4 years ago Ed O’Bannon noticed that his image was being used without his permission. His subsequent suit threatens to upend the NCAA. Chris Parisi reports.
To pay or not to pay. Not to misquote the Bard, but that’s the question Ed O’Bannon’s class-action lawsuit against the NCAA and various entities has been asking since 2009, a question those who follow college sports have debated repeatedly while those who govern college sports have tried to ignore for decades.
It’s the same question that is now wreaking havoc with the college sporting industry and all it touches: Should student-athletes receive compensation above and beyond their scholarships—tuition, room and board, and books—for any benefits their likenesses have rendered to others?
To be clear, we’re not talking about just a few dollars, and we’re definitely not minimizing the potential impact a finding for O’Bannon would have across a very large playing field. That field includes at a minimum: said institutions of higher learning/higher athletics; the NCAA, the governing body of college sports; the individual college athletic conferences; and far beyond, to video games and media royalties, including everything from traditional print and broadcast to social media.
And even though the question may reflect on the past, on whether student-athletes from eras gone by were taken advantage of, as well as on the future, on whether, moving forward, scholarships should include a moderate amount of spending money—and I lean in that direction, personally—and what fair restitution may be to O’Bannon and those he ultimately represents, the ripples from this case are already being felt in the present.
Quite a bit of frenetic brainpower is being spent on figuring out how to weave through and around the complex legal, logistical and political minefields that thirty-plus years of the current free ride have created. This includes figuring out how to apply any finding in accordance with Title IX, which mandated equal rights for women with respect to opportunity in education, what to do about sports with only partial scholarships, and how athletics departments would foot the bill.
But I’m getting way ahead of myself. The O’Bannon case has been going on for over four years now—there’s quite a bit to catch up on.
We can start even further back, say almost 30 years. It could be argued that the stage was set back in 1984, when a ruling for the University of Oklahoma against the NCAA determined that the NCAA’s restrictive football television package violated federal antitrust laws. This opened the door for all sorts of opportunity—just ask ESPN—and as technology exploded in Moore-like fashion, new vehicles in terms of reaching consumers were created that had never been imagined. Who ever thought of watching games on devices in the palm of one’s hand? Some of this was right out of Dick Tracy or Star Trek.
Fast-forward to July of 2009, and Ed O’Bannon, a Wooden Award winner who now sells Toyotas in Las Vegas was at a friend’s house watching his friend’s son playing an Electronic Arts NCAA video college basketball game. The game featured several NCAA championship teams, including the 1995 Bruins’ team. O’Bannon starred on that team which beat Arkansas 89–78 for UCLA’s 11th title. The guy wearing No. 31 in the video game looked a lot like O’Bannon and shot left-handed, just like O’Bannon. Same guy, same team, the only difference was that there was no name on the jersey.
“My friend kind of looked at me”, as O’Bannon has recalled to Yahoo! Sports and the Las Vegas Sun, “and said, `You know what’s sad about this whole thing? You’re not getting paid for it.’ I was just like, `Wow, you’re right.’ It just kind of weighed on me. He laughed pretty good and I just sat there thinking, ‘Wow, that’s true.’ My reaction was a little bit of embarrassment, but I was also disappointed that no one told me that they were going to be using my likeness to make this video game. They never sent me any paperwork. I didn’t release my face or my likeness.”
So O’Bannon sued the NCAA, EA Sports and the Collegiate Licensing Company (CLC) for using his likeness in video games and television programs—pretty much any and all commercial ventures—without fair compensation. He contended that the NCAA manipulated rules and cheated student/athletes out of rightful and fair compensation when they let the video game maker EA Sports use those players’ likenesses in video games (like NCAA Football and NCAA March Madness).
At the center of the suit is an interpretation of the NCAA’s Rules of Amateurism combined with Student-Athlete Statement – Division I Form 08-3a, one section of which reads, “You authorize the NCAA [or a third party acting on behalf of the NCAA (e.g., host institution, conference, local organizing committee)] to use your name or picture to generally promote NCAA championships or other NCAA events, activities or programs.” Student/Athletes have to sign waivers accepting the terms woven into these rules and regulations.
