NIL standards regarding athlete compensation could represent major shift
With all the changes that the COVID-19 pandemic has spurred, this college football season has been most unusual so far. A return to normal, however, isn’t in the cards for next fall. That’s the first semester the NCAA’s new Name, Image and Likeness (NIL) rules are expected to go in effect.
These rules and standards represent a major shift away from the amateur model that the NCAA has promoted since the mid-1900s. They will allow student-athletes in all sports to monetize their own fame through activities like commercial endorsements, social media influencing and hosting sports camps.
Imagine seeing your favorite Razorback or Red Wolf shill for local car dealerships or headline their own football camps. If the NCAA’s three divisions adopt the NIL rules by January 2021, as expected, you may see such scenarios starting in the 2021-2022 season.
What is the NIL?
In April 2020, the board of governors for the National Collegiate Athletics Association, college sports’ governing body, recommended rule changes that allow student-athletes to receive compensation for their name, image and likeness.
This isn’t meant to be pay for play, however. Paying directly for athletic performance or participation (even though that’s what leads to the fame) isn’t permitted. On top of that, student-athletes aren’t allowed to involve trademarked intellectual property of their university or conference in their commercial activities. For instance, a star quarterback for the Hogs couldn’t wear a Razorback jersey or mention the Razorbacks in a commercial.
The board’s recommendations will move to the rules-making structure in each of the NCAA’s three divisions. The divisions are expected to adopt the new NIL rules by January 2021.
This overhaul won’t make most student-athletes rich. Perhaps a few extra hundred dollars here and there. Most student-athletes at smaller schools simply don’t have large enough followings or name recognition to command big money through their own direct activities (e.g. camps or personal appearances) or third-party promotional activities.
In 2021, at least, student-athletes will also be operating in a (let’s hope) post-COVID-19 world recovering from the pandemic-induced recession this year. It’s likely many smaller companies won’t have the same advertising budget as in most years.
Still, a select few student-athletes do stand to gain quite a bit from these sweeping changes. Stars in profitable sports like baseball, basketball and especially football can fetch higher amounts. Take recent Razorback basketball players Isaiah Joe and Mason Jones, for example.
Before leaving college to enter the 2020 NBA Draft, Joe and Jones were the two best players in the Razorback basketball program. They were also the two of the most popular, both in traditional ways and in terms of social media following.
If the NIL were in effect, sponsored campaigns on Jones’ social media channels (primarily Twitter and Instagram) would have an annual value of $18,660 (or $696.69 per post), based on a valuation formula devised by Influencer (INFLCR), a software-as-a-service platform that stores, tracks and delivers sports team properties’ content across their influencer network of athletes, coaches, former athletes, media, etc. One of INFLCR’s hundreds of college team clients is the Arkansas Razorbacks.
Joe, meanwhile, would have a $21,480 annual social value ($834.40 per post) as a Razorback, according to the INFLCR formula.
But, as Arkansans know, the king of sports in this state is football. Razorback football, to be exact.
That shows up in the fact that football produces the lion’s share of the revenue that the University of Arkansas athletic department as a whole produces. It also shows up in the valuation numbers for Rakeem Boyd, the Hogs’ star senior running back.
Boyd has a social media value of $2,652.23 per post for an $88,240 annual social value.
That’s pretty impressive, but it should be noted Boyd is an outlier. He’s not only a star, but he’s a highly engaged one with 250,000 total interactions on social media from August 2019 through August 2020, according to INFLCR.
Legions of Razorback fans make up his 45,000-plus Twitter followers and 67,000-plus Instagram followers. But he’s also drawing interest and followers from audiences beyond the state’s borders, and even football fans who don’t follow the Razorbacks. For instance, Boyd spent much of his youth in Houston, a major metropolitan area. Then, while spending a year in junior college in Kansas, he was featured in the Netflix series Last Chance U, a reality sports drama. He undoubtedly picked up plenty of followers from that.
When it comes to building social media value, the numbers of followers matter but the number of engaged followers is more important. Many interactions between the producer and audience, like what Boyd has, is key. That’s what the Hogs basketball program promotes to recruits in this Tweet:
The university’s selling points to recruits go well beyond audiences, says Jon Fagg, the Razorbacks’ deputy athletic director, who is part of the University of Arkansas NIL working group of eight people. Traditionally, the UA athletic department has pitched the school’s Walton College of Business and Northwest Arkansas’ vibrant job market and Fortune 500 companies to attract recruits thinking about life after sports.
