NCAA reaches historic agreement to pay billions to US college athletes

U.S. college sports are hugely popular and, as such, they move billions of dollars. Until now, however, athletes have received only a few crumbs of the revenue pie derived from packed stadiums and halls and vast television audiences. On Thursday, the NCAA, the governing body of college sports, and its major league partners signed a historic agreement that will pay out billions to athletes, the parties announced.

The settlement, which must still be approved by the federal judge overseeing the case, ends a series of class-action lawsuits brought by athletes demanding retroactive compensation for their services, alleging an abusive monopolistic position by the NCAA. It also implements revenue sharing with the players, paving the way for some professionalization of college sports, especially in American football and basketball, the two sports with the largest followings.

According to the firms representing the plaintiffs, Hagens Berman and Winston & Strawn LLP, the settlement will radically change the economic model of college sports and provide billions of dollars in damages awards and tens of billions of dollars in future revenue sharing to college athletes.

The out-of-court settlement has been reached between the plaintiffs, the NCAA, and the five major college sports conferences (Big Ten, SEC, Pac-12, Big 12 and ACC, known as the Power 5, which group together 69 prominent universities). The settlement resolves three pending antitrust lawsuits (House v. NCAA, Hubbard v. NCAA and Carter v. NCAA) that challenged the NCAA’s limits on the compensation and benefits that college athletes can receive for their athletic services and for rights pertaining to their name and image.

The college sports organizations have agreed to pay more than $2.75 billion in damages to approximately 14,000 past and current college athletes over a 10-year period. In addition, the settlement eliminates certain NCAA and conference rules that prohibit direct payments from universities to athletes. The agreement also allows schools to share revenue directly with college athletes.

Although the full details are not known, in the first year of the agreement, each university can share 22% of the average Power 5 university’s revenue, which is currently projected to be well in excess of $20 million per year per university. These new payments and benefits are in addition to scholarships, third-party image payments, healthcare, and other benefits already received by college athletes. Universities can elect to apply the new payments and benefits to athletes playing any sport. The agreement also eliminates NCAA scholarship caps to open the door to more opportunities in all sports.

The value of the new benefits and payments that can be provided to college athletes under the agreement will grow each year in line with increases in college sports revenues. Over the 10 years of the agreement, lawyers estimate that the total value of the new payments and benefits for college athletes will exceed $20 billion, making it one of the largest collective antitrust settlements in history, according to Hagens Berman and Winston & Strawn LLP.

U.S. college sports already attract talent from around the world through scholarship programs and benefits and as a gateway to professional competition, but this windfall may increase the attraction for young college athletes from around the world to ply their trades in the NCAA.

The discussion of college revenue sharing had even reached the U.S. Supreme Court, which censured the system in place in a case involving education-linked benefits. “The bottom line is that the NCAA and its member colleges are suppressing the pay of student athletes who collectively generate billions of dollars in revenues for colleges every year,” said Justice Brett Kavanaugh.

“This landmark settlement will bring college sports into the 21st century, with college athletes finally able to receive a fair share of the billions of dollars of revenue that they generate for their schools,” said Steve W. Berman, managing partner and co-founder of Hagens Berman.

Officials from the NCAA and the five major leagues issued a joint statement. “The five autonomy conferences and the NCAA agreeing to settlement terms is an important step in the continuing reform of college sports that will provide benefits to student-athletes and provide clarity in college athletics across all divisions for years to come,” it read. “This settlement is also a road map for college sports leaders and Congress to ensure this uniquely American institution can continue to provide unmatched opportunity for millions of students.”

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