Making (Business) Sense of NIL’s Fluid World

As college sports—like most others short of the PBR, the UFC and professional golf—wait on the sidelines for a chance to return to action as the COVID-19 crisis moves along, the debate over who, how and what will be involved in the valuation and implementation of “Name Image and Likeness,” or NIL, for student-athletes rages on.

Like many recent sport business debates, most notably those around CBD and sports betting, the political football of governance tied to revenue bounces from state jurisdiction to federal legislation and back again with no clear path in sight.

One path that is clear though is: if you are a student who happens to be a scholarship athlete, you will be able to be fairly compensated when a school, or a brand, or even a cause, wants to work with you. What that will look like and how the path to compensation works is still unclear, but according to almost all parties, including the NCAA, that day will be at hand for all.

Since California weighed in on athlete pay last year, 34 states have either introduced or passed their version of compensation legislation. The Florida Legislature passed a compensation bill on Mar 13 that is awaiting approval from the governor. If signed, it takes effect Jul 1, 2021, and would make Fla. the first mover in terms of athletes being able to market their NIL, be it by a third party or by themselves. (Other states such as Calif. and Colo. are not slated to take effect until the end of 2022.)

One of the ironies in the debate is that the center of knowledge, disruption and thought should be a college campus, with young entrepreneurial minds tied to best practices, coming together to lead.

Sadly, colleges on the athletic business side, often are the followers not the innovation leaders, with few exceptions. That means the opportunities will be driven from outside, be they large consulting groups like JMI or IMG College who control most (if not all) school media rights and will look to fold these new revenue opportunities into the mix; or others with a unique POV or expertise in the marketing of athlete or high level personalities to brands through social engagement or direct to consumer plays.

“While many details still need to be determined, every indication is that student-athletes will have the right to secure third-party representation for endorsement deals. Therefore, the brand would be working directly with an entity that is experienced in helping athletes monetize their NIL,” explains Sean Downes, VP, Business Development at Athletes First Partners, a growing brand advisory business whose clients include the NBPA, and sister firm of Athletes First, one of the most respected athlete talent representation firms in sports, especially the NFL. “In this scenario, it will be incumbent on each school to align their student-athletes with a reputable organization that represents the best interests of the athletes, but also has the acumen to build integrated NIL partnerships that drive measurable value for the brands.”

Will Wild West win?

How that school alignment versus the wild west of “representatives” chasing individual athletes is still a murky water, one which brands who don’t want to run afoul of NCAA eligibility will have to deal with. There is still more than a bit of caveat emptor that brands will have to deal with, so many may choose to stay with the conventional rights sellers rather than looking for the more engaged and entrepreneurial.

Brands being risk averse and working with familiar reps will be one option; those looking to disrupt the space and going direct to athlete…as we are seeing in the social space with companies like INFLCR and opendorse…will be another.

Then there is the market itself. Will it be massive for the future quarterback at the University of Alabama or the hoops star at Duke University?

Or, will a more under-the-radar and thus more nimble women’s volleyball player at UCLA or gymnast at Nebraska or baseball player at Florida be the one (or ones) to seize a moment and be a creative leader?

All of that remains up for debate at this point…along with the issues of ambush marketing and what exactly can or can’t be sold. (The most recent statement from the NCAA appears to have put the initial kibosh on the group licensing needed for video games for example, but that too is still unclear).

Some people see windfall, others see problems with the rich getting richer while the trickledown to those beyond the bigger schools and conferences being minimal.

“The big stars will of course have many opportunities thrown at them, but others will too,” said Zach Segal, a Denver-based entrepreneur, former ultimate Frisbee player at NYU and Brown Law School grad who last year launched, a popular platform that seeks to unite brands and athletes in an open marketplace. “Deyna Castellanos played soccer at FSU and has 1.4 million Instagram followers. Lexi Graber is a gymnast at Alabama. She only has 14,500 followers, but I bet many of them would want to know which Tuscaloosa gymnastics studio she likes.”