But in 2021, expect some of those businesses to work with the UA and current student-athletes in unprecedented ways, potentially around endorsement deals.
“We want to be as innovative as possible,” Fagg said. “We want to be as specific to Arkansas student athletes as possible. And so this part of the country, as we all know, has an incredible balance, an incredible set of communities around the university and Walmart and Tyson and the vendor world. And so we are seeking input from that community as well, because those tend to be the best companies in the world.”
He added, “So we are doing everything we can to partner with people on campus who are innovative, as well as with innovative companies in the community, to ensure that we have the absolute best [NIL] program we can for our student-athletes.”
Keeping track of individual endorsement deals and social media followers introduces new kinds of metrics to the sports landscape. These aren’t the kind of “scores” most fans of college sports are used to following.
Which begs the question…
How did we get here?
Let’s start with the basics. The vast majority of colleges and universities are tax-exempt, and so are their athletic departments. They don’t have to pay their players since they operate under an amateur model that presumes college players are education-focused students, not money-focused employees. But college sports have become increasingly professionalized and lucrative in recent decades, as the market rate of today’s top college coaches shows.
Consider Arkansas head football coach Sam Pittman makes $3 million per year, and that’s low by SEC standards. His top two assistants both make at least $1 million a year.
Some critics cite college coaches’ expanding pocketbooks, while the NCAA “fixes” student-athletes’ compensation at the price of attendance plus stipends, as evidence of an unfair system involving price-fixing that puts the NCAA in potential violation of federal antitrust laws.
This issue has spurred antitrust lawsuits that challenge the NCAA’s compensation rules. Recently, a few states including California and Florida have passed state legislation granting college athletes the right to paid endorsement deals and agents.
Likewise, use of agents was one of the recommendations approved by the NCAA’s board of governors. But those agents and advisors must be qualified by a yet-to-be-decided third party, according to yet-to-be-prescribed criteria.
Details around these regulations are being sorted out in Congress.
In late September 2020, a bipartisan pair of congressmen introduced a new bill that would govern student-athlete compensation and provide restrictions around the types of products and services they will be able to endorse. The Federal Trade Commission (FTC) would be in charge of enforcing all aspects of this new NIL law if it passes next year. How the FTC’s authority would interact with a third-party administrator to be chosen by the NCAA isn’t yet decided.
One of the bill’s co-authors, Rep. Anthony Gonzalez (R-Ohio), said the bill creates “guardrails” to protect gender equity and set up a general framework that can evolve over time. “We believe a federal law is what’s appropriate to pre-empt all the state-by-state chaos,” he said in early June to the Knight Commission on Intercollegiate Athletics.
“We all know it doesn’t make a whole lot of sense to have a high school student looking at different state legislatures and saying, ‘I like Florida’s law better than Oklahoma’s law, so maybe I’ll go to the University of Miami.’”
A federal standard “levels the field for all of college sports so no matter what state you’re in, you play by the same rules, which in theory means you have equal opportunity inside of that,” Gonzalez added.
Almost certainly, there will be hiccups — at the very least — with any federal NIL law. Issues both expected and unexpected will emerge in ways not anticipated, across a spectrum of nascent issues.
For instance, the NIL bill doesn’t clarify how the FTC would distinguish between payments for a student-athlete’s value as an endorser versus his/her value as a recruit. If, say, a sports bar owner in Fayetteville wanted to pay a Hogs quarterback $125,000 for a minute-long commercial, there is no set method to determine when that type of contract crosses the line from the fair market value for an endorsement into a payment to make sure the quarterback stays at the UA (instead of transferring or leaving for the NFL).
Incidents like this, which are bound to flare up across the nation, are one reason the new NIL bill proposes a 13-person commission that would recommend a dispute resolution process. The commission, to include two current or former student-athletes, coaches, athletic directors, conference administrators, corporate governance experts and sports marketing experts, would also advise the NCAA on how to certify agents for student-athletes and make other recommendations to legislators as the industry evolves.
In theory, there will be no limit on the amount of money a student-athlete and his/her agent can earn. In reality, though, earning potential will be limited by some of the most important restrictions in outlines for proposed legislation around student-athlete compensation:
• NIL deals are delayed until the athlete’s second semester in college.
• Prohibition on deals with companies and brands related to alcohol, tobacco, marijuana, gambling or adult entertainment.
• Deals cannot be used as recruiting inducements to a specific school.
