Stewart Mandel of The Athletic shook the college sports world last Friday when he published an article about an unnamed football recruit’s deal with an NIL collective. The 2023 recruit, who by rule and definition hasn’t signed with a school, gets $350,000 up front. That’s a lot of money, but it wasn’t the thing that made everyone take notice.
The player will get monthly payments that escalate over time, leading to a hedged but still eye-popping statement that the contract “could pay him more than $8 million by the end of his junior year in college”.
A lot of folks took that one element and ran with it, slinging all kinds of takes about what that means for college sports. It is a big deal, but it’s not the most important aspect of the story.
If you subscribe to The Athletic, I’d recommend reading the whole piece if you haven’t yet. It’s not that long and will only take a few minutes. It illuminates and clarifies a lot of how NIL collectives work, and it lays out real pitfalls for athletes.
After all, lawyer Mike Caspino gave Mandel the contract to look at because he wanted to highlight some bad practices he’s seen from various collectives. It’s possible he also wanted to sell himself as a good negotiator to gain some business in the future, but there will be vastly more NIL contracts than he could ever do himself. I really do think the main reason he pulled back the curtain some was to raise awareness of the potential dangers of NIL collectives.
First, here’s a brief overview of how this works. Let’s say a recruit named Joe Quarterback signs a deal with the NIL collective that supports the Goliath State Bakery Raiders. The collective gives him some money up front and then promises $1 million per year in exchange for exclusive control to his NIL rights.
The collective then will arrange endorsements, sponsored social media posts, autograph signings with Raiders fans, and other activities for Joe, and it will pocket the proceeds. It has to line up more than $1 million worth of NIL arrangements for Joe per year just to break even on the deal. Not only does it have to cover the annual payments, but it needs to cover the signing bonus plus the expenses of its employees and other business overhead.
If Joe ends up a Heisman contender, it’s doable. If Joe doesn’t pan out or has bad injury luck, it’ll be far more difficult.
To an extent, the collective doesn’t actually have to line up more than $1 million worth of NIL deals for Joe. Many collectives have subscription plans where fans give a certain amount per month. You can browse a list of collectives at Business of College Sports to see what’s on offer around the country.
There are usually perks that come with subscriptions, so it’s not like everyone is making a straight donation while getting nothing in return. There is variability here, though. For example NIL-Auburn gives you different things at different donation levels, while The Gator Collective offers the same stuff to everyone no matter how much they pay. Especially with the latter model, the more that people pay, the more money the collective has to cover deals that don’t break even.
It all sounds good as long as all parties, from the collectives to the athletes to fans, understand what they’re getting into. Caspino’s concern is that not all athletes do.
He’s seen one proposed contract that would allow a collective the chance to take back money it paid to an athlete plus an extra 10% for expenses. Another deal would let a collective keep a player’s NIL rights until the contract’s end even if it terminates the deal.
How easy would it be to terminate a deal? It depends on the language of course. One way that fellow Athletic writer Andy Staples discussed on his podcast would be for a contract to require in-person appearances.
If Joe Quarterback transfers to a school across the country, the Goliath State collective might be able to void his deal by scheduling him for an autograph signing at the local mall on a Wednesday night during the season. He can’t miss class and practice to do that, so voila, he’s breached the contract and they no longer have to pay him anything. If the deal had a clause letting the GSU collective keep his NIL rights anyway, then it could still sell merchandise with his name or image on it or force him to do sponsored social media posts for free under threat of lawsuit.
At this point, we’re getting into market dynamics issues. How far would a collective be willing to go to enforce this stuff? If Joe raises a big stink about how unfair the collective is to him, it might make recruits think twice about signing on with Goliath State and its collective. Some players will inevitably do it anyway because money is money, but the truly prized recruits might stay away. The collective will have to think long and hard about these kinds of knock-on effects, and I’m sure officials in the school’s NIL department will start losing sleep over it at some point.
Since most 17-year-olds are not proficient in contract law, they’re going to need some help here. It’s not clear to me how much schools can do directly. I know they’re not allowed to be openly in cahoots with collectives, but I also suspect they can’t act as an NIL intermediary for a player who hasn’t enrolled. I’m sure schools will sooner or later put pressure on the collectives not to pursue abusive contract language, and the collectives themselves could publicly pledge to play fair.
After all, collectives are independent ventures. There’s nothing stopping someone from spinning up a rival one if a collective becomes known for being scummy. UF already has two in fact, the aforementioned Gator Collective and Market Pryce Florida. For the record, I’m making no judgments on their reputations since they’ve not been around that long. UF just has a large enough fan base that good ol’ market competition makes perfect sense for now.
A collective ultimately will live or die by its reputation, as a good one is required to get the subscription payments that subsidize their NIL rights income. A collective that doesn’t supplement its income from NIL deals with subscriptions will either lose recruits to collectives that do or go broke.
I think it’s a good thing that college athletes will be able to profit from their NIL rights. Those rights, like almost anything else in our economy, are worth what someone is willing to pay for them. If a collective is willing to pay $8 million over three years for a guy’s rights, then those rights are worth $8 million over three years.
The legalese of contracts can hide all kinds of traps though, some that Caspino shone a light on through Mandel’s story. That is where the true danger of NIL lies, and I hope sunshine can be an ongoing disinfectant to the NIL sphere going forward.