Source — House v. NCAA settlement plan upsets non-Power 5 schools

As the NCAA continues to move toward an expected settlement of the Landmark House v. NCAA lawsuit and other related antitrust cases, the NCAA plans to pay an expected $2.7 billion in damages over the next decade, sources told ESPN.

The NCAA sent a four-page memo to all 32 Division I conferences this week in which it plans to cut distributions to leagues in six annual payout categories to pay the agency’s proposed $2.7 billion in compensation.

The memo details how the NCAA could split the expected $1.6 billion that would come from the reduction in NCAA distributions, sources told ESPN. The remaining $1.1 billion is expected to come from NCAA reserves, catastrophe insurance, new revenue and budget cuts, sources said.

Of that $1.6 billion, about 60 percent is expected to come from leagues outside of the Power 5 leagues named in the House lawsuit, according to sources. (The NCAA is named, and all schools are members.) The remaining 40 percent will come from power conferences.

For example, annual costs for the Big East Conference are projected to be between $5.4 million and $6.6 million over the next decade, according to a source familiar with the memo. The West Coast Conference, another successful basketball-focused league, is expected to pay between $3.5 and $4.3 million annually. The lowest level of expected annual payments for minor leagues is under $2 million, which is estimated to be more than 20 percent of what these leagues receive from the NCAA annually.

That upset commissioners and officials in those small-revenue leagues, including a series of meetings with the Collegiate Commissioners Association and the CCA22, the 22 leagues without FBS football.

Of the $1.6 billion, the NCAA will withhold distributions from six funds across its 32 Division I leagues, ESPN has learned. These include basketball performance funds (through the NCAA tournament), grants-in-aid, academic enhancement funds, sports sponsorships, conference grants and academic performance funds.

There are three categories of NCAA payments that will not be affected: Equal Conference Funding, Student-Athlete Opportunity Funding and Special Assistance Funding.

The NCAA does not plan to divert money from its Division II and Division III distributions, sources said. Sources cautioned ESPN, however, that the numbers are fluid and subject to change.

There has been a flurry of meetings of the CCA and CCA22 in recent days, and the duration of those meetings has been to try to find out whether additional models can be proposed to reduce the financial burden. According to a memo obtained by ESPN, CCA22 plans to send a letter to the Power 5 and the NCAA for additional payment models.

According to a source, the NCAA memo said the minor non-power football league was expected to pay more than $2.5 million per year to help cover the cost of the settlement. A source from that CCA22 league said the amount is about 25 percent of annual NCAA revenue for the league’s schools.

“We are not named in the lawsuit,” said a minor league source. “We have no say in that. We’re just being told what our taxation is.”

Another source at a CCA22 league added: “It’s incredibly unfair and has a dramatic impact. I’m losing about 10 percent of my operating budget. Do I cut two staff members to pay for Zion Williamson? Ninety percent to get five football and men’s basketball players.” The 40-percent payment for the suit project money power conference is disproportionate.”

There’s a downside to that number, as about 300 schools will pay for 60 percent of the settlement, while the 68 power conference schools in the four major football leagues in 2024 will pay for about 40 percent.

According to one source, the average overall revenue for non-Power-Five schools in fiscal year 2022 was $27 million. The $330,000-per-school reduction in distributions would come out to 1.2% of average school revenue, according to one source. . ($27 million different from the pure NCAA payout noted above.)

“Back compensation means half of the picture,” an industry source told ESPN. “The proposed revenue sharing arrangement — about $20 million per campus for more than 60 campuses — would cost more than $1 billion annually and would provide all Division I protection from future similar lawsuits.”

Continued pushback from CCA22 is expected in the coming days, sources said. It comes against the backdrop of a vote by the NCAA and the Power Conference on the settlement, widely expected to pass, which comes next week.