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American College Athletics: From Paying Nil to NIL

Clarice Mullady



Stadiums in the United States are not only filled by the likes of Patriots, Nets, or Warriors fans. Seats are filled and stadiums are left sold out by colleges. TV screens are filled not only by the Tom Bradys and Lebron Jameses of the world, but also by students like you and me (perhaps slightly taller students, that is). In 2019, Division I athletics generated $15.8 billion in revenues according to the National Collegiate Athletic Association (NCAA), which oversees student athletic departments across the US.  


If this is not impressive enough, let us scale it to European sports. Camp Nou, home of FC Barcelona and the largest stadium in Europe, seats just over 99,000 fans. The University of Michigan’s Wolverines play in a stadium with a capacity of over 107,000 fans. Each seat generates money for the school and for the NCAA, but not a cent of it goes to the players on the field who attract the crowds. While elite coaches can make over $10 million per year, the student-athletes have been restricted to getting their tuition paid and maybe receiving a stipend to live off of during the school year. But why are they entitled to anything else? After all, they are students. They benefit from a free, quality education all while pursuing their athletic passion at an amateur level at the school’s expense. What does it matter that the NCAA’s revenues rival professional athletics? These are students, not employees. This was the stance taken by the NCAA for nearly a century.  


Since its founding in 1906, the NCAA has been reluctant to give up any profits to these players. It has long focused on upholding the concept of amateurism in the collegiate sports realm, which has significant monetary implications. In 1936 student-athletes began receiving scholarships to subsidize their education. Slowly, the rules have continued to loosen despite the NCAA’s best efforts. In 1956 the NCAA implemented the “Sanity Code”, limiting the amount of financial aid paid to athletes. In 1973 they began enforcing academic requirements on students to play for schools. They are just students in the end, shouldn’t the privilege of playing for a school be contingent on academic ability, shouldn’t they be held to the same standards as any other student attending the university? In the 1990s the tide started to turn. 1991 brought about more generous scholarships. Then, at the turn of the century, high-profile cases began reaching the Supreme Court. These cases began to creak open the door to higher compensation, judicially challenging the restrictions on paying student-athletes.  


In 2014 the gavel was struck on a landmark case– O’Bannon v. NCAA. UCLA basketball player Ed O’Bannon sued the NCAA because they were profiting from using his likeness in videogames. The US Supreme Court ruled that the NCAA’s policies, which prohibited student-athletes from making money from their own name, image, and likeness (NIL) were in violation of anti-trust laws. Although this only explicitly protected athletes’ NIL rights up to the value of their tuition, it ensured that in the future the NCAA could not ban schools from hypothetically paying unlimited salaries to student-athletes or granting endorsement deals. Five years later California passed the Fair Pay to Play Act, allowing athletes to profit from their NIL, another step in the right direction. Within a year the NCAA was forced to reconsider its rules, leading to a change in policy which came into effect in July of 2021. The new rules began to allow students to outright profit from their NIL.  


To be certain, profiting from NIL does not mean cutting into the university’s ticket sales, it is simply making money from separate entrepreneurial deals made with third parties. In other words, a student-athlete can be paid by a local supermarket to wear their t-shirts and promote their business. The Olympics, a fairly good comparison in terms of talent, have used this model for years. Olympians could cut their own deals with brands and student-athletes could not even make any money from jerseys with their own names sewn on the back. Now, students can make money from their own business ventures without losing their playing eligibility thanks to the new laws and recent NCAA rule changes. How much money are these athletes now entitled to? As much as they are able to derive from their own popularity!  


According to Opendorse, an NIL marketing platform which helps alert student-athletes to potential brand deals and connect them with business owners, the average deal is roughly $600. This includes all athletes. A star like Bryce Young, the ex-starting quarterback at the University of Alabama, can be offered more than $1 million in endorsements. The possibilities do not end there. With the wide use of social media, athletes can create their own platforms to generate value. According to Dev Sethi, Director of Sports Partnerships at Meta and previously at Instagram, athletes can partner with brands and use social media commerce tools to bring their NIL to life. Gaining a larger audience will result in greater brand recognition and open doors to revenue– making opportunities. Some athletes can make over $50k+ per social media post alone. These payments help cover the cost of living and compensate the athletes for the mental and physical stress that they are under. As George Owens, an old MIT professor pointed out many years ago, “If it is necessary for a boy to undergo extreme risks, why not reimburse him in a business manner?”  


