College Football and Basketball Player Fair Market Value Estimates Seem a Tad Overstated

The National College Players Association (NCPA) released a study, entitled “The $6 Billion Heist: Robbing College Athletes Under the Guise of Amateurism”. With a title like that, you know that the positions taken are neutral and balanced. The NCPA was founded by Ramogi Huma, who is also connected with Kain Colter and the CAPA challenge at Northwestern University regarding a player’s union.

This issue is divisive on both sides. Major college sports, particularly the revenue producers of college basketball and college football, are awash in money, as television deals have exploded over the last two decades. One can have a philosophical difference about the issue of whether players should be compensated above and beyond scholarship amounts, but let’s set that aside. How does one account for “fair market value”?

According to the NCPA, the average FBS football player is worth $137,357 per year, and the average college basketball player is worth $289,031.

How did they arrive at such a figure? That’s where I question the legitimacy of the calculation.

" At present, there is no formula to determine the fair market value of a revenue-producing college athlete in the sports of football and men’s basketball. In an attempt to experiment with such a model, we theorized that the revenue-sharing models that exist in the National Football League (NFL) and the National Basketball Association (NBA), which have been arrived at through a collective bargaining process and with the aid of player representation, would provide a starting point on an estimation of what the value of revenue-producing college athletes in their programs. In 2011, the NFL reached an agreement with players that they would share at least 46.5% of the revenue generated by the league while the NBA owners agreed to a 50% revenue-sharing standard for its players. Those standards were applied to the revenue reported by colleges’ and universities’ football and basketball revenues to better gauge the value of the college players that participate in these sports."

Just so we are clear, the estimates are based on the percentage for NFL and NBA players, the upper 5% of athletes compared to even those at the college levels. The further right on the talent/exceptionalism spectrum we move, the higher the percentage that the more elite group can command collectively. Any individual college player who refuses to play is more easily replaceable, on the playing field, than a professional one. The larger size and relative replaceability would both serve to significantly lower the percentage that the market would provide for those players.

This NCPA report, though, just assumes that the correct percentage is identical to that used by NFL and NBA players. In both those leagues, younger player salaries are artificially lowered relative to veterans, and that’s with a collective bargaining position in place (because veterans are willing to trade cost control for future young players in exchange for more veteran money). How exactly would that work in a hypothetical free market system where college athletes got paid their value collectively?

To illustrate this impact, take a moment to consider what the NCPA is actually saying about top level players relative to what a league like the NBA pays. For example, according to the report, players from the top ten college basketball teams (by player fair market value) are worth $901,763 per season. That is 10 teams and 13 players per team, so 130 college basketball players.

For comparison, the 30th pick in the NBA draft is paid $880,000 in year one. 130 players in college should be paid more than the last pick of the first round in the NBA Draft, if you accept these figures at face value. The top ten teams, by money earned, produced 30 drafted players in the last two drafts. The majority of the players on those rosters will never play in the NBA.

How would the market respond? Why would the highest earning schools really pay their players $900,000 on average when those same players could not demand anywhere close to the same money in the NBA or in Europe?

Are some of the top level players worth a substantial amount of money? Yes, but they can be counted on a few hands. The report likely overstates the value because it assumes 18 to 21 year olds–a group with far less certainty about their performance and with fewer potential years of service to build a personal brand–would command anywhere close to the same percentage as the top professionals.

Consider baseball, which does have a minor league system, and where the top professionals also command a high salary (and where young professionals are more cost-controlled). Top level high school athletes do have a real choice between playing in the minors and going to college. In that minor league system, some players are suing, claiming they are compensated below minimum wage laws. The top prospects can command high bonuses, but the vast majority do not command much or have a lot of leverage in their pursuit of becoming highly paid professionals in the future.