Why pay exuberant prices for goods and services when you can rent it more cheaply from a stranger online? That is the principle behind a range of online services that make it possible for people to share accommodation, household appliances, cars, bikes and other items, connecting owners of underused assets with others who are willing to pay for them. A growing number of businesses such as Uber, where people use their car to provide a taxi service to paying passengers, or Airbnb which lets people rent out their spare rooms, act as matchmakers, allocating resources to where they are needed and taking a small percentage in profits in return. 

Such peer-to-peer rental business is beneficial for several reasons. Owners make money from underused assets. Airbnb says hosts in San Francisco who rent out their homes average a profit of $440 (after rent) and some neighborhoods snagging upwards of $1900 a month. Car owners who rent their vehicles to others using RelayRides make an average of $250 a month; some make more than $1,000. Borrowers, meanwhile, benefit from the convenience and pay less than they would if they bought the item themselves, or turned to a traditional provider such as a hotel or car-hire firm. And there are environmental benefits, too: renting a car when you need it, rather than owning one, means fewer cars are required and fewer resources must be devoted to making them.

The internet plays a vital role in this business, it makes it cheaper and easier than ever to provide accurate supply and demand information. Smart phones with global tracking services can find a nearby room to rent or car to borrow. Online social networks and review systems help develop trust; internet payment systems can handle the billing. All this lets millions of total strangers rent things to each other. The result is known variously as “collaborative consumption”, the “collaborative economy”, “peer economy”, “access economy” or “sharing economy”.

The model of the sharing economy works for items that are expensive to buy and are widely owned by people who do not make full use of them. Bedrooms and cars are obvious examples but you can also rent fields in Australia, washing machines in France and camping spots in Sweden. As proponents of the sharing economy likes to put it, access trumps ownership.

How Did We Get Here and Why Now?

The world is at a turning point. Globally, economies are strained as companies and governments are seeking to “do more with less”. Natural resources are no longer cheap and plentiful and some are at the risk of exhaustion. The urbanization of populations continues to rise, and more old people are ageing while young people, such as the Millennials also known as generation Y, are booming. These changes are most prevalent in big cities and new business have already begun to adapt.

The consumer is changing, the Millennials generation, born 1980s to early 2000s, are 92 million strong and stand to inherit large amounts of wealth and decision making power in the U.S. for many years to come. Millennials have experience incredible uncertainty, having lived through the 2008 – 2009 financial crisis and struggles with increasing student debt. These financial pressures lead to demand for a more efficient allocation of resources – and that, by large means they want to own less, be more connected with others and be a part of something bigger than their individual selves.

While the classic American dream is to own everything, the Millennial’s version is to move to an “asset light” lifestyle. These trends have sparked massive innovation, created new marketplaces and potentially holding the keys to the future.

Premium on Ownership Disappears

About a decade ago, companies such as Zipcar started to capitalize on idling cars, which sit on idle for an average of 23 hours a day. Today there are hundreds of ways to share assets, the most popular ones include entertainment, transportation and hospitality and dining.

At 9% entertainment and media holds the highest percentage of users. The consumption of media has changed drastically since the rise of digital age and perhaps it is the best example of the millennial generation shift.

Let’s travel back to 1999, when the millennials were still children  exploring the internet. Many children took advantage of Napster, a website that enabled users to download songs for free. Illegal? Sure. But no one really cared. There are profound differences between the millennial’s peer-to-peer downloading than that of their parents or even people 5 years their senior. From the very beginning the experience of acquiring and consuming media content was based on the premise that access to content should be easy and free.

Now back to 2015, access to media content is essentially free. Want on-demand access to whatever music you want? Spotify has got you covered. On-demand access to movies and TV shows? Netflix. On-demand access to videos of anything you want to watch? Lose a few hours on Youtube. Of course some of these services require a subscription fee so they are not truly free. But when access to goods and services becomes cheap, satisfactory and reliable enough that the premium on physical ownership has disappeared, there is hardly any reason to purchase these goods and services aside from personal habits or peculiar requirements.

