NCAA settlement details payouts, revenue sharing

The NCAA, its five power conferences and lawyers representing a class of Division I athletes filed the detailed terms of an antitrust lawsuit Friday that has the potential to reshape the business of college sports.

The parties agreed in late May to settle a trio of lawsuits (House v. NCAA, Hubbard v. NCAA and Carter v. NCAA) about the various ways schools compensate their athletes. Friday's filing is the first of several important steps toward formalizing the agreement. The new details outline how past athletes will share the $2.78 billion in damages that the NCAA has agreed to pay, sets up a new system for revenue sharing and outlines new roster limits for a long list of college sports, among other items.

"This is another important step in the ongoing effort to provide increased benefits to student-athletes while creating a stable and sustainable model for the future of college sports," the NCAA and its power conferences said in a statement Friday evening. "While there is still much work to be done in the settlement approval process, this is a significant step toward establishing clarity for the future of all of Division I athletics while maintaining a lasting education-based model for college sports, ensuring the opportunity for student-athletes to earn a degree and the tools necessary to be successful in life after sports."

Schools will be permitted for the first time to pay their athletes directly via name, image and likeness (NIL) deals under the terms of the settlement. Each school could provide up to 22% of the average revenue that power conference schools generate from media rights, ticket sales and sponsorships -- a sum that is expected to be between $20 million and $22 million per school when the settlement goes into effect at the start of the 2025-26 academic year.

Athletes would still be able to make money from NIL deals with third parties, but the NCAA said the settlement will allow them to install a more "robust and effective enforcement and oversight program" to make sure those third-party deals are "legitimate NIL activity." Many athletes -- especially in football and basketball -- currently receive money from booster collectives, which have evolved to serve as outsourced payrolls to attract top players rather than payments for an athlete's actual value as an endorser. The NCAA hopes its new system will reduce those types of arrangements.

The NCAA plans to create a database of NIL deals to try to objectively assess whether arrangements between an athlete and a third party qualify as a legitimate endorsement deal. Several coaches and athletic directors have told ESPN in the past weeks that they anticipate some form of NIL payments from collectives will continue.

The settlement allows for the court to appoint a "special master" to rule on any disputes about new rules related to player compensation. This marks a notable change from the NCAA's history of using its own enforcement arm to determine if any athletes or schools are violating its compensation rules. The settlement would also establish an arbitration process for players and schools to object to any punishment under the new rules.

The two sides have not yet determined who will serve as the new enforcement entity or who will oversee the arbitration process of any future disputes.

The $20-22 million figure that serves, in effect, as a salary cap will increase over time as the leagues' revenue grows. Experts cited in the court documents said they expect the cap number to grow to nearly $33 million per school by the end of the settlement's 10-year term. The NCAA and plaintiffs' attorneys said those payments when combined with the tuition and other benefits that athletes already receive will create a system where many schools are sharing close to half of the revenue they generate with athletes. That figure is comparable with revenue share agreements in professional sports.

Steve Berman, co-lead counsel for the athletes, said reaching a near 50/50 revenue split was their intent during negotiations.

"That was what was in our heads, yes," Berman said.

The 50/50 split calculation considers all athletes at the school as one group rather than on a sport-by-sport basis. For example, it is highly unlikely that football players -- who generate the majority of revenue for most schools -- will receive 50% of the money that the football team generates. Some of those benefits have to be shared equitably due to Title IX regulations. The settlement does not provide detailed instructions on how to apply Title IX to these new benefits, leaving some potentially tricky decisions up to each individual school.

The law firms run by Berman and his co-lead counsel, Jeffrey Kessler, will be responsible for auditing financial statements from NCAA schools during the course of the 10-year settlement to make sure schools are properly reporting their revenues.

For past damages, the plaintiffs' attorneys submitted a proposed formula for deciding how to divide money among the eligible athletes. Any Division I athlete who played a sport from 2016 to present day is eligible for past damages. The 2016 cut-off is due to the statute of limitations on the initial House v. NCAA lawsuit, which was filed in 2020. The formula takes into account a number of factors, including where the athlete went to school and how many snaps or minutes they played.

Berman said that football and men's basketball players from power conference schools will be eligible to receive an average of $135,000. Women's basketball players from power conferences could receive an average of $35,000. The likely payout for athletes from other sports will depend on how many enter claims.

For some, part of the payouts will also be based on the athletes' potential earning power had they been able to sign NIL deals while they were in school. Berman said the highest individual estimated payout for one athlete will be $1.8 million.

As part of the settlement, the NCAA agreed to remove any limits on the number of scholarships a school can provide to athletes. Previously, NCAA rules dictated a certain number of scholarships per sport. If the settlement is approved, there will instead be a limit on how many total players each team can have on its roster and each individual school will decide how many of those players it wants to put on scholarship.

Judge Claudia Wilken is expected to review the proposed settlement terms for the next several weeks and decide whether to accept them on a preliminary basis by early September or sooner. The settlement proposes that notice would be sent to athletes about the details of the settlement on October 1 and that the window for athletes to object to its terms would be 105 days later on Jan. 14, 2025.

Berman said the plaintiffs plan on publishing a website that will allow all athletes to figure out how much money they might receive from the pool of damages.

After the athletes have a chance to review the terms, Judge Wilken will make a final ruling on whether to accept the settlement. That decision is not expected until late 2024 or early 2025.