What the Weak Dollar Means to College Basketball

Recently, I am sure you have heard the news about foreign multi-nationals coming in and buying up US assets. First it was an Abu Dhabi conglomerate buying the Chrysler Building. Then, it was the venerable and iconic Anheuser Busch being sold to a Belgian Company for $52 Million. As comedian Lewis Black put it, “You know you are in trouble when you are losing out to Big Waffle.”

What other deals lurk on the horizon? How about Josh Childress signing with a Greek team for $20MM/year tax free? the Atlanta Hawks countered with a mid-level exception offer of $5.5MM. You don’t need to know a thing about basketball to correctly guess which offer was accepted.

Some may think this is a blip on the radar, but let’s take a look at the underlying economics that made the deal possible. The US Dollar is currently worth a paltry .67 Euros (In 2002, the two currencies were at parity). $20MM/year is suddenly only 12.5MM Euros. Granted that is no small sum, but there are a Greek soccer stars who routinely sign for that kind of money. Childress could never earn that kind of money in the NBA.

As basketball continues to grow in popularity, so too will the demand for the games best players. Even the college game is not immune. Let’s look at the case of Brandon Jennings. Jennings may be the best prep point guard in the country. Jennings just jilted Lute Olson and the Arizona Wildcats to play in Europe for a year before planning to enter the NBA draft in 2009. Hailing from Compton, CA; economics certainly played a part. Whether or not Jennings would have ever qualified to play in college academically is immaterial. As illustrated above, a weak dollar means that euros go a lot further these days.

(What’s more, who’s to say that if Jennings is successful that he doesn’t decide to remain in Europe? He won’t be able to get $20MM/year as a lottery pick.)

Basketball players historically have had at maximum, 15 years of earning potential in the NBA. Most NBA players have far shorter careers. If as a prep player, you can extend your professional playing days by four years by choosing to play overseas; the option becomes a viable one. Especially, when European club teams can approach NBA salaries.

Josh Childress doesn’t even start in the NBA and he signed a contract worth $20MM/year. How much could Lebron, Kobe, or D-Wade earn overseas? $50MM/year?

In years to come, why would a player like Greivis Vasquez play for free in college when he can earn millions in the Spanish league? Not evey D-1 player has the skills to play overseas, but many of them do. Better than half of the starters in the ACC wind up playing professionally (most overseas). I think it is inevitable that we will start to see a migration of prep players to Europe. The weak dollar only exacerbates this migration.

This trend may soon force the NCAA to deal with the elephant in the room. Big-time college athletes (by that, I mean those playing revenue producing sports of football and basketball) generate millions of dollars for their schools, yet they earn no money for their efforts.

We’ve all the arguments for and against pay college stars, but if high school start going to Europe in en masse, the NCAA may be faced with having to either start paying their athletes or see college athletics slowly disintegrate.