What’s a NIL Deal? How Amateur Athletes Make Money as Schools Rake in Billions in TV Rights

Read our Advertiser Disclosure.
Contributor, Benzinga
August 25, 2022

On August 23, Alabama head football coach Nick Saban signed an 8-year, $93 million extension, making him not just the richest current coach in college football but the wealthiest coach in the history of the sport itself. Saban has led Alabama to six national championships since becoming coach of the Crimson Tide in 2007, so most Alabama fans and alumni consider the deal to be well worth it, especially considering the football team’s $180 million revenue total in 2021.

Until recently, there was one particular group on the outside looking in regarding payment - the actual football players themselves. The National Collegiate Atheltic Association (NCAA) not only barred players from receiving payment directly from their teams but also forbade any type of endorsement or marking campaigns for compensation. In fact, if a player were caught receiving any type of compensation (even a free tattoo), they would lose their eligibility to play college sports. Naturally, this was not a very popular bylaw for the athletes. 

That all changed in June 2021 when the Supreme Court struck down the bylaw preventing athletes from earning endorsements. College athletes still cannot be paid for performance, but they can use their name and image to score advertisements and business endorsements - a concept known as a Name, Image, and Likeness (NIL) deal.

What is a Name, Image, and Likeness (NIL) Deal?

If you bowled a 300 at your local bowling alley and the owner of the alley wanted to pay you to appear in a commercial promoting the venue, you’d be free to do. But until 2021, if you played for a college team, you would have been unable to accept the offer due to the risk of losing your ability to play. 

In June 2021, the NCAA vs Alston case was heard by the Supreme Court, who unanimously ruled against the NCAA. Players gained the right to receive compensation for using their name, image, and likeness to score endorsements, sponsorships, paid appearances, and other perks previously banned by the NCAA. Only two restrictions remain set in stone - no college player can be paid for their athletic performance and no school can offer payment in exchange for enrollment in the sports program.

NIL has already altered the college landscape drastically. Schools don’t just compete for prospective athletic recruits, but they also must provide opportunities for the top recruits to earn sponsorship deals from local and national businesses. College sports has always been big business, however the lines between sport and commerce have been even more thoroughly blurred.

Pros and Cons of NIL Deals

Players earning the right to take endorsements seems like a no-brainer (hence the unanimous Supreme Court ruling), but there are some other benefits and drawbacks to consider when debating the new NIL agreements.

Pro: Players Gain More Rights Over Their Image

The best college athletes are often granted scholarships to attend school for free, but the tuition price paled compared to the amount of revenue schools were bringing in from football activities. With NIL in place, college athletics rid itself of the notion of ‘amateurism’ and allowed players to pursue business interests outside of football, which is something a capitalist society should allow all private citizens to do.

Con: Increases Gaps Between Bigger and Smaller Programs

College sports have a hierarchy, with the top schools landing the top athletic recruits. The type of player recruited by Nick Saban at Alabama will be superior talent-wise to the type of player recruited by, say, Greg Schiano at Rutgers. The best players always gravitated to the most successful college programs, but that trend may increase even further as larger schools will be able to offer more sponsorship opportunities than smaller, less successful ones.

Pro: Players Without Pro Futures Can Earn Compensation

There are over 100 Division 1 college football programs in the United States, each rostering more than 100 players. In professional football, 32 teams exist and they can have a maximum of 53 players on the roster. You don’t need a strong math background to see that the overwhelming majority of college athletes will NOT enter the realm of professional sports. NIL allows these players to profit off the short time they spend on the college athletic fields. 

A good example of this is the Saint Peter’s basketball team, a tiny non-name college from North Jersey that advanced to the Elite Eight during the 2022 NCAA tournament. The odds of a player from Saint Peter’s reaching the NBA are slim to none. But thanks to NIL, the players on that Cinderella-like squad can now cash in on their success through sponsorship deals and endorsements, like diminutive point guard Doug Edert who scored a deal with Buffalo Wild Wings. 

Con: Formation of School ‘Collectives’

Money has always been interwoven through college athletics - just Google ‘college football bagmen’ if you want a glimpse at some of the stuff going on behind the scenes. NIL has unfortunately given birth to collectives, or groups of well-funded alumni who can contact players and offer financial compensation in exchange for attending their alma mater and playing sports. Wealthy alumni who influence the decisions of young athletes are known as boosters and the NCAA forbade them from contacting players in the past. Uneven regulation between states also muddies the waters of what’s legal and illegal regarding collectives contacting and recruiting prospective players.

About Dan Schmidt

Dan has written about a wide range of topics including stocks and investing, cryptocurrencies, banking, student loans, and credit cards.