How NIL Rights May Re-Slice College Football’s Money Pie

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  • Andrei Nilă
    Association football player

The early signing period has come and gone for college football programs. Unlike in years past, NCAA athletes are now able to sign NIL (name, image and likeness) deals and earn income off endorsement deals and merchandise sales without losing their college eligibility. Obviously, this is good for the athletes, but what will be the effect on the incomes of other people who make a living off of college football, particularly college football coaches?

There’s a pie of money spent by fans, including boosters big and small, that goes to many entities, from colleges to local businesses, media companies, athletic apparel companies, sports drink manufacturers, etc. This pie needs to somehow be divided among various interests.

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Will this pie grow with players having NIL rights? Does having players own their NIL rights increase fan willingness to pay? Simon Rottenberg would have his doubts, I believe.

Rottenberg’s Invariance Hypothesis basically says that players tend to play for the team that values them the most, regardless of who owns the legal right to use playing talent. Changing who owns the right to use playing talent (from teams to players or vice-versa) won’t alter the distribution of talent, but it will alter the distribution of money generated by playing talent.

In the case of NIL, which is a right tied to playing talent, the right to earn NIL income is transferred from colleges to athletes. Transferring this right from colleges to players does not change which programs value which players the most.

Presumably, Alabama is the team that values Heisman-trophy winning quarterback Bryce Young the most, whether Alabama owns Bryce’s NIL or Bryce owns it. Something similar can be said about the Texas Longhorns football program and its entire group of offensive linemen. If the Invariance Hypothesis holds, we won’t see a great reshuffling of talent across the college football landscape solely due to the transfer of NIL rights, and the pie of money won’t grow. But its distribution certainly will change.

College athletes can now get a slice of the pie, above the table and out in the open. We can already see how this will play out in the sports wilderness. For instance, some Texas Longhorns boosters have creatively set up a nonprofit that will pay each offensive lineman on the Longhorns roster a $50,000 stipend. Alabama’s Young reportedly has endorsement deals (such as one with Logan’s Roadhouse) totaling at least $1,000,000. Tom Brady’s new apparel company has signed endorsement deals with nine college athletes.

Under previous NIL rules, this money would have gone to the colleges, which would, in turn, give some to the coaches as salary. Now it can go directly to players. If Rottenberg’s Invariance hypothesis holds, the money pie will not grow, and giving the athletes a slice means somebody else’s slice must be smaller. That could well mean that, all else equal, players getting their NIL rights will have a negative effect on college coach salaries.

Phillip A. Miller is a Professor of Economics at Minnesota State University, Mankato, and author of the Market Power blog.