The Story of Name, Image and Likeness
On July 1, 2021, the National Collegiate Athletic Association (NCAA) adopted a uniform interim policy that allowed student-athletes to benefit from their name, image, and likeness (NIL) without jeopardizing their NCAA eligibility for the first time in its 117 years of existence. With pressure mounting from several successful judicial challenges in recent years (see: O’Bannon, Alston) and a parallel surge of NIL legislation being passed at the state level, the policy suspended the NCAA’s existing NIL rules grounded in the upholding of amateurism at the college level, and it offered the following guidance—effective immediately—for all incoming and current student-athletes:
- Individuals can engage in NIL activities that are consistent with the law of the state where the school is located. Colleges and universities may be a resource for state law questions.
- College athletes who attend a school in a state without an NIL law can engage in this type of activity without violating NCAA rules related to name, image and likeness.
- Individuals can use a professional services provider for NIL activities.
- Student-athletes should report NIL activities consistent with state law or school and conference requirements to their school.
In a press release following this landscape altering move, former NCAA President Mark Emmert hailed the policy’s adoption as “an important day for college athletes,” but underscored the Association’s intent to continue working with Congress in pursuit of federal regulation. In other words, Emmert and other members made it clear that while the door was now open for student-athletes to profit from their NIL, the NCAA had no plans of relinquishing their long-held authoritative power without a fight.
Today, the NCAA is still pushing for congressional action that has yet to come. What was intended to be a short-term, soon-to-be-supplanted directive, the interim policy remains in place, and the NCAA has offered little in the way of additional guidance since its adoption. As a result, NIL activity has skyrocketed across its hundreds of member institutions with participating parties operating in an environment akin to “The Wild West,” largely free of significant oversight and clear boundaries. Such free range being afforded to those engaging in the marketplace has been an early catalyst for big spending, and student-athletes have been quick to exercise their newfound rights. Year one of NIL activity yielded earnings of $917M and are expected to clear the $1B mark in year two. Men’s football and basketball have accounted for nearly 67 percent of all NIL activity to date, and the highly touted stars in each respective sport have certainly reaped the benefits. Former Alabama Quarterback and Heisman trophy winner Bryce Young, for example, entered lucrative partnership agreements with the likes of Dr. Pepper, Nissan, and Beats by Dre (among others) in 2022 and earned a reported $3.5M in NIL compensation. Female athletes have also been shown to have undeniable star power, with LSU gymnast Livvy Dunne netting an estimated seven figures in NIL money and LSU basketball player Angel Reese securing a whopping seventeen NIL partnerships with brands such as Bose and McDonalds.
While the stars and their cash rich deals are what typically grab headlines, star players are a fraction of the nearly 460,000 college athletes across the U.S. who are now eligible to engage in NIL activities and, in turn, are not representative of the norm. Though data remains limited due to the recency of permissible NIL activity and the absence of a central framework for how and when deals should be reported, the average NIL deal valuation is estimated at about $650 per student-athlete, per activity. Social media partnerships have and will continue to dominate the NIL space, accounting for nearly two-thirds of all NIL activity, and often serve as an easy access point for local mom-and-pop businesses to engage in the marketplace without requiring a significant financial investment. Local brands have shown a particular knack for finding creative, niche ways to leverage individual players’ NIL, evidenced by deals like SOS Heating & Cooling partnering with Nebraska freshman wide receiver Decoldest Crawford for a television ad. Teamwide deals have also become more commonplace, with programs securing partnerships that effectively allow them to provide their entire roster of players with a “salary” in the form of uniform NIL compensation for all team members. In summary, NIL activity has accelerated since the adoption of the interim policy and, absent some form of sweeping legislation that allows for the NCAA to claw back some of its authoritative power, there are no signs of it slowing down.
