Accounting 101 Might Be More Useful than You Thought...

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Happy Friday, folks.

As I'm sure you are well aware, people absolutely love college football refs, and they have nothing but respect and admiration for every single call that they make.

Yeah, not quite. People have been clamoring for some sort of adjustment to officiating for years, and every season brings another glaring example of a call gone wrong. Some have called for increased accountability from officials and for referees to be made full-time employees (can't believe neither of these is already a thing...), and, even more radical, some have asked for the replacement of real refs with robots.

Those people are likely walking around with their chests out today as the Triple-A, baseball's highest level minor league, is introducing robot umps. AI might be all the rage these days with its ability to "produce" crazy art pieces and write essays (did they write this?👀), but these particular bots will strictly patrol the strike zone, forcing disgruntled fans everywhere to find new excuses for why their teams lost.

Don't anticipate this one making the move to college football any time soon. If it did, there'd likely be holding and PI calls on literally every play. However, perhaps microchips in the balls could be a technological innovation to explore. They were already successful in the World Cup, and they are a low-cost, low-intrusion improvement that many could get on board with.

Think of how many games have ended in controversy over iffy ball placements. However, it was one of these erroneous decisions that gave us the most iconic hit in football:

Every time I think things might finally be looking up for the Pac-12, they manage to go and get gum in their hair.

The conference had to fire two senior executives, the CFO and President of the Pac-12 Network, after an independent audit found that the two had found out about an overpayment from a network distributor and chose not to disclose this overpayment, boosting the conference's revenue numbers, and thus team athletic budget plans, with money that wasn't theirs.

Just how much did the distributor (rumored to be Comcast) overpay?

$50 mill.

The payments date back to 2017 which is when the report claims the two execs first found out about the discrepancy. It's never a good thing to have to get rid of two so highly ranked officials, and the relationship between the network and even other distributors is likely to be on shaky grounds moving forward. That's not even considering the network value the league lost when two of its biggest brands announced their departure last summer.

Maybe it was supposed to be a tip?

Finally, I tend to not post about every single NIL deal that I see because many of them tend to look pretty similar, and if I did, this newsletter would be about 10K words long. However, every once in a while, a cool NIL partnership emerges which I think is worth writing about.

Such a deal was announced between the Pac-12 (is this... good news???), the media company Curastory, and the tech company Tempus Ex Machina. The deal will provide student athletes in the conference (initially just football players) with tools to curate highlight videos with their own commentary. It will also serve as a platform for allowing brands to propose ad scripts to the athletes to read during these videos or in their other social media posts.

Many athletes are already side hustlin' as content creators, from posting dancing TikTok videos to day-in-the-life Reels on Instagram. This partnership will allow (eventually) thousands of athletes to access advanced tools to create the best content and maximize their personal brands. The earning potential is real, too. Curastory announced that athletes would be paid $30 for every 1000 views on these clips.

You might wonder how this sort of ad spend, and big NIL deals more broadly, actually impacts companies. Well according to hotel chain Hyatt and its deal with Tennessee wideout Jalin Hyatt, the answer is pretty big and pretty positively.

The deal reportedly helped the brand draw 1.2 billion media impressions, an ad value of $3 million based on unique views, reach, and the industry. The deal granted Hyatt (the receiver) a number of hotel gift cards which he could give out to his teammates in exchange for his promoting the company, and while his own compensation was not disclosed as part of the deal, based on the results of the campaign, he'll likely be able to command a much higher sum in future sponsorships.

Quick aside, but do you guys like NIL deals? Considering adding a recurring section like "NIL Deal of the Week." Are there any other sections that you'd like? Perhaps a team outlook or reader question of the week? Just shoot me a response either here or on Twitter and let me know.

Spoiler alert: in my other newsletter, The Startup Breakdown, I'm writing about a super interesting sports operations and NIL-related company for Monday's edition. If you're interested in checking it out, make sure to subscribe to read full breakdowns of the startup and venture scene once a week in your inbox.

The College Athlete Protection Act was introduced last week in California which proposes to pay athletes via conference revenue share. Going to try to simplify all of the legal jargon, so buckle your seatbelts for this one cause it's big.

The bill proposes a revenue sharing model whereby student athletes playing in sports in which the team earns at least twice the amount spent on scholarships in revenue, for most meaning football or basketball (both men and women), would be paid a base annual salary.

