LOWELL BERGMAN, Correspondent: [voice-over] It's March, and the nation has gone "Mad." Nearly 140 million people tune in to see the biggest basketball tournament on the planet, which ends this weekend with the "final four." "March Madness" is a multi-billion-dollar business. Only the Super Bowl is bigger.
TELEVISION ANNOUNCER: The madness is back!
LOWELL BERGMAN: The power behind this spectacle is the National Collegiate Athletic Association. They make all the rules for big-time college sports.
MARK EMMERT, President, NCAA: [NCAA Convention] I'm now in my 101st day on the job as—
LOWELL BERGMAN: Mark Emmert is the new president.
MARK EMMERT: —many opportunities, many challenges—
The NCAA is a voluntary association of around 1,100 colleges and universities.
LOWELL BERGMAN: [on camera] And it's a non-profit.
MARK EMMERT: Yeah. Absolutely. Yes.
LOWELL BERGMAN: And how much of your revenue comes from men's basketball?
MARK EMMERT: Ninety percent of the revenue that flows into the NCAA comes from the media rights and ticket sales for the NCAA men's basketball tournament.
LOWELL BERGMAN: And the current contract for March Madness with CBS and Turner Broadcasting is for how many years and how much money?
MARK EMMERT: It's 14 years and it's $10.8 billion.
LOWELL BERGMAN: $10.8 billion?
MARK EMMERT: About $700 million a year.
LOWELL BERGMAN: That's a lot of money.
MARK EMMERT: It is. It is, yes.
SONNY VACCARO, Fmr. Marketing Executive, Nike: It's a business, and good for them! It's an unbelievable business!
[www.pbs.org: Where does the money go?]
LOWELL BERGMAN: [voice-over] Sonny Vaccaro is one of the people who made March Madness what it is today by bringing hundreds of millions in corporate endorsements to college sports.
[on camera] You made it possible, this commercialization, no?
SONNY VACCARO: Yeah.
LOWELL BERGMAN: You're the guy who supplied the money.
SONNY VACCARO: Yeah.
LOWELL BERGMAN: [voice-over] But for decades, Vaccaro has been critical of the way the NCAA does business. He says that while many make millions, the people we tune in to watch, the players, get shortchanged.
SONNY VACCARO: I know that the kids aren't treated fairly. That's what I know is wrong.
LOWELL BERGMAN: [on camera] Everybody's making money in this system—
SONNY VACCARO: Everybody, except the kids.
LOWELL BERGMAN: Except the kids?
SONNY VACCARO: Except the kids!
LOWELL BERGMAN: [voice-over] Sonny Vaccaro also made a lot of money off those kids. He became known as the godfather of youth basketball because of his relationships with the best young players in the nation. Those players attended Vaccaro's summer camps and his all-star games, where they could showcase their skills for big-time college basketball coaches.
In 1977, Vaccaro had a new idea and he took it to a then little known athletic shoe company called Nike.
SONNY VACCARO: I said, "We ought to give the shoes away and we ought to pay the college coaches. Put the shoes on the kids and the T-shirts on the kids, and the public will buy."
LOWELL BERGMAN: Soon Vaccaro was giving away truckloads of Nike's shoes to college coaches, and then paying them so their players would wear them, coaches like Bill Foster from Duke and Jerry Tarkanian from UNLV.
[on camera] You were paying college coaches. Was it a violation of the rules?
SONNY VACCARO: No. No. I basically gave them my check, which Nike later reimbursed me—
LOWELL BERGMAN: You were writing personal checks?
SONNY VACCARO: Yeah. Yeah.
LOWELL BERGMAN: $10,000 here, $15,000 there, personal checks.
SONNY VACCARO: And that number went— yeah, that number then went from $10,000 to $25,000 to— some of the coaches got stock in Nike.
LOWELL BERGMAN: In 10 years, how much were you writing checks for?
SONNY VACCARO: Ten years?
LOWELL BERGMAN: Over the next 10 years.
SONNY VACCARO: Quarter of a million to $500,000, half a million dollars. You know, it went bonkers.