O’Bannon’s action got some publicity after its initial filing, and a bit of a lift when his suit was combined in January of 2010 with a similar lawsuit filed earlier in 2009 by former Arizona State quarterback Sam Keller against the CLC and EA Sports for a similar complaint (using his likeness in video games without his permission). But the lawsuit got virtually no respect from the NCAA or the other defendants except an immediate motion to dismiss—no respect that is, until a month later, when a district court judge in San Francisco denied the NCAA’s motion for dismissal in the class-action lawsuit.
The ruling meant that O’Bannon’s lawyers won the battle to demand information related to the dispute, mandating that the NCAA had to hand over documents related to their licensing agreements. This started framing the money associated with the case, and lent credence to the core of the suit, which has two main components and hinges in part on how the Sherman Antitrust Act is interpreted.
Specifically, O’Bannon’s case argues that the NCAA, in league with its member schools, conferences, the Collegiate Licensing Company (CLC) and Electronic Arts (EA), acted to prevent student-athletes from getting paid for the revenue generated by the use of his likeness. His case contends that this violates antitrust laws because the marketplace would be more competitive if student-athletes could enter into license agreements.
A great example is Christian Laettner’s famous buzzer-beating shot that lifted Duke past Kentucky in the 1992 NCAA tournament. I remember watching that game, when Grant Hill hurled the inbounds pass to Laettner over halfcourt to near the free throw line, where he caught it, dribbled and let fly. That footage has been sold by the NCAA to be used in commercial advertisements for over two decades. What could Laettner or Hill have gotten?
Additionally, O’Bannon notes injury to the right of publicity, which is a property interest in one’s unique characteristics, which includes facial image, physique and athletic tendencies, voice, personality traits and other distinguishing features—such as O’Bannon’s left-handed drives and tenacious rebounding.
The Sherman Antitrust Act specifically bans artificially fixing prices. O’Bannon is alleging that if the NCAA didn’t force him to sign the contracts and waivers, then he could have marketed himself as the NCAA has done, and gotten money from commercial endeavors seeking to use his likeness. In essence, because he is unable to pursue any bids, the NCAA has fixed the price of using his image at zero dollars, and eliminated any ability to take advantage of a free and open market.
The denial of dismissal two and a half years ago gave O’Bannon his stick. Now his case had legs, because it opened up the possibility of it becoming a class-action suit.
Before we go there, let’s take a look at the money involved, because that’s really at the crux. If the bills weren’t in large denominations, there wouldn’t be so much noise surrounding the lawsuits.
Identifying revenues associated with the use of a student-athlete’s likeness is no easy task, as there is no simple way to definitively track all the cash flows. So we’ll look at some representations to get a feel for the magnitude.
Start with television. Remember from above, 1984 was noted as a causal point in time, when television started on the road to become the one of the main drivers in college sports. CBS and Turner Sports now pay the NCAA $785 million a year for the rights to broadcast the men’s basketball tournament. That contract enabled the Big Ten to pay its schools $25 million apiece last year.
The retail marketplace for college licensed merchandise in 2011 was estimated at $4.6 billion. That’s what Collegiate Licensing Company (CLC) reported for audit. The University of Texas at Austin realized slightly more than $10.6 million in royalties from the sale of its merchandise over the July 1, 2010 to June 30, 2011 period.
EA Sports’ total net revenue at the end of the fourth quarter of 2012 stood at $1.36 billion, an increase of 25% over the Q4 2011 figure of $1.09 billion. Net revenue generated from digital sales nearly doubled year-over-year, $419 million in Q4 2012 as opposed to $211 million in Q4 2011. Industry analysts told Sports Illustrated the “NCAA Football” franchise likely accounted for 5%, or $125 million, of EA Sports’ total revenue per year. Note I use the word accounted—more on that soon.