This pay can be a maximum of $25k with any excess going into a trust which players can then access upon graduation, thus incentivizing players to complete their degrees. The total pool to be distributed would by either a) 50% of the revenue minus the cost of athletic scholarships or b) it could be the totality of any additional revenue each year. The school would get to choose their plan.

For demonstration, under plan a, USC football players would have earned $215K, men's basketball players $155K, and women's players $110K in 2019. However, the bill gives schools another option to distribute revenue. With plan b, if the school grows its revenue, it would not keep any of the increase, but it would also mean that in years when revenue does not change (or declines), athletes are not paid anything.

The flexibility is meant to allow schools to minimize the expenses on athlete payouts to sustain their other athletic teams, nearly all of which actually lose athletic departments a lot of money.

Further stipulations in the CAPA include requiring schools to provide expanded medical care coverage for athletes even after they've hung up the cleats/sneakers as well as clarification that this doesn't "serve as evidence" that California student athletes are employees.

There's also discussion of establishing a board tasked with overseeing the new rules and inserting some much-needed transparency and vetting to the recruiting and NIL/marketing agency and legal processes.

Not everything is all butterflies and kombucha, though. The bill even contains penalties for athletic directors such as suspension for up to three years for cutting roster spots or sports to save costs. This last point seems unlikely, but it does highlight the massive effect that this legislation would have on the way that California athletic departments are run.

Possibly most brazen of all, the bill even offered some constructive and sure to be well-received suggestions for programs to minimize their expenses moving forward... among them?

• Stop spending so much on new stadiums

• Get rid of some of the "off-field" analysts and extra staff

• Cut down on some of the massive coaching contracts

Lol, right... Lincoln Riley is probably laughing so hard he's wiping his tears with 10 million $1 bills.

If passed, this would have national ramifications as it would put California schools at odds with the NCAA's "you can't pay for play" rule, so the rule changes would be far from finito.

The revenue sharing model suggestion isn't a new one, and in fact, it's not even the first bill of this type in the Golden State. Last year, a similar bill was introduced but rejected over gender equity concerns, a challenge which the extension of revenue sharing to women's basketball players looks to overcome. With the new bill, there is actually hope that it'll pass through the State Legislature.

Similar revenue sharing models have been discussed elsewhere in the country, too, most notably in the land of corn and gravy where the College Football Player's Association worked with players at Penn State to open up discussions about a more comprehensive compensation package for Big Ten players.

Chief among the group, led by quarterback Sean Clifford, was securing post-graduation medical insurance and discussing a revenue sharing model following the conference's massive new media rights deal secured after poaching USC and UCLA.

Worth noting is that despite sounding pretty union-y, the CFBPA is not a union, a distinction reserved for individuals classified as employees, something which the NCAA is fiercely fighting to prevent. Even so, it's not likely that we've heard the end of the organization's involvement in pushing for increased athlete organization moving forward.

The group hasn't yet commented on the CAPA, but the bill has garnered the support of an even larger organization, the National College Players Association, which represents the interests of all student athletes regardless of sport and even has the backing of large labor unions like the US Steelworkers.

In addition to the legal outcomes, this bill would also greatly boost recruiting for California schools. Even players who wouldn't generally make much through NIL would suddenly have the opportunity to earn more than 4x the national average income just for playing football. For USC in particular, this would supplement a prior NIL commitment from the school's collective, Student Body Right, which has promised to offer a living wage to all scholarship Trojans.

Much like we're seeing the expansion of NIL at the high school level as states seek to prevent any sort of competitive disadvantage (most recently growing momentum in Georgia), we're likely to see more states follow Cali's lead in authorized compensation. This wouldn't be the first time, either, as the state was actually the first to enact legalized NIL deals following the Supreme Court's ruling in the Alston case.

However, more interesting (and impactful) will be the federal response to the bill. The NCAA has been working tirelessly to prevent this very type of legislation, and it might increase its cries to Congress for officially granting an antitrust exemption to ensure that this movement doesn't spread.

Interestingly enough, a bill was also introduced in the state of Oklahoma this week, too. It clearly proposes prohibiting players from being classified as employees. It's too early to conjecture just how likely this is to pass, but the question of employment status has been raised by enough important groups this year that it seems inevitable that we will have no choice but to reach some sort of concrete decision sooner rather than later.

In the past year, we've seen major cracks in the fortifications of the NCAA's business model. The organization is doing all that it can to seal them before they spread, but fortunately for the athletes who are providing the product, it might just be too late.

Enjoy a couple of NFL games this weekend, and maybe check out some other sports, too. Cricket, anyone?

Cheers to another day,

Trey