10 pick and was eventually selected in the fourth round of the 2013 draft). Get drafted at the same (or better) slot and the policy would pay nothing. Just as stock traders use put options to lock in gains and protect against market declines, draft insurance would protect the relatively few stars who have something great to lose and compensates those that truly generate additional revenue for the universities (the Big House on the campus of the University of Michigan will be full regardless of whether Denard Robinson or Devin Gardner is taking the snaps, however Clowney and Manziel could be generating tens of millions of dollars that wouldn't exist otherwise).
This system would also resolve any Title IX issues, since it applies equally to female athletes. Insurance premiums would be paid for by the NCAA and/or the universities. Disability insurance has been available for elite athletes for decades, but these policies only protect against career-ending injuries and the athletes are required to pay the premiums (though loans against future earnings are available). With this proposed draft insurance system, policies would pay out for any reason and would cover the difference between projected and actual guaranteed compensation of the initial professional contract. Draft insurance would also provide incentive for athletes to remain in college longer. Each year, a number of underclassmen, often athletes who have just completed their freshman year, face a question of entering the NBA draft or remaining in school.
The typical rule of thumb advice is to enter the draft if one is projected to be a lottery pick (top 14), as there is too much money to risk losing by remaining in college. But some athletes may want to remain and gain extra seasoning, extra coaching, enjoy campus life and even gain a degree. Instead, they are pushed into the draft for the huge payday, leaving the NBA with more raw, immature prospects. With draft insurance, everyone gains- colleges get another year of service from players, the players get an extra year of preparation, maturity and education, and the professional leagues get more refined products. For this reason, the professional leagues might even consider subsidizing some/all of the cost of the premiums. The horrific sight of Kevin Ware breaking his leg on national television prompted some to question the morality of college athletics, where participants potentially sacrifice health and well-being without monetary compensation. A draft insurance system could provide protection for player value while navigating the practical landmines that have made monetary compensation of college athletes such a challenge in the past.