Speaking of how the schools are benefitting, not all schools will receive the $10 million that Texas does from merchandising, but figure anywhere from $1 million to that $10 million is a good range. Revenue from EA Sports licensing is an order of magnitude smaller but not pennies. For instance, Wisconsin received about $170k from a combination of “NCAA Football” and “NCAA Basketball” (which was discontinued after 2010). Louisville gets about $112k.
But look at some indirect aspects of the size of college sports and imagine the impact if realignment is needed in some areas, like coach salaries. Mike Krzyzewski, basketball coach for Duke, makes over $7 million per year. Louisville’s Rick Pitino guides their basketball team for $6.5 million. Nick Saban makes almost that much, leading Alabama’s football team for a little over $6.3 million; Mack Brown, his counterpart at Texas, makes about $6.2 million.
How about facilities? Monmouth spent $57 million to build its new Multipurpose Activity Center, which houses several sports.
And the NCAA? The 2012-2013 projection is $872 million, over 80% coming from that $10.8 billion, 14-year agreement with CBS Sports and Turner Broadcasting for rights to the Division I Men’s Basketball Championship. NCAA President Mark Emmert made nearly $1.7 million last year. Pac-12 Commissioner Larry Scott raked in $3.1 million in 2011.
No matter how you slice and dice it, that’s a lot of money.
Now let’s look at the compensation for student-athletes—a full scholarship. That covers tuition and fees, room, board and required course-related books. A full scholarship at an in-state, public school is $15,000 a year. For an out-of-state public school, it’s $25,000, and private schools average $35,000 a year.
Don’t discount this version of a free ride; it’s not trivial at all. A free higher education and the tools to succeed if this sports thing doesn’t work out is a nice graduation present. Keep in mind that only 2% to 3% of college football players get drafted, and even if they do, the average career is about three years—not having to worry about school loan payments is a huge benefit.
Back to the case itself. While the legalities were proceeding in 2009 and 2010, O’Bannon was joined by other plaintiffs. In March of 2010, eleven former college football and basketball players, including Alex Gilbert, a teammate of Larry Bird at Indiana State; Harry Flournoy and David Lattin, members of the 1966 Texas Western team that was the first all-black starting lineup to win an NCAA basketball title; and Thad Jaracz and Bob Tallent, who played for Kentucky, all joined the lawsuit.
In January of 2011, The Big O, Oscar Robinson, who played college ball for Cincinnati in the late ‘50s, along with Tate George of UConn and Ray Ellis, the Ohio State defensive back who went to the 1980 Rose Bowl with the Buckeyes, joined the suit. Feeling emboldened, Oregon junior tight end David Paulson took a swing at the NCAA. In October of 2011, former San Francisco basketball student-athlete and NBA legend Bill Russell jumped on board.
And most recently, right after the 4th of July of this year, Judge Claudia Wilken ruled to allow current players to join O’Bannon’s suit. Arizona Wildcats Jake Fisher and Jake Smith, Minnesota Golden Gophers Moses Alipate and Victor Keise, Vanderbilt linebacker Chase Garnham, and Clemson cornerback Darius Robinson all jumped on board. Former Heisman Trophy winner Desmond Howard is also considering joining the suit, especially as he’s embroiled in a lawsuit of his own—one in which he is being sued for using a photo of himself, similar to the battle Johnny Manziel is locked into for signing his photos, perhaps for money. Fireworks indeed.
All of this lent credence to the 800-pound gorilla—determining if this suit goes class action. Judge Wilken is ruling on this as well, and on June 20th of this year she heard arguments on whether to certify or not.
The 63-year old Judge Wilken, who has presided over a previous licensing suit involving EA Sports, has yet to make a decision, and she has three options to consider. She can deny O’Bannon’s and his fellow plaintiffs’ motion for class certification, in which case the individual athletes will have to bring their own suits and the NCAA would probably have to settle a number of cases. This is the option that the NCAA is praying for; for them, it’s the best and least expensive.
She can certify the class action for only the former players, which would be a fairly expensive settlement path for the NCAA, but the organization surely has a contingency fund for this type of scenario, and it’s still way more desirable than going to trial.
