The End: the Svengali Coach, Transfer Portal, and the Effect of Free Agency

(Author’s Note: Apologies for this installment of the series taking so long. It’s been a difficult one to write, not because cranking out something to say on the topic is particularly difficult, but because it’s such a moving target. As the research was going on, the NLRB unionization authorization happened. Then the EA Sports video game revenue sharing decision is being discussed and finalized. Of course, the ACC disintegration and reorganization is continuing even with the odd crippled schedule now being implemented in a conference that cannot possibly have a true champion or championship. It’s a mess and getting messier by the week. This piece probably could be a small book given the evolution of the facts.)

Old Style and New Interest Fans Have Different Objectives

The beating heart of collegiate sports fans is their love for their particular institution and the ethos that surrounds the school and the favored competitive sports that unite the current students, alumni, and close relatives into a fanbase. There are many fans who have other associations. There are often many folks who might not have attended the particular university, but that program is like their local sports fix. Maybe they work at something that is benefitted by a college game day. Think of the kitsch store proprietors, the hoteliers, the restauranteurs, security people, even reporters and photographers.

Many fans fit in more than one category, but all have an institutional interest in routing for that particular program/school. But the ‘new’ money-based fans are often an emotional head scratch for them. As mentioned in the first sidebar article, gambling interest has become a draw for some programs, not all, but some. There are also professional interests where a local team might be a draw for a business for marketing and entertainment purposes. That’s where a pile of premium tickets and commensurate payments to the sports funds might not be owned by a fan or fans but by a corporation and used for marketing, rewards, and entertainment value. These new ‘fans’ are there for business, and not for loyalty to the program.

The old-style fans exert pressure, and are affected by actions and results at a much different interest level than the monetary interest “fan”. That’s the big connector, here. We are seeing the rapid, court induced professionalization of collegiate athletics, and those pressures are creating a very different environment for the participants in the sport most connected to the changes; namely football and basketball. There are some other non-revenue sports that might be affected as well, but to a much lesser degree. The desire to wager money or invest heavy emotional capital on the volleyball or track and field teams is considerably lower than either the baseball or softball teams, and those sports are only now even really achieving sub-niche interest.

The money pressure bears heavily on football and basketball (we’ll leave the differentiation between men’s and women’s hoops alone for the time being). Those pressures are influencing the personnel situation and participation for programs across the nation and up and down the various conferences. What we are seeing is the effects, both positive and negative, of the phenomenon of Svengali coaches, the player transfer portal, and the problematic effects of total year-to-year free agency on the stability of collegiate athletic programs.

Follow the Money, and Follow the Coach

The big money factor impinging on the entire concept of collegiate athletics has come home to roost at the top of each sport with a vengeance. No one is going to fool anyone, players come to programs for many individual reasons, the prestige of the school, the potential for professional step ups, and now the NIL program that might be in place for the program, but one ventures to guess that the biggest single draw if you took a survey would be the relationship with the coach. Now, this isn’t necessarily a negative thing, but it is a major factor of which fans need to be acutely aware. Many star players show up in the locker rooms of programs because a particular coach influenced their decision, heavily.

It’s as old as the hills in sports. Who wouldn’t want to play football for Knute Rockne, Bear Bryant, Earl Weaver, Bo Schembechler, Ara Parseghian or Lou Holtz? What college basketball player wouldn’t stand in line for a Dean Smith, John Wooden, Pat Summit, or Bobby Knight team? Those are just names from the more distant past. There are many coaches who attracted players personally not just within the picture of the programs that they coached. So, what’s the gimmick in this being a problem, you ask?

Something that this entire essay is about, now but has been blown into the stratosphere by the virtual free agency of players, the huge monetary compensations promised above the table to some players, and the massive leap in compensation for Division 1 head coaches and some staff. In the “olden days” collegiate coaching was a journeyman’s affair. Coaches toiled I relative obscurity for often embarrassingly tiny pay, and never for very long in one place. Successful programs had limited internal promotion opportunities, and if the wins didn’t come, the pink slips did because the head coaches were off to the next opportunity, and the assistants might or might not get an opportunity with that coach at the next location. It was a labor of love, not a mercenary journey through the battlefields of 15^th century Italy.

