New Compensation Model for College Athletes Could Cost Energy Schools $300 Million Over Ten Years (Video)

SCOTTSDALE, Ariz. – With a bag over his shoulder and luggage in hand, Baylor football coach Dave Aranda hurried down the main steps of the Hyatt Gainey Ranch after the annual Big 12 conference meetings.

He buzzed through the lobby to say a quick hello, then threw himself out the door with a destination in mind. “I’m going to the (Arizona) Cardinals,” he said with a smile. “I have to learn how to do all this!”

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

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

As industry executives continue to negotiate with plaintiffs’ attorneys in the House antitrust case, details about a future compensation model – a necessary part of any settlement agreement – ​​continue to emerge. Those who shared details were granted anonymity because they were not authorized to speak about a proposed settlement that is still undergoing changes.

While negotiations are active and have lasted eight months – not a new revelation within the industry – the concepts of the proposed new model are becoming more formalized as leaders work to meet a deadline set by advocates.

Money figures become clear: for those participating in the power conferences, the price tag is high.

The 10-year settlement agreement could cost each energy school as much as $300 million over the decade, or $30 million per year. That figure assumes a school meets what is assumed to be: (1) a revenue sharing cap of $17-22 million for athletes; (2) at least $2 million in withheld NCAA back injury benefits; and (3) as much as $10 million in additional grant costs associated with 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 budget for public school athletic departments 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 freedom to decide whether or not to extend scholarships over new roster limits that are expected to be implemented across all sanctioned sports.

While concepts are obscure and questions linger, a new model framework is becoming increasingly visible and social among high-level administrators at the four power conferences.

In the meantime, that deadline – within the next forty days – is fast approaching.

What’s the money?

The college athletics world has been preparing for months for, or perhaps even bracing for, the abolition of the NCAA’s age-old amateurism rules — whether through an employment law ruling, a lawsuit settlement or a change in state law.

But there is still a big shock in the numbers slowly seeping out of the negotiations.

Schools will have the ability to share millions in revenue with athletes with a spending limit comparable to the salary cap of a professional sports team. Estimates put the amount at $17 to $22 million per program, although the amount may fluctuate. The figure was determined using a percentage (about 22%) of the Power Four athletic department’s average revenue streams, specifically ticket sales, television contracts and sponsorships – not donations.

In addition, the NCAA is responsible for paying approximately $2.9 billion in back damages over a ten-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, primarily from the NCAA men’s basketball tournament (more than $700 million annually). Energy schools expect to see a reduction in distribution of at least $2 million per year, but that figure could also fluctuate dramatically.

The final financial concept of any new model includes the implementation of roster limits and the expansion of scholarships across these limits. For example, under current rules, the NCAA allows schools to distribute 11.7 scholarships to a 32-player baseball roster.

Under this new model, schools can now choose to award a scholarship to any roster position, regardless of how many are established for that specific sport. The same applies to other sports, including football, where the selection limit could actually be reduced. The NCAA recently increased the football roster limit for preseason camp from 110 to 120 players.

The costs of increasing the scholarships are significant. Two power conference executives told Yahoo Sports they plan to add more than 100 additional scholarships at a cost of $9 million to $10 million a year. Some of the additional grant costs can be counted toward the revenue sharing limit, but that is also a fluctuating figure.

Who is in?

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

The topic has generated many spirited discussions during meetings between conference chairs and athletic directors over the past year. Approval of a settlement would likely require a simple majority or supermajority of a conference’s board of university presidents.

The Big Ten is the most aligned in its desire to settle the lawsuit, multiple sources tell Yahoo Sports. But, as one administrator said: “If one competition is established, we will 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 dark.

But it is a stark reminder of the existing budget gap between the ACC/Big 12 and SEC/Big Ten, whose future television contracts and distribution of the College Football Playoff will further widen that financial gap. Should the Big 12 and ACC have a lower revenue cap than the wealthier SEC and Big Ten? It’s a question some people ask.

Some schools, even those in the power leagues, may not have the resources to pay even half of the revenue cap. In a fiercely competitive industry where talent acquisition is rooted in talent acquisition, offering a limited amount of money could further widen the gap between the four conferences, as well as within them.

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

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

There are also other options, such as reducing coaching and administrative salaries. According to Knight Commission data, salaries and buyouts account for nearly 40% of FBS athletic department budgets. Another 20% of budgets are related to facility construction, renovation and debt.

Schools are already preparing to cut salaries. According to the Columbia Tribune, new Missouri athletics director Laird Veatch’s contract will include a “force majeure provision” regarding potential changes to college sports’ financial model. Model changes could trigger a renegotiation of his deal, according to the outlet.

Such a concept goes beyond the contract of sports directors. At one SEC school, administrators tried to include at least a similar clause in new coaches’ contracts. The clause will lead to a salary cut if athlete income sharing is implemented, according to two people with knowledge of the clause.

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

When does it start?

If a settlement is reached – which is not a guarantee – the revenue sharing model will not start until the fall of 2025 and may even be postponed until 2026.

The timing and settlement hinge somewhat on another antitrust case: Fontenot v. NCAA. That case seeks billions of dollars for college athletes in compensation for television 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: Steve Berman of Hagens Berman and Jeffrey Kessler of Winston & Strawn. Fontenot was engaged by law firm Korein Tillery.

A hearing in the Fontenot case has been scheduled for later this month, a key date in the settlement talks. A consolidation of all four cases is ideal to avoid future legal challenges against the NCAA and power leagues.

How did this happen? It’s one of many unanswered questions as negotiations continue, along with the swirling uncertainty surrounding Title IX (how will it be applied?) and the future of NIL collectives (will it all be brought in-house?).

What is certain: college athletics are on the agenda in a more serious way than ever before.