LOWELL BERGMAN: [voice-over] Then the universities and the colleges jumped in. They offered to put the Nike logo on all their teams. Then other major corporations got into the act, and suddenly, college sports was on its way to becoming a multi-billion-dollar business.
ANDREW ZIMBALIST, Sports Economist, Smith College: Sonny was the innovator here. He's the guy who promoted it to Nike first, and then to Adidas and Reebok, did very well financially for himself. Interestingly, along the way, he would criticize what he was doing.
SONNY VACCARO: ["ESPN Town Meeting: Sports in Black and White"] The people I represent and the people I've represented have made billions and billions of dollars off the industry.
ANDREW ZIMBALIST: He would say, "Look, I know this is a rotten business. I know this is dirty. I know this is hypocritical."
SONNY VACCARO: I was part of that darn thing. I'm still part of it.
TED KOPPEL, Moderator: You're still part of it.
SONNY VACCARO: But it's wrong. There aren't any residuals for these kids. You keep selling them and selling them and selling them, and they've gotten nothing, nothing and nothing!
LOWELL BERGMAN: Four years ago, Vaccaro decided that his years of complaining weren't changing anything, so he quit and went on a crusade.
SONNY VACCARO: [campus speech] Just so we understand, the first step in this, where I'm going tonight— unless the people who make the rules and the people who divide the money up come to their senses, it's not an equal playing field. There's no recourse for the student, quote, "athlete." Everybody has a right except the player!
LOWELL BERGMAN: [on camera] You walked away from this business.
SONNY VACCARO: Yes, sir.
LOWELL BERGMAN: Why?
SONNY VACCARO: Well, so you couldn't look me in the eye and say, "Well, you're still working for Nike, Adidas or Reebok." So I had to get rid of that. I went to the law schools, the business schools, the journalist schools to go after the complete fraud of amateurism within amateur sports in America.
LOWELL BERGMAN: [voice-over] What Vaccaro calls fraud, the NCAA proudly defends. They say the revenue from March Madness goes back to the schools and pays for other NCAA tournaments.
MARK EMMERT, President, NCAA: So the NCAA runs 88 national championships, but it is men's basketball that allows the golf championship to go on or the volleyball championship to go on because those, of course, don't generate that same kind of revenue.
LOWELL BERGMAN: [on camera] So it's men's basketball that essentially subsidizes the rest of these championships.
MARK EMMERT: Yes. That's exactly right.
[NCAA Convention] This is an incredible organization that serves our universities and our student athletes so well—
LOWELL BERGMAN: [voice-over] Earlier this year, at his first NCAA convention, Mark Emmert spoke about the student athlete.
MARK EMMERT: What makes sense to me is to talk about and think about student athletes as pre-professional, as people who are in training for what they will do in their life. That's what all of our students are like. They're pre-professional, and some of them happen to play sports.
CONVENTION VIDEO: Robert Griffin III, star quarterback for the Baylor University Bears—
LOWELL BERGMAN: Emmert then brought a player from Baylor University, Robert Griffin, to the stage. Griffin told the crowd he was earning two degrees while playing ball.
ROBERT GRIFFIN: Plan A would be, you know, go to law school after I finish my communications degree, and plan B would be go to the NFL. So you know, if plan B works out, it's fine, but I've always got plan A.
MARK EMMERT: Ladies and Gentlemen, Robert Griffin!
LOWELL BERGMAN: But Griffin's success isn't the norm at Baylor. In recent years, the graduation rates for the university's revenue-generating sports — football and men's basketball — have been in decline. In fact, according to the NCAA, Baylor's basketball team graduates less than half of its players. And last year, the graduation rate for Baylor's African-American players was 29 percent.
[on camera] It doesn't sound like an acceptable graduation rate, and definitely, 29 percent isn't higher than the general student body.
MARK EMMERT: No, that's not an acceptable graduation rate. And if an institution were to have a continuous track record like the one you just described, they would suffer some very significant penalties in their ability to participate.
LOWELL BERGMAN: [voice-over] Mark Emmert insists that in the future, there will be severe penalties for teams with poor academic records. But in this year's March Madness, there are 16 teams that graduate less than half their players.
