The Effect of Scandals on the Economics of College Sports
On July 16, 2012, the NCAA issued unprecedented sanctions against Penn State University, the Penn State University Athletic Department, its football program, and its legendary coach Joe Paterno relating to the criminal conviction of Jerry Sandusky and the actions of high-ranking Penn State officials in not reporting incidents related to Sandusky’s criminal acts. In addition to the NCAA sanctions, there will also likely be significant civil and federal claims made against the university. These sanctions and claims raise a number of concerns for, not only Penn State University, but also for other stakeholders in college athletics. For one, the effect that the problems at Penn State will have on the Big Ten Conference and its Regional Sports Network (RSN), the Big Ten Network, is an issue to consider for all sports properties and television operators who own or are thinking of starting a RSN.

The Penn State football program received the following NCAA sanctions:

• $60 million fine;
• Vacating of wins from 1998-2011 (112 wins);
• Four-year postseason ban;
• Four-year scholarship reduction (80 total);
• Players may transfer and play immediately at other schools; and
• Athletic department on probation for five years

The Big Ten conference supported the NCAA’s actions, saying in a news release it is condemning and censuring the school for "egregiously" failing on "many levels -- morally, ethically, and potentially criminally." The conference banned Penn State from the Big Ten Conference football championship for four years and allocated roughly $13 million, representing Penn State’s share of the Big Ten Championship game revenue over that period, to charity.

Penn State officials quickly responded that they accepted and would not contest the sanctions imposed by the NCAA and the Big Ten conference.

Penn State also faces potential federal sanctions as the result of the Sandusky case. Among other things, the US Department of Education is reviewing the case to determine whether there were Clery Act Violations. The Clery Act was passed by Congress in 1989 and requires colleges and universities that participate in federally funded financial aid programs to keep and disclose information about crime on and near their respective campuses. Violations of the Clery Act can result in fines to an educational institution or, in extreme cases, loss of federal funding to that institution. In addition, there will be civil claims from the victims of Jerry Sandusky that will result in large cash settlements being paid to the victims.

The Penn State football program, like most other Division I schools in major conferences, is the primary revenue source for the athletic department at Penn State and is responsible for funding many, if not most, of the other Division I sports teams at Penn State. It is likely that the sanctions imposed on the football program at Penn State and the resulting loss of revenue from the football program for many years will have serious implications throughout the Penn State athletic department, including the possibility that the budgets for other Penn State athletic programs will be significantly reduced or eliminated entirely.

The Big Ten Network, which relies largely on sports other than football to supply a large part of the programming, has become a very valuable asset for the conference and its member institutions. Other conferences, such as the Pac 12, the Big 12, and the SEC, have either begun the process of creating or are seriously contemplating creating such a RSN. It is still unclear how the Penn State sanctions will affect the Big Ten Network, however, it is certainly something that the owners of the Big Ten Network will need to consider. Although not a founding member of the conference, Penn State has one of the most storied sports programs of any school in the Big Ten. Penn State also has one of the largest student bodies and alumni base in the Big Ten. Finally, Philadelphia and Pittsburgh, presumably two markets that are very interested in the Penn State programming featured on the Big Ten Network, are two of the top television markets in the Big Ten Network market footprint.

A college RSN that relies heavily on the fan base and programming from each of its member institutions would be well served to consider how to minimize the exposure that it faces if one of its member institutions has its football program sanctioned. One way to accomplish that is by spreading the risk, which the Big Ten, for instance, has done by recently adding University of Nebraska to its conference and RSN package. Obviously, the more schools that a conference has the less exposure it will have if one or more of its member schools is sanctioned or otherwise has issues. 

Another way that conferences and universities can protect themselves against risk exposure to their businesses, including an RSN, is by enacting a self-imposed code of conduct that establishes checks and balances and watch dog provisions similar to the measures that have been applied to corporate America through Dodd-Frank. This type of process, if implemented at the conference level and at all member institution schools of a conference with (or without) an RSN, would enable the schools and the conference to better identify, prevent, and monitor issues that could threaten its program and the business assets of the schools and the conferences. With so much financial and emotional investment in college sports, it seems that there should be a regulatory threshold established by the colleges and conferences and applied themselves rather than relying solely on the punishments administered by the NCAA, the US Department of Education, or other independent organizations.

Furthermore, one wonders if these colleges and conferences need an “ombudsman” role to keep an independent eye on what is happening at their member institutions. One of the most important statements made by the NCAA in delivering the Penn State sanctions was “These events should serve as a call to every single school and athletics department to take an honest look at its campus environment and eradicate the ’sports are king' mindset that can so dramatically cloud the judgment of educators." The internal checks and balances that an independent ombudsman would provide could begin to address this issue raised by the NCAA and would also be very useful business protection tool for college and conference RSNs and their media partners. The vulnerability of a Penn State, which went from one of the jewel sports programs in the country to one that is now facing so many issues in less than one year’s time, makes it clear that no institution is immune. Definitive preventative actions at all levels of college sports would be a prudent business protection strategy for all stakeholders involved in college sports.

