Dear Everyone, Please Stop Calling Donor-Funded Collective Payments “NIL”
Before diving into this, I want to make one point abundantly clear: I wholeheartedly believe that revenue-generating college athletes should be paid and paid well.
And the free market clearly agrees.
Over the past two years, we’ve seen numerous groups, known as “collectives”, emerge with the primary goal of compensating top athletes at their respective universities under the guise of “NIL”. This trend has proven a truth that the NCAA has relentlessly tried to downplay for decades: many college athletes have a market value that far exceeds their scholarship.
These collectives are typically founded and led by prominent supporters of the university and primarily pay their athletes using funds raised through donations. Now, if you know the NCAA’s history with boosters, you likely find how this has all played out as amusing as I do.
For decades and despite the NCAA’s rules, boosters have been compensating college athletes under the table. A McDonald’s bag full of cash here. A car delivered to an auntie over there. Most organizations would recognize this recurring issue as an indicator that there was a misalignment between current compensation (scholarship) and actual market value. Most organizations would look at their inability to successfully enforce their rules as a sign to modernize their business model and develop a compensation model that aligns more closely with market value. But not the NCAA. They doubled down. Tripled down. Quadrupled down. The NCAA has spent the last 40+ years doing everything in their power, including spending hundreds of millions of dollars lobbying our government, to not have to compensate any athletes beyond their scholarship.
Now, in the era of NIL, the very group that the NCAA has struggled to regulate for decades are the ones founding and running most of these collectives. Boosters are more empowered than ever, and the NCAA hasn’t really been able to do anything about it.
Oh, if this isn’t the consequences of the NCAA’s own (in)actions.
But I digress. This isn’t an article about all of that.
What I want to address is how labeling these donor-funded collective payments as “NIL” (and including them in NIL valuations) is having a negative impact on the commercial NIL market, resulting in less opportunities for athletes, schools starting to cut NIL resources, and is overall leading us down a road where NIL may be nothing more than retention payments for revenue-generating athletes and national brands partnering with high-profile influencer athletes.
The Value of NIL Brand Partnerships
Maybe I’ve drunk the NIL koolaid. Perhaps surrounding myself with NIL advocates, aka the admins and service providers who really believe in this, has created an echo chamber of sorts. But man, do I really believe that it’s going to be a damn shame if a real commercial NIL market never develops the way I believe it could and should.
First and foremost, athletes who engage in commercial NIL partnerships gain more than just monetary compensation. They develop professional skills, expand their networks, enhance their resumes, and experience personal growth. Depending on their field of study, NIL can even improve their understanding of classroom material by providing practical applications.
Through NIL, these young adults learn about marketing, sales, branding, negotiation, finances, contracts, and more. They make valuable business connections that can lead to full-time job offers after graduation. They discover their personal identities outside of being athletes, all while learning through hands-on experience.
For small businesses, NIL initiatives provide an affordable sports marketing opportunity and an ability to reach an engaged and hyper-local audience. Through working with college athletes, they can also gain strategic insights into the valuable yet hard-to-reach young adult demographic.
Universities can see benefits as well. Already, we’ve seen local businesses have successful campaigns with a school’s athletes and then expand their sports marketing efforts into a corporate sponsorship. Additionally, a high volume of recurring commercial NIL opportunities may reduce a school’s reliance on their donors to fund both their athletic department and their collective’s “NIL” payments.
And finally, and what really excites me, is that there are early indications that NIL is increasing interest in professional sports leagues, particularly in women’s sports. More fans translates to revenue growth and higher compensation for the athletes (you know, since they no longer have that pesky amateurism status preventing them from reaping the benefits of their sport growing in popularity). This would be HUGE for women’s sports.
The Problem with Calling Collective Payments “NIL”
The vast majority of coverage on “NIL” revolves around collective payments, often featuring stories like “every scholarship athlete gets a truck”, “this high school athlete has a 7-figure NIL valuation”, and “P5 collectives need to raise $Xm/year to keep their university competitive”.
It’s easy to see why these stories get so much attention. They involve substantial sums of money, feature high-profile athletes, and often carry a controversial or boundary-pushing element, making them highly engaging content.
So, what’s the issue?
