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Solving the Coaching Pay Problem

This last weekend Adrian Wojnarowski penned a column examining the salaries of college coaches. In this column is the following statement: “NCAA president Myles Brand threw up his hands this week and said that the NCAA could do nothing to stop the runaway salaries (of coaches) in his sport.”

Indeed, with a bit of thought, I think we can figure out how to solve Brand’s problem. Let me start by noting that the highest-paid state employee is a college basketball or football coach in many states. It’s now unsurprising to find a college coach making 5 to 10 times (or more) what a university president makes. What is surprising is that college coaches are now being paid salaries similar to what the pros pay.

Why is this surprising? In discussing the salary Nick Saban is scheduled to be paid by the University of Alabama, Andrew Zimbalist observed: “The average I-A football team earns about $15 million a year in revenue; the average N.F.L. team earns about $160 million. How can a college coach create as much value as an N.F.L. coach?”

Where does the money come from to pay the college coach? The salary cap in the N.F.L. has now passed $100 million. An average N.B.A. team pays more than $60 million to its players. This gives us some idea of how much a professional team incurs labor costs. HOWEVER, an NCAA football or basketball team does not have this cost. Consequently, although the revenues are more minor because colleges are not fully compensating their workers, these institutions can pay coaches a salary compared to the pros.

So what can the NCAA do? The NCAA made an effort to restrict salaries for assistant coaches, only to learn that this is illegal. One suspects that similar restrictions on the pay to head coaches would also be challenged in court.

Given that the NCAA cannot pass a rule to restrict salaries, they must look elsewhere for a solution. And looking around, the answer should suddenly be obvious. It’s time to pay the players. The research of Robert Brown and Todd Jewell indicates that a future NBA first-round draft choice will generate more than $1 million in revenue each year in college (and this was based on data from 1996, so the $1 million figure understates the revenue generation occurring today). This sum dramatically exceeds the cost of a scholarship. Because the NCAA does not compensate the players for the generated money, this money has to go elsewhere. It seems reasonable that much of this money is currently flowing into the pockets of the coaches. But if the players were paid, the money would not be available to the coaches, and consequently, wages paid to coaches would decrease.

It’s important to remember that we were not watching the coaches during the Final Four. The Final Four was about players like Greg Oden and Joakim Noah. Yet if these players stay in school, their revenue will continue to go to their coaches and universities. (Well, in Noah’s case, it might not c0ntinue to go to his coach. Billy Donovan may indeed be going himself to a program like Kentucky – where the grass may be greener and the piles of money just a bit higher.)

The NCAA needs to stop pretending that the revenue sports like football and basketball are primarily about education. Coaches do not get fired because the education of their players is suffering. And Billy Donovan is not being recruited by Kentucky because of his impact on graduation rates. Coaches are hired and fired because of wins. And these wins and the corresponding revenue beats generate come from the players. If the NCAA did what every other business has to do – i.e., pay its workers – the coaches' salaries would fall, the players would keep the money they generate, and the NCAA’s futile quest to enforce rules that everyone has an incentive to break could be ended.