[www.pbs.org: Schools on the list]
MICHAEL LEWIS, Author, The Blind Side: Getting educated is hard to do when you're spending 50 hours a week playing football or basketball.
LOWELL BERGMAN: Michael Lewis is a best-selling author who has written extensively about the business of sports. Lewis says that while researching his book, The Blind Side, he realized that college athletics is not what the NCAA says it is.
MICHAEL LEWIS: It's a purely commercial enterprise, and a pretty ruthless one.
LOWELL BERGMAN: [on camera] You mean it's not amateur sports?
MICHAEL LEWIS: Oh, no. It— college sports is professional in every aspect but one. They don't pay the labor.
LOWELL BERGMAN: [voice-over] Lewis has reported that the real value of a star quarterback on a big-time college team could be as much as $5 million a season.
MICHAEL LEWIS: So you've got a labor force that is essentially indentured servants. It's pretty convenient if you don't have to pay the players.
MARK EMMERT: We provide them with remarkable opportunities to get an education at the finest universities on earth — that's American universities and colleges — to gain access to the best coaches and the best trainers, to develop their skills and abilities so if they have the potential, that small proportion, to go on and play in professional sports, we're helping them develop those skills and they can go do it. If they choose to not go on, or if they don't have those skills or abilities, then they get to go on in life and be successful as a young man or a young woman.
LOWELL BERGMAN: Before they're allowed to compete, athletes have to sign this form saying that they are amateurs — they give up any compensation for playing — and promise to abide by all the rules in this 440-page manual. In return, most get an athletic scholarship. But there's a catch.
ANDREW ZIMBALIST, Sports Economist, Smith College: Since 1973, you can't give a four-year scholarship. You can't give a three-year. You can't give a two-year scholarship. You can only give a one-year scholarship.
So if the person is no longer valuable to the coach, he doesn't have to waste one of his scholarships on that person, even if the person's a terrific student, even if the person broke a leg. And so it seems clear that there is a compensation for a specific skill, and that makes it look very much like a professional job.
LOWELL BERGMAN: And that scholarship is on average $3,000 short of covering a student's essential expenses.
JOAKIM NOAH, Chicago Bulls: I feel like there's a lot of exploitation going on when I look at what's going on.
LOWELL BERGMAN: Joakim Noah led the University of Florida to two NCAA championships. He got his start in Sonny's camp, and today he's part of that 1 percent of college players who make it to the NBA.
JOAKIM NOAH: The University of Florida did a lot for me. I have a coach that I love to this day. But at the same time, I'd have some teammates who came from all around the country, and you know, couldn't pay for their family members to go watch this game. I mean, we're playing in the Final Four. But you can't go watch the game- the school can't pay for it? Like, why not? You know, why can't— I mean, how much money are we generating here?
LOWELL BERGMAN: [on camera] Seven, eight hundred million a year.
JOAKIM NOAH: That's a lot of hamburgers right there, you know? And a kid's uncle can't go see him play in the Final Four?
MARK EMMERT: The NCAA does not provide travel benefits for families.
LOWELL BERGMAN: So if they can't afford it themselves, they can't see their children playing in March Madness.
MARK EMMERT: I— I'm not sure what—
LOWELL BERGMAN: Well, I mean—
MARK EMMERT: Is that a question or a statement?
LOWELL BERGMAN: Yeah, I mean, their son cannot solicit money from someone—
MARK EMMERT: That's right. We do not want student athletes soliciting money. That's— that's a fact.
TERRELLE PRYOR, Ohio State: I'm deeply sorry, but—
LOWELL BERGMAN: [voice-over] But as the news media reminds us, the players do sometimes take money and get caught, and then they become pariahs.
NEWSCASTER: —for accepting impermissible benefits—
JOAKIM NOAH: "We got dirt on this guy. We got dirt on this guy. He can't play next year. He can't— look at him. We knew he was dirty." I mean, I just think there's a lot of that goes on that people don't know, you know, that— and it's unfair to the college athlete.