Ten years ago, to watch a movie released on DVD, there were 2 options: purchasing or renting. Of those options, renting was the inferior option as there was a greater premium on ownership. Today, that premium has disappeared, streaming a movie on Netflix isn’t inferior to owning a DVD the same way that renting was. And ever since then, the extensive access to cheap and easy media content, has lead to new kinds of behaviours have emerged like binge-watching. Similarly, the rise of music streaming services has enabled behaviours such as sharing playlist, a process that used to be time-consuming and effort-intensive. When nobody buys music but has access to it, social sharing of music emerges as a natural and human behaviour.

Obstacles on the road to Success

To truly grasp the scale and greatness of the sharing economy, consider the following data. Airbnb averages 425,000 guests per night, totalling to more than 155 million guest stays annually – nearly 22% more than Hilton Worldwide, which serves 127 million guests in 2014. Five-year old Uber operates in more than 250 cities worldwide and as of February 2015 was valued at $41 billion – a figure that exceeds the market capitalization of companies such as American Airlines and United Continental. According to PwC’s projections, the sharing economy (including travel, car sharing, finance, staffing and music streaming) has the ability to increase global revenues from $15 billion today to around $335 billion by 2025.

It is not hard to find evidence of successful sharing economy but not everyone is as delighted by the rise as its participants and investors. Taxi drivers in America and now Europe have complained loudly (and in the case of Paris, violently) about the intruders who, they say not only are unqualified but also under insured.

Uber has always been plagued with problems with regulation and taxi unions around the world. In 2014, a court in Brussels prohibited drivers from from accepting passengers through UberPOP or face a €10,000 fine. In July 2015, Uber took one of its biggest hits. The judge ruled that Uber has not complied with state laws designed to ensure that drivers are doling out rides fairly to all passengers, regardless of where they live or who they are. This lead to a $7.3 million fine or California Suspension.

It is not just car-sharing services that have run into legal problems. Apartment-sharing services have also fallen victims of regulations and other rules governing temporary rentals. Many American cities ban rentals of less than 30 days in properties that have not been licensed and inspected. Some Airbnb renters have been served with eviction notices by landlords for renting their apartments in violation of their leases. In Amsterdam, city officials point out that anyone letting a room or apartment is required to have a permit and to obey other rules. They have used Airbnb’s website to track down illegal rentals.

On top of legal regulations, issues with customers have also become obstacles for sharing businesses. In 2011, Airbnb suffered a rash of bad publicity when a host found her apartment trashed and her valuables stollen after a rental. After some public relations and Airbnb eventually covered her expenses and included a $50,000 guarantee for hosts against property and furniture damage.

Peering into the Future

The sharing economy can be compared to online shopping, which began in America 15 years ago. In the beginning, people were not too sure about the vendors and didn’t trust the services. However with time and perhaps a successful purchase on amazon or two, people felt safe buying from other vendors too. Now consider Ebay, a company started as a peer-to-peer platform, now is now dominated by professional “power sellers” (many of whom started as ordinary Ebay users).

Big corporate companies dominating the market are getting involved too. Avis, a car rental firm has shares in Zipcar, its car sharing rival. So do GM and Daimler, two car manufacturers. In the future, companies may follow a hybrid business model, listing excess capacity on peer to peer websites. In the past, new ways of doing things online have put the old ways out of business. But they have often changed them.

We will have to wait and see which on-demand services start to gain traction with mainstream markets and which wont’t. It is not likely that in thirty years time our whole lives will be on demand and we won’t hold ownership. But a major possibility is products and industries most likely to be disrupted by the sharing economy would be things that we possess but not necessarily. An example would be Airbnb, it has disrupted the demand for owning vacation homes (something you possess) and tourist hotels (something you don’t possess but is still “yours” in a way that an Airbnb isn’t). 

