BUDGETING

NIL Deals: Collective vs. Commercial

House vs. NCAA was a landmark case for college athletes in all sports. It set the precedent for current student-athletes to be paid by their respective schools for the work they perform and the wins they help achieve. The focus of the ruling placed student-athlete payment responsibilities on the educational institution by requiring direct payments to the athlete as part of revenue sharing. Another ruling, NCAA vs. Alston, addressed name, image and likeness (NIL) deals, and has allowed college athletes to use their personal brand as a source of income like pro athletes — something that was previously against regulations. We’ll dive into the two of the main ways NIL college athletes can be paid and a few important considerations for getting paid and striking deals.

Commercial NIL

Commercial NIL opportunities are essentially brand deals and endorsements with a third party. When an athlete makes a name within their sport because of the way they play, lead or advocate, brands get excited to share that magic. By hiring an athlete for their recognition, a brand believes it will help them gain access to a new market for consumers, increase visibility and trust, and lead to increased revenue. Commercial brand endorsements are a great way to supplement collective NIL salaries, school revenue sharing and increase marketing opportunities. One important part to commercial NIL deals is understanding this is considered income, even if an athlete is gifted items or trips. That means student-athletes must actively keep track of what they have been gifted and account for that as payment when it comes to tax filings.

Collective NIL

Alternately, athletes can receive payments paid by college collectives, based upon the value to their team. Most often, collective funds come from alumni of the college, supportive fans, local businesses and wealthy boosters. The benefit to collective payments is that they often model professional salary structure and make it easier to document for tax purposes, along with having consistent income. However, there is a cap to how much an athlete may earn under a collective deal, while commercial deals are only limited to the number of offers given.

Important Considerations

As any athlete begins — or continues — to use their NIL as an income stream, there are many important factors to consider. While the list here is not exhaustive, it’s a starting point to get any athlete thinking about other considerations.

• Be aware of any restrictions when signing a deal. A major one could be because it would compete with the current contract (clothing or shoes brands) signed by your school.
• Understand that specific industries may be off-limits to you such as gambling (in-person or online), tobacco, etc.
• Not all sports are viewed the same, but that doesn’t mean there are no deals to be struck. Even if your sport isn’t considered a major college sport, there are brands still looking for athlete power.
• Remain professional. An NIL deal means an athlete is now a brand, which means what they do out of the game is just as important as what they do in it.
• Be tax savvy. If taxes are daunting, then it might be worth considering hiring a bookkeeper and accountant.
• Be mindful that NIL deals are governed by not only the NCAA but also by specific state laws.

No matter what path a student-athlete selects when it comes to their NIL payment, it may be most important to find a reputable agent or agency to help navigate the world of NIL. Additionally, staying up to date with NIL changes is important because it helps a student-athlete better understand the conversations that their management teams are having.

Sources:

(https://www.espn.com/college-sports/story/_/id/45867746/college-sports-commission-loosens-prohibition-nil-collectives-payments

https://www.sportingnews.com/us/ncaa-football/news/how-does-nil-money-work-college-football-rules-athletes/ed5085f9f5c6fcf01db52586

https://www.mcneeslaw.com/nil-direct-pay-basics/

https://www.investopedia.com/why-are-college-athletes-getting-paid-11770657