Consolidating separate cases involving student-athletes Sedona Prince, Grant House, and Tymir Oliver, the litigation contested National Collegiate Athletic Association (“NCAA”) regulations limiting student-athletes’ NIL (name, image, likeness) compensation. Plaintiffs alleged antitrust violations, asserting that these rules restrained fair compensation and artificially suppressed NIL prices. In June 2021, the Court dismissed some of Oliver’s claims seeking injunctive relief but denied the rest of the motions to dismiss. Following the consolidation approval in July, the Plaintiffs, through the Consolidated Amended Complaint (“CAC”) submitted on July 26, 2021, broadened their accusations by incorporating details about an interim NIL policy implemented by the NCAA on July 1, 2021.

The CAC contended that the interim policy, although seemingly easing restrictions, still hindered NIL opportunities for student-athletes. It highlighted that while some prohibitions were temporarily suspended, rules preventing institutions from compensating student-athletes for NIL use and restricting NIL compensation tied to athletic participation remained intact. Moreover, the NCAA reserved the right to reinstate all suspended NIL limitations at any time.

Plaintiffs argued that these NCAA rules, even in their suspended state, constituted anticompetitive behavior, violating Section 1 of the Sherman Act. They alleged that these regulations artificially depressed compensation levels for student-athletes’ NIL and stifled their ability to capitalize on commercial opportunities while participating in Division I teams. In the absence of these nationwide constraints, the Plaintiffs contended that Division I conferences and schools would have engaged in competitive practices, allowing student-athletes to exploit NIL opportunities and share in the economic benefits arising from their names, images, and likenesses.

The CAC elaborated on a scenario where, without the contested rules, conferences and schools would have sought to enhance the value of athletes’ personal brands by redirecting funds from extravagant facilities and coaching salaries towards marketing and educational resources. This strategic reallocation aimed to foster opportunities for co-marketing student-athletes’ NIL with the school’s brand, further benefiting the athletes commercially.

In seeking legal recourse, the Plaintiffs pursued similar relief as their initial complaints, including injunctions, declaratory judgments, damages, and attorneys’ fees. These claims persisted despite the new allegations about the interim NIL policy, asserting that the NCAA’s regulations, whether suspended or not, unfairly restricted student-athletes’ ability to profit from their NIL.

Defendants filed a motion to exclude under Federal Rule of Evidence 702 certain opinions of Edwin S. Desser, Plaintiffs’ expert on sports media and broadcasting rights, and Daniel A. Rascher, Plaintiffs’ economics expert.

Broadcasting Industry Expert Witness

Edwin S. Desser has worked in the sports media industry since 1977 and has decades of experience in negotiating and valuing professional sports broadcast agreements. He spent 23 years as a media executive for the National Basketball Association (NBA), negotiating major broadcast agreements with ESPN, Turner, and NBC. He now serves as President and Owner of Desser Sports Media, Inc. – a sports media consulting firm where he advises clients on rights negotiations and valuations. He has strong academic credentials including a B.A. in Economics from the University of California, Los Angeles and an M.B.A. focused on Marketing from the USC Marshall School of Business.

Economics Expert Witness

Dr. Daniel A. Rascher holds an academic appointment as a Professor and Director of Academic Programs for the Master of Science in Sport Management at the University of San Francisco. Additionally, he serves as a Partner at OSKR, LLC, an economic consulting firm, and is the President and Founder of SportsEconomics, LLC. He received his Doctor of Philosophy degree in Economics from the prestigious University of California, Berkeley. 

Discussion by the Court

Desser undertook the task of assessing the estimated value of student-athletes’ broadcast NIL (BNIL) in major collegiate sports like Power Five Football Bowl Subdivision (FBS) games, men’s Division I basketball, and women’s Division I basketball. His conclusion posited that around ten percent of the revenue generated from broadcast rights for these sports could be attributed to the inclusion of student-athletes’ NIL within the broadcasts. This determination was based on his extensive background in negotiating professional sports broadcast agreements and an analysis that incorporated data, including royalty rates from professional sports group licensing.