A bus full of Chinese tourists arrive in front of Galeries Lafayette Haussmann, a must-visit department store in Paris; it is just one of many throughout the year. Although recent policy in Chinese government has devalued its currency, RMB¥, and consequently slowed down its economy, it doesn’t seem to scare Chinese people away from traveling to Europe. Nor has it decreased the desire to purchase luxury products. According to the article “Meet The Chinese Luxury Shoppers Who Are Taking Over The World” from Business Insider, Chinese customers account for 35% of the luxury sales around the globe and their spending is 1-2 times higher than other nationalities.

Jasmine Lai, 24, is a recent college graduate from one of the well-known universities in Shanghai, Fudan University. After graduation, she took a trip to Europe to help propel her career as an overseas purchase agent. “Before this trip, I was not aware that the price for the same luxury product in Europe and in China could varies so much.” Lai saw a chance for her to step in. The price discrepancy between luxury products priced in Euros and the same product’s price in China, gave her the idea for a brand new business model. “I started to ask myself. If I was able to purchase the luxury products in Europe and bring those products back with to China, even if a service fee is added, the price for the product from Europe is still lower than its retail price in China.”

With the advancement of technology, instead of setting up online website, Lai created a business that relies solely on two of the most used mobile applications in China, which are Sina Weibo and Wechat. Sina Weibo is a social media application that combines the functions of Facebook and Twitter. Users are able to comment, share posts from friends, and upload photos, and videos. Contrarily, Wechat offers free messaging and focuses on interactions between the user and his/her friends. “Wechat serves as a great way for me to interact directly with my client. When my clients saw a product that they are interested in buying, they would send me the picture of the product directly through Wechat.”

Using these graphics, I will explain how Lai’s business model works. Take this iconic handbag from Saint Laurent, one of the luxury brands in Paris. On the top, the price for the bag is £1590, which is ¥9540. On the bottom, the price for the same bag in China, is $2190, which is ¥14322.6. When a customer requests the bag, Lai would signal her buyers in Europe to confirm the price of the bag. Once the price, ¥9540, is confirmed, Lai will add thirty percent of service fee, ¥2862, to the price and report the price back to the customer on Wechat. After the client’s nod, Lai’s employee in Europe will purchase the bag and sent it back to China.

Although it might seem to be fun and glamorous to be an overseas purchase agent, there are many underlying difficulties and uncertainties jeopardizing Lai’s daily work. “The most challenging part of my job is going through customs,” Jasmine said.

A big part of Lai’s career as an overseas purchase agent is to travel to Europe twice a year, during its sale season. It was easy and quick for Lai and her employees to buy the desired products for the clients. Nevertheless, bringing all the products back safely to China without custom’s suspicion is the hardest part.

“Carrying all the products with me didn’t become a problem until recent years. During my first and second year as an overseas purchase agent, I would place all the items into two large suitcases. Except having to pay an extra overweight fee, I never encounter problems with China custom. However, the situation is different nowadays.” With an increase numbers of overseas purchase agents, Chinese shoppers tend to purchase luxury products overseas thus leading to a shrinking economy for the luxury brand market in China. As soon as the government realized the overseas purchases are endangering the growth of its luxury brand industry domestically, it immediately enforced stricter custom policies.

“With the new custom policies, instead of leaving the price tag, boxes, and the wrap for the luxury products, we need to remove everything in order to pretend that all the products are for personal instead of commercial use.” The updated custom policies definitely bring changes to the overseas purchase industry but it seems that even though the risk for buying the products through overseas purchase agents is bigger than buying the products in a nearby department store. Chinese shoppers are willing to take the risk instead of paying for the retail price, which include stiff taxes imposed by the government.

