The fate of college football and NCAA athletic events this year appear to be in serious jeopardy due to the coronavirus pandemic. Cancellations would carry significant financial repercussions for schools that would lose revenue from events that regularly generate millions. Already, the cancellation of last year’s NCAA tournament saw an expected $375 million evaporate from the organization’s coffers. Given that financial picture, the NCAA might be kicking itself these days over a decision that its Board of Governors made a little over a year ago, on April 30, 2019. That was the day the NCAA declined to move esports under its governance umbrella.
Today’s landscape, due to the pandemic as well as recent legal developments, looks very different than it did in April 2019. And now, as schools scramble for an alternative to revenue-generating live sports events, it’s pretty clear the NCAA’s desire to cling to its view of amateurism could cost the institution dearly after it discarded a platform that could have helped mitigate, to a degree, past and potential future financial losses around traditional sports.
When the NCAA board unanimously passed on taking esports under its governance, the decision centered on two main concerns, according to its press release: video games are predominantly played by males (which creates possible Title IX complications) and the violent nature of some games is not in line with the NCAA’s image. While these concerns are valid, there was also the fact that the existing financial model of individual sponsorships for talented esports players and streamers conflicted with the NCAA’s stance on amateurism. In order to accommodate esports, the NCAA would have had to reconcile its stance prohibiting its athletes from capitalizing on their athletic performances, an issue for which the NCAA was already under siege.
The NCAA’s position for decades has been that its student-athletes, as it likes to call them, are amateurs and thus, cannot receive anything of value (in-kind or cash) for their athletic talents (beyond their scholarship, room, board and a small stipend that was introduced in 2015). However, in 2019, California became the first state to pass the Fair Pay to Play Act. This law, which goes into effect in 2023, would permit California based collegiate athletes to make money off of their personal brand by capitalizing on their name, image and license (NIL) rights. As of April, some 30 states were discussing legislation similar to the Fair Pay to Play Act or had already begun the approval process. One of the biggest problems with adding esports to the NCAA stable has thus disappeared, but the organization may have already missed its shot to bring esports into the fold.
When the NCAA backed away from esports the void was filled by many smaller organizations, like the National Association of Collegiate Esports (NACE), American Collegiate Esports League (ACEL) and the Electronic Gaming Federation (EGF), to name a few. Under those banners, esports programs are popping up all over the country at schools ranging from Harrisburg to Ohio State.
“Once the NCAA passed on the opportunity, we knew our organization would continue to grow,” said Michael Brooks, Executive Director of NACE, which was created in 2016. To date, NACE has over 170 member schools that have provided more than $16 million in esports scholarships.
One of the school presidents on the review committee for the NCAA Board of Governors was University of Kentucky president Eli Capilouto. After leaving the session in which Intersport, a Chicago-based consulting company, provided the NCAA a report on the role esports could play within the NCAA organization, Capilouto realized that no matter what the NCAA decided, esports were something his school needed to explore further. According to Heath Price, associate chief information officer for the University of Kentucky, the school saw beyond the competitive element and grasped the bigger picture.
“We came at the esports plan as a campus-wide initiative, beyond the 30-40 elite gamers that would be on our roster of players," Price said. "This was a global initiative to engage the entire campus, approximately 30,000 students, as well as our global community.”
The idea was to build participant and audience numbers that would attract partners. Absent March Madness this year, in April, Kentucky announced a virtual basketball tournament using the game “NBA 2K20” that featured a bracket of future students, current students, alumni and fans of the program. According to Price, the university has been quite successful with this and other ventures, partnering with JMI Sports for the naming rights of UK’s new esports facility (along with the UK Federal Credit Union), as well as striking a deal with established esports franchise Gen.G.
Those moves are part of a revenue plan designed to “get us to our five-year goal of a revenue stream exceeding high six figures,” Price said, adding. "Perhaps it was better the NCAA did not take esports under its wings right now.”
The somewhat ironic part of the NCAA’s decision to pass on esports was that its board of governors essentially went against the recommendation of Intersport, the consulting group it hired to explore the issue. Over a two-year period, the consultants accumulated the pros and cons of taking on esports from NCAA member schools and presented its findings to the NCAA board.
Kurt Melcher, the Executive Director of esports for Intersport led the task force that ultimately failed to convince the NCAA to take a chance on the competitive video gaming arena. Melcher believes the reservations of the NCAA stemmed from its “inability to get past the fact that gamers might come to college after earning money, have a personal brand already built in their streaming following, and could easily have a sponsorship deal in place with a vendor [for a mouse, keyboard, or monitor], prior to accepting an NCAA scholarship.” Although not discussed openly in the meetings, Melcher believed, “the NCAA’s amateurism definition was not something they were ready to change, in order to accommodate the esports athletes.”
While the “high six figures” short-term goal of UK pales in comparison to the revenue by top-tier basketball schools around the NCAA tournament, it’s still a significant sum that can curb some of the losses caused by the pandemic. The schools will continue to have that ability to add esports, but due to its decision the NCAA is missing out. Brooks believes the inability of the NCAA to shift sponsors to esports will impact them for years.
While the NCAA may not get to enjoy revenue from esports, it can still learn a valuable lesson in how its member institutions and student athletes adapt to the new era of NIL rights. While such a landscape will be new to the NCAA’s traditional sports, esports programs have been dealing with that dynamic all the while.
Melcher was hired by Intersport and part of the NCAA working group because he started the first collegiate esports team in 2012 while working at Robert Morris University. Melcher remembers how many of the players he was recruiting from high school had in-kind or cash sponsorship deals.
“I knew if we were going to have a successful program, we would have to honor the existing partnerships the players came to our school with," Melcher said. "If we had a mouse deal with the program, we would exclude that student from the mouse company deal if they had a competing mouse deal and make sure that player was not of any promotions that would cause conflict with his existing deal.”
NACE rules permit gamers to license names, images and likenesses to sponsors. Its director, Brooks, does not believe that factor cuts into the revenue of the school. In fact, he believes “it is not just about moving money from one group to another,” but rather it’s the “future for all college athletes and institutions to grow.”
“Whether the esports team is part of the athletic department or the engineering school, we believe esports’ success is due to its flexibility, allowing the school to obtain sponsorships while encouraging the gamers to develop their own broadcast channel and licenses,” Brooks said. “It is all about helping the athlete build their personal brand, which in turn aids the college in the long run.”
Ellen M. Zavian is a professor of Sports Law at George Washington University. Follow her on Twitter @zavian.