LOWELL BERGMAN: Critics say that the document the players sign doesn't even allow them to benefit after they leave college, while the NCAA continues to make millions by marketing their games on DVDs and selling the rights to broadcasters like ESPN Classic and video game makers like EA Sports.
ED O'BANNON, UCLA, 1990-95: Changed my life with this game.
LOWELL BERGMAN: In 1995, Ed O'Bannon was the National Player of the Year and led UCLA to victory in the Final Four.
SPORTS ANNOUNCER: —and UCLA can hang a banner in Westwood!
LOWELL BERGMAN: Today, O'Bannon receives no residuals from any game he played in or any compensation for the use of his image.
ED O'BANNON: Oh, dunk the ball, son!
LOWELL BERGMAN: [on camera] Is that you, 31?
ED O'BANNON: Yeah. Absolutely, that's me— left hand, all net. Yes, that is me. [laughter]
LOWELL BERGMAN: [voice-over] O'Bannon first discovered that he was included in this video game when he was visiting a friend.
ED O'BANNON: He asked me if I had ever seen this game and that I was in it.
LOWELL BERGMAN: Was it the UCLA team?
ED O'BANNON: UCLA team, yeah. immediately, seeing yourself on the video game— I'm thinking to myself, "Wow, they got me on a video game." And while this kid was playing, he almost whispers it in my ear. It was like, "You know, the crazy thing about this is you didn't get paid." They didn't ask me for my image. They didn't ask me, you know, for my left hand, for my sweet jump shot.
LOWELL BERGMAN: And you don't get a piece of the action, basically.
ED O'BANNON: Whatsoever. No.
LOWELL BERGMAN: [voice-over] Economists say that because players never get paid, coaches and administrators can make millions.
ANDREW ZIMBALIST: So in that system, the coach ends up getting paid the money that would otherwise go to the player. And so you have these coaches all over the map who are getting paid $2 million, $3 million, $4 million, $5 million.
LOWELL BERGMAN: Like coach John Calipari, who makes $4 million a year at Kentucky, and coach Bill Self, who makes $3 million a year at Kansas.
When Mark Emmert was president of the University of Washington and other schools, he regularly supported paying coaches in excess of a million dollars a year.
[on camera] How do you respond to economists who say that if you had to pay the market value of some of the players, particularly the star players on your teams, then you couldn't afford to pay the coaches that much?
MARK EMMERT: Well, it's an interesting but irrelevant argument. You know, the fact of the matter is, if you paid the custodians in the stands a lot more, there'd be less revenue to pay the coach. You know, what— what basis would one make that argument? The fact is, they're not employees. They're student athletes.
LOWELL BERGMAN: You don't see the contradiction that many have pointed out that when we're watching March Madness, you may have a coach who's being paid six figures, maybe seven figures in some cases — everyone is being paid — the athletic director — but the students aren't. The athletes who are actually performing are not paid.
MARK EMMERT: No, I don't find that contradictory at all. Quite the contrary. I think what would be utterly unacceptable is, in fact, to convert students into employees.
LOWELL BERGMAN: By the way, how much do you make as head of the NCAA?
MARK EMMERT: Well, we don't discuss my salaries, but I'm well compensated, like many people.
LOWELL BERGMAN: More than you made at the University of Washington?
MARK EMMERT: We don't discuss our salaries.
LOWELL BERGMAN: Well, I assume you didn't take a step down.
MARK EMMERT: I'm welcome to argument about the relevance of that.
LOWELL BERGMAN: [voice-over] Records show that Mark Emmert made more than $900,000 a year when he was president of the University of Washington, and that his predecessor at the NCAA made almost twice that, $1.7 million.
[on camera] The criticism of your predecessor's salary, and I assume yours will be similar, is— how many employees do you have?
MARK EMMERT: There are about 450 employees at the NCAA.
LOWELL BERGMAN: Non-profits that are many, many times as big, from the Red Cross to the YMCA—
MARK EMMERT: I had 37,000 employees at the University of Washington.
LOWELL BERGMAN: Right. Now you have how many?
MARK EMMERT: Four hundred and fifty.