It’s all different, now. Coaches have picked up on the one-way loyalty of programs, and internalized it. They’ve also brought that perspective to their coaching assistants and most especially their favored players. Hey, we all know coaches have their favorites. We’ve been the tackling dummies putting the sweat equity in at the Defensive Tackle position in practice, only to have the coach’s “best player” take the field on a Friday night or Saturday afternoon. Coaches pick and choose, and now players are getting the same opportunities courtesy of the courts and forced NCAA regulatory changes.

This means that the pressure to attract a floating core (or corps – both fit) of athletes capable of sustaining the coaches’ lifestyles has been massively increased. That’s part of the dark side of the bargain. The reality is that coaches make their money using the labor/effort of program participants (both players and staff). The end result is a limited time of interest for the coach, and the player often being left behind largely unmoored from any legacy as the coach moves on to the next player, who butters his or her bread, rises.

There is something doubly sad about the entire thing from the perspective of the fan base. It’s a shock to find out that someone you thought was all in for you (plural as a program fan base) was actually in it for the mercenary coach who has moved on to “bigger and better things.” For those of us more in the know about how things have shaped up, it’s less shocking, and more just flat out disappointing. We will talk about the long-term ramifications of this divided or misdirected loyalty and the results in the last article before the wrap-up, “The End of Legacies.”

The final word on this enhanced sort of movement is that like all “coaches’ pets” situations it only benefits a few athletes, and leaves the remainder in a sort of limbo where they, being former stars at their prior competitive levels, are handed a stark reality that they might just be at the end of their experience. On3 provides 2024 College Football Transfer Portal (on3.com) some of the absolute numbers on the transfer portal and we’ll talk about this in the free agency section. But the number that is relevant, here, is 58% of the players transferring in 2024 were signed, and how many of those were “up” not down or parallel?

Follow the Money, Again – This Time It is Name, Image, and Likeness

Of course, we have seen and been the victims of the NIL draw for leaving players. That reality needs to be discussed because Name, Image, and Likeness money is wildly out of control. The regulation is spotty, state law based, if at all, and has implications that most 17- to 22-year-olds are ill equipped to handle both emotionally and financially. Our deep dive into NIL just got infinitely more complicated because of several court decisions, and a looming “revenue sharing” policy that provides a sort of stipend distribution to collegiate athletes. College sports departments gearing up for ‘economic earthquake’ with direct pay for athletes looming (yahoo.com) Superficially, it all looks like it’s a long overdue imposition of monetary “fairness.” Unfortunately, the definition of “fairness” is not completely understood, nor is it agreed to in principle. That’s a huge problem, and part of the NIL problem at its root. Name, Image, and Likeness offers huge boatloads of money to a few people, some money to others, and virtually nothing to most of the rest of everyone else.

We have discussed the NIL issue several times over the last several years, but it has become even more acute a reason for athletes being attracted to programs, transferring, and participating in program activities than ever before. Instead of rehashing the issue from the perspective of its obvious increase in the level of open corruption of the entire concept of a student-athlete, let’s examine some of the lesser considered issues of the new source of personal lure to some athletes.

I’m the Taxman. Hey, Hey, I’m the Taxman

Folks, Scholarship Money is not taxed by federal, state, and local governments. NIL money, however, is considered income (1099 MISC, or Self-declared on the 1040 long form) by the IRS. Student-Athletes Involved in Name Image Likeness (NIL) Agreements Should Be Aware of Their Tax Obligations - TAS (irs.gov). The Tax liability situation can be both surprising to an 18-year-old, onerous, and can mean all of the problems associated with paying or not-paying high tax bills. Just take a look at Name, image, liability - Journal of Accountancy to give you a year-old perspective, and with increased exposure will come increased scrutiny. The Journal of Athlete Development and Experience even provides a downloadable guide for how a student-athlete can best deal with the monetary implications. ”INCOME TAX CONSEQUENCES OF NIL FOR COLLEGE ATHLETES” by Marena M. Messina and Frank M. Messina (bgsu.edu)

