Though unpaid, top players worth millions to University

Devin Gardner crumpled to the ground after Michigan’s failed two-point conversion attempt against Ohio State.

In football terms, it was a devastating loss. Financially, Gardner represented eight figures in economic benefit for Michigan, lying in the Michigan Stadium turf.

Analysis by The Michigan Daily shows that in direct revenues, a player like Gardner can add $5.5 million to the University per year. In free advertising alone, Gardner generating more than $8 million through media exposure over one month.

The current NCAA system, which prohibits monetary compensation to student athletes, makes it impossible to precisely evaluate a player’s market value. But as the debate over player compensation continues, the question is as important as ever.

Less than a month ago, the high-profile case, Ed O’Bannon V. NCAA, granted class certification to current and future players who are seeking a cut of television revenue and ticket sales for college revenue sports. In 2009, The Atlantic published a 15,000-word article titled, “The Shame of College Sports.” Earlier this year, Business Insider estimated that the average Michigan football player was worth $470,000.

But for higher-profile players, the revenue potential can soar. The analysis shows that over three years as a starter at wide receiver and quarterback, Gardner can be expected to add upwards of $16.5 million to Michigan in direct revenues, with many more millions in advertising and exposure for the university.

Gardner, like the rest of the NCAA’s 450,000 athletes, will receive no direct monetary compensation, though he does receive a scholarship.

THE $5.5-MILLION MEN

In 2011, Robert Brown, a professor of economics at California State University, San Marcos, published a paper in the peer-reviewed Journal of Sports Economics. In it, he estimated the marginal revenue of a NFL-caliber college football player using financial data from 2004-05. Since then, Michigan’s football revenues have ballooned from $46.4 million in 2004-05 to $85.2 million in 2011-12 under Athletic Directors Bill Martin and Dave Brandon, the current head of the Athletic Department.

The idea, Brown said, is to control for other factors, and then find “what an additional NFL-quality college player produces for his football team revenues.”

In 2011-12 figures, Brown’s model estimates an average NFL-caliber player adds roughly $5.5 million in direct revenues each year.

For a star player like former Michigan quarterback Denard Robinson, Texas A&M’s Johnny Manziel or, to a lesser degree, Gardner, that figure can climb much higher.

“At that extreme level, you can’t even say how much,” said Lawrence Kahn, a professor of economics at Cornell Univeristy, referring to players like Robinson or Manziel. “All you can say is he’s, I’m sure, way more valuable that the average NFL draftable player.”

That is likely true of most quarterbacks who play at Michigan, a school that typically creates NFL-caliber players at the position that often become the face of the program.

“You take Gardner, and you put him at Utah State, he’s not going to generate the revenues obviously that he will at Michigan,” Brown said.

For Gardner, the current quarterback, the conservative $5.5-million estimate puts his value to the program at $16.5 million over a three-year career as a starter.

The players do receive compensation, including scholarships, apparel, travel, training and meals. According to the Knight Commission, Michigan spent $273,863 on each scholarship football player in 2011, ninth most in the nation. For comparison, that’s more than 10 times the $26,345 it averages in academic spending for all students.

But James Duderstadt, University president from 1988 to 1996, says that figure is inflated by factors other than direct spending on athletes.

“The fallacy on that is that, in fact, the ($273,863) that is spent on each student is primarily spent on coaches and staff salaries,” Duderstadt said. In 2011, Michigan spent $8.76 million on salaries for coaches, support staff and administration.

The athletes, he said, are “the people that are generating the wealth, but the wealth is going to athletic directors, coaches, conference commissioners. None of it, I would add, really goes to the universities.”

IN EXPOSURE VALUE, MORE VALUES

The study’s $5.5-million annual figure includes direct revenue sources such as television revenues and ticket sales. But it ignores indirect sources like jersey sales and media exposure.

Jersey sales receive the bulk of the attention, but for universities, they account for a tiny fraction of total revenues. Even with Manziel, the most attention grabbing in the country, Texas A&M earned just $59,690 on all jersey sales for the fiscal year ending June 30, 2013, according to ESPN. Jersey sales account for 1.1 percent of licensing revenue, according to the Collegiate Licensing Company.

Most teams, like Texas A&M, take 10 percent of the wholesale cost in royalties. Michigan takes 12 percent. Jersey sales are lucrative for the manufacturers and retailers, but not for the schools themselves.

The real money comes from the free advertising generated by players like Gardner. To estimate the value of Gardner’s exposure, the Daily commissioned analysis from the Ann Arbor-based Joyce Julius and Associates, a research firm that specializes in measuring and evaluating corporate sponsorships. The company looked at Gardner’s media exposure on television, print and online for August — a month with just one game — and September.

“We’re basically saying, ‘OK, how many people saw or hear the message or heard the article or story’ of whatever the topic was that we were monitoring,” said Eric Schwartz, president and executive director of research of Joyce Julius and Associates. “Say Devin was mentioned on SportsCenter, we would value that mention based on the number of folks that were watching that particular broadcast.”

In other words, the company determined how many people each piece of media reached, and evaluated how much money the University would otherwise have to spend to reach a similar-sized audience.

The results revealed an enterprise even more profitable than on-field revenues. In the two months analyzed, Gardner was mentioned or appeared in an article 7,565 times, reaching an audience of 702 million people. That was worth $15.6 million in free advertising in just two months, for a team that struggled early on.

Of the media exposure, a majority of the value – $11.7 million – came from Internet news sources. Another $2.4 million came from print media and $1.5 million from television news.

Most of the value came during the month of September — about $11 million compared to the $4.5 million in August.

Of course, NCAA rules prohibit any monetary compensation and puts restrictions on transfers and other forms of compensation. Economists, including Brown, describe the NCAA as a cartel operating in what they call a monopsony — one buyer for labor but many sellers.

“Because they restrict the pay, there’s exploitation,” Brown said. “Players are worth more than the compensation they receive. That’s the bottom line.”