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College NIL Firms Challenged by Speed of Free-Market Reform Push

daniel libit
·10 min read

Following the national rallying cry over college athlete financial rights reform, a number of name, image and likeness entrepreneurs have sought to demonstrate that they can be part of the intercollegiate industrial complex while at the same time serving as change agents and athlete advocates.

Twelve weeks since new NIL provisions went into effect around the country, these roles of diverging self-interest have appeared, for the most part, compatible. At least, that has been suggested by the stream of daily press releases hailing win-win deals between athletic departments and companies offering, through their technology or expertise, to maximize athletes’ extracurricular earnings while minimizing schools’ headaches.

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But given how quickly things have already moved on the college sports reform front—much faster than even some NIL consultants had anticipated—the next big debate is closing in: Does NIL go far enough?

The question threatens to complicate, if not fully rupture, the outward harmony between the nascent enterprise of NIL and a core group of reformers concerned with athlete labor rights. Up until now, these factions have appeared to operate in virtual lockstep, if not interchangeably, as they collectively sought to end the NCAA’s previous ban on athletes doing NIL deals.

Arguably, the larger compensation debate is already well underway following the Supreme Court’s unanimous Alston case ruling in June that the NCAA’s cap on education-related benefits violated antitrust laws. On Thursday, a Congressional subcommittee on consumer protection and commerce will take stock of the last three months of college athletes being permitted—through a patchwork of state laws—to earn endorsement money.

If Congress fails to establish a national NIL standard, or opts not to give the NCAA its long-coveted antitrust exemption, the courts and state legislatures could again be the ones to reset the goalposts for how athletes can get paid while in school. Last month, a federal judge in Pennsylvania allowed an antitrust lawsuit to proceed, in which 14 current and former college athletes have sued the NCAA and their schools, claiming they were unlawfully denied their status as employees.

“I do think it is going to a much more open market, laissez-faire system, and happening a lot faster than I thought it would,” said Casey Schwab, CEO of Altius Sports Partners, the NIL compliance and education consulting firm that launched last fall.

Schwab says he and his team of prominent advisers had initially assumed that sometime next year, there might begin to be a “slow movement” to expand athlete rights beyond NIL. That’s no longer his assessment.

“As we are seeing, I think that transition is happening before our eyes, and there is no going back,” said Schwab. “By 2022, we are probably going to be in a place where there are very few restrictions on purchasing of NIL rights.”

Schwab, who previously served as vice president of business and legal affairs for the licensing arm of the National Football League Players Association, says he is not a proponent of allowing players to be paid directly by schools. Though a self-avowed athlete advocate, Schwab still believes it is important to distinguish college athletes from pros.

“By ripping the Band-Aid off entirely and taking away all the restrictions,” he said, “you are going to see athletes get hurt in the process.”

Schwab continued, “I think if we go to pay-for-play, and if it becomes essentially players negotiating contracts, let’s just call it what it is—another version of professional athletics, and with that comes all the upside and downside of professional athletics versus the current collegiate model.”

In recent weeks, Sportico has interviewed a number of the key players in the growing NIL business, inquiring about both their philosophical stance on a free (or freer) market for college athletes as well as how their companies align to that potentiality. With varying degrees of certitude, the consensus opinion of this group is that the reform snowball should come to rest, at least for a while, at name, image and likeness. The outliers were NOCAP Sports’ co-founders Nicholas Lord and Casey Floyd, who said they were in favor of removing the remaining restraints of amateurism.

“America was built on a free-market economy, where any price cap is illegal and people are paid for the value of their services,” said Lord, a former Gettysburg College basketball player whose company allows schools to access its online platform for free, but derives revenue by charging sponsors that contract with athletes.

For the most part, however, the budding NIL business leaders expressed reluctance about any additional loosening of earning restrictions. Their rationales included concerns about the potential negative consequences to schools or athletes—especially those in the Olympic sports—as well as a generalized fear, once invoked in opposition to NIL, that this will eventually lead to the demise of college sports.

“As a former student-athlete, I think there is a lot of benefits to amateurism,” said Opendorse CEO Blake Lawrence, who played football at Nebraska. “Any movement to institutions being able to pay student-athletes directly could do a lot more harm than good to the overall ecosystem.”

Lyle Adams, a former college soccer player who founded the NIL compliance platform Spry, called pay-to-play “very dangerous.”

“We are dealing with young men and young women who are still growing and maturing,” said Adams, who also worries about the spectator experience.

“Deep down, as sports fans, we all like to [follow] the Cinderella story,” he said. “I don’t think those events happen as frequently, if they do at all, if we move to pay-to-play.”

