Thousands of college athletes now have the opportunity to submit claims for a share of a $2.8 billion settlement designed to compensate them for the revenues colleges have generated from their performances. This landmark case addresses allegations that current and former athletes were unfairly denied compensation for the use of their name, image, and likeness (NIL).
Traditionally, college athletes were prohibited from receiving compensation beyond scholarships and limited expenses. However, recent changes in rules and state laws in 2021 now enable athletes to earn money through commercial use of their image, such as brand deals and agreements with school-specific collectives funded by supporters.
The $2.8 billion settlement, resolving multiple lawsuits against the NCAA and major athletic conferences, has the potential to significantly impact the college sports landscape by potentially leading to direct payments from colleges to athletes.
Athletes who participated from 2016 onwards are covered by the settlement. The largest payouts from the fund are expected to benefit football players, with individual amounts reaching as high as $1.85 million.
While some athletes may have gone on to lucrative careers in professional sports like the NFL and NBA, many others have not reaped significant rewards from their athletic endeavors. For these athletes, the potential payouts from the settlement could be transformative, according to the lawyers involved in the case.
Although the agreement still faces legal challenges, a judge recently granted preliminary approval, allowing the claims process to commence. Eligible individuals will start receiving notifications soon through the settlement website.
Referred to as the House v. NCAA settlement, this resolution will also address two other antitrust cases in addition to the primary lawsuit.
Breaking down who gets paid from the settlement
The agreement outlines three main groups of athletes: Power Five men’s football and basketball players, Power Five women’s basketball players, and all other Division I athletes. The average payouts, as estimated by the plaintiffs’ attorneys, will be $135,000 for men’s football and basketball players, $35,000 for women’s basketball players, and varied amounts for other athletes, potentially ranging from hundreds to thousands of dollars. Over 400,000 athletes are eligible to make claims.
The preference for football, particularly Power Five football, is justified by the assertion that sports outside of basketball and football contribute little to the media contracts of conferences, thus justifying the larger payments for Power Five athletes.
The payout calculations consider factors such as the revenue generated by the college, the athlete’s on-field performance, and the specific position played. For example, in football, quarterback positions are likely to receive higher payouts compared to running backs based on NFL player salary metrics.
What is the timeline for athletes to get paid?
Individual athletes will not determine their exact payout until at least December, with payments distributed annually over up to a decade. Athletes retain the option to opt out of the settlement to pursue independent litigation against the NCAA or the major conferences involved.
While a final approval hearing is scheduled for April, the process may still face appeals and challenges regarding the equitable distribution of funds, protecting athlete rights, and adherence to federal laws such as Title IX.
What else does the settlement do?
Besides retroactively compensating athletes for missed television and marketing opportunities, the settlement introduces a revenue-sharing model that could allocate up to $22 million per year for athlete compensation. This new landscape could see college athletes earning between $15 billion and $20 billion over the next decade, with additional revenue from third-party agreements potentially boosting their income.
The evolving compensation framework in college sports may revolutionize how athletes are financially rewarded for their contributions, reshaping the future of college athletics.
