Friday, 3 May 2013

Comparing the Economic Investment and Incentive of Universities and Professional Teams in the Context of Licensing Broadcast Rights

Furthering the discussion of the topic of Warren's post yesterday, the economics of college athletics calls into question the exclusive right of universities, conferences and the NCAA to sell and license the broadcast rights.  This purported exclusive property interest in college sports has never been challenged.  The rationale for protection of the right to exploit game broadcast rights is presumably based upon the professional sports broadcast licensing model and the underlying rationale set forth in the Pittsburgh Athletic case, which is that protection provides an economic incentive to make the investment required to produce a performance of interest to the public (which is essentially the underlying rationale for copyright protection) as well as the prevention of unjust enrichment due to the substantial investment required to produce the event.

But college and professional sports are not at all similarly situated in terms of the extent of the investment made or the incentive to make it, which makes recognition of the exclusive property right less compelling.  First, the extent of the investment made in college sports is much less because the producers do not compensate the players who make the live event possible.  Indeed, in justifying a professional team's property right in Pittsburgh Athletic, the court specifically mentioned the substantial expense of professional team owners in paying the players whose performances are what drive consumer interest and demand and thereby contribute substantially to the monetary value in the broadcast for which networks are willing to pay substantial rights fees.  Additionally, professional team owners, unlike the producers of college sports, make a substantial investment in the purchase price for their ownership interest in the club. 

Second, the for-profit/not-for-profit distinction between professional and college sports changes the economic incentives to make the investment, in that professional team owners put their personal funds at risk for the prospect of earning a profit and return on their investment.  In college sports there is no expectation of return on investment in an ownership sense.  The individuals who support and make monetary investments in a university's athletic program are taxpayers, students, and private donors.  However, unlike professional team owners, the investment of these individuals is certainly not based or dependent upon the university's ability to exploit game broadcast rights.  Moreover, universities, unlike for-profit professional teams, do not need an economic incentive to produce a game of interest to the public.  Indeed, according to the NCAA and its member institutions themselves, athletics is an integral part of the university's educational mission and the purpose of intercollegiate athletics is not to profit but to enhance the educational experience and the student body.

In my view, the economic reality of Division I college football and basketball presents a classic unjust enrichment scenario in which the exponentially increasing rights fees the NCAA, conferences, and universities continue to engorge at the players' expense is increasingly becoming more unjust.

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