• Extra Points
  • Posts
  • No, NIL isn't going to ruin the Olympics. C'mon.

No, NIL isn't going to ruin the Olympics. C'mon.

Good morning, and thanks for spending part of your day with Extra Points.

This Extra Points newsletter is brought to you by the Daily Upside:

No, NIL isn't going to ruin the Olympics. C'mon.

Let’s face it, traditional business news – like sports news – is painfully dry and littered with annoying jargon. Founded by investment bankers, The Daily Upside is our favorite source for premium business news actually worth reading. The Daily Upside is jam-packed with equal doses of charisma and insight:

Want to know if rising inflation will erode the cash in your bank account?

Or why Tesla is ditching its strategy of placing showrooms in luxury malls?

There are plenty of newsletters that regurgitate the headlines – what a waste. The Daily Upside goes a level deeper to instantly boost your business IQ and upgrade your investing know-how. Simply put, we love it.

Over the weekend, I saw most of the college football internet dunking on this column, from NBCLX:

I don't share this article here because I want to holler at the person who wrote it. If you're not in the weeds of college sports as part of your regular beat, I understand that nuance can get lost, just like if I wrote a newsletter on say, congressional redistricting later this week.

But I think this framing is worth examining again, because it's still a commonly held one in this country. I don't believe NIL represents a potential existential threat to the future of U.S. collegiate Olympic sport programs, and I don't think I've spoken to an AD or senior administrator who does. But I do think there are reasons to be concerned about the financial sustainability and well-being of the Olympic pipeline, and it's worth taking a closer look at what forces actually could threaten to jeopardize America's success in international Olympic sports.

So...let's unpack this story here

I'd be concerned right from the very jump of the story. Here are the first two paragraphs:

Nearly 80% of U.S. athletes at the Tokyo Olympics shared a common attribute (beside their insane athleticism): They all starred on NCAA teams first.

But there’s concern that recent changes within college athletics could lead to widespread cuts to programs that train future Olympians but aren't as self-sustaining as football or basketball, typically the only programs that generate profits.

First, and I swear I'm not trying to be a pedantic nerd here, but nobody is generating profit because these aren't for-profit entities. There is no accounting reason to attempt to show a financial surplus, and if you just pull up the FRS report and treat that as a P&L statement, you're going to miss out on a ton of context.

Does football generally bring in more revenue than other sports? Yes, duh. But even some of those Olympic sport programs that an AD might fret over generate more money than they cost to run. Schools like Eastern Illinois, Long Island or Sacred Heart have swimming programs not because they hope to sell a gazillion tickets or win national titles...they have them (in part) to recruit students who will pay at least partial tuition. Back in 2015, a study commissioned by the MWC and MAC, found that swimming programs at their levels, schools that may not have ever sold a single ticket, produced $869,396 more than their operating costs, thanks to tuition and fee money.That money doesn't show up on the FRS report!

Ohio State doesn't need to sponsor a swim team in order to recruit students. But a lot of DI schools do, and "Does this program make a profit?" isn't the right framework to evaluate them, pre or post-NIL.

Now, the story also notes that several Olympic sport programs have been dropped across the country. But.....

Via the story:

In 2020, schools cut 289 teams across the country, according to the NCAA. Since 2001, the NCAA has added dozens of Division I schools, but in that time, the number of men’s swimming and diving programs has dropped from 149 to 131. There are also 40 fewer men’s tennis teams, 13 fewer wrestling teams and seven fewer men’s gymnastics teams than in 2001.

It's absolutely true that nearly 300 athletic programs were dropped in 2020. That has nothing to do with NIL (the NIL marketplace didn't even open until 2021). It also wasn't just a D-I problem, as more than half of that 289 number came from D-II and D-III schools. You saw such a dramatic spike because of the COVID pandemic that wiped out not just athletic revenues, but university revenues. You might have heard about this on the news.

With few exceptions, the programs that are getting dropped are not the ones that historically produced many Olympians. We could argue that schools dropping swimming is a bad idea for many reasons, but generally, the best swimmers are only coming from about a dozen schools, and right now, those aren't at risk.

One could also argue that COVID simply gave many schools an excuse to pull off politically unpopular cuts that they would have liked to have done earlier. Via a SI story from June 2020:

“It’s clear that the D-I model of intercollegiate athletics has been broken,” says Mike Moyer, executive director of the National Wrestling Coaches Association, “and COVID-19 is exposing it.”

It's also worth noting that at the DI level, many of those schools ended up bringing sports back, thanks to litigation. Just off the top of my head, Clemson, ECU, William & Mary, Iowa, Stanford, UConn and Brown reinstated some of their programs after lawsuits, or the threat of lawsuits. Litigation might be the most effective tool to bring back a previously dropped sport.

College sports are not the dominant feeder program for every Olympic sport

My colleague Steve Dittmore at AthleticDirectorU broke down the math for the 2016 Olympics. For some sports, like swimming, diving and field hockey, the college pipeline is unquestionably the dominant way of developing international-caliber talent. Virtually every single athlete participating in those sports was a college athlete.

