Inevitable growing pains will inform, and benefit, the landscape of NIL
On April 12, 2021, Altius Sports Partners CEO + Founding Partner Casey Schwab authored the following op-ed article in Sports Business Journal.
Prior to the 1951 college football season, the NCAA voted to prohibit national broadcasts of football games. Professional leagues shared the NCAA’s concern that broadcasting sports into American living rooms would decrease attendance and lead to a drop in ticket revenue.
Fast forward 70 years. National broadcasts led to increased attendance, exposure and popularity of the sports, drawing in billions of dollars more in brands paying to align with sports leagues for sponsorships and merchandise.
In cliché form, the pie got so big that it needed a bigger ship for the rising tide.
The parallels with name, image and likeness regulations in college athletics are clear. Most of the discussion on the revenue impact of NIL rules changes has centered on how the schools will ultimately lose. The underlying assumption is that it is a zero-sum game. Like the leagues’ concern over people not attending games 70 years ago, though, what if that is too narrow of a view?
The key is changing the tone of the conversation. But to achieve this type of growth for all stakeholders, we must approach the framework from a different starting point, while acknowledging the fundamental differences between college and professional athletics.
Playing to win vs. playing ‘not to lose’
One of the issues on the table is whether student athletes will be able to do NIL deals with existing corporate partners of schools. Those opposed to the idea argue that allowing student athletes to do NIL deals with school partners will incentivize such partners to shift their money to student athletes — and away from the schools.
If the rights are rolled out in silos, restricted from being used together, this might end up being true. But here, consider the NFL. The league partners with the players to sell sponsorship rights packages together, growing the budgets of their partners along the way (imagine the pie growing).
One example of this growth is cross-pollinating traditional sponsorships with media buys and branded content, combining the NFL’s intellectual property and the services of the highly marketable players, tapping into a broader budget pool from the partner. Another example is new licensing categories like nonfungible tokens (or NFTs). This emerging category could have minimal value with school IP alone, but by adding the power of student athletes’ NIL for highlights or imagery, the rights fees and royalties for both sides — schools and the athletes — will be much higher.
By allowing partners to use school rights alongside student-athlete NIL rights (for additional fees, of course), there is a premium added that makes the split of the collective buyer-side market more than either of the set of rights sold alone. The bar napkin explanation: 1 + 1 = 3.
Enticing new brands to the college market opportunities
NIL deals also have the potential for opening new markets to each respective rights holder. Consider a wearables company that advertises around the impact of its product on elite athletes’ performance. If college athletes at a Power Five school can get paid as brand ambassadors, that company very well may pay the school for use of its marks in conjunction with the collateral including the athlete.
This goes back to the power of brand recognition of athletes in their jerseys — like fans see them on game day — for ads. Taking the example further, it is also an opportunity for the school to generate revenue for distribution of the wearable product to its athletes, which is in addition to the revenue generated for use of the school marks.
Increased brand exposure for schools
Similarly, if student athletes can do NIL deals on social media in their school attire, it will garner measurable brand exposure for the schools. Consider the impressions generated by student athletes with millions of followers. If tapped into properly, this could unlock an entirely new market for school athletic programs to gain fans, followers and merchandise buyers.
Student athletes chose their programs over many others. It makes business sense for schools to recognize that allegiance and embrace the new opportunity so that everyone can prosper.
Impact on human capital in college sports
The last thing to make administrators optimistic is the flipside of the coin that many of them fear: an entirely new skill set needed for everyone working in college athletics.
Before the NIL discussion, understanding the difference between a Form 1099 and a W-2 or what to look for in a marketing deal were not required skills for working in college sports administration. When NIL rules go into effect, however, these questions (and many, many more) will come fast and furiously from the student athletes whom all administrators serve. This will surely add to already loaded plates of work.
But it also will provide professional development opportunities for everyone who works in college sports. A great example of this is Keith Sanchez, the LSU football coach who is now headed to law school to add NIL expertise to his recruiting and coaching repertoire, as reported by The Athletic. Every athletic department will need this expertise, both internally and externally, and this will create career growth opportunities across the board.
NIL rules changes are coming. With those changes, there will certainly be growing pains. But when it comes to commercial impact, the question is whether these changes can be framed in a way to provide opportunities for student athletes that also benefit the overall ecosystem, from marketing agencies and professional services providers to the schools themselves. With the right approach, we believe it can.