UFC vs. State of New York – A True Heavyweight Battle
In November of 2011, a group of plaintiffs – including leading Mixed Martial Arts (MMA) promoter Ultimate Fighting Championship (UFC) – filed suit in the US District Court for the Southern District of New York, seeking a declaration that New York State’s 14-year-old ban on professional MMA fights is unconstitutional, and an injunction banning its enforcement. The complaint raises multiple constitutional issues. It alleges, among other things:

• That the ban – targeted as it is at the “violent message of MMA” – constitutes an impermissible content-based restriction on First Amendment speech;
• That the ban is unconstitutionally overbroad, as it prohibits not just professional fights, but also “advancing” or “profiting from” professional MMA — an odd restriction, given the lack of enforcement against the “MMA World Expo” held every year in Manhattan, or the UFC-sponsored “viewing parties” in Madison Square Garden;
• That the ban is unconstitutionally vague, since it prohibits professional MMA fights, but not professional fights in the individual martial arts on which it is based — as well as the fact that the ban does not prohibit amateur MMA competitions, but the New York State Athletic Commission has said that it will use the ban to close such events;
• That the ban violates the Equal Protection Clause of the Fourteenth Amendment, given that New York allows many sports which are arguably more dangerous than MMA, such as boxing, hockey, rodeos, and, of course, football; and
• That the ban is irrational and in violation of the Due Process Clause, given that it bans live professional MMA, but not amateur events or televised events.

The detailed complaint also delves extensively into the history of MMA, and the sport’s response to efforts to make it safer, rather than to restrict it outright. New York’s ban is contrasted with New Jersey’s attempts to regulate fights, as well as UFC’s adoption of safety procedures during its fights. The positive messages of MMA also receive great attention, often with (presumably unintentional) humorous results — when making the point that the MMA does not promote violence, the complaint quotes a professional fighter: “I entered this sport for the skill, the challenge, and brains it takes to succeed in the arena of combat.” 

Whether or not the UFC will succeed in its suit remains to be seen. But the suit’s existence raises at least one interesting point in the sports law context, even outside the constitutional violations it alleges. There are very few – if any – instances of sports receiving an outright professional ban on the state level. When competitions are forbidden, the restriction usually arises at the municipal level. The few exceptions appear to be bans on competitions involving animals, such as dog racing or – more controversially – dog fighting. Athletic endeavors which involve humans alone do not normally receive scrutiny from states. MMA is unique in that regard.  

The complaint implicitly questions the tendency we have to discredit new or unfamiliar sports for the very things we laud in more familiar sports. It is easy to question how the violence in MMA – and the effects of that violence – compares to that of boxing. What is more challenging is comparing the violence in MMA against violence in sports that dominate the current sports landscape — including football and hockey.

Increased oversight, however, is not out of the question. A March, 2012, filing in this case by the New York State Attorney General Eric Schneiderman states that “Indeed, increased legislative and regulatory attention to sports such as boxing, football, and hockey may well be coming.” Does that mean that it is possible that the New York State legislature could make such things as hockey fights or helmet-to-helmet hits in football chargeable assaults? It will be interesting to follow this case as it continues to be litigated.

Concussion Legislation
Over the last two years, 31 states have adopted youth concussion laws. The quick pace of these laws’ passage is testament to the increased public awareness of the disastrous effects that concussions can have, especially on brains that are still developing. Of the states with the most high school football participation, only Ohio, Florida, and Georgia have not yet passed such a law. Of the 31 states with a youth concussion law, only five adopted the law prior to 2011, and only one state – Washington – adopted such a law prior to 2010. 

Due in part to the efforts of the National Football League – which has promoted the adoption of such laws – each state’s statute shares superficial similarities with the statutes of other states. Most states’ laws reflect the tenets of the NFL’s “Lysedt Law” model legislation, which asks that the law do three things:

1. Inform and educate youth athletes, their parents and guardians, and require them to sign a concussion information form;
2. Immediately remove from play or practice an athlete who appears to have suffered a concussion; and
3. Require an athlete to be cleared by a licensed health care professional trained the evaluation and management of concussions before returning to play or practice.

Clearly, there are many ways to accomplish such a goal, and a brief review of the recently passed laws of the two states with the largest high school football participation – Texas and California – reveals several differences in application of the above principles.