The student-athlete is considered self-employed by the IRS, and subject to those tax regulations. Self-employed individuals tax center | Internal Revenue Service (irs.gov) Needless to say, the bigger the NIL checks the larger the tax implications. Folks, this is not wages from an employer. This is untaxed self-employment income (Schedule ‘C’) stuff. That means the athlete will have to declare lump sum payments for a single year’s income. They will owe the standard breakdown of marginal taxes where the Feds will take a percentage off for the first tax rate, then tax the margin at each higher rate. Meaning the bulk of a six-figure payout for a superstar will be taxed at the highest marginal income tax rate. Add to that, every working tax payer who doesn’t have W-2 compensation package will pay the 15.3% Social Security and Medicare (12.4% SocSec, and 2.9% Medicare) self-employment tax on the first $200,000 of income. If they are married and filing jointly that is $250,000. For the uninitiated that means if a big-name player gets a $200,000 NIL check he/she will owe $30,600 of that just to the Social Security Administration.

This all happens before the beneficiary of the remuneration has to sit down and figure their Federal Tax and State and local Tax liabilities (if state taxes apply). If you are curious, you can plug and chug numbers at Intuit’s Turbo Tax Site. But at $200K we are talking an average tax rate of about 32%. Remember you don’t get to deduct those social security taxes off of the income totals, and other expenses and exemptions would have to be applied to get some sort of reduction in the Federal and State taxable income levels.

Questions are Begged, Answers are Still “In the Wind”

Some critical questions are:

• What 18-year-old is going to be able to juggle a business/self-employment tax return every year?
• Are they going to understand how to file and pay quarterly estimated taxes – which avoids penalty payments for waiting until the end of the year?
• Who is going to do this work?
• Who is going to certify that these kids aren’t going to be taken advantage of, or defrauded?

There are even bigger questions relating to managing the “business relationships” evenly across college athletics:

• Are these young people going to be given some sort of financial chapter or line in the tax codes to enable them to deal with the ramifications of the potential massive shift back and forth for their collegiate years?
• If they are now employed, and filing full self-employed income tax returns how does the scholarship compensation be dealt with?
• Will the tax-free status of that remuneration be changed as the player professionalizes and the scholarship actually equates to income, akin to rental income, a corporate car, or housing allowances?
• Is the NCAA going to provide services to assist NIL enabled players and their families in lieu of their incorporating, hiring an accountant, and becoming their own business?
• Is the government going to write new tax regulations or empower the NCAA to enforce related regulations?

Wait There are More!

In short, Name, Image, and Likeness payments are a de facto professionalization of some college athletes. What happens to those lesser-known players who have rather nominal or non-existent NIL deals in upper-level programs? How do lower notoriety schools with little NIL potential compete with big name programs attracting high dollar players? How do the high-dollar stars mix with practice squad guys on the same teams? There is already a quiet resentment between the scholarship and non-scholarship athletes. Does that get worse?

The conclusion is that NIL might seem like some sort of great thing, but the serious ramifications are just beginning to dawn on people. Who shows up in tax court because they didn’t pay their estimated taxes? Who sues an “agent” or “accountant” for not properly dealing with a student’s NIL compensation? When do the IRS audits hit families and athletes who are ill equipped to deal with the rigors of a business grade high dollar tax audit? And ultimately, the begged question is; was this even the point of collegiate athletics in the first place?

We will leave the questions unanswered for now. They aren’t rhetorical, they are straight up questions, at least systemically, and will continue to beg responses as the need for agents, representation, and collective bargaining accelerate. The NLRB has already declared that even without scholarships (Ivy League has none) Dartmouth’s basketball players are some types of employees, and therefore can unionize. All of those questions go from asked to shouted. The answers still cannot be heard.

What We Have is Free Agency

A free agent in the sports world is the ultimate self-employed athlete. They are free to move from one team/program to another from season to season in search of whatever is motivating them to play and move. A player buried on the depth chart in a program that recruited him out of high school, or left unplayed at the end of the bench instead of on the court for significant time where she thinks that she should be used to be the prime motivator for transferring to another program. The hit was pretty heavy, though. The player had to sit out an entire season, along with qualify for full admission to the new post-secondary program. We have already highlighted the court decisions that essentially declared the first level of collegiate free-agency by requiring that the NCAA accommodate the athletes’ desires to transfer to another program.