As of today, there has been no federal law drawn up to be equally implemented across the nation. NIL deals are governed by a “patchwork” of state laws. In the case where the state itself has failed to pass a regulatory act, the power to oversee NIL is left up to the university. Unsurprisingly, this has led to tremendous inconsistencies and a complete lack of transparency. In an attempt to tame the current situation, the NCAA has created several compliance guidelines. Although they may be open to interpretation, they do aid schools in setting general parameters. The guidelines maintain that 1) in a deal there must be deliverables provided by the athlete to the company paying them (i.e. There must be a quid pro quo), 2) athletes cannot receive bonuses based on their stats or performance on the field, and 3) deals cannot be contingent on remaining at a specific school. More importantly, however, the NCAA has stated that schools cannot enter into NIL deals with their own athletes. All deals must be made through third party agencies to avoid the creation of material recruitment incentives to induce them to attend a particular school. However, this issue is far from resolved. Bribery of 18-year-old players has been a longstanding problem in the college scene and these NIL deals have further muddied the waters. Incentives are now being openly offered in the form of so-called ‘collectives’. These are funds made by boosters, alumni, and fans that pool resources to direct money towards college players with few restrictions, circumventing the NCAA’s rules.  

In the process of writing this article I spoke with my uncle, former NFL coach and current coach of one of the Big Ten Conference schools. (For the Europeans out there, or literally anyone who isn’t tailgating in the Midwest, the Big Ten is the oldest collegiate football conference and one of the best!) I spoke with friends of mine deeply involved in the collegiate sports world at schools like the University of Arizona and the University of Las Vegas. They described the current sentiments on the sports teams and on the campuses regarding the new NIL rules. They voiced both their opinions and concerns.  


The money there is to be made depends a great deal on how good a player is, how much management they have access to, and how large their fan base is. This can lead to a divisive locker room. It can be tough, but the young athletes are navigating this relatively well. In the real world it has always been the case that some people are paid more than others depending on similar factors. The new rules are simply blurring the lines between the de facto minor leagues and professional sports.  


However, there are harsh implications to this that students may not have previously considered. Schools may begin cutting underperforming players, after all, they have become less amateur. The relationship between players and schools may change to that of an employee-employer. It is a slippery slope. Recruitment will become less equitable – universities which fail to support athletes with NIL deals will be left at a disadvantage, while those who have endless resources will take their pick from the talent pool. Before these rules, boosters (financial donors to collegiate athletic programs) could not offer cash to potential athletes as an incentive to join their team; now it is more difficult to patch loopholes in pay-for-play rules. Teams with large NIL exposure and strong support infrastructure will more easily win over prospects and transfer students. A new level of competition has been created. The NCAA fears that schools will begin organizing pre-packaged deals for star athletes, which would be in every respect, a salary paid by a third party. Nevertheless, the students would be making money, many of them from underprivileged backgrounds. They would be fairly compensated for their work on and off the field. Local stores and the third parties involved would gain exposure and benefit from advertisements directed towards a young and excited customer base. The NCAA’s cartel-like restrictions are being struck down for the benefit of these individuals.  


The NCAA will continue to lobby for Congressional legislation to standardize NIL rules nationally. Thus far, they have failed to lead the innovation on NIL rules and so they will seek to establish themselves as enforcers and get ahead of any future unfavorable changes to current rules. They will fight to defend their control of college sports, its organization, and its regulation-making and they will want to realize an anti-trust exemption they have long sought. The NCAA has relied on the concept of amateurism in college sports and sees a viable threat in the concept’s blurring.  


As with any change, there is a great deal of fear surrounding conversations about these regulation modifications. Colleges fear that the changes may evolve into excessive competition between themselves, eating into their profits. The NCAA fears losing control over collegiate sports, the monopoly on which they depend to remain profitable. Students fear retaliation via strict performance contracts and the threat of eventual reintroduction of restrictions. The NFL and NBA both fear the increase in negotiating power student-athletes are certain to gain. However, these changes, which allow students to make money off of their very own person, are unlikely to turn into direct revenue sharing or distribution of salaries to students in the near future.  

 

These new rules are simply allowing student-athletes to hold the same rights as any other student, or as a matter of fact, as any other citizen. Restricting only some in their ability to profit off of their own talent, skill, and personal brand is a gross encroachment on personal liberty. These students should be allowed to do the very same that Jackie, the communications major, is permitted to do. Yes, there are differences in how much money each individual is able to generate, but the same is true in any other scenario. The free market will dictate the worth of each unique NIL. Furthermore, maintaining a liberal approach to regulation will stimulate competition and innovation, driving a fairer compensation environment for athletes, as is the case within pro leagues. Letting go of unnecessary restrictions implemented by the NCAA will create a more equitable system where athletes are able to negotiate their own deals, determine their own worth, and wield power over their own person! 


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