Current State of NIL
Up until this year, college athletes were not able to make money based on their on field antics. As of July 1, 2021, thirteen states (AL, AZ, FL, GA, IL, KY, MS, NE, NM, OH, OR, PA, TX) have passed NIL laws which will allow college athletes to make money on their name, image, and likeness. The next year (2022) five (AK, MI, NV, SC, TN) more state NIL laws will become effective and the following year (2023) six (CA, CO, MD, MO, NJ, OK) more state laws will become effective; 24 states of 50 with NIL laws enacted.
States without NIL laws can engage in any commercial activity in line with newly enacted NCAA policies. While there are edge cases, for example, what happens with transfer students with signed NIL contracts moving to states without different laws, it appears that the NIL is positive for student athletes.
This is a huge departure from the decades long stance of the NCAA prohibiting student-athletes from making any money (aside from an education) from playing sports, even though some sports like football, bring in tens of millions of dollars into the schools. This led to the early departure of many high profile athletes leaving college early for lucrative professional contracts lest a career ending injury occur in amateur (college) play.
What’s NIL worth?
From a monetary perspective the implications of NIL are huge. EA, for example, paid $40 million to 29,000 current and former players, coming out to $1,200 per athlete with a maximum payment of $7,200. Video game publishers typically pay out between 10-15% of a game’s revenues for licensing fees. EA’s NCAA football game brought in $80 million in revenue of which 15% or $12 million to be divided amongst the 11,000 players comes out to about $1,100.
Apparel wise, Nike pays the top schools up to $8 million in licensing. Assuming all athletes are the same, and an average of about 750 athletes per school, and using the same 15% we come out to about $1,500 per athlete. (Although it’s not clear why the students would only receive 15% in the apparel category.)
On top of that, these athletes grew up with social media and have amassed massive followings throughout their high school careers. They would be able to monetize their audiences to a similar tune, $6 CPM.
What’s the future hold?
What would this mean to professional and amateur sports? We’ve noticed that the Olympic Games have grown significantly since the first Games in 1896. From 9 sports to 33 sports in the 2021 Games, athletics have grown by leaps and bounds. The NIL could allow new professional athletes similar to how endorsements and the growth of basketball allowed players to focus on the game year round. For example, there is now a professional Cornhole league.
Speaking of the Olympics, these athletes would also be allowed to compete in the Olympics if they chose to since the Olympic Games’ requirement of amateur status disappeared in the 80s, culminating in the 1992 Dream Team with Michael Jordan.
It also derisks any athlete that wants to complete their education in lieu of the massive payday. There have been many stories of world class athletes that have gotten injured in college and missed out on that 7 figure contract. Perhaps mid tier or third round drafted athletes would stay in school longer or wait for an ideal draft class to maximize their earnings?
We also have to think about how this might apply to the quickly growing gaming space. Will the NCAA begin to govern e-gaming? If so, that could have a massive impact on the economics of the space. Amazon paid a billion dollars for Twitch, a live gaming platform.
Are there any unintended consequences? It remains to be seen. What do you think? Is NIL good for college athletes? Is there anything bad that could happen? Email us and let us know your thoughts!