The California law essentially mimics the three tenets of the Lysedt Law, but requires little more. The law provides that the athlete “shall not be permitted to return to the activity until he or she is evaluated by a licensed health care provider, trained in the management of concussions, acting within the scope of his or her practice.” But the methodology of evaluation, the “scope of practice” and even what is a “licensed health care provider” remain undefined. Indeed, even the word “concussion” is left undefined.

By contrast, the Texas law is extraordinarily specific, and requires much more than the broad outlines of the Lysedt Law. Among other things, the Texas law:

• Requires each school district to appoint a “concussion oversight team” which is tasked with establishing a “return-to-play protocol, based on peer-reviewed scientific evidence” which will guide when and whether an athlete will return to the sport;
• Specifies that the members of the “concussion oversight team” must include at least one physician, as well as at least one advanced practice nurse, neuropsychologist, physician assistant, or athletic trainer;
• Requires that the “concussion oversight team” members must have “training in the evaluation, treatment, and oversight of concussions”;
• Specifies the persons who can make the initial determination that a player may have suffered a concussion;
• Requires the student be cleared to play by both the “concussion oversight team” and a physician of the student’s (or student’s parents) choosing, using evaluation methods based on “established medical protocols based on peer-reviewed scientific evidence”; and
• Specifically notes that a coach may not authorize the student to return to play.

But the fact is that although there is much more awareness of concussions and the risk of concussions, there is no “established medical protocol based on peer-reviewed scientific evidence” — and the few that come closest are often contradictory in their recommendations and approaches. Another complicating detail is the fact that for all of the current awareness and concern, there are very few raw numbers available to assess the effectiveness of legislation.  For instance, the floor debate in several states’ legislatures included the assertion that 300,000 concussions are suffered nationwide each year. That number is credited to the Center for Disease Control. But the CDC’s only source for that number is a study published in 1991. In that study, the “300,000” number indicates all head injuries in the United States., regardless of age or whether they were “concussions” in the medical sense, and is based solely on data taken from the National Health Interview Survey — not any empirical data. Moreover, even in that study, the incidence of brain injury ascribed to athletic participation is 20 percent of the total number of head injuries (or 60,000). None of the state legislation requires reporting concussions, nor requires any agency to compile the data to study the effectiveness of the law over time. In short, while these laws may relieve some of the concern generated by recent events, there is no mechanism in place to determine whether they will actually be effective in protecting high school athletes.

The recent, tragic deaths of retired NFL players Dave Duerson and Junior Seau (both of whom reportedly suffered from dementia), and the lawsuit filed by 2,000 former NFL players against the NFL and helmet manufacturer, Riddell (alleging that the NFL and Riddell concealed information that they had about head injuries in football), focus their attention on NFL football, attention must also be paid on the effect of concussions on young athletes. Recently, Pop Warner Football the nation’s largest youth football organization, which has over 250,000 players, modified its rules of contact to limit the opportunities for head on collisions and other head-to-head contact in Pop Warner practices.

This issue threatens the future existence of the sport of football, as we know it today. More state and local legislation and rulemaking that acknowledges and takes measures to minimize the problems, together with the development of helmet technology to lessen impacts are all issues that all stakeholders in the sport of football should actively encourage and support.

University of Maryland Athletic Department Cuts
The University of Maryland recently eliminated seven varsity athletic programs due to a multimillion-dollar deficit in the budget for its athletic department. With revenues falling and costs rising, the athletic department’s budget shortfall is projected to reach $17 million by 2017. As a result, Kevin Anderson, Maryland’s Director of Athletics, announced on July 2nd that the university was left with no choice but to make the cuts.

Men’s and women’s swimming, men’s tennis, women’s water polo, acrobatics and tumbling, men’s cross country, and men’s indoor track and field were cut. Men’s outdoor track and field, led by Andrew Valmon (who is also the head coach of the US men’s track and field team for the London Olympics), was originally scheduled to be cut as well. But that program was saved for next season as the result of a fundraising campaign that generated close to $900,000. However, the men’s outdoor track and field team must still raise close to $2 million by the end of this year to ensure its survival for 2013-2014 and must raise close to $4 million to ensure its permanent survival.

Maryland, like many other schools in large Division I conferences, depend on the revenue from its football and men’s basketball programs to bankroll much of the athletic department’s budget. However, revenue from Maryland’s football and men’s basketball programs has recently seen a fairly sizable downturn. This downturn has been cited as a major factor behind the recent cuts in the “non-revenue” programs.

Declining revenue and rising costs are concerns that are not just limited to the University of Maryland. In fact, just 22 of 227 NCAA Division I public universities earned a profit in 2011. With the dependence on just a few sports to fund all athletics, it is possible that the loss of “non-revenue” sports may become a trend at other universities throughout the country.