Additionally, Desser was tasked with estimating the allocation of revenue per sport within Defendants’ multi-sport broadcast agreements. He determined an approximate breakdown wherein seventy-five percent of the revenue was allocated to football, fifteen percent to men’s basketball, five percent to women’s basketball, and the remaining five percent distributed among all other sports covered by these agreements. This allocation opinion stemmed from his wealth of experience in negotiating sports media deals, conversations with numerous network and college conference executives, and a comprehensive review of pertinent evidence, such as audited financial statements, various broadcast contracts for college sports, and publicly available information indicating the popularity of different collegiate sports.

Defendants sought to exclude Desser’s ten percent opinion, arguing its unreliability based on several grounds. They claimed that the opinion lacked a factual basis due to the absence of any prior separate valuation of student-athletes’ NIL in broadcasts, asserting the absence of a “real-world” market or data for reliable valuations. Additionally, Defendants contended that Desser’s industry experience wasn’t sufficient as he hadn’t specifically negotiated college sports broadcast rights.

In opposition to the motion, Plaintiffs argued that professionals like Desser, with expertise in negotiating broadcasting rights, often rely on their experience to estimate the worth of various components within these rights. They highlighted Desser’s detailed explanation of how his extensive industry background supported the ten percent opinion. Moreover, Plaintiffs asserted that Desser substantiated this opinion by examining comparable data points, such as the royalty rates for professional football and basketball players’ NIL in merchandise and video games. Lastly, Plaintiffs pointed out that the absence of concrete real-world data regarding the value of student-athletes’ NIL in broadcasts was a consequence of Defendants’ limitations on student-athlete compensation.

In his report, Desser outlined his methodology for estimating that at least ten percent of the value of Defendants’ broadcast agreements could be attributed to student-athletes’ NIL in FBS football and Division I men’s and women’s basketball broadcasts. He drew upon his extensive experience in negotiating professional sports media rights, estimating that roughly half of the total value of sports broadcasts was due to athletes’ contributions, encompassing both their athletic performance and NIL. From his experience, Desser deduced that the majority of this value stemmed from athletic performance, with a minority—approximately twenty to thirty percent—attributed to their NIL. Consequently, he conservatively concluded that ten percent was a plausible estimate for the value of student-athletes’ NIL in these specific broadcasts.

Furthermore, Desser supported this estimation not only through his experience but also by examining royalty rates in group licensing agreements for merchandise and video games utilizing professional athletes’ NIL. He underscored the relevance of video game royalty rates, deeming them highly indicative as video games emulate real-life sporting scenarios without involving athletes’ actual performance, isolating the value of their NIL. Given Desser’s comprehensive explanation rooted in his expertise and the relevance of the royalty data he analyzed, the Court deemed his ten percent opinion reliable and not subject to exclusion.

Defendants attempted to discredit Desser’s opinion by arguing that the concept of valuing NIL rights in broadcasts was fabricated solely for this litigation and lacked a real-world market due to the absence of separate valuations of student-athletes’ NIL in past college sports broadcast agreements. They contended that this absence invalidated the factual basis for attributing value to student-athletes’ NIL and suggested that, as a result, Desser’s estimation lacked credibility.

However, the Court dismissed this argument, highlighting the disagreement between the parties regarding the existence of value for student-athletes’ NIL in broadcasts. It clarified that the dispute over whether student-athletes’ NIL possess value didn’t warrant exclusion of Desser’s opinion. The Court emphasized that the determination of Desser’s opinion’s reliability rested on its foundational basis rather than the specific conclusion it reached. Additionally, it underscored the different standards applicable to damages calculations in antitrust cases compared to those in patent cases, indicating that the relaxed standard for antitrust cases acknowledges the necessity of drawing inferences or assumptions due to the nature of the conduct being scrutinized.

Desser’s opinion on the value of student-athletes’ NIL in broadcasts was backed by a comprehensive explanation despite the absence of separate valuations in previous broadcast contracts. He acknowledged the lack of standalone valuation for NIL in existing contracts, noting that broadcast agreements typically bundle rights without isolating specific components unless a distinct business reason necessitates it.