On top of that, while student-athletes would be allowed to identify themselves by sport and school, the use of conference and school logos, trademarks or other involvement would not be allowed.
Figuring out which deals are legit and which are not according to federal NIL law will be a heavy regulatory lift, even with the FTC involved, according to John Long, a sports lawyer who specializes in NCAA infractions.
“That is where the money is going to be made for practitioners, and that is where the headaches are going
to originate for compliance officers or administrators at particularly power five institutions,” he said on the Mike Meltser Podcast.
Long added, “You’re going to have to do some research to see how the deal was offered, how it came about, whether there is a quid pro quo that is involved. And institutions are going to have to implement mechanisms by which they investigate these agreements and document them, the monitoring efforts that they took to evaluate those arrangements.”
In the past, college sports has been no stranger to illicit “handshake deals” between boosters or other moneyed interests and recruits or recruits’ handlers and relatives. It’s possible, however, that allowing big recruits to actually bank tens of thousands off of their fame while in college will cut down on the motivation behind such shady dealings.
For one, college athletes and their inner circles will have more to lose than ever before if they risk eligibility by trying to game the system. They would not only lose sports eligibility and paid college tuition, but also an opportunity to expand their own personal brand by picking up thousands of social media followers and the endorsement deal potential they help bring.
In an environment where the recruit will get paid no matter where he goes, the incentive to cheat weakens.
“I think there will be very few ‘handshake deals,’” said Fagg, who also oversees the UA’s NCAA compliance program. “I think the free market will play itself out. We will certainly need to monitor activities. I think young people who have value who are going into business, they will find that business at the appropriate level. Kids who should make hundreds of dollars will, and the kids who should make thousands of dollars will.”
Here, the free market may sort itself out. But the ins and outs of regulation won’t.
There are nearly 500,000 NCAA student-athletes. It’s impossible for the NCAA and its member institutions to process the paperwork generated from NIL deals with a significant number of them. The need to decrease the compliance burden on the student-athletes, institutions and businesses is a big reason for a third-party administrator (beyond the FTC) to track NIL activity, identify parties in the market and monitor for the types of deals that should be further scrutinized, says Blake Lawrence, CEO of Opendorse, a publishing and marketing platform for student-athletes, teams, player associations, leagues and more.
“It also creates kind of an at-arms-length for the NCAA to be a little further from the activity,” he told Rivals.com. “Ultimately the NCAA is going to be in a position [where] they’re going to have to put something in the market that is going to accomplish the impossible task of making everybody happy. If that third-party entity or group of entities is tasked in doing [all this], it at least gives distance the NCAA would desire from being the sole party in making this work.”
It makes sense the NCAA would want to create distance — because there’s a lot here that could go wrong. Rogue boosters could knowingly (or unknowingly) run afoul of the rules. Under the proposed NIL federal bill, that would be a civil, not criminal, violation. That still could result in “very minor misdemeanor-like” penalties, according to a legal source of CBS Sports’ Dennis Dodd.
If it does turn out that the price to pay for violation of the new NIL law is essentially a slap on the wrist, then college fans can expect a whole lot of slapping in the years to come. The end result may ultimately cost college sports its tax-exempt status.
“If you get to a point where institutions are essentially creating a payment mechanism for their athletes through their boosters, through their apparel companies, through external forces, and this is just a cover up where schools are paying for athletes, just through third parties, then it’s really going to be hard for the Internal Revenue Service, the Department of Justice and the Committee on Ways and Means to look and say this is not a professional activity,” Long added on the Mike Meltser Podcast.
“And if institutions have to start paying taxes, especially in this COVID-19 world that we’re living in where schools are already strapped for cash, you can kiss modern collegiate athletics as we know it goodbye. Because they are not going to afford to operate the same way that they have been in the past.”
Regardless of how legislation pans out, and the exact timing on when the new NIL rules go into effect, administrators, coaches and players alike are preparing for the new reality. The Razorback athletic program, for instance, is already offering classes focused on branding and social media marketing for student-athletes. Expect similarly entrepreneurial classes, some of which may entail determining one’s own true market value as a student-athlete, to come down the chute from the UA’s Walton College of Business in the coming years.
Krystal Beachum, a former Henderson State basketball player, is one thought leader in this nascent field of “student-athletepreneurship.” Beachum, who also graduated with a sports management graduate degree from the University of Arkansas, has honed her sense of what works when it comes to athlete marketing through her older brother Kelvin Beachum, an investor and NFL player since 2012. She took some of those lessons, along with what she gleaned at the UA, to write, For the Other 98%: The Ultimate Guide for Student-Athletes To Go Pro in Entrepreneurship, a book of practical advice for student-athletes looking to start side businesses while retaining eligibility.