NIL Notable Developments & Emerging Trends
After nearly two years of permissible NIL activity, certain trends have emerged as the landscape has taken shape. One of the more notable developments is the emergence of “collectives” and the prominent role that they now play in the NIL marketplace. According to the Internal Revenue Service (IRS), “NIL collectives can be described as (third-party) entities affiliated with, yet independent from, a college or university that generates funding to support NIL opportunities for student-athletes.” As of January 2023, over 200 collectives are known to exist in the NIL ecosystem and—to the NCAA’s concern—have become increasingly involved and important in the scope of NIL activity. Typically founded by well-known alumni and supporters of a college or university, “collectives generate and pool revenue raised through contributions from a wide variety of sources, including boosters, businesses, fans and more,” and then use the funds to create opportunities for student-athletes to leverage their NIL rights for compensation. The involvement of “boosters”—individuals, independent agencies, corporate entities or other organization who participates in or promotes an institution’s intercollegiate athletics program—in the recruitment of student-athletes has always been forbidden under NCAA bylaws, but its adoption of the interim policy effectively opened an unintended loophole for prominent university supporters to attract top recruits to their respective schools through NIL deal offerings.
The NCAA’s concern over collectives acting as facilitators of prohibited pay-to-play arrangements grew large enough by May of 2022 for the governing body to issue clarifying guidance regarding third party involvement in NIL activities. Without citing collectives by name, the supplementary guidance made it clear that NCAA collectives are subject to the same rules as boosters and are precluded from engaging in recruiting activities with potential student-athletes. More specifically, collectives cannot facilitate NIL agreements that are guaranteed or contingent on a student-athlete’s initial and/or continuing enrollment at a particular institution, nor can they provide compensation or incentives for athletic performance, achievement or membership on a team. While seemingly straightforward in theory, the policing of such conduct has proven to be a difficult task in the NIL era, and almost nonexistent as a result. As collectives have aggressively pursued top talent across the nation on the back of promises of lucrative opportunities awaiting those who choose their affiliated universities, the interim policy’s continued governance, combined with the fear of pursuing (and potentially losing) further legal actions, has left the NCAA in an unfamiliar position of weakness – devoid of the requisite power to effectively pushback.
Collectives becoming both emboldened and central to the NIL dealmaking process has introduced a new wave of legal issues to be addressed, most notably the question of whether a collective is legally bound by its promises. The recruitment saga of 2023’s No. 27 high school football recruit, Jaden Rashada, is particularly illustrative of this notion. After initially committing to attend the University of Miami, Rashada was reportedly offered a $13.85M NIL deal from the University of Florida-affiliated Gator Collective. The offer spurred Rashada to decommit from Miami and subsequently sign a national letter of intent to attend Florida. When the mega-deal unsurprisingly fell through just months later, Rashada requested (and was ultimately granted) a release from his letter of intent, eventually committing to attend Arizona State University. Rashada’s situation was described as “the first public, high-profile case of a collective reportedly failing to keep its promise to a player,” and it certainly raises some interesting questions. Can a collective be held liable for failing to uphold its promise if a student-athlete relies upon said promise in deciding to attend a specific university? Does a university have any power to hold student-athletes to their commitments after they’ve signed a national letter of intent? What about when a student-athlete decommits from one school and commits to another that is offering him a sizable NIL deal as in the case of Rashada? Could there be grounds for the school left empty handed to make claims of tortious interference? It remains to be seen how these questions, along with others that are sure to arise, will be addressed moving forward.
NIL Marketing Agencies
In addition to collectives, other notable developments include the formation and involvement of marketing agencies in the NIL marketplace, and NCAA member schools finding new ways to integrate NIL activity more heavily into their athletic infrastructures. Professional sports agents have long been prominent figures in the sports world, but as market trends have solidified over the past two years, new NIL-specific marketing agencies that cater specifically to student-athletes and influencers have started to emerge. While permissible NIL activity has certainly caused a gold rush of sorts, many traditional sports agents and agencies have been less enthusiastic about getting involved in a space that is largely driven by smaller deals which pale in comparison to professional player contracts and endorsement deals. Such hesitancy has presented an opportunity for companies like Glacier Marketing Group—a group of young college professionals that pride themselves in marketing geared towards Gen Z—to enter as an alternative or supplementary option for those seeking to exercise their NIL rights. Rather than remain on the sidelines, agencies like these have chosen to embrace the unique qualities of the NIL marketplace and offer more targeted services such as helping student-athletes raise their social media stature to attract new deals.
