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Sources: New college athlete compensation model may cost power schools $300M each over 10 years

Sources: New college athlete compensation model may cost power schools $300M each over 10 years

SCOTTSDALE, Ariz. — A bag slung over his shoulder and luggage in his hand, Baylor football coach Dave Aranda hustled down the main staircase at the Hyatt Gainey Ranch after the annual Big 12 conference meetings.

He buzzed through the lobby for a quick hello and then jettisoned out the door with a destination in mind. “I’m going to see the (Arizona) Cardinals,” he said, smiling. “Got to learn how to do all this!”

A college coach or administrator visiting a professional sports organization is not necessarily groundbreaking. But Aranda’s visit — presumably to learn more about roster management and pay scale — is indicative of the times.

The college sports industry is moving closer to the inevitable: a direct athlete-compensation model.

As industry executives continue to negotiate with plaintiff lawyers in the House antitrust case, details of a future compensation model — a necessary piece to any settlement agreement — continue to emerge. Those who shared details were granted anonymity as they were not authorized to speak about a proposed settlement that continues to undergo changes.

While negotiations are active and have been for as many as eight months — not a new revelation within the industry — concepts of the proposed new model are becoming more formalized as leaders work to meet a deadline set by attorneys.

Money figures are becoming clear: For those in the power conferences, the price tag is steep.

The 10-year settlement agreement could cost each power school as much as $300 million over the decade, or $30 million a year. That figure assumes a school meets what is believed to be: (1) a $17-22 million revenue distribution cap for athletes; (2) at least $2 million in withheld NCAA distribution for back damages; and (3) as much as $10 million in additional scholarship costs related to an expansion of sport-specific roster sizes — a concept previously unpublicized.

The $30 million price tag, a startling figure for an industry that has only provided athletes with mostly non-cash resources, is about 20% of the average athletic department budget of public schools in the ACC, Big Ten, SEC and Big 12.

However, as reported earlier this week, the revenue-sharing portion of the new model is “permissive,” meaning schools are not required to reach the cap or share revenue at all. Schools will also have the discretion to expand scholarships, or not, across new roster limits expected to be implemented across all sanctioned sports.

While concepts are murky and questions linger, a framework of a new model is becoming more visible and socialized with high-ranking administrators across the four power conferences.

Meanwhile, that deadline — within the next 40 days — is approaching quickly.

For months now, the college athletics world has prepared or, perhaps, braced itself for the removal of the NCAA’s century-old amateurism rules — whether through an employment ruling, litigation settlement or state law change.

But there is still sticker shock in the figures slowly seeping from negotiations.

Schools will have the opportunity to share millions in revenue with athletes with a spending limit similar to a professional sports team’s salary cap. Estimates put the amount at $17-22 million per program, though the amount could fluctuate. The figure was determined through a percentage (roughly 22%) of an average of Power Four athletic department revenue streams, most notably ticket sales, television contracts and sponsorships — not donations.

Separately, the NCAA is responsible for paying about $2.9 billion in back damages over a 10-year period. The funds, some of which could be offset by insurance payments, are expected to come from the NCAA’s annual distribution to schools, mostly from the NCAA men’s basketball tournament (upwards of $700 million annually). Power schools are expecting to see a reduction in distribution by at least $2 million annually, but that figure, too, could fluctuate dramatically.

The final financial concept to any new model involves the implementation of roster limits and the expansion of scholarships across those limits. For instance, under current rules, the NCAA permits schools to distribute 11.7 scholarships across a baseball roster of 32 players.

Under this new model, schools may now choose to provide a scholarship to each roster position — however many are determined for that specific sport. The same goes for other sports, including football, which could see its roster limit actually reduced. The NCAA recently increased the football roster limit for preseason camp from 110 players to 120.

The expense of increasing scholarships is significant. Two power conference administrators told Yahoo Sports that they plan to add more than 100 additional scholarships at the expense of $9-10 million annually. A portion of the additional scholarship expense may be counted toward the revenue-sharing cap, but that too is a fluctuating figure.

There are several key court cases in play that could drastically alter the revenue distribution in college sports. (C. Morgan Engel/Getty Images)

Not every school’s president or chancellor is in agreement on settling the lawsuit and adopting a new model for a variety of reasons explained in this Yahoo Sports story published earlier this week.

The topic has generated plenty of spirited debate within meetings among conference presidents and athletic directors over the last year. The approval of any settlement likely needs a simple majority or supermajority vote from a conference’s board of university presidents.

The Big Ten is most aligned in its desire to settle the suit, multiple sources tell Yahoo Sports. But, as one administrator said, “if one league settles, we all settle.”

However, some conferences are exploring the possibility of setting their own league-wide revenue-sharing cap at an amount lower than the $17-22 million figure.

Is this a possibility? It remains murky.

But it’s a stark reminder of the existing budgetary gap between the ACC/Big 12 and SEC/Big Ten, whose future television contracts and College Football Playoff distribution will further grow that financial chasm. Should the Big 12 and ACC have a lower rev-share cap than the richer SEC and Big Ten? It’s a question some are asking.

Some schools, even those in the power leagues, may not have the resources to even afford half of the rev-share cap. In a hotly competitive industry where talent acquisition is rooted in recruiting, offering a limited amount of funds could further grow gaps not only between the four conferences but within them.

“Some schools may say, ‘I’m out,’” said one industry source.

But there is new money coming. The CFP recently completed an ESPN television extension that pays $1.3 billion annually to the conferences — a combined 58% of which is earmarked for the SEC and Big Ten (roughly $20-23 million per school annually). The ACC and Big 12 receive about 15-17%.

There are other options too, such as reducing coaching and administrative salaries. Salaries and buyouts are responsible for nearly 40% of athletic department budgets in FBS, according to data from the Knight Commission. Another 20% of budgets are related to facility construction, renovation and debt.

Already, schools are gearing up to slice salaries. Within the contract of Missouri’s new athletic director, Laird Veatch, there will feature a “force majeure provision” related to potential changes in the college sports financial model, according to the Columbia Tribune. Model changes could trigger a renegotiation of his deal, according to the outlet.

Such a concept goes beyond the contract of athletic directors. At one SEC school, administrators at least attempted to include a similar clause within the contracts of new coaching hires. The clause triggers a salary reduction if athlete revenue-sharing is adopted, according to two people with knowledge of the clause.

As one administrator quipped, “You can always find the money.”

If a settlement is reached — it’s not a guarantee — the revenue-sharing model will begin no sooner than the fall of 2025 and could even be delayed until 2026.

The timing and the settlement hinges, somewhat, on another antitrust case: Fontenot v. NCAA. That case seeks billions of dollars for college athletes in compensation from televised broadcasts.

While the House settlement is expected to consolidate two other antitrust cases — Hubbard and Carter — the Fontenot case is an outlier. House, Hubbard and Carter share the same legal team in Steve Berman, of Hagens Berman, and Jeffrey Kessler, of Winston & Strawn. Fontenot was brought by the law firm Korein Tillery.

A hearing is set in the Fontenot case for later this month, a key date in settlement discussions. A consolidation of all four cases is ideal as to prevent future legal challenges against the NCAA and power leagues.

How does this happen? It’s one of many lingering unanswered questions as negotiations continue, just like the swirling uncertainty around Title IX (how is it applied?) and the future of NIL collectives (will it all be brought in-house?).

What is a certainty: College athletics is on the clock in a more serious way than it’s ever been.

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