Or she can rule for certification on behalf of current and former Division I men’s basketball and football players over the commercial use of their identities. If she does, and the case ends up in trial, a judgment against the NCAA could result in punitive damages, which, under federal antitrust law, would be tripled. That means billions of dollars, not millions, and doubtless changes some of the core rules that shape college sports. This ruling would definitely push the NCAA to seek a settlement, and the size of that is what has lawyers drooling at the prospect of landing a shot smack on the NCAA’s jaw.
Reactions to the case are mixed, as one would expect. Some current college players like Minnesota defensive back Brock Vereen, two of whose teammates, Moses Alipate and Victor Keise, joined the lawsuit, and Nebraska cornerback Ciante Evans, don’t seem to care.
At the Big Ten media days before the start of the college football season, Vereen was quoted as saying, “I came to the University of Minnesota to get an education and play football. At the end of the day, I can say I’m in a video game. I think the way the case is going to go, if the money is granted, it’s a benefit, and if not we don’t lose anything.”
Others, such as Michigan offensive lineman Taylor Lewan and Northwestern defensive end Tyler Scott, know of the case, but haven’t really followed it. “I don’t know enough about it to actually comment on it,” Lewan said. “I know Jake Fischer, an [Arizona] linebacker who is signed on to that. I asked him for a couple of details and about the story on it, but other than that I know nothing about it.”
Penn State lineman John Urschel stated the most obvious of sentiments. “Honestly, college football players are very biased. You’re asking us if we think we should get more money. It’s tough for anyone to say no,” he said. “Anyone in any profession, if they were asked, ‘Do you think you should get more money?’ I think anyone in any career would say, ‘Yes, I would like a little bit more money.'”
Maryland head coach Randy Edsall said if he were a college football player now, he would join the O’Bannon lawsuit. He said the schools “make money off the players’ likenesses and the kids get nothing for it.”
Big Ten Commissioner Jim Delany warned that Big Ten schools would probably place less emphasis on college sports if they had to share television revenue. He wrote that it was “his longstanding belief that the Big Ten’s schools would forgo the revenues in those circumstances and instead take steps to downsize the scope, breadth and activity of their athletic programs.” “It’s a statement of belief,” Delany said. “I think that’s what would happen. I do not believe that the hypothetical case being put forth—if it actually became the case—that Big Ten institutions would engage in that.”
Other high-level collegiate officials sang similar tunes. “It is possible that Wake Forest might cease playing Division I or Football Bowl Subdivision sports entirely if pay-for-play became a reality,” Wake Forest President Nathan Hatch said in a statement. Texas, whose athletic programs generated $163.3 million in revenue in 2012, more than any other university, “has no interest in a model that would force us to professionalize two sports to the detriment of the balance of the athletics department’s sports, fitness and educational programs,” according to a statement by Texas Athletics Director DeLoss Dodds and Texas Women’s Athletics Director Christine Plonsky.
Timothy White, the chancellor of the California State University System, worried about gender equity concerns. “Paying male athletes for their participation in sports would seriously undermine the objectives of Title IX and CSU’s ability to remain in Title IX compliance,” he said in a statement.
“Would only players who play be paid?” SEC Executive Associate Commissioner Mark Womack asked in a statement, raising a very legitimate concern. “Would only players in sports that generate positive net revenue for an institution be paid, which is more often than not football and men’s basketball? Would sports that do not generate positive net revenue (read “all others but football and men’s basketball”) be eliminated or designated as ‘club sports?’ How would Title IX impact any payment scheme?”
Admittedly, these are all good questions, but they could also be used to delay and obfuscate.
Speaking not about the lawsuit but about paying players in general, seven SEC coaches, including South Carolina head coach Steve Spurrier, offered to pay players out of their own pockets. He was joined by Alabama’s Nick Saban, Florida’s Will Muschamp, Tennessee’s Derek Dooley, LSU’s Les Miles, Ole Miss’ Houston Nutt and Mississippi State’s Dan Mullen.