Desser emphasized the inherent value of student-athletes’ NIL within sports broadcasts, highlighting their significance in enhancing viewer interest. He asserted that omitting NIL—such as players’ faces or names—would diminish the appeal of sports broadcasts to audiences and consequently reduce attractiveness to advertisers. Moreover, Desser pointed to the actions of media companies securing rights to student-athletes’ NIL within broadcast agreements, underscoring their insistence on contractual assurances from entities like the Power 5 conferences or the NCAA. These assurances were deemed necessary by broadcast partners to ensure the usage rights of athlete NIL across the country, despite any legal assertions by the NCAA regarding these rights.

The Court recognized that while these opinions might be novel, they were supported by Desser’s thorough explanations, validating the assertion that student-athletes’ NIL indeed hold value within broadcasts. Additionally, Desser’s specific estimation of at least ten percent of Defendants’ broadcast revenues being attributed to student-athletes’ NIL was deemed adequately substantiated based on the aforementioned reasoning. The Court emphasized that the novelty of these opinions wasn’t a sufficient reason for their exclusion, given their substantial support.

Defendants raised concerns about Desser’s lack of experience in negotiating college sports media agreements as a basis for questioning the reliability of his ten percent opinion. However, Desser provided a thorough rationale explaining the relevance of his extensive background in negotiating professional sports media contracts. He highlighted the substantial similarities between professional and college sports broadcasting deals, emphasizing the commonalities in media license agreements, networks involved, production teams, equipment used, sponsorships, distribution methods, and viewer demographics.

Moreover, Desser’s involvement as a consultant in college media rights further supplemented his expertise in this domain. The Court noted that challenges to Desser’s experience mainly addressed the weight to be assigned to his opinion rather than its admissibility.

Defendants also contested the validity of the professional sports group licensing royalty rates that Desser relied upon to support his ten percent opinion. They argued that these rates weren’t suitable comparators for estimating the value of student-athletes’ NIL in broadcasts as they pertained to products like apparel and video games, not sports broadcasts themselves. However, the Court deemed these challenges as matters affecting the weight of Desser’s opinion rather than its admissibility. Desser adequately justified his reliance on these group licensing royalty rates, explaining their relevance in estimating the value of student-athletes’ NIL within broadcasts.

Defendants sought to exclude Desser’s allocation opinion regarding the distribution of broadcast revenues across various sports in multi-sport contracts, citing concerns about its reliability. They argued that Desser’s reliance on his experience lacked sufficient explanation, doubted the consistency of allocation ratios of multi-sport broadcast revenue to various sports across conferences, and pointed to evidence contradicting his allocation opinion, such as disparities in allocations within the Southeastern Conference and the increasing popularity of women’s sports.

In response, Plaintiffs defended Desser’s allocation opinion as reliable, emphasizing its foundation in his extensive experience in sports media deal negotiation, discussions with industry executives, and analysis of relevant evidence, including audited financial statements and broadcast contracts for college sports. Desser’s rationale centered on the dominance of FBS football as the primary revenue driver due to its widespread popularity compared to other sports. He reasoned that men’s basketball, while popular, significantly trailed football in value contribution, while women’s basketball, less popular than its male counterpart, held even less value. Other sports collectively contributed the least due to minimal popularity, often relegated to streaming platforms or conference networks.

Defendants disputed the validity of Desser’s allocation opinion, claiming it lacked foundation as they interpreted it to imply uniform allocation percentages across all conferences, which they argued was unrealistic. However, Desser clarified that his opinion represented an “overall average allocation” applicable across multi-sport broadcast agreements for all Defendants involved in the case. This opinion did not propose a conference-specific, season-specific, or school-specific allocation but aimed to offer a reasonable allocation to apply across the multi-sport college broadcast agreements. The Court dismissed Defendants’ misinterpretation of Desser’s opinion as insufficient grounds for exclusion.

Moreover, Defendants raised concerns about the need for specific, annual revisions in allocating revenues due to variations across schools, conferences, and years. Desser, however, justified his “overall average allocation” by explaining that any such variations were already factored into the final rights fees received by Defendants. He asserted that his allocation opinion accounted for these variations, as it was applied to the final rights fees after considering the diverse factors at play. The Court concluded that criticisms regarding the specifics of Desser’s approach affected the weight of his opinion rather than its admissibility.