The collective payments and valuations are being mistaken as the standard rates for NIL deals
Businesses see the headlines and believe that they are completely priced out of the NIL market or can’t imagine how a deal like that would help their company. And that’s the reality: Legitimate NIL brand deals can’t touch the generosity of the donor-provided collective payments, either financially or in athlete deliverables. It just wouldn’t make sense for them to do. Their purpose for engaging in NIL is a business one. They expect a return on investment that, at minimum, exceeds their spending, as any business would.
The belief that NIL isn’t an option for a business like theirs has resulted in many companies not even exploring the option.
This belief overwhelmingly impacts small businesses
Small brands are the most likely to:
- Have never engaged in sports marketing or influencer marketing before. Because of this, they don’t have a preconceived idea of what the “going rates” are for these types of initiatives. When they see coverage about “NIL” that is actually collective payments, they take it at face value.
- Have the individual in charge of marketing also wear other hats within the company. This person doesn’t have time to dig deeper and uncover that the commercial NIL market is not the same as the collective payment market.
- Not have a massive marketing budget. They may not be able to offer much beyond free product, which couldn’t be further from the compensation they believe they’re expected to pay.
Small local businesses are where the meaningful NIL partnerships lie for 99% of athletes.
The large majority of college athletes don’t have influencer-sized audiences or national reach.
But that doesn’t mean that their comparatively small audience isn’t valuable. College athletes generally have a highly engaged and trusting community, one that is hyper-localized to their college town and/or the city they grew up in, and is composed of both college sports fans and the hard-to-reach demographic of young adults.
For local businesses (e.g. a pizza place just off campus), partnering with college athletes to promote the restaurant makes a lot of sense. The pizza place will be able to reach college students, attendees of the university’s games, and other local residents. Because of the trusting nature of the athlete’s audience, the business will likely see a higher than usual conversion rate and be afforded the opportunity to turn these new customers into lifelong fans of their pizza.
Unfortunately, these local businesses aren’t even taking the first step towards creating their first NIL initiative.
Athletic departments could set the record straight, right?
Given the reach and influence that schools have within their communities, it seems like an obvious solution to combat these misconceptions would be for athletic departments to prioritize educating their local businesses. Unfortunately, many are instead actually contributing to the confusion by using their reach to ask for more donations to fund “NIL”.
Listen, I get it. I really do. College sports are big business and it can be detrimental to the athletic department’s bottom line to lose top talent to competitors. But local businesses that see this messaging about “NIL” certainly aren’t getting any closer to understanding how partnering with college athletes for NIL initiatives could benefit their business.
The overarching issue isn’t as much the school using their influence to ask for more donations to fund collective payments. They have to keep up with the newest “arms race”. The problem is the confusion caused by calling this “NIL”.
On top of that (and whether they really believe this or if it’s just an easier answer, I can’t tell), many athletic departments attribute the low number of legitimate brand partnerships to their athletes being “just not interested in NIL.”
Please. Given the opportunity, most college athletes would happily engage in NIL partnerships with local businesses they love. And they would accept an offer that is likely to give the brand the ROI that they’re looking for. But these opportunities just aren’t happening.
They may be at risk of never happening. Multiple schools have mentioned that they are already cutting back on their budget for NIL education and resources due to this “lack of interest”. And if my time as an NIL administrator taught me one thing, it’s that if athletes don’t feel supported by their school/coaches/teammates in pursuing NIL opportunities, that’s usually enough to stop them from participating.
Where Do We Go From Here?
Let’s change the terminology! Here are my suggestions*:
- For offers to high school athletes, we can call them “RIG” (Recruit Incentive Guarantee), “PIP” (Prospect Incentive Payment), or “RIC” (Recruit Incentive Compensation).
- For transfers, let’s use “TAP” (Transfer Acquisition Payment) or “TAG” (Transfer Acquisition Guarantee).
- We can call payments aimed at retaining athletes “ARC” (Athlete Retention Compensation).
I think these acronyms better encapsulate collective payments and can help alleviate the current confusion around what “NIL deals” actually are.
Thanks for your consideration,
PS. Admins – Please consider supporting your business communities. I promise you it’ll be worth it. If you need some guidance or ideas for getting started, I share a “blueprint” of sorts here.
*While these suggestions reflect exactly what these payments are, I acknowledge that they never will actually be seriously considered because that’s the sshhhh, wink wink, quiet part.