Besides the need of paying extra attention on custom policies, monitoring the foreign exchange between RMB¥ and the Euro becomes the daily task of an overseas purchase agent’s due to the fact that it might also serve as a potential threat to the sales. On one hand, when the value of the RMB¥ increases comparatively to the value of the Euro, the price of Chinese exports increased because it is more expensive for European to buy Chinese products but it is cheaper for Chinese to buy European products. On the other hand, when the value of the RMB¥ decreases comparatively to the value of the Euro, the price of Chinese imports increases, which makes it cheaper for European to buy Chinese goods but more expensive for Chinese to buy European products. “When RMB¥ appreciates against Euro, our sales tend to decrease a little because our clients are more likely to pick Europe as their travel destinations,” recalled by Lai.

The luxury brand industry in China is booming. An increased number of Chinese shoppers, combined with an increased interest toward luxury products, creates more opportunity. However, just like how happiness is often associated with the purchase of luxury products, the risks, such as custom policies and the fickle foreign exchange rate, are closely tied to the success of overseas purchase agents.

College sports are an important fragment of most universities. Athletics create a sense of community and pride for the schools and can ultimately lead to more applications and alumni donations if a specific sport performs well. Those sports in particular are male football and basketball teams. Many universities receive millions of dollars in revenue from television broadcast deals and merchandise sales for college football, and to an extent, men’s basketball. It is no wonder why the question of “should college athletes get paid?” is in discussion as well as currently being discussed in court.

One man who stepped up and voiced an opinion is former UCLA basketball star and NBA player, Ed O’Bannon. In July of 2009, O’Bannon filed a lawsuit against the National College Athletic Association pleading the department violates antitrust laws by using former and current players images, names, and likenesses for commercial purposes. What sparked O’Bannon’s reason to be a lead plaintiff was seeing his image in an NCAA video game that he was not compensated for. The O’Bannon v. NCAA case is fighting against the college organization and believes players should be compensated a fraction of the billions of dollars generated by college athletics from its huge television contracts. After six years the case has caused much controversy for the NCAA and universities. But just recently, some court decisions have impacted the case.

The NCAA has created multiple laws to keep college athletics as amateurism sports. This includes that all athletes cannot be compensated for the use of their name, image, and likeness while attending the university. If such actions are performed, punishments can be anywhere from losing playing time to being kicked of the team. For instance, during the 2014 football season, former Georgia player Todd Gurley was suspended from the team for four games because he made money off his own autograph. It even goes to as far as former players, like Ed O’Bannon, not compensated for their image used in video games authorized by the NCAA.

The NCAA is fighting for college athletes to receive no compensation beyond their scholarship because it would ruin amateurism status of athletes and goes against “eligibility” rules. Others argue paying players would destroy the moral purpose of college athletics and drive spectators away. But let’s not leave out a big factor here, money. It has been debated whether or not universities could generate enough money to pay athletes while also supporting them and contribute to other less popular sports. However, these concerns still leave out the main point. People are arguing that it is the athlete’s own name, and ethically he/she should be able to make money from it. Several college players have testified that the sport they play in college is their occupation and the many hours they devote to the game makes it difficult to function as a regular college student. An article from the Business Insider discussed one of the O’Bannon v NCAA trials over a year ago and how O’Bannon viewed his student-athletic career. “I was an athlete masquerading as a student,” O’Bannon said at trial. “I was there strictly to play basketball. I did basically the minimum to make sure I kept my eligibility academically so I could continue to play” (Dahlberg). This statement from the article demonstrates the commitment student-athletes have and why many are arguing for players to receive payment.

Recently some major decisions have been ruled in the O’Bannon v NCAA case. In June of 2014, a federal judge ruled that the NCAA cannot stop players from selling the rights to their names, images, and likenesses. This conclusion hit hard on the NCAA regulations which prohibit student-athletes from receiving anything more than a scholarship. The court suggested an idea that money generated from television contracts be put into a trust fund that college football and basketball athletes would receive after eligibility. The cap for the money would be up to $5,000 a year, and the most a player could make is $20,000 after four years. The NCAA of course disagreed with this statement and fought against it.

