Sources: Non-Power 5 irked by settlement plan

As the NCAA continues to make steps toward the expected settlement of the landmark House v. NCAA lawsuit and other related anti-trust cases, there is pushback on how the NCAA plans to pay the expected $2.7 billion in back damages over the next decade, sources told ESPN.

The NCAA sent out a four-page memo to all 32 Division I conferences this week detailing how the organization plans to cut back on distribution to leagues in six annual payout categories to pay the proposed $2.7 billion in damages.

The memo detailed how the NCAA could split up an expected $1.6 billion that would come from reductions in NCAA distribution, sources told ESPN. The remaining $1.1 billion is expected to come from NCAA reserves, catastrophic insurance, new revenue and budget cuts, sources said.

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

For example, the cost annually for the Big East is projected at 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-centric league, is expected to annually pay between $3.5 million and $4.3 million. The lowest level of annual payouts expected to be withheld for smaller leagues is just under $2 million, which is estimated to be more than 20% of what those leagues get from the NCAA annually.

This has set off a flurry of upset commissioners and officials in those smaller-revenue leagues, including a series of meetings of the Collegiate Commissioners Association and the CCA22, which are the 22 leagues that don’t have FBS football.

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

Three categories of NCAA payments are not expected to be impacted: the equal conference fund, the student-athlete opportunity fund and the special assistance fund.

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

There has been a flurry of meetings of the CCA and the CCA22 in recent days, and the tenor of those meetings has been trying to find whether additional models can be proposed that lessen the financial burden. According to a memo obtained by ESPN, the CCA22 plans to send a letter to the Power 5 and NCAA requesting additional payment models.

According to a source, one smaller non-power football league was told in the NCAA memo that it would be expected to pay more than $2.5 million per year to help cover the costs of the settlement. A source in that CCA22 league said that amount is approximately 25% of the annual NCAA revenue for the schools in the league.

“We’re not named in the lawsuit,” said a source in a smaller league. “We don’t have a voice in any of this. We’re just being told what our taxation is.”

Added another source in a CCA22 league: “This is incredibly unfair and has a dramatic impact. I’m losing about 10% of my operating budget. Do I cut two staff members in order for money to go to Zion Williamson? Ninety percent of the money in the suit projects to go to Power 5 football and men’s basketball players. The 40% payment for the power conference isn’t proportionate.”

There’s a counter to those numbers, as nearly 300 schools would be paying for 60% of the settlement, whereas 68 power conference schools from the four major football leagues in 2024 would pay for nearly 40%.

According to a source, the average overall revenue of non-Power 5 schools was $27 million in fiscal year 2022. A $330,000-per-school reduction in distribution, according to a source, would come out to 1.2% in the school’s average revenue. (That $27 million is different than the pure NCAA payouts referenced above.)

“The payment of the back damages is only half of the picture,” an industry source told ESPN. “The proposed revenue-sharing arrangement — nearly $20 million per campus for more than 60 campuses — would cost more than $1 billion annually and provide all of Division I protections from future similar lawsuits.”

There is expected to be continued pushback from the CCA22 in the coming days, sources said. That will come amid the backdrop of votes by the NCAA and power conferences on the settlement, widely expected to pass, that are coming next week.