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Good Thursday Morning. Here’s the rundown of this week’s Sports Business Playbook:

• 📰 This Week’s Topic: The House settlement is approved, and we are officially entering a new paradigm for college sports. There are explainer articles coming out of the wazoo, so let’s do something different and look at the new era through the lens of three classic thought experiments

• 🤯 “Whoa of the Week”: Streaming reaches an important milestone, and the Lakers sold for how much?

• 💪 Weekly Reminders that Sports are Awesome: J.J. Spaun — U.S. Open champion and dad, Gage Wood’s gem, and some great new camera angles

Hey team,

We’re doing something different in this week’s SBP.

As I mentioned during last week’s edition, we have officially entered into a new era of college athletics. The House settlement is approved, and schools will now be able to officially pay athletes on July 1st.

While there were sighs of relief and cheers of triumph upon the news that the settlement was approved, the reality is starting to set in for college administrators: out of the frying pan, into the fire.

There are countless articles breaking down the in’s and out’s of the settlement (here, here, and here, for example), so I thought it would be interesting to look at this from a different, philosophical perspective.

So, we’re leaving the boardroom and heading to the classroom, as we examine the House settlement and what it means for college athletics through the lens of three classic thought experiments.

Refresher on the House Settlement

Okay, fine. Here’s your overview on the settlement first.

1. Backpay: Thousands of former athletes that played from 2016-2024 are eligible to receive a portion of a $2.8 billion pool in backpay from lost NIL compensation. More than 85,000 athletes have filed for backpay.

2. Revenue Sharing: $20.5 million revenue share with athletes starting July 1. ~90% of the revenue share is expected to go to football and men’s basketball at most schools

3. NIL: Net new NIL deals above $600 will go through a clearinghouse called NIL Go, powered by Deloitte and LBi Software, in order to determine legitimacy and “fair market value.”

4. Enforcement: A new enforcement entity managed by the power conferences instead of the NCAA — dubbed the “College Sports Commission” — will oversee and enforce rules related to the revenue-share concept

5. Roster limits: A net new structure that would be enacted with approval of the settlement (and a big sticking point with Judge Wilken due to the ramifications for Olympics sports and walk-ons) was resolved via a compromise where schools can grandfather-in athletes on existing teams or those who have been cut this year, as well as recruits who enrolled on the promise of a roster spot.

The wheels are already turning here, with schools opting in to the settlement to keep up with the Joneses and starting to think about how to cover the $20.5 million. The universities can increase revenue by raising money via new revenue streams (slapping a logo on everything), donations, the state and/or student body via loans and increased student activity fees, and even private equity.

On the other side of the coin, they’re also looking to cut costs, and the athletic department staff and non-revenue generating, Olympic sports are the most likely first up to the the chopping block cuts. As examples, Michigan announced last week it was reducing staff by 10%, both UL-Monroe (tennis) and Washington State (the field portion of track and field) cut sports. This will likely become the norm until schools figure out how this is going to work.

Somewhere in between the two, the most important job at school right now is not the athletic director or head football coach — it’s the GM overseeing how the $20.5 million cap is managed.

We are truly in new times.

Let’s get to the thought experiments.

Galileo’s Falling Objects

The ancient Greek philosopher Aristotle also dabbled in physics, positing that heavier objects fall faster than lighter ones. This belief ended up holding for nearly 2,000 years, until Galileo came along. The Italian scientist challenged Aristotle’s multi-millennia theory, instead hypothesizing that objects of different masses fall at the same rate in the absence of air resistance.

To prove his theory, the legend goes that Galileo dropped objects of different weights from the Leaning Tower of Pisa. While likely just a thought experiment, his efforts led to the conclusion that falling objects accelerate at a constant rate due to gravity, regardless of mass.

If I haven’t lost you yet, you’re probably wondering how this applies to college athletics.

Well, we may have shifted to a heavier object, but we’re still on the same collision course with the ground.

The House Settlement looks good on paper and fixes a number of things that were wrong with NIL Era. Players are finally getting a cut of what they deserve, an NIL clearinghouse hopefully prevents pay for play, and a new third party not named the NCAA is running the enforcement arm to ensure schools and players abide by the rules.

The problem? It doesn’t fix the underlying issues that plague the system.

The NCAA is already facing a new wave of lawsuits less than a week later, including female athletes who believe the settlement violates Title IX and others who believe it will disproportionately impact non-revenue sports.

And that’s before some athletes inevitably start asking questions about if the revenue cap and/or the NIL clearinghouse’s determination of what is “fair market value” are violations of anti-trust law. The College Sports Commission is just as susceptible to these challenges as the NCAA was — new group led by people with sterling resumes and a name definitely created by a group of consultants; same courtroom drumbeat.

This is the fundamental flaw of the House settlement. It passes the buck one more time to “objective third parties”, yet it doesn’t fix the true issue: the lack of collective bargaining puts college athletics on a treadmill of lawsuits and disputes.