LOWELL BERGMAN: And you're probably going to make more money here. And so the criticisms is, why is this? Why this inflation of salaries, whether it's coaches, athletic directors, or the president of the NCAA, when the players, when the athletes, are kept in tight financial circumstances?
MARK EMMERT: I can't say often enough, obviously, that student athletes are students. They are not employees.
LOWELL BERGMAN: I'm a fan watching, for example, March Madness. Why should I care? I'm just interested in the entertainment.
MICHAEL LEWIS: Yeah, no, but you— you shouldn't care unless you have some weird obsession with justice. The coaches make millions of dollars, the university rakes in all this dough to the great detriment of the players themselves.
MARK EMMERT: Mr. Lewis is allowed his opinion on it. I obviously disagree. These are student athletes participating in an athletic activity on their— on their campus at their institution, and they have access to the best educational opportunities that we find in the United States. And Mr. Lewis seems to think that that's not a fair bargain, and I disagree.
LOWELL BERGMAN: The NCAA, when we talked to them, they say, "We're supporting the student athlete." That's—
MICHAEL LEWIS: [laughs] Yeah. The NCAA is— well, they're in a fraudulent position. They're in a false position. They are in the position of defending the indefensible. And I'm amazed it hasn't been more fiercely challenged in the courts.
SONNY VACCARO: Why do I believe this case has just cause and these people are wrong?
LOWELL BERGMAN: [voice-over] That's exactly what Sonny Vaccaro and a team of the nation's leading class action lawyers decided to do, sue the NCAA in federal court. One of their targets is that clause in the document the players sign that they say denies the players any compensation from the use of their image for the rest of their lives.
SONNY VACCARO: What I'm saying is these kids deserve a piece of the pie when they're no longer there.
LOWELL BERGMAN: [on camera] You're not a plaintiff.
SONNY VACCARO: No, I'm not. I'm an unpaid consultant, too. I'm not a plaintiff. I get no money. And every place I've gone, I pay my own way.
LOWELL BERGMAN: What's in it for you?
SONNY VACCARO: I had to do it. I had to do it. I owed those kids.
LOWELL BERGMAN: [voice-over] Ed O'Bannon attended one of Sonny's camps when he was 15 years old. Today he works in a car dealership in Las Vegas, Nevada. Recently, Vaccaro reached out to him about that lawsuit against the NCAA, and Ed O'Bannon has become the lead plaintiff.
[on camera] People say to me, "Well, if Sonny is involved, there must be some money floating around here somewhere." Got big-time lawyers, billions of dollars on the table here. Do you plan to get rich off of this?
ED O'BANNON: No, I don't. Whether it's $50 billion or 50 bucks, I want— I want there to be some type of acknowledgement. And I want— me personally, selfishly speaking, I want the way the NCAA does business— I want that to change.
LOWELL BERGMAN: [voice-over] O'Bannon's lawsuit, legal experts say, has the potential to transform the business of college sports. We asked Mark Emmert about one of the key issues in the case.
[on camera] This is the form that all athletes have to sign, NCAA's form. They can't play without it, right?
MARK EMMERT: Right.
LOWELL BERGMAN: They have to sign this. And it has a clause in it that says that they agree that their image, basically, is the property of the NCAA and the institution that they're playing for. Is that the basis for the NCAA selling their images on your Web site or selling videos of old games to ESPN Classics, and so on?
MARK EMMERT: Well, first of all, there's some pending litigation around the whole likeness issue, so I'm really not at liberty to comment on— on the— the status of all of that.
LOWELL BERGMAN: [voice-over] The NCAA's attorneys also would not comment, but a spokesman for the organization maintained that it does not sell players' images for commercial purposes.
The lawsuit is now proceeding toward trial, and nearly two dozen former players have joined Ed O'Bannon as plaintiffs. Joakim Noah is not part of the suit. He says he's spoke to us because college players are afraid to talk about how the NCAA does business.
JOAKIM NOAH: My college experience was unbelievable. What everybody loves about college sports is that they see that the kids are giving it everything they got, and they're doing it for their schools and the pride of their schools. that's a beautiful thing. That's what people love.
But at the same time, who are these people making all this— making these— this money, all this money? And shouldn't the kids get a piece of that?