The NCAA Is Running Scared. But Why??

Let's talk today about a recent press release by the NCAA. The NCAA just stated this:

The NCAA has made the decision not to enter a new contract for the license of its name and logo for the EA Sports NCAA Football video game. The current contract expires in June 2014, but our timing is based on the need to provide EA notice for future planning. As a result, the NCAA Football 2014 video game will be the last to include the NCAA's name and logo. We are confident in our legal position regarding the use of our trademarks in video games. But given the current business climate and costs of litigation, we determined participating in this game is not in the best interests of the NCAA.

The NCAA has never licensed the use of current student-athlete names, images or likenesses to EA. The NCAA has no involvement in licenses between EA and former student-athletes. Member colleges and universities license their own trademarks and other intellectual property for the video game. They will have to independently decide whether to continue those business arrangements in the future.

How terse. But what does it mean? It means the NCAA is running scared. What are they saying here? Let's break it down:

1. The NCAA will no longer associate with EA Sports, but this has NOTHING to do with some sort of "legal position." It is all about business climate and the costs of litigation.

2. The NCAA never had anything to do with EA Sports and it was those "member colleges and universities" the entire time. Without further context, this second paragraph seems so wildly unrelated to the first that it seems completely out of place.

It looks like the NCAA doesn't want to have anything to do with EA Sports and wants to make 100% clear that it never had anything to do with EA Sports. Why is the NCAA distancing itself from EA Sports and trying to cover its rear end on this matter?

The NCAA did this, because former UCLA Bruin Ed O'Bannon has filed a lawsuit against the NCAA. You may remember O'Bannon because he helped UCLA win its last National Championship, back in 1995.

He brought this lawsuit to, amongst other things, obtain a portion of the profits from NCAA video games like the ones that EA Sports make. I'll get into the lawsuit itself in a little bit, but before we get to the specific lawsuit, let's look at the nature of the law here.

EA SPORTS

Here is why the NCAA is attempting to distance itself from EA Sports:

A former EA Sports producer says that the NCAA games developed by EA Sports over the years were designed to replicate actual players without using their names.

So, the EA Sports video game franchise tried to basically recreate the Aaron Rodgii and DeSean Jacksons of the world in their video games as accurately as possible. They wanted to make it as clear as possible that these pixels were obviously certain players. They just stopped short of using their actual faces/names.

The NCAA doesn't want to be associated with this anymore. Let's find out why

RIGHT OF PUBLICITY

So, why does it matter that video games designers basically tried to use the likeness of players without actually using the likeness of players? Because each person owns the rights to their own likenesses:

The right of publicity, often called personality rights, is the right of an individual to control the commercial use of his or her name, image, likeness, or other unequivocal aspects of one's identity

People cannot just benefit from your name, image, and/or likeness. But that is exactly what EA Sports and other video games (and the entire NCAA system) is doing. Sure, in the game it's just Texas A+M QB #2, but everybody knows that it is really Johnny Manziel. You buy the game to play as Johnny Football, and EA Sports, Texas A+M, the NCAA (and others) all receive a slice of the proceeds. However, Johnny Manziel himself makes no money off of this. Additionally, if Johnny Manziel were to make any money from the transaction, his amateur status would be compromised and he may not be able to play for Texas A+M anymore. The system is such that it is Johnny Manziel's rational self-interest to make as much value for his likeness as possible, but not be able to profit off of his hard work and dedication.

Additional options by EA Sports allowed fans to include players names. Check out this All-Time Cal team at EA Sports TeamBuilder. Each individual player there has an actual name, including Alex Mack and Tyson Alualu. Although the video game faces look nothing like the actual players, it is clearly the individual human beings listed there. EA Sports is clearly making money off of the name and likeness of former players.

If the Courts determine that EA Sports inappropriately made money off of players' likenesses, there could be substantial damages for these previous video games and potentially future video games. The NCAA's actions to disassociate themselves with EA Sports is designed to cap any prior damages incurred in their involvement with EA Sports games and avoid future damages.