Eventually, follow-on cases would drop the sit-out requirement, and as of the past year, there are literally no limitations on the number of transfers and there is no wait it out limit, either. The net effect has been a baseline free-agency that has made it difficult for programs to keep teams intact from season to season. It has become necessary for coaching staffs to actually actively recruit their own players from season to season. Before anyone takes this to the pity bank, it’s important to remember that before the transfer portal the program loyalty issue flowed in one direction. Once college sports went to year-to-year qualifying for scholarships, there was no guarantee to the player, especially those buried on the depth chart, access to their promised scholarship in the future.

Friction and Feelings

The has always been a tendency for players to possess a sort of divided loyalty. Departing coaches always had a tail of players and recruits that followed them to other locales. Even the NCAA recognized that a completely dismissed coaching staff put recruits at a disadvantage so allowed for various waivers enabling players to find other situations that they felt suited them. The problem comes in where the opening section describing the types of fans meet the coach and then the player whose loyalties are not necessarily to the program and the school that hosts it.

Since the transfers happened more rarely in the past, the close relationship between a few athletes and their coaches just didn’t have the same impact on the fan base. Over the years of covering college sports the chance to meet former players (who are also fellow alumni) and talk to them honestly, has been an enlightening experience. Some former athletes have a great deal of affection for their alma maters, especially those for whom the sheepskin hangs on the wall. If the coach is a legend and intimately tied to the image of the institution and the fan base, the loyalty to the coach and the program run in parallel. The problem comes into focus when the mentor-mentee relationship becomes separated from the institutional affection offered to the athlete (and the coach, too) from the fan base.

There aren’t any two ways about it. There are fans who devote a great deal of energy and emotion in their perceived role of being a fan. They also invest a great deal of time and money in the image association. That emotional load then transfers to the athletes who are playing a sport for the fans/spectators. Fans are fully aware that the player is a transitional figure, but there is that intellectual and emotional “contract” that expects the athlete to reciprocate in those transitional feelings. There is the fan expectation that the athlete possesses the same cultural and institutional affections. When it becomes obvious that they don’t or that the affection was transactional, not reciprocal, the fan reaction can be visceral and often inappropriate. What further fuels the negative reaction is that the athlete, often operating in an isolated environment of self-reinforcing group behaviors of their own, cannot understand the fan base’s reactions.

The end result in this divergence of interests is that fans are less likely to invest in personal interest relationships with individual athletes. The irony is another tie back to the NIL section, because those personal interest relationships drive the demand side of the Name, Image, and Likeness market. There are many professional team fans wearing jerseys from players that have long since been traded away, or turned free agent and signed with another team.

The business end of the situation might be as brutal as the actions of the athlete abandoning their legacy for perceived greener pastures, or to follow a coach who will ultimately be finished with them and move on. What will happen is largely what has happened in professional baseball with guaranteed contracts and total free-agency. Players become commodities to be paid for and plugged in for specific limited seasonal goals. Coaches, players, and fans will have to deal with the massive emotional shift in collegiate athletics.

It’s NOT SUPPOSED TO BE…

There is a time when most folks are working in some job, and the boss comes in and tells you that you’ve been laid off, so sorry, “it’s just business.” No one really cared how you were going to pay the rent, feed the family, or put clothes on their backs.

It’s really disappointing to many college sports fans when they hear “It’s just business.” Since they intuitively know that it’s just not supposed to be.

Next up, we tackle the close of this one. The professionalization of both the coaching and athlete ranks is launching shot after shot into something that many colleges have great pride in, and that’s the concept of Legacy. The coaching carousel combined with player free-agency has endangered one of the most cherished parts of college sports, and that’s the concept of Legacy. We’ll dig into that next.

There will be a money related sidebar, too. The new revenue sharing model, and the push for unionization fuses are lit and the entire woodpile is about to launch itself skyward. We’ll talk about that as we see things develop.

GO HOKIES!!!!