EA Settles with former NCAA Athletes for $40 Million

October 21, 2013

Uncategorized

By James Gill – Thompson Rivers University 3L JD Student

About four years ago, Ed O’Bannon launched an anti-trust lawsuit against the National Collegiate Athletic Association (NCAA) and its licensing company for the use of images of himself and other high profile college athletes. The lawsuit alleged that the defendants agreed to block the athletes from getting paid for their likenesses in video games produced by the infamous video game maker, Electronic Arts, after they left college. Later, his action was combined with Sam Keller’s, which sued the NCAA and Electronic Arts on similar grounds. Recently, Electronic Arts settled out of the action for $40 million. The settlement also covered another named defendant, Collegiate Licensing Co., leaving only the NCAA as the sole defendant. 

Upon participating in college athletics, the athletes are required to sign an agreement, which essentially gives up their rights to profit from their images and likeness. The agreement applies not only while they are athletes competing in the collegiate league, but also after graduation.Some have said that the agreement is a product of the NCAA’s effort to deprive the athletes of their compensation for their images. Such an agreement is a part of the league’s scheme that prevents college athletes from being compensated for their athletic contributions. Indeed, the NCAA regulations provide that athletes are ineligible for participation in sports where there has been some form of payment to the athlete in a number of circumstances. For example, athletes are ineligible for participation in NCAA sports if they have ever taken pay or a promise of pay for competing in the sport (Bylaw 12.1.2), or if they have ever accepted any pay for promoting a commercial product of service or allowing his or her name to be used for promoting a commercial product or service (Bylaw 12.5.2.1 and 12.3.2.2).

But could the argument not be made that this is a bad bargain? As noted by Forbes magazine contributor Patrick Rishe, young people who are still in their teenage years are put into a situation where, at the young age of 17 or 18, they are being asked to sign away some of their legal rights related to their athletic abilities.In many jurisdictions, such young people are still considered minors.Of course this is likely done by way of a guardian, or some other similar means. The point is that these are young people signing away significant rights, which in many cases have the potential to convert into significant value.

Further, many have argued that as the products being sold and drivers of much of the revenue for a multi-billion dollar sports league, these athletes ought to be entitled to compensation beyond that of receiving an education. In support of this notion, it is often stated that these athletes are no longer competing in an amateur league. In fact, an attorney for the plaintiffs in O’Bannon stated that these athletes are ‘semi-pro’ or ‘pre-professional’. If this is true, then why shouldn’t the model for NCAA athletes be revised in order to follow some other semi-pro leagues?

A common counter-argument is that the athletes are compensated by other, non-monetary means. Specifically, many of the athletes are given the opportunity to receive an education and get the exposure to win a professional contract in the ‘big leagues’. Some have even stated that monetary compensation would push college athletics further from academics, whereas it should be moving in the opposite direction. But is that fair? Of course, one cannot discount how invaluable an education is. Nor can one discount the possibility that some of these athletes will go on to obtain lucrative professional sports contracts. However, the vast majority of the athletes do not go on to participate in professional sports. It might be further argued that such an arrangement is disproportionate given the enormous revenues of the NCAA ($871.6 million in revenue for 2011-12).

In the end, the settlement by EA stands to compensate the athletes for the use of their likeness and identities. Although this may not necessarily be direct compensation for their participation in the sport, perhaps it stands as a starting point for a change. One thing that is for sure is that the settlement has forced some stakeholders to reevaluate their positions on the matter, as evidenced by EA deciding to pull production on the upcoming version of the NCAA football game.

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One Comment on “EA Settles with former NCAA Athletes for $40 Million”

  1. Franz Fuls Says:

    I just hate evergreen contracts. Its unfair to expect junior athletes to deprive themselves of an income opportunity in the future, regardless of current benefit. Good to see some justice shining through.

    Reply

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