March 27 (Bloomberg) — Lawsuits challenging amateurism in college sports may result in higher costs for universities and the National Collegiate Athletic Association, Moody's Investors Service said.
A ruling yesterday by the National Labor Relations Board allowing Northwestern University football players to unionize is the latest threat to the model of not paying athletes in college sports, Moody's analysts led by Dennis Gephardt said today in a report. A change in the practice "would ultimately precipitate a major retooling of college sports programs, which are often critical to the identity of universities and help with student recruitment and donor support," Gephardt said.
The NCAA is facing separate lawsuits challenging its authority and faces the potential of higher costs from legal judgments and settlements, regulations or new policies, Moody's said. In June, the ratings company changed the outlook of the Indianapolis-based association's debt to negative because of the increased risks. NCAA debt is ranked Aa2, the third-highest investment grade.
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Any increase in expenses that school officials would bear from changing the amateur sports model "would put additional pressure on universities, which are already dealing with a challenging operating environment," said Gephardt, who is based in New York.
If student players are compensated, they may require subsidies from universities higher than what the institutions already spend on their programs, Moody's said.
"In a market regime with no limits on player benefits, we would expect wide variation in both the ability and willingness of universities to compete for top players," Gephardt said.
With assistance from Mason Levinson in New York.
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