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January NIL Update

by michelle
January NIL Update

NIL Trends: January Update

By Michelle Meyer

1/31/21

Wow! We’ve already made it through the first month of the year. And what a busy 31 days it’s been for the upcoming NCAA Name, Image, and Likeness legislation. Even with the NCAA indefinitely postponing the vote to change their rules, athletic departments, agencies, brands, and athletes are all moving full steam ahead prepping for the upcoming changes.

Here are the interesting things that I learned this month and some speculation of where we may be headed:

Athletic Departments Partnering with NIL Agencies is the New “Shiny Locker Room”

For years there has been an “arms race” of sorts between the universities in the power five conferences. Because the NCAA rules caps how much an institution can compensate an athlete (full scholarship plus cost of living stipend), athletic departments have turned to spending on extravagant locker rooms, new stadiums, athlete-only buildings, and other luxuries to entice top recruits into their programs.

With NIL legislation all but a sure thing, athletic departments are now investing heavily in third party brand agencies to prepare their athletes to monetize their name, image, and likeness. While education is super important for the athletes at this time, there are ulterior motives for these institutions striking these six figure deals: Recruiting.  

The universities who have moved quickly in this space are making their deals known publicly and I can imagine that most coaches have already incorporated the new brand development offerings into their recruit sales pitch. 

I anticipate more six-figure deal announcements this month from universities around the country. 

Financial Education Needs More Attention

An issue that is not currently being discussed much but may have huge consequences is how collegiate athletes will manage their finances once they’re permitted to monetize their NIL. The athletes of football and basketball are likely to see the largest deals and the statistics we have about their financial literacy at the professional level (NBA and NFL) is disheartening. According to Ryan Schachtner, a financial expert who developed an education program specifically for collegiate athletes in the NIL era, 60% of NBA players file for bankruptcy within five years of retiring. In the NFL, it’s even worse: 78% file bankruptcy or experience financial hardship only two years after leaving the league. Collegiate athletes are going to need support, guidance, and education to make informed decisions around their finances as soon as the new NIL legislation goes into effect. 

While universities are spending some serious cash to partner with brand agencies, I’m hopeful that they will also look at programs like Schachtner’s to educate athletes before it’s too late.

No Federal Bill in Advance of Florida’s NIL Law Going into Effect on July 1

With the pandemic still a main concern, a new President and Democrats taking control of the Senate, the Supreme Court agreeing to hear the Alston case, and legislators warning the NCAA about antitrust infractions, a federal bill being passed before July 1 seems highly unlikely. However, Florida’s “Intercollegiate Athlete Compensation and Rights” bill is slated to go into effect in just five more months.

The NCAA may try some desperate measures to delay the Florida bill from going into effect, mostly to prevent them from having to invest time and resources into figuring out how to handle the Florida schools playing by different rules. When California first passed their NIL bill (set to go into effect on January 1, 2023), the NCAA threatened to not allow California schools to compete in their championships. However, with dozens of states with NIL legislation either passed or in the works, that option is no longer feasible. 

If the NCAA and/or Congress can’t get a bill passed this year, it will be interesting to see if top recruits start committing at a higher rate to programs in Florida.

Federal Legislation is Likely to be More Athlete-Friendly

When the NCAA first went to Congress to ask for assistance with a federal bill that would trump state legislation, the Senate was controlled by the Republican party, which is historically friendlier towards the NCAA. They requested that a federal bill include antitrust protections and limitations on athlete endorsements, among other things.

Now that Democrats have a narrow majority in the Senate, they aren’t likely to get antitrust protections and there is a potential for benefits extending beyond name, image, and likeness to be included in a federal bill. If Senator Cory Booker gets his way and his College Athletes’ Bill of Rights is passed, athletes in profit generating sports may even receive a percent of the revenue that they help generate.

While I think a revenue share is unlikely, I think some other proposals in Booker’s bill could pass, such as the medical trust fund and scholarships extending until an athlete graduates.

States Continue to Propose and Pass NIL Bills

Massachusetts and Mississippi both proposed their own NIL legislation this month. While it’s likely that a federal bill will be proposed, passed, and go into effect before all but Florida’s, the states creating their own bills put increasing pressure on the NCAA and the Senate. Also, while no state will admit to it, I would imagine some states were worried that if they didn’t create legislation, they would put their state’s institutions at a recruiting disadvantage, even if only for a short period of time.

Another purpose of state NIL laws may be for each state to put forward their “ideal” which would benefit their universities the most. This way, a federal bill may incorporate pieces of each state’s legislation.

Conclusion

Everything around NIL is moving rapidly, except the most important piece: the actual legislation. I would encourage all collegiate athletes and PSAs to continue prepping as if you will be able to monetize your NIL on August 1, 2021. However, I wouldn’t be surprised if the “go into effect” date is pushed back at least six months, if not a year.

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