NIL University Support
Many universities have similarly chosen to embrace the NIL era rather than exercise caution and invest significant resources into integrating NIL activity into their respective athletic programs. Clemson University, for example, built and opened a brick-and-mortar building dedicated to college athlete branding and education. Coined the Clemson Athlete Branding Institute, or “The CAB,” the 12,000-square-foot building will serve as an on-campus resource for student-athletes and offer services and space to aid marketing and content creation. It is the first dedicated NIL facility of its kind, and others are sure to follow. Universities have also started to develop NIL positions to address the issues and needs that this new space presents. In March of 2023, the University of Minnesota announced the hiring of Jeremiah Carter as Sr. Associate AD for NIL/Policy and Risk Management. In this new role, Carter will be primarily responsible for identifying and managing issues related to emerging structural changes within collegiate athletics. Duke University showcased similar adaptation in its hiring of Rachel Baker as men’s basketball General Manager. In a first-of-its-kind role for the program, the former Nike employee will assist players in the management of NIL opportunities and help develop their personal brands. In the world of recruiting where competitive advantage matters, universities are almost certain to continue to seek new, creative ways to bolster their respective NIL offerings.
Females Dominate NIL Activity
Over the last two years, female student-athletes have emerged as leaders in NIL activity. LSU gymnast Livvy Dunne, who currently boasts 7.5 million followers on TikTok, is one of the highest NIL earners, making a staggering $3.5 million from NIL deals. In March 2023, the Women’s NCAA Basketball Tournament produced record breaking audiences with two of the breakout stars of that tournament raking in the NIL dollars. Following the National Championship, which saw her LSU Tigers emerge victorious, basketball star Angel Reese’s NIL valuation skyrocketed to $1.3 million. The LSU forward, who won the Tournament’s Most Outstanding Player award, netted lucrative deals from Raising Cane’s and Dick’s Sporting Goods. University of Iowa’s Caitlin Clark, who set viewership records ablaze with her Curry-esque shooting, is another top earner, enjoying high profile deals with Nike and Buick. It is no secret why women dominate NIL deals; their social media followings trump their male counterparts. Bryce Young, the highest paid college athlete and Alabama quarterback, has 418,000 followers on Instagram. Dunne has 4 million. Reese has 2 million. Clark has 714,000. Female athletes’ ability to utilize social media means brands have built-in audiences for their NIL partnerships. Over the past two years, women in the NIL space have continued to prove they are better than their male counterparts at growing a personal brand and building an audience, exemplifying the power of being ready when the spotlight comes.
NIL Law Developments
When the NCAA issued its interim policy in 2021, finally allowing student-athletes to capitalize on their name, image and likeness, states raced to put laws in place to govern these deals with very little idea of what the marketplace would look like or what schools, students and businesses would do with their newfound freedom. Now, two years in, states have begun passing increasingly bold legislation that directly contradicts the NCAA’s policy. At the same time, at the federal level, the NCAA has been pushing Congress for greater national powers of enforcement.
State Law Developments
A new state bill in Texas, House Bill 2804, proposes to completely strip the NCAA of their enforcement powers against schools and collectives for NIL violations. While the bill still bans pay-for-play inducements directly, it shifts the power of enforcement from any outside institutions to the state itself. The bill allows collectives to give season tickets and other previously banned access benefits to donors. Considering recent NCAA guidance on enforcement, this new law seeks to preemptively protect high revenue programs and donors in Texas from what may be classified as recruitment inducement. The new NCAA guidance implies that its investigators are permitted to presume guilt until innocence is proven and the new head of the NCAA, Charlie Baker, has promised harsher penalties for NIL violations. Texas colleges feature some of the highest dollar NIL deals and feature some of college athletics most dedicated fans and donors, meaning some Texas schools could become high-profile targets for the NCAA to flex its new enforcement powers. The new state law would protect the institutions from NCAA enforcement, but there is concern the bill would amount to allowing schools to blatantly use NIL deals as recruitment with no fear of reprisal. It is expected to hit the Governor’s desk soon and could go into effect as early as July 1, 2023.
