December 31, 2023

The Evolution of NIL Deals: Is There a Dark Side?

On July 1, 2021 the NCAA officially gave student athletes the NIL green light, allowing them to monetize their name, image, and likeness. Fast-forward to 2023, and student-athletes like Livvy Dunne and Bronny James are signing million dollar deals with mega brands like Nike, Under Armour, and Adidas. When NIL was first introduced, not many people could have predicted this high of an earning potential. While the evolution of NIL deals is a great financial opportunity for student athletes, the ruling also poses negative effects with athletes transferring for bigger deals and the increased risk of student-athlete exploitation. 

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Student Athletes Get Their Payday

The NCAA and member schools have financially benefited from student athletes for decades, and NIL finally gives student athletes a piece of the pie. Some of the deals that these student athletes are securing has the ability to change their families' lives. Anthony Leal, a basketball player on the Indiana Hoosiers, was able to help his sister pay off her student loans because of the money earned from NIL deals. Athletes like Leal are finally getting a chance to capitalize on their personal brand’s popularity.  

We’ve also seen college athletes profit from commercial appearances as part of their NIL deals. Caleb Williams, for example, appeared in a series of Wendy’s commercials where he stood on a podium and announced that he was "transferring to Wendy’s." While Williams would not disclose the compensation amount, he did admit that payouts from NIL opportunities have “changed his life.” Iowa women's basketball star, Caitlin Clark, has also benefited from these brand commercial opportunities. Clark was the first college athlete to sign with State Farm and has appeared in a series of commercials quipping their signature line: “like a good neighbor State Farm is there.” Clark said that her deal opens up other opportunities for female athletes and helps to grow the women's game.

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The Transfer Portal Problem

While NIL gives student-athletes more financial opportunities, not everyone is a beneficiary. Since NIL is now a factor in college recruitment, larger teams are using its appeal to lure elite level players in ways smaller schools can't. We are seeing this most prevalent in college football as more and more players decide to transfer schools with more favorable NIL deals. When the transfer portal opened up this year, a total of 538 scholarship players entered the portal, which is an 18% increase from last year's opening day. Top players in the portal attract interest from SEC, Big Ten, and ACC schools, which, due to their size and brand appeal, can provide more lucrative NIL deals. The evolution of NIL has favored major schools, giving them an edge in recruiting top talent and adversely affecting smaller schools that struggle to compete financially for players.

We are currently seeing this play out in real time with Cameron Ward’s transfer out of Washington State. The sought-after quarterback is predominately considering ACC, Big Ten, or SEC schools. During meetings with these schools, they’ve all emphasized the potential NIL earnings he could make by joining the squad. Miami is currently leading the race, but regardless of his choice, Ward is expected to secure a seven-figure NIL deal with his chosen school. While moves like these financially boost players and top football programs, they limit opportunities for smaller programs and emphasize money over the spirit of the game. 

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Risk of Exploitation

With newfound opportunities to profit from their name, image, and likeness, student athletes face a risk of exploitation due to their limited business knowledge. Given their youth and lack of expertise in contracts, caution is essential when dealing with brands or player representation groups. It's disheartening to see college students potentially exploited, emphasizing the need for genuine concern for their well-being in these engagements.

This exact situation transpired last year when former Florida Gator Gervon Dexter signed an NIL deal with Big League Advance Fund II, agreeing to a payment of over $400K. The deal required him to pay 15% of his pre-taxed NFL earnings for the next 25 years. Dexter, drafted by the Chicago Bears, is now suing to void the agreement. His legal team cites violations of Florida's NIL laws, lack of licensing in the state, and failure to notify the University of Florida within 72 hours. This case underscores the importance for all student athletes to be aware of potential negative situations that could impact their future. 

While NIL is an undeniable financial asset for student athletes, the rule book is still being written. As we dive into the new year, we'll see the structure of NIL continue to evolve. New regulations may come into play with NCAA's recent proposal to allow schools to pay athletes in ways not directly tied to educational resources. The NCAA claims these new rules can help create a model for greater governance over NIL in the future. The proposed changes seem like good news for student athletes, but only time will tell if this developing structure works in their favor.



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