Defendants also criticized the evidence Desser relied upon, arguing that he cherry-picked supportive aspects while disregarding contradictory elements in the documents. However, the Court deemed these criticisms as impacting the weight given to Desser’s allocation opinion rather than challenging its admissibility.

Rascher was tasked with developing methodologies to estimate injury and damages for alleged harm suffered by certain members of proposed classes related to broadcast NIL (BNIL) injury and damages, as well as third-party NIL injury and damages.

For BNIL injury and damages estimation, Rascher constructed a methodology centered on the absence of rules prohibiting conferences and schools from paying student-athletes for their NIL in broadcasts, while other NCAA rules regarding payment for athletic performance remained intact. He envisioned a hypothetical scenario where Power Five Conferences would compete to attract student-athletes by offering payments for their NIL in broadcasts, maximizing conference broadcast revenues. Rascher posited that this competition would prompt conferences to engage in group-licensing agreements with incoming FBS football and Division I basketball student-athletes, providing equal payments for their NIL in broadcasts.

To estimate the economic value conferences would have paid the proposed class members, Rascher combined Desser’s ten percent opinion with his own analysis of relevant data, including professional sports group licensing royalty rates. He estimated the collective value of proposed class members’ broadcast NIL as around ten percent of the revenues received by Power Five Conferences from broadcasting contracts for FBS football and Division I basketball. Additionally, Rascher relied on Desser’s allocation opinion and his own assessment of data to determine the allocation of revenues from multi-sport contracts to specific sports.

Next, Rascher calculated the student-athlete share of each conference’s broadcast revenues for each sport by multiplying the total revenues of each conference by ten percent, representing the value of student-athletes’ NIL compared to broadcast contracts. He then divided this share by the number of proposed class members in each conference, year, and sport to estimate the individual payment each member would have received annually in the absence of the challenged rules. These estimations are preliminary, with final adjustments planned upon completion of discovery.

Rascher developed a “before-and-after” methodology to estimate third-party NIL injury and damages for eligible members of proposed classes affected by the challenged NCAA rules. This method focused on estimating third-party NIL payments student-athletes would have received if the rules prohibiting such payments had not been in place.

The “after period” considered payments made after July 1, 2021, when the NCAA suspended the rules prohibiting third-party NIL payments until the date of class certification. Rascher used these “after period” payments as a baseline to estimate the potential third-party NIL payments that would have occurred in the “before period,” ranging from the 2016-2017 academic year to July 1, 2021, in the absence of the challenged rules.

Rascher deemed the “after period” payments as reliable estimates of the economic value of third-party NIL payments, capturing effects based on individual student-athletes’ identities, sports, positions, and schools. To calculate a preliminary estimate for the “before period,” Rascher used one year of “after period” payments, acknowledging data limitations. He utilized reported third-party NIL payment information from student-athletes to estimate these payments in the “after period,” excluding individuals who did not receive such compensation during this period.

Rascher plans to refine his estimates in the forthcoming merits report, considering supply and demand variations between the “before and after periods” for each student-athlete. These adjustments would account for factors like transfers between schools or conferences, changes in the athlete’s role impacting NIL compensation, and the pandemic’s impact on demand for Division I college sports during the “before period.” Rascher intends to use available data, including school records or publicly available information, to make these adjustments, showcasing the methodology’s reliability in measuring third-party NIL compensation while considering significant supply and demand differences.

Defendants aimed to exclude Rascher’s BNIL methodology, alleging its unreliability due to multiple reasons. First, they asserted that Rascher’s reliance on Desser’s ten percent opinion was speculative and unsupported. Additionally, Defendants claimed that the assumption of equal broadcast NIL payments for all proposed class members contradicted economic theory and failed to consider variations in conferences’ broadcasting revenues. Lastly, they argued Rascher’s approach overlooked legal factors post-July 2021 that might prohibit NIL payments.

However, the Court rejected these grounds for exclusion. It determined that Rascher’s BNIL methodology wasn’t solely reliant on Desser’s ten percent opinion but also incorporated Rascher’s analysis of group licensing royalty rates for professional athletes’ NIL, validating the ten percent estimate. Rascher’s analysis was deemed reasonable and adequately supported.

