NCAA $6.4 Billion Threatened by Suit Over Player Likeness

Photographer: John Biever/Sports Illustrated/Getty Images

Former University of California-Los Angeles Forward Ed O’Bannon is seen at the NCAA National Championship in 1995. Close

Former University of California-Los Angeles Forward Ed O’Bannon is seen at the NCAA... Read More

Close
Open
Photographer: John Biever/Sports Illustrated/Getty Images

Former University of California-Los Angeles Forward Ed O’Bannon is seen at the NCAA National Championship in 1995.

Ed O’Bannon, the college basketball player of the year in 1995, said he isn’t suing the National Collegiate Athletic Association to get rich. It’s about fairness.

The former University of California-Los Angeles forward is challenging the right of college sports’ governing body, conferences and schools to keep proceeds from selling the rights to athletes’ likenesses to be used in such things as TV broadcasts, video games and clothes. The plaintiffs say the case may reduce the $6.4 billion in annual revenue that universities get from athletics by as much as 50 percent.

“It’s a legitimate threat to the NCAA,” said Michael McCann, a law professor and director of the sports and entertainment law institute at the University of New Hampshire. “The antitrust claims have logic behind them, namely that there are industry actors -- the NCAA, college conferences, video game publishers -- who have clearly made money off the images and likenesses of players. Normally in law we are compensated” for that.

A victory for O’Bannon, 40, might destroy the model that has developed since Rutgers College defeated what is now Princeton University in the first college football game 144 years ago. Schools would have to share revenue with athletes, then possibly drop money-losing sports to offset the cost. The richest football and basketball teams probably would form superconferences rich enough to play by the new rules, Duke University law professor Paul Haagen said in an interview.

“It is difficult to see how the organization could survive in anything like its current form were it to suffer a major loss in this case,” Haagen said.

Class Hearing

Tomorrow, U.S. District Judge Claudia Wilken in Oakland, California, is scheduled to hear lawyers argue whether O’Bannon’s suit, now combined with a lawsuit filed by former Arizona State University quarterback Sam Keller, should become a class action, allowing the plaintiffs’ attorneys to sue on behalf of all college football and basketball players.

The antitrust plaintiffs are asking to represent and seek damages for all former student athletes in the U.S. who competed in Division I basketball or NCAA football’s top echelon and whose images or names have been included in game footage or video games since July 2005. In their request for a court order restricting NCAA actions, the lawyers seek to represent all current and former college athletes whose images or names may be or have been included game footage or video games after they stopped being NCAA athletes.

Signed Agreement

College athletes are required to sign an agreement relinquishing their rights to profit from their images, including after they graduate and are no longer subject to NCAA rules, lawyers for O’Bannon and Keller say. The agreement is a product of the NCAA’s effort to deprive them of compensation for use of their images, so it’s unenforceable, the lawyers said in court filings.

The action began almost four years ago when O’Bannon sued the NCAA and its licensing company, alleging in a complaint that they agreed to block him and other former college athletes from getting paid for their likenesses in Electronic Arts Inc. (EA) sports video games after they left college. O’Bannon’s case was combined with Keller’s, who sued the NCAA and Electronic Arts for using his likeness in video games without his permission.

The NCAA said its agreements with athletes are legal and binding, NCAA attorney Donald Remy said in an interview.

Non-Revenue Sports

Wake Forest President Nathan Hatch, who chairs the NCAA Division I board, has said that if revenue had to be shared with athletes, his school probably would have to eliminate some non-revenue sports, a category that includes everything except football and men’s basketball at most schools, to cut costs.

“The thing that might be crippling is the issue that amateurism is now a sham; a 19th-century ideal for a certain kind of athletic competition that the court said doesn’t exist anymore,” Haagen said.

O’Bannon said comments like Hatch’s are scare tactics. “There are billions of dollars being made,” he said. “There is enough to go around.”

The NCAA’s revenue for 2011-12 was $871.6 million, according to the governing body. NCAA managing director of research Todd Petr said schools spent $11.7 billion on intercollegiate sports, almost twice what they brought in, and only 23 athletic departments make money on their programs, according to court filings in the case.

Michael Hausfeld, attorney for the plaintiffs, said it’s time to end the arcane notion of amateurism in college athletes. The athletes spend more time in practice than they do in class, he said.

Commercial Enterprise

“Intercollegiate athletics is not amateur at all, it’s a commercial enterprise to make money, and as much as possible,” Hausfeld said in an interview. “I think the public understands that these are hybrids. You can call them semi-pros, pre-professionals, but not amateurs.”

A ruling by Wilken in O’Bannon’s and Keller’s favor would expand the number of plaintiffs to include tens of thousands of athletes whose interests would be represented, and who could share in damages without having to file individual lawsuits.

McCann, of the University of New Hampshire, said plaintiffs claims against the NCAA have never been litigated.

“This isn’t about whether college players should be paid,” he said in a telephone interview. “It’s about their image and likenesses, not their labor.”

NCAA’s Confidence

Remy, the NCAA attorney, said he is confident that the governing body for college sports will win.

“The facts and the law are on the side of the NCAA and its member institutions, so I am not concerned that the doomsday scenario that some paint as a product of this litigation ultimately will come to fruition,” he said.

Roger Noll, a retired economics professor at Stanford University hired by the plaintiffs’ attorneys to calculate damages, estimated that athletes should receive 50 percent of revenue from licenses that use their images.

Remy said U.S. law forbids college athletes from being paid based on the 1984 Supreme Court decision about football television rights. The court ruled 7-2 in a lawsuit brought by NCAA against the University of Oklahoma that the NCAA and its member universities market “competition itself.”

“In order to preserve the character and quality of the product, athletes must not be paid, must be required to attend class, and the like,” Justice John Paul Stevens wrote for the court’s majority. “The NCAA play a vital role in enabling college football to preserve its character, and as a result enables a product to be marketed which might otherwise be unavailable.”

Post-Graduation

Though a loss might have major ramifications for the NCAA, McCann said college sports would survive.

If money were placed in a fund to pay players for licensing their images, and the money is paid after they graduate, that’s different than paying them a salary.

“I don’t know what an appropriate definition for amateurism is -- at least in today’s market,” McCann said. “What is amateurism in an era where coaches are paid millions of dollars, where television contracts for amateur games are worth billions of dollars?

‘‘If players are compensated, I’m of the view that college sports would continue. It would make it more expensive for schools.’’

Selling Cars

O’Bannon, meanwhile, is working as a car salesman at Findlay Toyota in Henderson, Nevada. After winning the John Wooden Award in 1995 as college basketball’s most outstanding player, he was selected by the New Jersey Nets with the ninth pick in the National Basketball Association draft and signed a $3.9 million contract. He averaged 5.0 points and 2.5 rebounds during two seasons in the NBA. He played in Europe, then went back to UCLA to get his degree.

He insists he isn’t trying to get rich with his lawsuit.

‘‘It had nothing to do with me actually picking up a check or getting paid,” he said from his office at the car dealership. “I thought it was illegal to use one’s likeness without a person’s permission or compensation.

The case is Keller v. Electronic Arts Inc., 09-01967, U.S. District Court, Northern District of California (Oakland).

To contact the reporters on this story: Curtis Eichelberger in Washington at ceichelberge@bloomberg.net; Karen Gullo in San Francisco at kgullo@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net; Michael Sillup at msillup@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.