Act local…

That type of hyper-local appeal may even be more valuable for schools whose draw is much stronger regionally than nationally, and is something that can appeal to athletes outside of the major conferences as well.

It will be far more cost effective for a rising star at say, Villanova University in Philadelphia, to partner with one of the nearby Honda dealers or possibly the Delaware Valley Honda Dealers group than look for a national deal with Honda. The local pizza place in Clemson, S.C., is likely of greater interest to a rising Clemson track star than say, Domino’s.

But don’t forget global

“There are opportunities for all brands, but college athletes, and their followers, are often at a formative moment in their lives,” Segal added. “Brands that provide services for a lifetime may see the most benefit of deals with student athletes since they will be acquiring life-long customers. Banks, apparel companies, insurance companies, and local service providers come to mind, but that is not meant to be an exclusive list.”

While the long term “traditional” deals may seem to be the big moneymakers for NIL candidates, the one-off opportunities where athletes can capitalize on a cause and a moment in time may be a nice return for those who can capitalize, and the social space plays well to those opportunities.

Case in point

Last Nov at Cameron Indoor Stadium, in Durham, N.C., Stephen F. Austin University, pulled off the men’s basketball shocker of the year, stunning top-ranked Duke on their home floor in overtime, 85-83, on a last second shot by graduate student and Bahamas native Nathan Bain. The stunner thrust SFA and Bain into the national spotlight on an otherwise quiet night in sports, but it was Bain’s backstory, that his family had lost almost everything in Hurricane Dorian and there was a slowly performing GoFundMe page out there to help his family recover, that became the hook for the night.

While fans raised decent money, think about what could have been done to seize the moment if NIL was in place.

Imagine if Bain had the rights to his own likeness off of that moment. Perhaps someone uses his image and a Lumberjacks catch phrase for t-shirts that could be quickly turned around and sold for the cause. Maybe even tied to a local or national brand. Now, Bain can use his story and his image to transcend beyond fleeting moments of fame, leveraging those seconds of excellence (plus whatever else he does during his season) to grow his own brand, tied to a cause or not.

This wasn’t on the scale of UMBC shocking No. 1 seed Virginia in March Madness or Loyola of Chicago and Sister Jean making a run to the Final Four. It was just one amazing night in a very long college hoops season, but it was certainly an attention-getter, and a young basketball player from the Bahamas took advantage of one moment in time to capture the nation’s attention.

Coming down the road is a larger window of opportunity for the athlete’s themselves to take advantage of; carved out for those who can seize the spotlight, whether they are softball or soccer players, women’s basketball players or men’s golfers.

Right now that window remains closed, but it is certainly on the verge of being pried wide open.

Social media is an equalizer

“The thing that’s great about social media is that it keeps score and it keeps things fair when it comes to fair-market values,” Jim Cavale, INFLCR’s founder and CEO, told the Orlando Sentinel earlier this week. “Not just the quantity of followers but the quality of them—meaning how well they engage in the post; along with the activity of the student-athlete—how often they post and the variety of their posts not just their lives on the court but off the court as well. All that plays into the opportunities that they will or will not have on social media.”

As we move into a post-COVID world in and around sports of all sizes, the reassessment that brands are getting on ROI and all the messiness that will come with that look at reduced or reallocated budgets will come more into play. With that reset will come an examination of new, cost-efficient opportunities that may not carry the massive price tag (or the accompanying questionable return at such steep prices), that existed before Mar 12, 2020.

The reset most certainly will involve NIL and its evolving opportunity—although it is impossible to predict whether that will be a windfall initially, or a gradual increase in both spend and return.

The one given is that this marketplace has never been open, at least legally, before so what it will look like in 2021 will be different from 2025 and beyond.

However, it is a marketplace that is evolving even as the stadia are silent, and be it in the traditional advertising space or the social space, it could have a loud voice for brands, and even creative advisors and platforms, as we move into our new normal.

It is a transactional business we will watch closely as the coming months unfold.