Regarding the equal payments assumption, Rascher justified this by arguing that in the absence of the challenged rules, rational economic behavior by conferences would entail equal NIL payments to student-athletes. He emphasized that unequal payments would not align with economic rationality at a conference level, potentially placing less elite schools at a recruiting disadvantage.

The Court found Rascher’s argument compelling, citing real-world evidence of professional athletes sharing licensing revenue equally and explained that Rascher’s methodology was founded on economic principles and evidence. Rascher’s response to criticisms, backed by economic reasoning, supported the conclusion that equal payments for broadcast NIL were rational within the context of conference-level competition.

Rascher defended his BNIL methodology by highlighting that paying higher amounts based on athletes’ superstar status would essentially constitute compensation for their athletic performance, which is prohibited by NCAA rules. His methodology operated on the assumption that the NCAA’s restrictions on performance-based compensation would persist, as these were not challenged by the Plaintiffs in the legal action. The Court determined that Defendants’ objections to Rascher’s assumptions were more about the weight given to his opinions rather than questioning their admissibility.

Defendants argued against the reliability of Rascher’s BNIL methodology, claiming it was flawed due to the assumption that each conference would pay ten percent of its broadcast revenue to recruit student-athletes in football and basketball. They contended that this assumption was economically unsound and could disadvantage conferences with lower broadcasting revenue. However, the Court disagreed with this assertion, noting that Rascher provided reasoning for the economic viability of this assumption in his constructed scenario, emphasizing that existing revenue differences among conferences already influenced investment levels in various aspects impacting athletes’ decisions.

Defendants also challenged Rascher’s but-for world, claiming it was impossible as it didn’t account for Title IX concerns, diversity and equity considerations, or state laws implemented in July 2021, which allegedly prohibited NIL payments to student-athletes. However, the Court found these objections insufficient to deem Rascher’s BNIL methodology unreliable. It concluded that disagreements over Rascher’s considerations in constructing the scenario were issues related to the weight of his methodology, not its admissibility.

Defendants sought to exclude Rascher’s third-party NIL methodology, claiming it was unreliable because it supposedly overlooked critical factors that could influence the market for student-athletes’ NIL between the before and after periods. They argued that Rascher’s method presumed uniformity in NIL values across periods without considering changes in athlete popularity, performance, or alterations in the NIL market.

However, the Court rejected this argument. It found that Rascher’s methodology wasn’t based on a simplistic assumption that NIL values remained constant across time. Instead, it used the observed NIL values in the “after period” as a starting point to estimate values in the “before period.” Rascher accounted for potential variations by adjusting the baseline for factors like athlete transfers, changes in roles, and the pandemic’s impact on sports demand. Additionally, Rascher tested this methodology with specific class members, demonstrating its ability to calculate third-party NIL payments while considering various factors affecting the market.

The Court concluded that Rascher’s approach wasn’t unreliable due to Defendants’ objections. It emphasized that challenges to Rascher’s failure to adjust for certain factors impacted the weight of his methodology, not its admissibility.

Held

The Court denied Defendants’ motion to exclude certain opinions by Edwin S. Desser and Daniel A. Rascher. The Court has not arrived on an outcome for this case since the remaining issues involved in this case still await resolution.

Key Takeaway

In the case, expert witnesses Desser and Rascher employed methodologies and formed opinions crucial to estimating the value of student-athletes’ Name, Image, and Likeness (NIL) in broadcast agreements. Desser’s estimation of around ten percent of broadcast revenues being attributed to student-athletes’ NIL was supported by his negotiation expertise and an analysis of relevant data, despite challenges regarding the absence of standalone valuations in previous college sports broadcast contracts. Rascher’s methodologies, particularly in estimating Broadcast NIL (BNIL) injury and damages, faced objections from Defendants questioning the assumptions of equal payments and overlooking post-July 2021 legal factors. However, the Court defended the reliability of both Desser and Rascher’s methodologies, highlighting their foundations in economic principles, real-world evidence, and expert analyses despite challenges to specific elements of their approaches.

Category: Broadcasting Industry Expert Witness

Court admits Expert Testimony on the Value of NIL Rights in Broadcasts in this Antitrust Lawsuit

Court admits Expert Testimony on the Value of NIL Rights in Broadcasts in this Antitrust Lawsuit