Understanding NIL in College Sports

Intro

We previously wrote about NIL in relation to NBA G League Salaries and the options that young players now have when deciding to go pro or not. That article was strictly about basketball, and it's important to note that NIL is applicable to all college athletes. 

What Is NIL?

For a quick refresh: ​NIL refers to an athlete's name, image, and likeness. For years, the NCAA didn't allow athletes to get paid, but on July 1, 2021, the NCAA passed its new policy that allows athletes at the division one, two, and three levels to monetize their name, image, and likeness.

Since that policy was passed, we've seen on one hand exactly what we expected to see: college athletes being paid. On the other hand, we've had a growing outcry from coaches and fans that the current state of NIL is unfair in many ways. 

Below is a breakdown. ​Note, the values listed in this table are based on the current NCAA NIL regulations as of April 2023. These regulations are subject to change as the NCAA and individual states continue to develop their policies regarding NIL.

Statistic
Meaning of NIL	Name, Image and Likeness
Definition of NIL	Refers to the ability of college athletes to profit from their name, image, and likeness, without losing their NCAA eligibility
Effective Date	July 1, 2021
Allowed activities	Athletes can participate in paid endorsements, sponsorships, social media posts, autograph signings, and other activities that were previously prohibited
Restrictions	Athletes cannot receive payment for athletic performance or participate in activities that conflict with their school's existing contracts or values
State laws	Several states have passed their own NIL laws, which may differ from NCAA regulations

What Is Great About NIL?

As college sports have exploded in popularity, the amount of money generated by these activities has grown at astronomical rates. 

In Gilbert Gaul's book, Billion Dollar Ball, he points out that a school like Texas, for example, generated $18,712,250 in revenue in 1999 from college football. In 2012, the Longhorns brought in $103 million, a 455% increase! 

Last fall, the Big 12 signed a 6 year contract extension with ESPN and Fox to broadcast its football games. The deal? More than $2 billion! Of course, that revenue is passed around to member schools, but even today, not a dime is paid directly to the players. 

To the schools' credit, players today "get more" in other support than ever before. Several large division one football programs estimate that they spend $250,000-$450,000/year per player. The University of Oregon recently built the the Jaqua Academic Center for Student Athletes, which cost $41.7 million. The budget to operate the center each year? $2 million. Schools have invested in 24/7 "fueling stations" to improve nutrition, built state of the art strength & conditioning centers, and created athlete lounges (check out the Alabama Football Lounge) that resemble 5-star resorts. 

At the heart of all of this, though, is actual dollars being paid to players. The NIL program wasn't set up to allow universities to directly pay athletes. Instead, it allows alumni, boosters, businesses, etc. to leverage athletes' popularity (and pay them). Local restaurants can pay to have athletes featured on their on ads, an insurance company may have a local standout on their website, etc. 

The good in all of this is that the athletes themselves, who are responsible for generating the revenue that leads to massive television deals, licensing agreements, etc., are being paid. Put simply: if there were no athletes, there would be no game on tv. 

Pat McAfee recently reacted to some of the top NIL deals in college sports. 

What Is Bad About NIL?

As it stands today, the lack of regulation around how much athletes can be paid is concerning. In 2022, Jimbo Fisher and Texas A&M landed the nation's #1 recruiting class. Of course, Fisher attributed the success to his staff, while outsiders pointed to the $25-$30 million that was supposedly organized by boosters to help support Fisher's efforts. 

Recently, Jaden Rashada, a high school senior quarterback, was supposedly set to make $250,000 per month as a freshman to play football at the University of Florida. In total, the deal was reported to be worth up to $13.85 million should Rashada stay for four years. Where this gets interesting is that Rashada had originally committed to the University of Miami, where he was slated to make $9.5 million.  When Florida came with a better offer, he flipped. However, the Gator Collective, Florida's NIL arm, backed out, and Rashada is now planning to attend Arizona State with no NIL deal. 

One could argue that this is the power of free market economics. You're worth what someone is willing to pay you. The flip side is that there is no limit. There are 125 division one college football teams and probably more than 100 have insignificant NIL budgets. Put simply: Programs that used to pitch recruits on their weight room, coaching staff, nutrition resources, academic support, etc. are now one trick ponies. NIL trumps all of these things. Pay up and be relevant or don't. 

Nick Saban made $10.95 million in salary in 2022. He's the highest paid University of Alabama employee, and it's not close. However, even Saban, who is arguably the greatest college football coach ever, can't compete with the pull of NIL. For anyone reading this, put yourself into the shoes of a 17 year old football recruit. You may love everything about the University of Alabama and Nick Saban's plan for your future. However, Alabama can pay you $100k/year. Texas A&M calls and says, "we'll pay you $1.5 million next year." Where do you go? 

What Needs to Happen

For starters, college sports aren't amateur athletics anymore. Those days are long gone. This is one of the most lucrative businesses in the United States. Take my prior example of Texas football's revenue of $103 million in 2012. Of that $103 million, $77 million was profit (Gaul). There aren't many businesses out there operating at a 75% profit margin. 

NIL needs to be regulated just like professional sports leagues have a salary cap. Can a team with a budget of $2 million beat a team with a budget of $100 million? Of course they can. We can look to major league baseball and the New York Yankees for that. However, this isn't healthy for college sports. The entire point of NIL was to put some money into the pockets of the players. It's happening, and that's a good thing. However, do we want the future of college sports in the hands of the richest alumni? We're certainly headed down that road. 

Andy Wittre, of On3 Sports, recently reported that NIL collectives are being brought into the recruiting process for college basketball. It makes sense: if the money is a big part of the "pitch," then it doesn't make any sense to shy away from it. Wittre reports that top college basketball programs have $3 to $4 million to work with and that top offers are in the $800k range. 

We recently wrote about the appreciation in college basketball coaches' salaries. I'll save you a click and simply say that it's massive. With that as the precedent, college NIL deals are going to explode in the next couple of years. If the NCAA doesn't put some measures in place quickly, the NCAA will quickly become the third most lucrative league in the world behind the NFL and NBA.