Are Collegiate Athletes Interests Being Well-Served?

I have previously blogged about the expansion of “name, image, and licensing” (NIL) opportunities for collegiate athletes. This has spawned so-called collectives.

NIL collectives are independent organizations that fundraise money for various universities and give it to attending college athletes in the form of NIL agreement payouts. Several NIL collectives guide their athletes through the NIL endorsement landscape. 

NIL collectives are a relatively new phenomenon. In less than two years, they’ve shaken up the college sports scene and spurred some controversy. They represent booster-funded organizations that are a common way for athletes to cash in on their NIL compensation. They have become a stand-in for salary, which has created deep concern for many in college sports.

Antitrust Settlement

Two weeks ago, a $2.8 billion antitrust settlement proposal was agreed to by the NCAA and the nation’s biggest conferences. The agreement may negatively influence the collectives even though the duties they perform will become more important.

“One of the key functions of a collective is properly managing payroll for a sport. And the skill set that’s been developed is now going to be required for every single [power conference] school,” said Blake Lawrence, whose company, Opendorse, works with dozens of schools of more than 40 collectives on NIL activities.”

Lawrence also wonders whether schools will hire key members of their collectives, those responsible for managing and moving money, negotiating with parents and players, and move the process internally. Or, according to Lawrence, “will schools hire the collective as their NIL agency, and shift some of their risk away from the school into the third party to manage the distribution of those NIL payments?”

NCAA Actions

The NCAA is trying to implement new rules to encourage schools to bring NIL activities in-house, allowing athletic departments to be more involved in setting up deals for their athletes. The NCAA has also passed legislation to bring more transparency and accountability to the process, including disclosure rules for deals above $600 and the creation of a deal database to help establish fair market value.

It has been reported that some collectives have said they are getting out of the collective business. This may be premature and only time will tell whether it does happen.

Another issue is revenue-sharing. The revenue-sharing model proposed in the antitrust settlement — which still needs approval from a federal judge — and agreed to by the NCAA, Big Ten, Big 12, Pac-12, Atlantic Coast and Southeastern conferences would allow schools to direct up to 22% of the average power league school's annual revenue to athletes. That amounts to about $21 million per year and would rise as revenues rise over the 10-year agreement.

NIL enforcement is currently on hold after attorneys in Tennessee and Virginia sued the NCAA, challenging rules that ban recruitment inducements and pay-for-play.

The bottom line is that Congress needs to get involved. There needs to be a model that takes into consideration the revenue these athletes bring to the university. Until then, it seems that collectives will still be used even though there are no rules of the road yet for oversight of their activities.

Profiting Off NIL

The amount of money that goes into college sports from boosters, donors, alumni, television advertising, sales of sports merchandise and so on opened the gates to allowing college athletes to make money from their NIL. These deals are negotiated directly between the athlete and/or representative and the party looking to profit from NIL.

In a perfect world, NIL would be a great solution to a decades-old problem of college athlete compensation, but we don’t live in a perfect world. NIL has been taken advantage of by some schools, which causes rampant transferring and an unfair college football landscape.

Beyond football, NIL causes major problems with gender inequity, and it does not give everyone an equal chance to get fair or adequate payment. Hopefully, at some point, the NCAA will figure out how to make NIL fair and equitable for all student-athletes. However, I doubt it as, in college sports, especially football, the rich get richer while the poor stay stagnant with respect to attracting funds from external sources for their athletes.

Posted by Steven Mintz, Ph.D., aka Ethics Sage, on May 29, 2024. You can sign up for his newsletter and learn more about his activities at: https://www.stevenmintzethics.com/.