Last month I wrote about my son’s experience playing AAU summer basketball. I said that he was fortunate to find a good program where he received great coaching and good competition, but that I could see there was a shady factor with other programs and I thought shoe companies had way too much influence. Last week the college basketball world was shocked by the FBI arrests of several high profile basketball coaches, agents and shoe companies. The U.S. Attorney for the Southern District of New York announced the indictments by displaying a fancy chart that illustrated the “pay for play” network of participants.
As shocking as it was, I can’t say that I am totally surprised. There is simply too much money at stake surrounding a bunch of young, naïve kids. The situation attracts an eco-system of bottom feeders who are always on the prowl for their next meal ticket. Aaron and I were at some of the tournaments that are referenced in some of the documents released to the public. I guess you have no idea who is sitting next to you. They even arrested a high-end bespoke suit maker who serviced professional athletes and was making money on the side by connecting his clients to investment managers. These kids don’t need investment managers. For a few pennies a month they could put most of the money they make into an index fund that they never touch – or they can hire Warren Buffet for free by investing their money in Berkshire Hathaway stock. The problem in most cases is that many of these players come from poor families that need money now, but the NCAA and high school b-ball rules forbid any compensation to the players or their families. This creates a fertile environment for wolves posing as sheep to thrive by giving these players and their families a little money now in exchanges for a management deal or a shoe contract in the future.
A handful of people have already lost their jobs over this. Expect a few schools to get dinged by probation and a couple of smaller violators to do some time. Unfortunately, some players will get labeled as troublemakers and may never play professional basketball, but the beat will go on for the shoe companies, the NBA and the NCAA. Pay these kids something for all the money they are generating for colleges and the NCAA or you can be certain this will happen again and again.
The NFL markets its brand as well as any enterprise in the world. I heard a comedian once say that the NFL is so popular, it has its own day. NFL football is huge. Each NFL franchise brings in approximately $400M a year in revenue; almost double the annual revenue of NBA teams and 2 ½ times as much as MLB clubs.