Beachum also has offered business startup training to student-athletes at various colleges across the nation and launched an online teaching portal, StudentAthletepreneur.com, for on-demand training and one-on-one mentorship.
Among the student-athletes Beachum has advised is Leena Morris, a former Cornell track and field star-turned-health coach who has built an audience including 180,000 Instagram followers. Beachum says Morris is a good reminder that student-athletes in any sport, even less popular ones, can build large niche audiences through personality and marketing savvy.
Beachum, like INFLCR CEO Jim Cavale, stresses that frequent, authentic interactions on social media are key to building a large, valuable following.
When things go badly, though, how do you stay “authentic”?
It starts with coaches who understand “the marketplace wants to know what it’s like inside their program,” Cavale said. “They can either let somebody write that narrative for the program, or they can control the message and write it themselves.”
He adds that Razorback basketball head coach Eric Musselman did a great job this last season after the Hogs hit a rough patch in January after a torrid start to the season. Cavale said that Musselman understood the message should be: “The reality is we’re not playing our best, but we’re working hard. The goal and vision of ‘Hey, we’re going to get out of this and play great again’ didn’t go away. That keeps fans engaged, and that’s what they want to see.”
The Score That Matters Now
Traditionally, the tally that matters most in sports is the one on the scoreboard at the end of the game. A clear winner and a clear loser results. Granted, the final numbers in terms of overall revenue (including merchandise, concession and ticket sales) mattered, too, but those numbers correlated with the wins and losses. The more teams won, the more money they made. The more they lost, the less money.
Increasingly, however, programs and student-athletes’ social metric scores matter, too.
As Cavale pointed out, even teams and programs on losing streaks can see their shortcomings as more than simple losses. Instead, they can frame them as part of a grander narrative — the low times before the triumphant rise.
Student-athletes and staff who pull this off can still engage the imaginations of their fans through the strength of their storytelling savvy. This means it’s possible for some players to “win” the hearts and minds of fans even through the darkest of times.
This dynamic helps explain why the Razorback athletics department ranks among the nation’s leaders in terms of social media engagement. The below chart, created by INFLCR and Athletic Director University, shows the top 10 universities in combined engagement on Twitter and Instagram as well as their posting volume and overall following.
Arkansas stands out because the other programs in the top seven had successful football programs with overall records well over .500 from 2017-2019, whereas the Hogs struggled mightily in those years. Arkansas’ No. 4 ranking speaks not only to the strength of other programs like basketball and baseball, but to the ability of its football players to connect with fans even in low times.
Rachael Harris, the Razorbacks’ assistant director of digital strategy, put it this way, tweeting: “‘We don’t have the largest following. We don’t post the most content. We don’t win the most championships. But we CONNECT with our audience.”
Rakeem Boyd, of course, is a prime example of doing that well. But even former Hogs quarterback Nick Starkel, for all his struggles on the field in 2019, helped Arkansas “win” the engagement game by providing a stream of entertaining and buzzy posts that included tearing his beloved Justin Bieber shirt after a loss to San Jose State.
Receiver Mike Woods, meanwhile, is likely the most active Razorback on social media. Going beyond Twitter and Instagram, he started his own YouTube channel (“WoodVille”) this past offseason and built it to nearly 1,950 subscribers. He regularly posted fan Q&As, training videos and his reactions to other Hogs’ highlights. On top of that, Woods posts his content to various channels and chats directly with fans there.
In the end, this level of engagement is a selling point for future recruits. The basketball program’s already all over it:
Such open, explicit pushing of individual branding in sports that historically preach, “There’s no ‘I’ in team,” leads to plenty more questions down the line. Nobody can be sure how the dawning of the NCAA’s brave new world will play out, or if the amateur model can survive it.
While college sports have experienced deregulation milestones before, this shift is more sweeping than most of its precedents. It’s still too early to tell how profoundly the new NIL law, regardless of the exact form it takes, will change the industry.
All the same time, one thing is clear: 2020 has ushered in a new model for college sports that is more unpredictable and topsy turvy than ever. With the onset of the NIL, expect more of the same in 2021.
Evin Demirel has written about sports, society and business for various publications. He is the author of African-American Athletes in Arkansas: Muhammad Ali’s Tour, Black Razorbacks & Other Forgotten Stories.