You are starting to hear some, including some ADs at the biggest schools in the country, say it, and groups like Athletes.org are creating consortiums of student athletes that will eventually work together to create something lasting via collective bargaining. The biggest roadblock is still the NCAA, though.

The organization has been asking for Congress to step in for years, and there have been several bills introduced in the last few weeks after a number of college athletics leaders went to Capitol Hill. But, as we have seen in similar situations in the past, it is highly unlikely members of Congress will prioritize digging into this and creating a groundswell of support to pass something, particularly when there is so much going on in politics right now.

So, while we’ve moved to a different object, we’re still left falling at the same velocity, and we will end up in the same place as before.

Thomson’s Violinist

This thought experiment was originally used in 70’s to discuss something much more important (women’s rights). Here’s the excerpt:

The consideration here is that although the violinist is a person with rights and you do not necessarily wish to kill him, he has no right to your body and the life-preserving functions that it provides.

While nowhere near the same level of gravity, I see parallels in the allegory between the schools and conferences.

I’ve written several times before about the the have’s and have nots of college athletics.

There has long been a vast disparity in size, sophistication, and revenue that exists between the major power conference schools and the smaller schools. The House settlement blows this chasm wide open by not only letting a group of schools rise above the rest by maxing out the $20.5 million revenue pool, but likely also enabling an even smaller subset to go above and beyond by enabling them to throw a ton of incremental money at rosters via NIL (The Athletic reports some schools are expecting to spend $40 million on their football rosters this year).

Here’s the thing, though. They should be able to do this, because these big schools are effectively playing a different sport.

Applying the same rules for Ohio State and Texas to Group of 5 schools and even some smaller Power 4 schools is a losing proposition that makes both sides unhappy. The big players want more money and don’t feel it’s fair to share the revenues with those that don’t contribute as much, and the smaller schools feel that the deck is stacked against them from the start.

Both are true, which is a sign that it’s time for them to coexist as separate entities.

The big schools drive the lion’s share of interest and revenue in college athletics, so it’s time for them to remove the connective cord that props up the smaller programs and do what they should have done long ago — start their own league.

George Washington’s Axe (Ship of Theseus)

This last one originates from Raj, a Michigan man, a great Twitter follow, and how I came up with the idea for this piece.

The “Ship of Theseus” paradox has been repurposed across a variety of cultures and time periods, but for our purposes, we’ll use the one I’m familiar with: George Washington’s axe.

The idea is simple, but the underlying question is challenging. A man claims to own the axe that George Washington used to cut down the cherry tree, but the axe handle has been replaced twice and the axe head has been replaced once.

If all of the pieces have been replaced with something new, is it still George Washington’s axe? (The Ship of Theseus asks the same thing but about a completely rebuilt ship).

When applying this to college athletics (and frankly all modern sports for that matter), we get an interesting philosophical question about how much of the shift to naked capitalism we as consumers are willing to stomach in the name of fandom.

College sports has never been perfect, and I think most of us are glad to see the players finally getting paid for what they create. But is this new system with all of its flaws, lack of guardrails, and extractive qualities really what we want?

Raj describes the feeling in colorful detail

Most of us are not there yet, but this continued trajectory likely will continue to siphon off fans as it pushes further into this corporatized territory.

All is Not Lost

With all of that being said, I do want to end this piece on a note of hope.

I have dolled out my fair share of criticism to the powers that be in college athletics since starting this newsletter a few years ago, and I will still maintain the NCAA is the worst organization on the planet.

But, I believe the tides are slowly turning in sentiment and thought, and we are heading towards a resolution in the not-so-distant future to the debacle of the last 20 years. It will not be perfect, but it will be better.

Plus, there is still something magical about college sports that I think gives this group more runway to figure it out.

I wrote about this after Michigan won the national championship last year: college athletics is still one of the most unifying forces we have in the United States, and it produces incredible moments that are unlike anything else in the human experience.

Despite all of my gripes, I will be like every other fan living and dying with my team on Saturdays in the fall. It’s going to take a lot more than the current issues to stamp out the deep passion and connection I feel for my school.

My hope is we can get to this resolution while maintaining this magic before it’s too late.

🤯 “Whoa” of the Week

Insane, mind-blowing things constantly happen in the sports business world. Here was my favorite of the past week.

1. The Lakers sell for $10 billion 🤯 (bonus: I love this visual walkthrough of sports valuations over time

2. Streaming hits a milestone, passing combined broadcast and viewing for the first time

💪 Weekly Reminder that Sports are Awesome

This newsletter is, of course, mostly centered on the business side of sports and the things that happen off the field. That being said, it’s important to remember why we fell in love with sports in the first place, though.

This section is meant to highlight the amazing things that happened in sports this week that serve as that reminder.

1. A wild finish to the U.S. Open, and J.J. Spaun is like any other dad with young kids

2. Arkansas’ Gage Wood throws the third no-hitter ever in CWS history, and the first since 1960. He recorded 19 (!!!) strikeouts

3. Two new camera angles that caught my eye

Thanks for reading! Let me know what feedback you have.

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Until next time, sports fans!

-Alex