By Sharon Terlep and Ben Cohen From Wall Street Journal

O’Bannon decision would allow athletes to make money from licensing revenue; NCAA can appeal

A federal judge ruled Friday that the NCAA’s ban on paying players for use of their likenesses violates antitrust law, the biggest step yet toward overhauling collegiate sports.

Former UCLA and NBA basketball player Ed O”Bannon was the lead plaintiff in the lawsuit. Getty Images

U.S. District Judge Claudia Wilken issued an injunction that prohibits the NCAA from enforcing rules that bar member schools and conferences from offering the football players and men’s basketball players in the most prominent programs “a limited share of the revenues generated from the use of their names, images, and likenesses.”

Judge Wilken stopped well short of giving schools free rein to cut big paychecks to players. College athletes would be able to earn money through trust funds created from licensing revenue, and the NCAA is able to cap that amount. The ruling still defines college athletes as amateurs, and the NCAA can appeal.

But the decision, if upheld, opens the door for college players at the nation’s athletic powerhouses to earn a cut of the hundreds in millions they generate for the first time in the 108-year history of the NCAA.

Judge Wilken, in her 99-page decision, said the NCAA rules “unreasonably restrain trade.”

The ruling, which could have awarded athletes as much as half of the television revenue they help generate, creates a new expense that many powerhouses can still afford. While schools may offer less than the NCAA maximum, according to the ruling, many have the means to offer more than the minimum. Some now make more than $20 million in TV-rights fees alone as their athletic departments’ revenues have exceeded $100 million. The injunction would go into effect July 1, 2016.

“The system has been unfair,” said Tyrone Prothro, a former Alabama wide receiver, who testified at the trial. “This is a step in the right direction to make things fair for athletes.”

The NCAA can set a cap on the money held in the trust that is no less than $5,000 for every year an athlete is eligible to compete. The NCAA is still permitted to enforce its current rules, including one that prohibits current athletes from making money off their likenesses by endorsing commercial products while they are in school. The ruling also allows the NCAA to enact rules that bar schools from offering certain recruits, such as the most coveted basketball and football players, a greater share of licensing revenue than it gives to others on their team.

NCAA Chief Legal Officer Donald Remy noted the limits and said in a statement the NCAA is further reviewing the decision.

The organization argued during a three-week trial this summer in Oakland, Calif., that opening the door for pay to college players would ruin college sports. In testimony, NCAA and conference officials argued that giving players a cut of broadcast revenue would turn off fans, create an arms race between schools and undermine the role of academics for college players.

In a recent interview, NCAA President Mark Emmert said paychecks for college players “would be the end of college sports as we know it.” Judge Wilken’s ruling shot down the notion that schools would give up big-time football and basketball if they were permitted to pay a limited amount.

Plaintiffs argued the top college programs already operate almost identically to professional teams, with gleaming facilities, multi-billion-dollar TV contracts and grueling regimens for athletes. The only difference, they argued, is that players are restricted in what they can earn.

“This is a significant step forward,” said plaintiffs’ lawyer Bill Isaacson. “She struck down the restrictions and is allowing the schools to do reasonable and decent things.”

The governing body of college sports had already taken action to reform itself this week. On Thursday, the NCAA’s board voted to give the 65 schools in the “Big 5” football conferences the freedom to govern themselves on issues such as scholarships and player insurance. Their new power is limited, but it would let those conferences—the Atlantic Coast, Big Ten, Big 12, Pacific-12 and Southeastern conferences—make certain concessions to athletes, including covering the full cost of attendance with stipends between $2,000 and $4,000.

The NCAA’s Remy referenced those changes in the organization’s brief response Friday night. “The NCAA is committed to fully supporting student-athletes,” he said following the ruling.

The ruling doesn’t represent the worst-case scenario for the NCAA, said Tulane law professor Gabe Feldman, but it marks a departure from the legal system’s historical deference to the NCAA. “It without question chips away at the NCAA’s amateurism foundation,” he said.

Former UCLA basketball star Ed O’Bannon filed the suit in 2009 after he saw an avatar that looked like him depicted in an NCAA-branded videogame. He claimed it was unfair the NCAA could license his image for a videogame or sell broadcast rights to games he played in while prohibiting him from receiving any proceeds. Two dozen other athletes, including five who were active NCAA football players, joined the suit.

The ruling comes as the NCAA faces growing public and legal pressure on schools to share some of their rising revenues with athletes. The value of TV-rights contracts have skyrocketed in recent years to more than $20 million annually per school in major conferences.

The O’Bannon case was the most prominent among several underway in which current and former college athletes are suing the NCAA and prominent athletic conferences, seeking a portion of revenues or the end of amateurism rules that prohibit free-market compensation for athletes. A push also is under way to unionize players at Northwestern University.

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