College Football Landscape Rattled With Terms From “House Settlement”

Between the advent of athletes being able to legally profit off their name, image and likeness (also known as “NIL”), the transfer portal creating constant free agency in recruiting, and the exponential growth of the overall financial pie, the last four years of collegiate sports has seen more figurative shifting earth than the last four decades combined.

If it’s possible to shake up an already earthquake ridden terrain even further, it happened late Friday evening in a California courtroom, when 75-year-old judge Claudia Wilken grained approval of a settlement of between named defendants (the NCAA and the power conferences in sports) and the plaintiffs (numerous collegiate athletes) that essentially created one giant, expensive truce for three separate lawsuits.  The settlement is referred to, for short, as the “House Settlement,” named after one of the plaintiffs in the aforementioned lawsuits.

The gist of the lawsuits was pretty simple — the athletes were seeking compensation for their athletic services, particularly in light of the exploding amount of revenue that schools are realizing from media rights, ticket sales, and merchandise sales. Make no mistake, this is groundbreaking stuff, and while it does create some guardrails for what’s been the wild, wild west the last few years, since NIL payments became a thing, we are far from finished. In fact, things could get even crazier.

With major college programs in both the SEC and Big XII, and considering the recruiting hotbeds of Houston and Dallas, no state is more affected than we are here in Texas. So, for now, here are the basics that you need to know about the new college sports landscape that goes into effect almost immediately. Schools can begin paying players on July 1. Here you go:

College athletics departments will now basically be run like pro sports teams
Operationally, the most important development of the House Settlement is that athletes will not be allowed to participate in the revenue generation that athletics department fat cats and coaches have benefitted from or year. Each school in the Division I power conferences, along with select other schools, now have the option to distribute up to $20.5 million to athletes. That number is set to rise slightly each year over the next several years. Essentially, schools now have a salary cap, spread out over all sports.

It’s believed the football schools will be distributing around 90 percent of the cap to football and men’s basketball players. The big unknown right now is “Where will schools find initially this $20.5 million?” Most have not budgeted for this, and it’s a given that, in order to keep up with other programs, they’ll have to find it. Keep an eye on the non-revenue sports at power schools — soccer, volleyball, track and field, and the like. Some of these may be in jeopardy.

There will be back payments to players from the last decade, too
As part of the settlement, the NCAA and schools are being asked to come up with $2.8 billion to pay to former athletes going back to 2016. While that sounds like a lot of money, it’s estimated that the damage could have been upwards of $10 billion had the lawsuits gone to trial. The basis of the multi-billion dollar figure is an estimate in lost NIL payments, and there are over 85,000 athletes claiming some degree of damage during the period in question. In short, if you’re an athlete that played a revenue-generating sport from 2016 through 2024, you might be getting a six figure check in the mail sometime soon.

This NIL clearinghouse is going to be fascinating to watch operate
The other massive facet of this settlement is a major operational initiative— the creation of the College Sports Commission, which will oversee the validity of NIL deals made between athletes and outside entities, like businesses and school NIL collectives, usually spearheaded by rich alumni. The CSC will function as a clearinghouse (overseen by Deloitte, called “NIL Go”) for NIL deals, with every deal for over $600 required to be sent to NIL Go for approval. NIL Go will govern based on what they feel is fair market value for the NIL services the athlete is providing, with the ostensible goal being prevention of massive “pay for play” payments that have nothing to do with NIL. I wish them luck, because…..

Still, there will be lawyers
….telling rich people what they can and cannot spend money on is a slippery slope. Truth be told, this whole thing is a slippery slope. The overall spirit of what was settled late last week is positive. Athletes, especially football players given the physical toll of the sport, should be compensated. Similarly, there should be guardrails on what the NIL landscape looks like, if maintaining competitive balance within the sport is a priority. From a practical standpoint, until college athletes have some form of collective bargaining and/or employment contracts, this will all remain a landscape with rules that are begging to be violated and fresh turf for lawyers to make millions, in follow up lawsuits.

So whether you’re a Longhorn or an Aggie, a Coog or a Horned Frog, a Bear or a Red Raider, buckle up! The off the field drama is about to possibly exceed the on field drama!

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