The players earn millions for their school. The fact that many athletics departments lose money anyway is not inconsistent with this.
Athletics departments lose money because the millions that FB and MBB bring in are spread around to cover the costs of other college athletics that no one watches.
Athletics departments also lose money because the inability to pay players leads to incredibly inefficient forms of “competition” to attract players, like paying coaches massive salaries and arms races to build new “state-of-the art” facilities. These are market distortions that result from not being able to pay the players directly.
1. The players earn money that is then plowed into their coaching, their training, their tutoring, their facilities, their travel, etc. They have a setup (facilities, trainers, coaching) that no other pro minor league int he entire world has. Emeka Okafor just wrote an article about his experiences this season in the NBDL (middle school gyms, long bus rides, etc., Gold's Gym) that make the differences stark. In other words, the schools have no interest in losing more money when all the proceeds already are used in that arms race.
2. If you paid the players, do you think the school would then NOT compete for coaches (top dollar) or build top notch facilities? Of course they would. There would still be an arms race. Not to mention the fact that players already get $5k over and above their tuition, food, housing, utilities and fees.
3. The cost of other college athletics argument is effectively irrelevant these days. Budgets are approaching $150m at schools. Most schools run their entire Olympic athletic programs for $5-10m tops. It is a very small part of the budget. I know a MAC school that ramped up D1 football, and their budget went from $7m for the entire athletic program to $30m+ in 2 years.