O'BANNON LAWSUIT

The players are fed up with this state of affairs. Now O'Bannon and a few others (like Bill Russell) have brought this lawsuit to try to change things. This lawsuit has been consolidated with other similar suits (including one by former ASU/Nebraska QB Sam Keller) and is currently pending in federal court in Oakland. Before we get into the current status, let's look at the allegations and what the results of the suit could be. Here are the two key allegations:

1. O'Bannon and other former college players, including fellow plaintiffs Bill Russell and Oscar Robertson, are entitled to a share of the millions of dollars in revenue the NCAA earns from video games and other products that use their names, images and/or likenesses;

2. Former and current athletes also deserve a share of the billions of dollars in television revenue the association, conferences and schools earn from selling sports broadcast rights

O'Bannon is trying to get current and former NCAA athletes a part of the pie here. They want some of the money the NCAA earns from video games and other products that use their likenesses. Further, they want part of the money earned in TV revenue for current broadcasts. This is billions of dollars we are talking about here, so the stakes are extremely high.

If O'Bannon wins, not only might NCAA have to pay out millions in damages, they may have to pay out billions in future revenue over time. Previous attempts to force the NCAA to do this through lawsuits have led to the NCAA settling with the plaintiffs. Here, however, O'Bannon has stated he will not back down. The situation has gotten so dire that the NCAA's credit outlook has been downgraded:

Ratings agency Moody's revised the NCAA's credit outlook to negative Monday as a lawsuit against college sports' governing body proceeds in federal court. The report marked the first time that litigation has emerged as a risk in a Moody's report for NCAA debt.

CURRENT STATUS OF LAWSUIT

So, where are we now? This is an extremely complicated matter, but I'll try to make it as easily approachable as possible. The plaintiffs are attempting to be certified as a class to make the lawsuit a class action. A class action is a type of lawsuit where a small number of plaintiffs represents a massive "class" so numerous that it would overload the legal system for each individual to bring their own lawsuit.

Here are the four factors to look at in determining whether a lawsuit should be upgraded to a class action:

1. Too Many People. If the members of the class has so many people that it would not work for each to bring their own individual lawsuit, then it points in favor of class certification. Here, that would appear to be the case. The class consists of former and current NCAA student-athletes, which is thousands upon thousands of people.

2. Common Questions. If there are common questions amongst all members of the class, then that points in favor of class certification. Here, I would argue that there are common questions, which are "Whether the NCAA has profited off of the players' likenesses inappropriately."

3. Typical Claims/Defenses. The question here is whether the representative parties (i.e. O'Bannon) will have typical claims/defenses as to the class as a whole. If they do, then it points towards class certification.

Previously, O'Bannon had a problem here, because he had no current players involved in the suit. There are two sets of claims, so if there are only former players involved, their claims may not be typical for all current players. However, O'Bannon has taken steps to resolve these problems.

In the time since the NCAA announced they would no longer be involved with EA Sports (and since I actually wrote this post), O'Bannon amended his lawsuit to add current players:

Led by a pair of Arizona Wildcats, six current college football players from major programs joined a federal antitrust lawsuit against the NCAA on Thursday, significantly raising the stakes in a court battle that challenges the economic model of big-time college sports.

The players are Arizona linebacker Jake Fischer and kicker Jake Smith, Vanderbilt linebackerChase Garnham, Clemson cornerback Darius Robinson, and Minnesota tight end Moses Alipate and wide receiver Victor Keise.

So, there you go!

4. Adequately Protect Interests. The final factor to consider is whether the representative parties will adequate and fairly protect the interests of the class. This problem is about one thing and one thing alone: money. O'Bannon and his plaintiffs will seek to maximize monies from the NCAA, which is an adequate to represent the interests of all players.

So, in my quick and dirty analysis here, it appears that, once O'Bannon adds a current player, he may be a in strong position for class certification.

What is the NCAA saying in response? They argue that there are wildly differing values for players and this would preclude class certification. The NCAA attorney even stated that in the most recent hearing:

... there's a handful of players who might have value, and there's the great bulk of the players who have no value. And so ... the hold-out, the star quarterback, the [Texas A&M Heisman Trophy winner] Johnny Manziel could say, 'I'm only going to play if you -- the broadcaster gives me a lot of money, right?' And everybody else is going to get nothing ...

That is a fairly solid argument, in my view. Sure, we hardcore Cal fans know the names of the 2nd stringers on the team, but the average fan doesn't. They aren't going to buy video games, because of the backup punter etc etc. However, this is an issue that goes to the question of damages--it is not necessarily one that precludes O'Bannon from showing that the lawsuit presents claims worthy of class certification. The legal question for Johnny Football and the backup punters of the world are the same, even if one could stand to obtain one penny and the other one million pennies. For that reason, I don't know how persuasive the NCAA's argument will be in Court.

JUNE, 2013 COURT HEARING

But my view is meaningless. The Judge's view is what counts here. What did Judge Claudia Wilken have to say at the June, 2013 hearing on class certification?