Meanwhile, in California, state legislators are pushing for student-athletes to be compensated as employees for the revenue they generate. Assembly bill 252 in California would require some Division I schools to share up to 50 percent of revenue produced by sports programs with the athletes in those programs, predominately men’s football and basketball. The goal would be to compensate athletes whose scholarship value does not match the fair market value of their services. In 2019, Division I athletes generated $15.8 billion in revenue with media rights, ticket sales and licensing while NIL deals capped out at $1 billion last year. High revenue programs like Division I men’s football and basketball often require greater time commitments of student-athletes, which can impact their studies negatively. This means the relative benefit of a scholarship is not fairly evaluated compared to what is expected of students in these programs. The bill would also mandate preservation of all sports programs – not only those that generate revenue – which is a common concern in discussing student-athletes as employees of their schools.
The lack of uniformity among state law has led to confusion for both athletes and schools in terms of how the NCAA’s NIL rules apply. Currently, the NCAA is pushing Congress to pass federal legislation that would give it stronger power to enforce the rules governing pay-for-play inducements and the power to police collectives. At the same time, there is fear that any federal regulation of NIL would prevent athletes from enjoying the bargaining power and agency enjoyed in a NIL “free market.” A draft of legislation by Sen. Graham would give the NCAA an “NIL clearinghouse” and the power to fine anyone, sue anyone and ban anyone from participating in college athletics, regardless of state law.
Recent hearings on Capitol Hill concerning the need for uniform law led to larger discussions about athletes as employees. Like the pending bill in California, many more in the NIL space have argued that direct compensation for student-athletes on revenue generating teams would be a more equitable remedy for the disparity of some teams in terms of the value of their scholarship. Paying players in NIL deals regardless of their actual individual value as a name has become a common practice that undermines the purpose of NIL. For example, some schools have begun guaranteeing NIL deals for every member of certain teams as a recruiting tactic. If schools instead paid student-athletes who played for particularly in demand teams this could solve the problem and more fairly reflect the monetary value of their play.
Additionally, a National Labor Relations Board (NLRB) complaint alleging unfair labor practices has opened the door for student-athletes to form a players’ union, similar to how the players’ unions in professional sports function. The NLRB complaint takes aim against USC, the Pac-12 and the NCAA with a hearing scheduled for November 2023. The purpose of forming a union would see student-athletes directly reap the benefits of the profits they earn while protecting players from more predatory practices that can see the students be treated as commodities. The push for a national union of college football players has gained popularity, with big names like Alabama football coach Nick Saban speaking his support for the issue. The NCAA staunchly opposes these efforts, but the days of not sharing profits with the athletes generating it may be coming to an end.
Student-Athlete NIL Considerations
With all the noise around the quickly changing legal landscape, it can be very difficult for the students to determine how to best protect themselves while still capitalizing on the opportunities. If you or a student-athlete you know has legal concerns, please contact Fredrikson’s Sports and NIL Clinic for pro bono consultations.
One area student-athletes should consider before signing NIL deals are the potential tax implications of their agreements. Many students may not consider that their NIL earnings will need to be taxed. Because income tax is not withheld automatically for many deals the way it would be by an employer on an employee’s paycheck, some student-athletes forget they owe taxes on the income they make through NIL. While business managers can help athletes determine how much money to set aside in anticipation of taxes, even students with relatively small deals should still plan carefully to not be caught off guard.
Students should be wary of conflicting state laws clashing with the NCAA. At this point, it’s unclear who will ultimately have the most enforcement power over NIL deals. While schools would most likely bear the brunt of the NCAA’s ire if they were found to have violated the rules, students should be wary of disobeying the rules as one risk would be a loss in eligibility. If a student-athlete thinks a particular deal or school may jeopardize their eligibility, they should contact an attorney to consult how to best protect their interests.
High School Student-Athletes
The ability for high school athletes to capitalize on their NIL also varies from state to state. Some states outright prohibit high school athletes from signing NIL deals while some have pending legislation. However, most states, including Minnesota, expressly permit high school students to earn on NIL deals. Before engaging in an NIL deal, students should check with the state law they live in as well as the state law for the company in question. High school students may also contact the Sports & NIL Clinic for guidance.
Please do not hesitate to contact Fredrikson with any questions about this rapidly changing area. Christopher Pham, the shareholder leading Fredrikson’s Sports & Entertainment Group, along with F. Charles Bennett and Tarun Sharma, are happy to help as you begin evaluating and executing NIL and related deals.