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NCAA Conference Realignment Update

The other shoe has dropped.  Friday night, the ACC had 12 members; by Sunday morning it had 14, completing the partial 2005 pillaging of the Big East by accepting Pitt and Syracuse as new members.  Unlike last summer, it appears unlikely that conference realignment will only involve a few schools. 13 is an extremely unwieldy number for organizing a conference football schedule, so the SEC will likely add another new member soon.

This mess raises a number of interesting economic questions.  For example, what is the optimum size of an NCAA Division I-A conference?  For many years, the answer appeared to be ten.  Changes in NCAA regulations and the potential to hold a conference championship football game apparently raised the number to twelve a few years ago, but it now appears to be somewhere north of there.  ACC commissioner John Swafford and SEC commissioner Michael Slive clearly believe that the answer is "at least 14."  Note that the answer from a profit maximizing perspective may differ significantly from the answer from a welfare maximization perspective.

Perhaps the most interesting economic implication of NCAA conference realignment, and one that has not received much attention in the popular press, is whether or not these changes are going to draw increased scrutiny of intercollegiate athletics from congress and federal anti-trust regulators.  Buried in an article in the New York Times are some interesting quotes from an unnamed "Congressional member from a state with a university potentially negatively impacted" by realignment (West Virginia?  Connecticut?).

“I think the situation is rising to a level where getting Congress engaged may be unavoidable,” the representative said.

“I think Congress has a variety of ways in which they could engage,” the representative said. “What we’re seeing is an effort by certain institutions to push other major institutions out of revenue deals and thereby impacting universities. And it’s done in a way that’s breaching contracts.”

“Congress has the nexus to engage,” he said. ”These are tax exempt organizations now making billions of s off of unpaid athletes. When it’s a regional league it seems to make sense. When you’re taking schools practically from coast to coast and putting them in big profit revenue leagues, we may be at a point where the N.C.A.A. has lost its ability to create a fair system for all to play in.”

It is also possible that the FTC or DOJ could get involved. At the same time the ACC pillaged the Big East, the conference also made noises about raising the buyout fee required for existing members to leave, currently between $11 and $13 million.  This move appears to be an attempt to deter the SEC from raiding the ACC for its 14th team.  These buyout restrictions could be interpreted as restraint of trade.  And of course conference expansion represents increased concentration in the market for college sports television rights broadcast fees.  That market clearly involves interstate commerce, and the 1984 Board of Regents Supreme Court decision makes it clear that college sports, unlike Major League Baseball, do not enjoy any sort of special treatment under anti-trust law.