Schools’ Purchase of NIL May Grow Revenues, Split College Sports
Trend lines are pointing towards the professionalization of college sports, “Either through legislation at the NCAA level, the state level, the federal level or forced by litigation,” said Andrew Donovan (VP, collegiate partnerships, Altius Partners). Just yesterday, the National College Players Association (an advocacy group for college athletes) filed a discrimination complaint with the U.S. Dept. of Education as part of the group’s efforts to push pay for play. That comes on the heels of the NCPA urging the National Labor Relations Board to classify athletes at UCLA and USC as employees. As pressure on the amateurism system mounts and with NCAA collectives multiplying, the former on-campus compliance officer believes college sports is moving “closer and closer [to a breaking point. One that] will eventually result in institutions having the ability to purchase and manage athletes’ NIL rights.”
JWS’ Take: As it stands, there are few guardrails in place on NIL. “No pay for play. No recruiting inducements. There must be a quid pro quo,” Donovan rattled off (i.e. no handouts). “And the one other prong is the institution cannot provide compensation in exchange for use of the athletes’ NIL.”
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But the Altius Sports executive says the last prong is “one to watch,” in terms of potential change, as college sports’ amateurism model continues to face attacks from a variety of directions. “You see what is happening [in California]. You have ongoing court cases with House and Johnson. We’re trending in a direction where the [NCAA] might be forced to give athletes more rights.” It should be noted the NCAA recently called for a review of NIL practices out of concern that rules prohibiting booster involvement in NIL deals were being violated.
In addition to the external pressures mentioned, the latest trend within college sports, the formation of NCAA collectives, could serve as a catalyst for change. Collectives are ungoverned, unlicensed booster groups that pool donor funds and facilitate income-earning opportunities for college athletes (see: the $8 million NIL deal awarded to a ’23 recruit, believed to be new Tennessee commit Nico Lamaleava). “There are varying degrees of institutional involvement [with these collectives],” Donovan explained, “depending on the state laws, the institutional policy and quite frankly, [the schools’] appetite for liability risk and Title IX risk.”
Considering the NCAA’s track record in court cases over the last decade (see: O’Bannon, Alston), some school administrators see institutions taking over the management of athletes’ NIL rights as a means of preserving amateurism—at least temporarily. The thinking is, Donovan said, “If we take control of this and offer more benefits to the athletes, 1) we might have an opportunity to win some of these lawsuits based on some of the proactivity we’re showing, and 2), [maybe we can] slow down the stream of lawsuits that are coming in.”
The potential trouble associated with NCAA collectives (Miami and BYU are already under investigation for NIL-related programs) has others in favor of taking on a greater role in the management of NIL rights. There is an “underlying element of the schools feeling like they know what is best for their institution and the athletes,” Donovan explained.
Increased control would also allow schools to better manage the donor dollars coming in. Bryan Felt (director of athletics, Seton Hall University) said some administrators are concerned about the emergence of collectives. Donors could in theory “start giving to [those organizations] and say they aren’t going to give to the athletic department anymore.”
While the desire to preserve amateurism and to regain the control they have become accustomed to having may be greater priorities, buying up athlete NIL rights would also give college athletic departments opportunities to expand existing partnerships and grow the revenue pie. In theory, schools would be able to use an athletes’ NIL “for [commercial] promotions associated with the program and potentially for the creation of commercially licensed products,” Donovan said.
The athlete activists who made NIL possible in the first place likely won’t like the perception of schools taking a cut of the proceeds away from players. But Felt thinks the idea could make sense for some athletic departments. “Could [a school] want to have more say in the process? Could [a school] want to do some more things to streamline the revenues out of [NIL]? I could certainly see schools attack it from that angle as a way to benefit the student-athlete and the athletic program.”
Donovan doesn’t pretend there is a universal desire among schools to manage NIL rights, not even within the major conferences. “There are a lot of administrators out there who don’t like the direction things are going [in terms of amateurism]. And moving to a model whereby the schools could potentially buy NIL rights, you’re kind of [going] full-blown professional [at that point],” he explained.
Others have concerns as to where the money to pay for the NIL rights—and the personnel needed to manage them—would come from (remember, this would be guaranteed income for the athletes).
But he says there is a small segment that recognizes the revenue opportunity and would prefer to control their own destiny. “Some of the bigger schools with larger budgets, that are frustrated by the lack of innovation across the board, could get to a point over the next year or so where they say rather than have outside forces manage and control [NIL], we’ll just go in and manage the athletes’ rights [ourselves].” Felt said he could “see [that] happening at the larger programs, which is where it makes sense” based on the number and size of deals at such programs.
Should that occur, Donovan believes it would lead to a split in Division I. “In order for [college sports] to move forward in a way where some of these benefits are being provided in a more equitable fashion, there has to be a shift,” he said. It is simply not possible for a school with a $50 million budget to manage its athletics department in the same (or an equitable) way to a school with a $200 million budget, never mind compete on the field. The NCAA’s new constitution, which gives each division (and by proxy, the schools) control over a portion of their bylaws, opens the door for it to happen.
Donovan isn’t necessarily advocating for that outcome. But he says, “It is prudent for schools to recognize the possibility and consider how they may operate and maintain and enhance success under such a model.”
It should be noted there could be some unintended consequences associated with athletic departments buying and managing student athletes’ NIL rights. “What would it mean for the nonrevenue sports? Are they still competing at the Division I level or do they become club sports on campus?” Donovan wondered. Some schools may decide not to incur the expense if they cannot turn a profit on the athlete’s rights.
