Weekly Column: Are There Limits to NIL?

In his capacity as a Columnist for California Sports Lawyer®, Founder Jeremy Evans has written a column about the growth of NIL in college athletics and whether it will lead to paying college athletes a salary.

You can read the full column below.

Name, image, and likeness (“NIL”) deals are fast becoming the go to financial option for college and increasingly high school athletes. Universities have built NIL software programs to help keep track of their student’s athletic business endeavors. Some universities have brokered NIL deals on behalf of entire athletic teams or departments.

Should there be limitations on NIL? On the one hand, the argument is that college athletes should be paid because they are essentially employees of the university based on their schooling and time given to practice and play in games. On the other hand, the argument is that college athletes receive scholarships and NIL dollars and that universities should stay away from paying college athletes because they are not employees in the traditional sense or definition.

The next question is where will the NIL money come from or how would a salary work? In the past, several states flirted with and introduced legislation that would force universities to split television revenue 50/50 with college athletes and let the revenue split serve as the salary for students. Others might argue that a split in television revenue is not necessary to satisfy the need or potential demand, but college athletes could be paid out of the television or apparel dollars that universities receive. For example, the Big Ten’s new television agreement will pay each member school $70 million per year.

Without knowing the financial health of every NCAA member institution (e.g., university), it is hard to know whether such television dollars could pay the university’s bills and their college athletes. UCLA, for example, has currently more debt in the athletic department then roughly a year and a half of television agreement payments once its university’s sports join the Big Ten Conference. The NCAA currently forbid college athletes from being paid directly by universities, although the rules have changed to allow for those athletes to broker NIL deals.

There are three things that are likely to occur if universities are forced to pay college athletes a salary. First, the National Basketball Association (NBA) is likely to remove it one-and-done rule and push the G-League as an alternative to enrolling in college. Second, the National Football League (NFL) is likely to rely on the XFL or USFL to help train college-ready star athletes. The NBA and the NFL are the only two professional sports leagues in the United States that require some college or overseas professional experience before entering the draft or playing in the professional ranks. The NBA and NFL would make the move for two reasons: to compete and bring in athletes earlier and maybe a more altruistic one as well; assist the NCAA and universities who the professional ranks have relied on for years as their minor league development systems.

Third, NCAA and Universities would oppose paying college athletes for several reasons: (1) the NBA and NFL changing their rules would result in less pressure on universities to pay college athletes because there is a true choice on going pro or enrolling in school; (2) it is unwise at best to pay college athletes without knowing the financial health of universities, the success and failures of the NIL market that is barely one-year old; or (3) the harm to college athletics and amateurism if the result is essentially another professional sports league.

Maybe most importantly, if implemented, are universities equipped to pay college athletes—would it pay a salary on past or projected statistical performance and/or comparable college athletes? Would there be an unfair advantage for certain colleges who can afford to pay for college recruits to join their university? Would college sports parity fall with the rise in college athlete salaries? Would there be a salary cap or luxury tax for college athletic payrolls? Will the NCAA continue to regulate college athletics, will conferences continue to expand, the playoffs grow, and the Power 5 gain more independence? An unregulated market may sound exciting to begin, but eventually unfairness will outweigh the benefits. There should be limitations and the NCAA would be wise to begin leading the charge.

About Jeremy M. Evans:

Jeremy M. Evans is the Chief Entrepreneur Officer, Founder & Managing Attorney at California Sports Lawyer®, representing entertainment, media, and sports clients in contractual, intellectual property, and dealmaking matters. Evans is an award-winning attorney and industry leader based in Los Angeles and Newport Beach, California. He can be reached at Jeremy@CSLlegal.com. www.CSLlegal.com.