College football is not an amateur activity

By DAVID MOON, Moon Capital Management, LLC
September 5, 2010

Did you see Neyland Stadium last night? You can make some noticeable changes for $200 million. Neyland Stadium is one of the nicest athletic venues in the country, which makes it one of the nicest competition venues in the world.

This massive cathedral – a shrine to southern sports – is used a grand total of seven times a year.

There are NASCAR tracks that are used even less than that, but there is a major difference: we don’t pretend that NASCAR is an amateur activity. Of course, there is no NCAA in NASCAR.

Repeat after me: college football is not an amateur activity, except for the college football players.

Thank the NCAA.

Mid and lower level NCAA and member institution employees may actually care about the organization’s stated mission, but at the highest level, the organization exists for a single purpose: to protect its monopoly and the finances of its member institutions.

I chuckled a couple of weeks ago when I saw my 1984 football headshot used in a magazine ad. My 27-year-old mugshot isn’t worth a whole lot; I would have gladly given permission for its usage. I suspect that I signed something when I was 17-years-old that gave UT the right to sell the use of the photo.

Or, more accurately, my parents did, since, like many student athletes, I wasn’t even old enough to enter into an enforceable contract when I eagerly chose to attend the University of Tennessee almost 30 years ago.

Coach Dooley makes $1.8 million a year. Mike Hamilton is paid $601,000. College athletics isn’t amateur for those two guys.

Nick Reviez, a starting linebacker last night, receives tuition, books, food and housing worth about $18,000 each year. He gets free surgeries too. Isn’t that enough?

Maybe. Maybe not. We don’t know. The reason we don’t know is because the NCAA institutions have done something that in any other situation would be declared illegal. They have colluded to limit the amount they spend on their player/student/employees.

Coach Dooley is a perfect cultural fit to be CEO of Tennessee Football, Inc. I like him. He is going to do well here. He has a hard job that I wouldn’t do for any amount of money. But his salary is equal to about 8 percent of the total annual operating expenditures of UT Football, Inc. If you applied the same standard at Coca Cola, the CEO would make $2.5 billion a year instead of $6.7 million, an increase of more than 350 times.

How do you create a pay model like this?

You restrict the pay of the majority of your employees – the people who actually do the work.

College football is not an amateur activity.

The NCAA regularly loses or settles lawsuits challenging its ability to set whatever rules it pleases. It has tried to limit the pay of its coaches, schools’ ability to negotiate their own television rights and student-athletes’ “pay” below the level required to pay for their schooling.

And in each of those cases the NCAA lost a lawsuit or settled.

There is a crack in the dam – and it can’t collapse soon enough.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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