How NCAA’s $2.8 billion legal settlement could impact Iowa Athletics

IOWA CITY — It is hard to understate the impact of the multibillion-dollar legal settlement that the NCAA agreed to this week.

“It’s a giant change to the college athletics model,” said Mit Winter, a lawyer with Kansas City-based Kenneyhertz Perry LLC who focuses on NCAA issues. “Probably the biggest change in college athletics history.”

The massive settlement — most notably resolving House vs. NCAA, but also Hubbard vs. NCAA and Carter vs. NCAA — includes nearly $2.8 billion in backpay to former athletes who competed since 2016 and before the NCAA allowed them to profit off their name, image and likeness. It also eliminates scholarship caps and adds NIL accountability measures.

But most notably, the settlement paves the way for schools to pay athletes directly. More specifically, schools can set aside up to $21 million of their revenue to share with athletes.

“That’s always kind of been like the biggest rule in college athletics — schools cannot pay the athletes,” Winter said in a phone call with The Gazette. “And now that’s changing.”

Winter predicts the direct athlete compensation “probably will not take effect until fall of 2025.”

“There’s still a lot of legal process that needs to happen before the settlement is actually finalized and approved by the court,” Winter said.

Iowa in relatively favorable position

Whenever the changes brought forward by the settlement do officially take effect, Iowa appears to be in a favorable position to succeed in the new environment.

A financial divide has been growing between the two wealthiest conferences — the Big Ten and the SEC — and the rest of the conferences at the FBS level.

Big Ten schools are benefiting from a seven-year media deal with Fox, CBS and NBC that is more lucrative than other conferences’ contracts.

The Big Ten and SEC also will receive substantially more than the Big 12, ACC and other conferences under the College Football Playoff’s recently-signed contract extension with ESPN. The annual CFP revenue for Big Ten and SEC schools will rise from nearly $5.5 million now to more than $21 million under the new contract, according to ESPN.

“Iowa doesn’t have the largest budget in the Big Ten — the largest athletics budget — and they’re not making the most revenue, but they are in the Big Ten,” Winter said.

That gives the Hawkeyes “a huge leg up” over schools in the Big 12 or ACC, Winter said, including in-state rival Iowa State.

“Iowa, just by being a Big Ten member, is going to receive many millions more dollars per year from their Big Ten distribution,” Winter said. “Which would probably mean they’re going to have an easier time making these payments to their athletes.”

Iowa State athletics director Jamie Pollard referenced the growing financial divide earlier this month when explaining to reporters why plans for a new wrestling facility were on hold.

“There’s just no way possible to go forward and convince the state that we can take bonds out to pay for a wrestling facility when the College Football Playoff decided to take all the money and give it to the Big Ten and the SEC,” Pollard said.

Along with Iowa’s financially advantageous positioning as a Big Ten school, it also doesn’t hurt that Iowa AD Beth Goetz has taken a forward-looking approach regarding the changes facing collegiate athletics.

“It's incredibly important that we both honor our tradition at the University of Iowa, but welcome and run to what that future is going to look like,” Goetz said when she was formally introduced in January as Iowa’s permanent AD. “We can lead in that space."

Player compensation model could lead to difficult decisions

While Iowa is certainly in a better position to handle the increased expenses that come with the House vs. NCAA settlement, Goetz still may need to make some difficult decisions.

“If a school wants to compete at the highest level, they know that they’re going to have to pay up to that cap, and they’ll figure out how they’re going to afford to do that,” Winter said.

Iowa Athletics had roughly $167.4 million in operating revenue and $160.3 million in operating expenses, according to the Hawkeyes’ NCAA financial filing from the 2023-24 fiscal year. It still has to pay back the bulk of its $50 million COVID-19 loan from the main campus.

The department had about $32 million tied up in coaching compensation in 2022-23, according to the NCAA financial filing, and $23.3 million in support staff compensation.

The amount that can now be spent on player compensation — about $21 million, with the potential for that number to rise as revenues grow — is more than what Iowa spent on its entire men’s and women’s basketball programs combined in the 2022-23 fiscal year.

Combine the total operating expenses of Iowa’s baseball, softball, volleyball, track and field, cross country and men’s wrestling programs in 2022-23, and that’s still slightly less than $21 million.

Iowa already tried to cut four sports in 2020 during Gary Barta’s tenure as AD. Women’s swimming and diving was later reinstated amid pressure from a Title IX lawsuit, but men’s gymnastics, men’s swimming and diving and men’s tennis did not survive. (The Title IX lawsuit settlement led to the addition of women’s wrestling as an intercollegiate sport.)

Bob Bowlsby — the former Iowa athletics director, Big 12 commissioner and most recently interim Northern Iowa AD — said earlier this year at an event hosted by the Iowa City Area Sports Commission that he anticipates “the movement of more and more resources into football, men’s and women’s basketball and a few selected other sports.”

“Nobody told this kid (plaintiff and former swimmer Grant House) that he’s probably going to drive the diminishment of the number of swimming programs across the country,” Bowlsby said. “There are going to be places that just say, ‘We’re not going to do it anymore.’ And I think our entire athletics ecosystem will be harmed by that.”

Goetz, on that same panel, said Bowlsby’s “point is really important.”

“How we protect men’s sports and women’s Olympics sports, I think, is going to be critical in the years to come,” Goetz said.

Only the ‘first step’ in determining future of college sports

As transformative as the House vs. NCAA settlement is, it does not preclude future legal action against the NCAA — legal action that could further change the collegiate athletics landscape.

Another antitrust lawsuit (Fontenot vs. NCAA) will still proceed, and the settlement “doesn’t affect the employment issue at all.”

“It is not going to end a lot of the other legal questions that still exist in collegiate athletics,” Winter said. “I view this as the first step in reaching whatever the ultimate end model of college athletics is going to be because there will be more change after this.”

Comments: john.steppe@thegazette.com

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