On September 30^th, 2015 The Ninth Circuit of Appeals confirmed the districts court decision that the NCAA amateurism rules violated antitrust laws. This of course was a big gain for O’Bannon but was not a complete victory. The court went against the injunction that would have forced universities to pay athletes up to $5,000 dollars a year. However, schools now must cover full cost of attendance, which is food, rent, books, etc., on top of scholarship. An article from Sports Illustrated claimed that Judge Jay Bybee, one of three judges out of the panel, expressed concerns that cash sums past educational expenses would transform NCAA sports into “Minor League” status. However, many still believe the cost of attendance is not enough for college athletes whose universities negotiate billion-dollar TV contracts.

The situation does not end there. Even though O’Bannon did not win the trust fund debate, the Lawsuit is far from over and he is not the only one striking down on the NCAA. Shawne Alston, Martin Jenkins, and two dozen other former and current players argue that the cap of athletic scholarships and cost of attendance are not enough and violate antitrust laws. If the cap was demolished, Universities may be forced to pay student-athletes market price scholarships, which can extend up to seven figures. This litigation will be heard in the U.S. District Court for the Northern District of California soon. That being said, let’s look at the possible financial decisions college athletics and universities would consider if athletes were required to receive money.

To help understand the situation better, I sat down with USC Sports Information Director Jeremy Wu and discussed the conditions that have athletic departments in dismay.

According to Jeremy, the new ruling that declares that Universities must pay full cost of attendance, food, rent, books, and more, is the first strain on schools financially. Some schools already proved this for football, such as USC, but now are required for all sports. Other major and smaller universities are in the process of making this transition.

The money for funding full attendance does come from the ‘billions of dollars’ schools receive from television contracts. But what a lot of people have a hard time understanding is the money received from these contracts are not just supporting football, but an entire athletic program. “A lot of schools even with TV contracts don’t make more money than they lose” Jeremy said, “Even though contracts are huge, such as millions of dollars, funding a full athletic department is a lot and it is covering more than just football, but all the sports”. Jeremy also continued to mention the money generated from TV contracts pays coaching staffs for all teams and buys necessities for the sports.

Before we dig in deeper, here are some interesting facts from the article, Cracking The Cartel, that talks about where the money for athletics is going:

• $156,647 is the median amount a division one school spends on a scholarship football player as of 2013
• $14,979 on a full time non student-athlete
• In 40 States, Football and Basketball head coaches are the highest-paid public employees

The facts above demonstrate the expenses universities spend not only on athletes, but college coaches. If athletes were to receive payments, the money spent on coaches most likely will decrease.

In order for the majority of universities to provide payment for athletes they would have to make some changes that would create a scale-back. The process would start with cutting smaller sports from athletic programs, such as golf or tennis. This leads to job loss not only for the people who coach the sport, but maybe a couple strength coaches, a nutritionist, and perhaps academic advisers.

From the article, Cracking the Cartel, it claimed one reduction in programs would be a drop off in athletic scholarships. Universities provide 85 athletic scholarships for football and that could shrink to 45, just like an NFL team.

Colleges could decide not to try and cut athletic programs all together. The programs who are most likely able to perform this financial event are the so-called Power Five conferences (the ACC, Big Ten, Big 12, Pac-12, and SEC), but even some say it may be too much and schools slowly would drop down to Division II. Jeremy discussed how small schools like South Dakota State, who don’t generate enough money off their athletic programs, would have no choice but give up its sports teams.

Even Title IX plays a heavy role and universities must still obey the rules that are enforced by it. If one women’s sports team is cut, then three men’s teams are cut as well. Title IX provides a unique experience for young female adults to receive an education and achieve an athletic career. Financial struggle to pay athletes would not only take this opportunity away from women, but men as well.

As a student-athlete myself, this situation definitely has me concerned. Though it is apparent that the NCAA needs to make some rule changes, paying college athletes certainly would transform intercollegiate athletics. If universities were to act on the most dramatic possibilities from this event, college athletics as we know it, would cease to exist.