But tennis? Only 18 percent of the U.S. Olympic team members were college athletes. Only 28 percent of gymnasts, 30 percent who competing in shooting, and just 64 percent of wrestlers were part of the system.

It's still fair to say that a significant majority of current Olympians were former college athletes. But it's worth noting that other sports are showing that it doesn't have to be that way.

I do believe it's correct to claim that the current Olympic sports model is under threat....but not because of NIL

If anything, one could argue that NIL strengthens the relationship between international competition and the college athletics system. Thanks to NIL, you could, hypothetically, win a gold medal, then go to college and actually earn money, rather than needing to immediately "go pro" to provide for yourself and your family. Suni Lee did exactly that...and she just dropped a perfect 10. Pretty cool!

But I think it's tough to argue this is a healthy system moving forward. NBCLX came close to getting it right here, in my humble opinion:

One of the most notable changes causing college sports financial uncertainty is the NCAA's new name, image and likeness (NIL) policy, announced in June, which allows athletes to share a piece of the profit pie. Many colleges are also spending more on football and basketball amenities, and ongoing litigation could require schools to treat student athletes as employees, which would increase costs dramatically.

NIL represented a big change, but again, not one that meaningfully changes the financial calculus of sport sponsorship. The internal pressures to shift resources to football and men's basketball (which predates NIL) and potential legal or legislative challenges that would establish athletes as employees are much bigger areas of concern.

I wrote about this last year...I honestly believe athletic departments would drop many Olympic sport programs if they had to classify all athletes as employees, even if they didn't necessarily have to. Such a ruling would be unlikely to change the incentive structure to spend big on football (fans, boosters and regents demand it), but would likely increase costs elsewhere in the department. There's no easy way for athletic directors to get off that cost growth curve, even if they want to.

And hey, maybe we don't even want to perpetuate the current college model for Olympic sports. There's a persuasive argument to the idea that the current 'amateur' model represents a significant wealth transfer from (mostly) Black athletes in football and basketball to (mostly) white athletes who swim, play field hockey or row boats. That approach has won the U.S. a lot of medals, but may not be the most ethical one to continue.

Is there a solution? Sure! But it probably involves the government

Almost every other country in the world uses some level of government investment to develop athletes who compete internationally. Developed countries may have Sports Ministers, sponsor development academies, fully fund and operate sport-specific leadership organizations, run joint trainings with their armed forces, etc.

If USA Field Hockey only has a budget of like, $10 million, and it can't rely on U.S. field coach coaches to develop talent anymore, it's going to need more money to replace that infrastructure. If that doesn't come from corporate sources, it would probably need to come from the state.

As we've written before, the federal government could also potentially get involved to reshape incentives in college sports spending. If, as part of a national NIL bill, Congress granted a limited antitrust exemption that limited spending on football coaches or infrastructure, it may be easier for schools to redistribute funds to other priorities. Congress could theoretically even require schools to do so, or at least, require them to do fund certain other sports.

It's great that the NCAA and various U.S. Olympic committees are working more closely together now, and it's great that many college administrators are brainstorming administrative tweaks to lower costs. If there are ways to make recruiting more efficient, reduce travel obligations for athletes, and better retain coaches, all the better. The new NCAA constitution should make it easier for conferences to push for the flexibility needed to make changes, after all.

But the big problems are structural. It's hard to imagine how better conference calls, streamlined recruiting, and more bus trips will change the desire to throw another two million bucks at a coaching staff that will finish last in the SEC West, simply because the boosters demand it.

That isn't an NIL problem. Athletic directors expressed concern that so much booster money would flow from departments to athletes that sport sponsorship would become impossible, but that hasn't really happened in practice. Most D-I Olympic sport programs weren't getting major corporate donations anyway, and the institutional donor pool and the NIL brand pool don't completely overlap. The tight end's deal with a car dealership isn't taking food from the mouth of the volleyball player.

There are significant legal challenges with which the NCAA will have to reckon. But at the end of the day, funding enough sports to kick butt at the Olympics is a resource distribution problem.

If schools can't be compelled to share resources, then those resources will have to come from somewhere else.

If taxpayers and the American business community don't want to shoulder some of that burden, and the P5 conferences can't (or won't) do it themselves, then Americans ought to get used to seeing other countries win more events.

There's no free lunch in college sports. But hey, at least thanks to NIL, I bet an Olympic sports athlete could help you find a great deal on a cheap one.

This Extra Points newsletter is also brought to you by Deep Culture:

No, NIL isn't going to ruin the Olympics. C'mon.

deepculture is a newsletter that sends you 20 interesting things every Tuesday, and a few other interesting stuff. Make your Tuesdays more interesting and subscribe for free.

To sponsor a future Extra Points newsletter, please email [email protected]. For article ideas, newsletter feedback, FOIA tips, athlete NIL sponsorships and more, I'm at [email protected], or @MattBrownEP on Twitter. Andy can be reached at @AndyWittry on Twitter or at [email protected]. Extra Points can be found on Reddit at /r/extrapointsmb

Join the conversation

or to participate.