Jim Cavale, CEO of INFLCR, says he hasn’t developed a “strong opinion” on more permissive athlete earning rules. “We have to figure out NIL first,” he said. “We are still seeing how all this money is flowing into the NIL world, and it is kind of early to advocate for other revenue [sources] for athletes.”

Athliance head Peter Schoenthal says that while allowing college athletes to earn endorsement deals has turned out to be a “no-brainer,” a market with even fewer restrictions could harm on-field competition.

“I think that creates advantages for certain schools,” said Schoenthal, a criminal defense attorney whose NIL compliance management software is now is use by roughly 40 athletic departments. “I could be wrong. I am willing to admit that my opinion could change.”

Nevertheless, as it now stands, the NIL industry seems most inclined to side with the NCAA against further deregulation, if push comes to shove.

“I think the reckoning will come sooner than later,” said Adams. “Hopefully, we can nip this in the bud.”

Ellen Staurowsky, a sports management professor at Ithaca College who has spent decades researching and espousing the market value of revenue-sport athletes, also sees this as a moment of truth: for anyone claiming to be on the side of the players.

“If you’ve got companies that are offering services to an athletic department and also saying they are advocates for athletes, at some point in time they are going to have to pick a side,” said Staurowsky. “They can’t be neutral parties in perpetuity.”

Ramogi Huma, the former college football player who was a driving force in the creation and passage of California’s first-in-the-nation NIL law, draws an even harder line.

“Advocating for today’s status quo means advocating for this racially unjust economic exploitation to continue,” said Huma, the executive director of the National College Players Association. “It’s my hope that everyone in the college athlete NIL space chooses to be part of the solution, even if they have to overcome a conflict of interest to do so.”

But Richard Karcher, an associate professor of sport management at Eastern Michigan, believes NIL firms are just too incentivized to keep the current labor restrictions in place.

“These [NIL] companies are benefiting from the size of the total addressable market and sheer volume of transactions,” said Karcher, which he sees as a product of athletes not getting paid directly by their schools.

Staurowsky doesn’t ascribe blame to any individual company or consultant: The problem, as she sees it, is with the space itself. Without a sufficiently financed college athlete association—the NCPA has operated on a relative shoestring over its history—or a recognized college athlete labor union, businesses can only turn to the existing bureaucracies of the establishment: schools, athletic conferences or the NCAA.

“Really, right now, the school is my only client,” said Cavale. “The athletes are the user, but the school is the one that invests in our tech product to build and manage their business.”

Cavale says it’s conceivable that INFLCR would, in the future, contract with a college players’ union, but he isn’t pushing for it.

“We have learned how to work well with schools because that is who we serve,” he said, “so I think we are fine with the model now.”

However, Staurowsky worries that the model now is one in which a growing NIL industry serves as scaffolding for a status quo that needs additional reform.

“If you are not independent, if you are not really completely on the side of the athlete,” she said, “then you are making compromises along the way, and those compromises are definitely going to slow things down.”

To be sure, college sports reform advocacy is not a monolith, especially when it comes to matters of athlete pay. And where one perceives a conflict of interest very much depends on one’s view of the current structure and its prevailing laws. For example, Opendorse has been the subject of some early industry grousing because it provides NIL consulting services to athletic departments while, at the same time, operating a marketplace for athlete deals—and paying college athletes to promote its platforms.

Does this constitute a conflict and, if so, one that anyone beyond Opendorse’s competitors should be concerned about? Though it appeared to aggrieve Florida Rep. Chip LaMarca, the main author of that state’s NIL law, this is not the kind of thing that rankles athlete advocates like Staurowsky and Huma, who take greater issue with the bylaws and statutes that treat college athletes differently than other students.

What happens if they get their way and a college athlete free market comes to pass?

As might be expected, the NIL industry leaders sought to distinguish their businesses’ capacity to accommodate such a future, while casting doubt on their competitors.

“Opendorse would be operating the same way we do today,” said Lawrence. “We build software for athletes. Everyone else builds software for the school that the athlete has to use.”

Adams, meanwhile, says Spry’s compliance software will evolve as necessary. “We have gone down this road of the dangerous but effective what-ifs,” he said.

Schwab says that his firm would likely continue to work on behalf of the schools, helping them “structure” commercial deals with their athletes. He says that Altius has been conscientious of where the wind is blowing, which is why the company’s most recently retained advisers come with backgrounds in commercial contracts and sponsorship licensing.

Still, as he ponders the future from the perspective of a college athlete advocate, Schwab acknowledges feeling a bit disoriented.

“Today we are paid by the universities to work on behalf of their athletes, so we view ourselves as working for the athletes, but the conduit is through the universities,” Schwab said. “If we end up in a world like professional sports, that could change, and then where we sit, I am not sure.”