\n FILE – The national office of the NCAA in Indianapolis is shown on March 12, 2020. (AP Photo\/Michael Conroy, File)
\n AP\n <\/p>\n
College sports has another before and after date.<\/p>\n
Before July 1, 2025 \u2014 last Tuesday \u2014 athletes could make money off their name, image and likeness (NIL) but not be paid directly by their schools. And after July 1, that has changed, making college sports look and feel even more like the pros.<\/p>\n
Some of the long-standing differences and caveats still apply. College athletes are not considered employees. Therefore, unlike athletes in the NFL, the NBA, the WNBA, the NHL and MLB, their pay and working conditions were not established through a collective bargaining process. But at least one major change will be familiar to any fan of those professional leagues.<\/p>\n
College sports has a (soft) salary cap now. Let\u2019s unpack.<\/p>\n
How did this come about?<\/p>\n
At the most practical level, the soft salary cap (or revenue sharing cap) is part of the massive legal settlement approved in early June. Commonly referred to as the House settlement, it consolidated three antitrust cases, all of them challenging past restrictions of college athlete compensation. And in that process, the defendants \u2014 the NCAA and the power conferences \u2014 agreed to allow schools to share revenue with (or pay) athletes directly for the first time. That officially started Tuesday.<\/p>\n
Lawyers for the defendants and plaintiffs settled on an initial annual cap of $20.5 million per school. That is for athletes across sports, though a bulk of the money will go to salaries for football and men\u2019s basketball players. Not every school will spend to the cap, though many power conference programs will. More than 300 Division I schools have opted into the new economic model, meaning they can pay athletes \u2014 up to that cap \u2014 but also have to abide by new roster limits in each sport. Schools that chose not to opt in are not allowed to pay athletes through revenue sharing. For now, this cap explainer is not relevant to them.<\/p>\n
Why $20.5 million?<\/p>\n
The starting cap was calculated by taking 22% of the average athletic revenue for power conference schools. In this case, the figures were from the 2023 and 2024 fiscal years. Importantly, only a specific set of revenue streams was considered, which has the attention of the plaintiffs\u2019 attorneys for House. Each year, the settlement will require the NCAA to share the data used to calculate the cap with the plaintiffs\u2019 attorneys. From there, the settlement permits the attorneys to \u201creasonably audit\u201d the data \u2014 and this week, Steve Berman, one of the lead attorneys, told USA Today they are doing just that. In question is whether certain revenue streams were not counted and should be, which could increase the initial number.<\/p>\n
Berman told USA Today that he is fine with going ahead with $20.5 million for 2025-26. But if the number were recalculated in an auditing process \u2026<\/p>\n
That would be significant. Why?<\/p>\n
Great question. Perfect time to ask.<\/p>\n
The settlement is a 10-year agreement. The cap will rise and recalculate throughout that span. There will be a 4% bump before the second, third, fifth, sixth, eighth and ninth years. There will be a recalculation, using that same 22% formula, before the fourth, seventh and 10th years. So if the baseline changed because of an immediate audit of the $20.5 million figure, there could be a trickle-down (or trickle-up?) effect on the initial annual increases.<\/p>\n
What counts as spending toward the cap?<\/p>\n
Three streams: revenue-sharing money paid to athletes, which will essentially function as salaries; scholarship spending above previous NCAA limits; and other education-related payments, known as Alston money.<\/p>\n
Alston money can account for up to $2.5 million per year toward the cap. Same with scholarship spending, though that part is a bit trickier to explain. The settlement permits schools to pay an uncapped amount of scholarship money to a fixed number of athletes across sports. Or in other words: Previous limits on scholarship spending have been replaced by new roster limits, meaning more money distributed to fewer athletes. A football team, for example, can carry a maximum of 105 players and offer 105 full scholarships, if it so chooses. But as far as the $20.5 million cap is concerned, only scholarship money spent above previous NCAA limits \u2014 and only up to $2.5 million per year \u2014 will count toward it. Confused? Welcome to the life of a longtime college compliance staffer.<\/p>\n
Why have you repeatedly referred to this as a soft cap?<\/p>\n
Another great question.<\/p>\n
Until this point \u2014 before July 1, 2025 \u2014 boosters funded five-, six- and seven-figure salaries in football, men\u2019s basketball and, to a lesser extent, women\u2019s basketball and other sports. With rules established by the settlement, the NCAA and the power conferences hope to change that. Any NIL deal that exceeds $600 will have to go through a clearinghouse, which will trigger a review of who is paying and what services they will receive from the athlete, among other factors. The hope, for the leaders of college sports, is to eliminate situations in which an athlete receives $500,000 for a few social media posts.<\/p>\n
At the highest levels of the biggest sports, those deals have fueled the NIL economy for the past four years. Donor groups, known as NIL collectives, typically have brokered them. Many legal experts are skeptical that the enforcement efforts would hold up against more antitrust suits.<\/p>\n
And throughout the history of college sports, there\u2019s at least one certainty: Motivated rich people will find a way to help their teams win. For that reason \u2014 that donors and NIL collectives will help schools spend above the $20.5 million barrier \u2014 it feels most responsible to call it a soft cap. The whole system could put at least some athlete payments back under the table, such as when they used to be delivered in McDonald\u2019s bags before the NCAA changed its NIL rules in 2021. Plus, beyond donor money, schools and collectives can still help athletes land brand deals to enhance their income.<\/p>\n
At the top of college football and basketball, spending from the revenue-sharing pool will be viewed as a baseline. It will, as ever, take a lot more money to thrive.<\/p>\n
<\/p>\n
\n FILE – In this photo taken with a slow shutter speed, Wichita State’s Ron Baker runs during practice for the NCAA college basketball tournament, March 20, 2014, in St. Louis. (AP Photo\/Charlie Riedel, file)
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