U.S. District Court Judge Claudia Wilken informed Ed O'Bannon and his lawyers at a hearing in Oakland, Calif., on Thursday that if they wish to include current players in their class-action suit against the NCAA's ban on compensating student athletes, they'll need to add a current player to the lawsuit.

This is the problem I noted above. Now, the plaintiffs here have amended their pleading to add some current players as noted above (although they are concerned the NCAA will retaliate against these current players). This will delay the process somewhat, because then the Court would have to re-consider that amended Accounting. Further, the NCAA, which has an unlimited budget to delay and fight this whole lawsuit, would try to drown the plaintiffs in paper. By that, I mean file tons of motions to delay the whole process. At some point, their tactics would run out and we'll get a ruling on the class certification. Hopefully, that ruling will come soon, but it is somewhat unclear when it will happen.

If the Judge rules that the class is certified, O'Bannon will represent thousands upon thousands of former and current athletes. His ability to create change through the lawsuit would be increased, because any rulings in favor of the plaintiffs would be in favor of all former and current players. Additionally, if the plaintiffs DID want to settle, then they'd have a lot more bargaining power. This increased bargaining power is because of the potential for massive changes and money damages to all former/current players.

If the Judge does not rule the class is certified, then O'Bannon just represents himself and the consolidated plaintiffs, which is just a few people. His negotiating ability is minimal and any orders in his favor may relate solely to the specific plaintiffs here. Each former and current player would have to bring their own lawsuits, which would be unrealistic. However, if the first set of players do win trials against the NCAA, later sets of current and/or former players would be able to use that initial success to win their lawsuits against the NCAA. It would be significantly messier, though.

So, that is why the NCAA is trying to distance itself from EA Sports and make it seem like they had nothing to do with the likeness issue. If the Court certifies the class action and finds that NCAA and EA Sports worked together to benefit off the likenesses of the players, then the NCAA and its ability to not pay its athletes would be ruined.

CONCLUSION

The NCAA is trying to distance itself from EA Sports and retroactively claim that they never really technically, I mean c'mon, had anything to do with them. What is most odd about this is that the NCAA actually sort of never did have much to do with EA Sports. EA Sports obtains the appropriate licenses via the Collegiate Licensing Company:

EA SPORTS will continue to develop and publish college football games, but we will no longer include the NCAA names and marks. Our relationship with the Collegiate Licensing Company is strong and we are already working on a new game for next generation consoles which will launch next year and feature the college teams, conferences and all the innovation fans expect from EA SPORTS.

So, now the games will just have a vague title without the NCAA's involvement:

First non-NCAA affiliated EA Sports college football video game will be called "College Football 15" source told @ESPN

— Brett McMurphy (@McMurphyESPN) July 17, 2013

So, this shows how desperate the NCAA is to completely and totally distance itself from EA Sports, no matter how tenuous their relationship was in the first place. Everything as we know it with the NCAA could change. I am not overstating the situation here. The basic underpinning of the NCAA is free labor. Basically, an unceasing series of anti-trust violations in the name of "amateurism."

Without the free labor, it is not the NCAA as we know it. The NCAA tries to cast aspersions on this potential reality, saying that women's sports may have to be cut or scholarships limited. It is unclear exactly what would happen outside of athletes getting paid for their hardwork and dedication.

The situation for Cal is hard to predict, but as I've outlined this summer, Cal's financial situation is somewhat precarious. Like many Athletics Departments, they do not make enough money on an annual basis to make a profit and generally use subsidies from the school and money from the endowment to make up any losses. Now, to be clear, the subsidies are decreasing over time, which is great. Additionally, there are the additional complications from the costs of the Memorial Stadium upgrade. Cal has a plan to pay for all of these expenses, but tack on another potentially huge expense and it could change everything.

What could Cal do to avoid paying its players if the NCAA loses here? Potentially nothing. The Athletic Directors are becoming nervous. They recently had a meeting in Santa Monica to discuss this matter further. The Big10 Commish Jim Delaney at one point said if O'Bannon wins, the Big10 may go to DIII to avoid the problems here.

He eventually back tracked, but clearly the individual schools are freaked out. Either way, the system as it is set up right now benefits a few people at the expense of many. There are a lot of people rooting for Ed O'Bannon, even if they are USC fans! What do you think about the case here? Should college athletes be paid or are their free college educations enough? Tell us your thoughts in the comments!