Spurrier would pay $300 per player, per game to the 70-member traveling parties for each squad. Figure in a SEC title game appearance or a bowl game, that’s approaching $300,000, which is no small sum, even for someone making a little over $5 million per year.
NCAA President Mark Emmert, who initially back on Feb. 14, 2011 held a somewhat hard line against paying student-athletes , took a safer, conciliatory stance a month later during the 2011 Final Four games, acknowledging that it was time for a serious discussion about if and how to spread some of the wealth to the players.
“The sooner, the better,” Emmert says in light of all the activity swirling around. “I will make clear that I want this to be a subject we explore.” To his credit, by October of 2011, the NCAA approved stipends of up to $2,000 for college athletes, and he’s continued to push advancement of the amendment as a starting point, not the end game, amid much debate.
Unfortunately for the NCAA, the effort to show serious attempts at reform will have little impact on the current case, as the tide seems to be shifting O’Bannon’s way.
First, there was the recent development noted earlier that current college players can be included in the lawsuit. Then, on July 17th of this year, the NCAA announced that it was letting its contract with EA Sports expire in June of 2014.
In August, one of the NCAA’s primary defenses—that they don’t profit off of merchandise sales bearing the names of players—experienced a little unraveling when ESPN’s Jay Bilas let the Twitterverse know how to order a Johnny Manziel jersey online at the NCAA Online Shop–a purchase that should never even exist, according to the NCAA.
And less than a month ago, at the end of September, as summer was officially giving way to fall, EA Sports announced that it was discontinuing its College Football video game series as a direct result of the lawsuit. Literally moments after that piece of news, EA Sports and CLC announced that they had reached a settlement in the case, leaving the NCAA as the last target standing. The details of distribution are not completely worked out, but it appears to be about $40 million across 125,000 current and former college athletes.
If you listen really hard, you can hear the leaves falling from the tree. The next thing you may hear might be the mighty oak itself falling. And if it does, it WILL make a sound.
A digression. Wouldn’t it be great if somehow that $40 million from EA Sports found a different, more meaningful home? While no details on distribution have come out, $40 million over 125,000 recipients, evenly split, is about $320 per student-athlete. I did the math 3 times.
My first thought: all this for $320? It was a little deflating, as I do fall in the O’Bannon camp. But split that between the players and charity, surely some good can be done somewhere with $20 million. That might be worth all this. Just a thought. And this was a settlement, not a finding with damages, a splash compared to what the NCAA might have to dole out.
So what’s next for the NCAA? Now that it is the sole defendant in the case, all attention will be focused on it. The wait continues for Judge Wilken’s decision on the class-action question. One of O’Bannon’s lead lawyers, Michael Hausfeld, told USA Today Sports that “We’re here anytime anyone wants to have a responsible conversation” but that “in order to resolve all legal aspects” a settlement would have to “address the monetary aspects and the restraint aspects.”
How much would that be? Five times the EAS settlement? Ten times? The NCAA has already shown an unwillingness to go this route and insists they will continue to fight in court, challenging the legalities of the claims.
“We’re prepared to take this all the way to the Supreme Court if we have to,” Donald Remy told USA TODAY Sports. “We are not prepared to compromise on the case.”
With appeals, this is a battle that could go on for a long time, probably several more years in the hope that Wilken rules in their favor, a strategy that does not seem prudent, as she has already indicated that she’d rather they settle out of court.
I’m actually a bit surprised, based on the numbers coming out of the EAS settlement, they haven’t at least asked the question of “how much”? But legal maneuverings take time and patience, as we’ve seen. One thing seems for certain—the genie is out of the bottle, and it’s not going back in. If the NCAA had three wishes, I’ll bet one of them is that they wish they had reacted sooner, much sooner, to stem the tide.
But the denominations are large, and money is like seawater. The more you drink, the thirstier you get. The next trial date is July 9th, 2014.
For more on this topic, read Liam Day’s “March Madness and The Quaint Notion of Amateurism.”