NIL Collectives: Help or Hurt | Arkansas Democratic Newspaper

When the NCAA lifted its long-standing ban on college athletes earning sponsorship money in 2021, there was no such thing as collegiate sports.

Today, endowment-funded organizations have become ubiquitous and a common way for athletes to make money, as name, image and likeness compensation has quickly evolved into a proxy for compensation – much to the chagrin of many college athletes.

With revenue sharing with college athletes looming on the horizon as part of the proposed $2.8 billion antitrust settlement agreed to Thursday by the NCAA and the nation’s largest conferences, the future of the collegiate teams appears uncertain even as the responsibilities they perform will become soon more important.

“One of the key functions of the collective is the proper management of wages in sports. And the skill set that has been developed will now be required in every school (power conference),” said Blake Lawrence, whose company Opendorse works with dozens of schools and more than 40 collectives engaged in NIL activities.

“Will schools hire key members of their collective to manage and transfer money, negotiate with parents and players, and then move it internally?” he added. “Or would schools hire the collective as their NIL agency and transfer some of their risk from the school to a third party to manage the distribution of these NIL payments?”

The revenue-sharing model proposed in the settlement — which still requires approval from a federal judge — and accepted by the NCAA, Big Ten, Big 12, Pac-12, Atlantic Coast Conference and SEC, would allow schools to direct up to 22% of a power league school’s average annual revenue to athletes . That works out to about $21 million a year and will grow as revenue increases over the course of the 10-year deal.

In a letter to Division I members obtained Friday by The Associated Press, NCAA President Charlie Baker estimated that athletes under the proposed model would receive between $1 billion and $1.5 billion in revenue annually.

The 22% limit has already attracted interest from those who support athletes’ rights. In the major professional sports leagues, the split between players and teams is approximately 50–50.

“Our expert said that in a world without NCAA regulations, athletes would receive 10% of broadcast revenues. We settle at 22%, so we set double the NIL value. You could say that this component is pay-play,” said Steve Berman, one of the lead attorneys for the plaintiffs in the House v. NCAA case, which is the subject of the settlement.

Berman said that if scholarships and other ongoing benefits for athletes are added to the new shared revenue, schools would spend about 45% of athletic revenue on their athletes.

Pay-to-play remains a touchy term for college athletes, especially as it relates to NIL and collegiate.

Instead of a model that pays athletes their market value, NIL filled that gap. Changes in NCAA rules intended to allow athletes to capitalize on their fame by promoting and sponsoring companies and brands have led to famous athletes earning hundreds of thousands of dollars through contracts with collectives for certain personal appearances and community service.

The NCAA is trying to implement new rules to encourage schools to host NIL classes on their own, which will allow athletic departments to be more involved in determining offers for their athletes. The NCAA also adopted NIL regulations that it hopes will provide greater transparency and accountability, including rules for disclosing transactions over $600 and creating a transaction database to help determine fair market value.

“I will say that we heard from some collectives and their reaction was: ‘Thank you. We are leaving the collective business,” Berman said.

If income sharing is to replace zero pay, some college administrators fear that collective payments will become a way to get around the 22% cap. Can the NCAA regulate this? Probably not without the help of federal legislation.

NIL enforcement is currently on hold after attorneys general in Tennessee and Virginia sued the NCAA, challenging rules prohibiting recruiting incentives and pay-to-play.

“Overall, I believe this agreement demonstrates the urgent need for Congress to act and provide more than half a million student-athletes across the country with a path to continue participating in athletics to obtain an education and develop life skills for the future,” the senator said. Ted Cruz (Texas) said in a statement Friday.

Spyre Sports’ James Clawson, who runs The Vol Collective for University of Tennessee athletes and won the NCAA’s review, said revenue-sharing dollars spread among all athletes would still leave top football players underpaid.

“Until there is a model where players are paid more equitably based on the revenue they generate, there will always be a need for a collective to complement the capabilities of athletic departments,” Clawson said.

Russell White, who heads The Collective Association, said college athletic leaders would be better off working with collectives rather than trying to put them out of business.

“Universities that connect with their collectives in any way… I think those who do it the quickest, in a true partnership, will see huge benefits,” White said.