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The disruption of the NIL program

Jan Garrison
 

IU experts explain the impact

 

May 25, 2022

There are two basic rules when it comes to the NCAA’s Name, Image, Likeness (NIL) program for college athletes:

  • Student-athletes must do work for the compensation
  • The compensation cannot be used as a recruitment tool

After much legal wrangling, lawsuits, and college athletes trying to unionize, the NCAA dropped its strict controls governing athletes making money. Deals can range from endorsing a local wings restaurant on Instagram to complicated shoe and clothing contracts. It is a disruption that has redefined amateurism in the NCAA and has athletes, teams, and coaches working to understand the ripple effect now taking place.

To further study this disruption in the existing marketplace, the entrepreneurial aspects of it, and to help Culver students, teachers, and coaches understand NIL program better, The Ron Rubin School for the Entrepreneur invited Jeremy Gray, senior associate athletic director for strategic communications and the director of the Mark Cuban Center, and Rebecca Pany, senior associate athletic director for sports administration, to campus for three information sessions on Monday.

Gray said the NCAA is simply allowing college athletes to make money like other college students. For example, Natalie Portman was a student at Harvard while she made Star Wars and commercials for Christian Dior.  But Lilly King, a swimmer at IU, couldn’t accept any endorsement deals after winning two gold medals at the 2016 Olympics. Katie Ledecky, who was a member of the Stanford swimming team, quit so she could profit from her Olympic success.

Student-athletes will now be able to promote their own businesses; serve as a spokesman for merchants; and do autograph signings and appearances. The compensation can be either in payments or in-kind contributions. But while the restrictions have been lifted, there are specific guidelines to follow and potential pitfalls for student-athletes. Athletes cannot promote gambling products, alcohol, tobacco, adult entertainment, banned substances, or other illegal products.

Pany recommended that athletes looking at larger deals should consider retaining the services of an agent (such as entertainment agent, not a sports agent) and a financial advisor. That way they stay straight regarding paying federal, state, and local income taxes.

Some athletes may need to watch how much they earn if they are receiving financial aid. If the financial aid is tied to their income, they could lose part or all their scholarship if they make too much.

International students cannot participate at all, Pany explained, because they are in the United States on educational visas, not employment visas, so they are not allowed to work.

IU is also reminding their athletes to protect their personal brand when considering NIL deals. The university is working with two firms that can advise them about social media and, if needed, crisis management.

When NIL first went into effect, Gray said, it was “absolute chaos” at the beginning. Twenty-nine states quickly passed regulatory laws, which 11 months later are being repealed because they only made matters more confusing. Officials from Indiana, Purdue, and Notre Dame met with state legislators at the time and said it was best to just let the universities work through the system.

 

Rebecca Pany (above) and Jeremy Gray answered individual student questions after their class sessions.

 

But there are institutional regulations the players must follow, Gray said. Since the university has a $56- million dollar deal with Adidas, players are required to be in Adidas team gear while officially representing the university during a game, practice, or other team functions. And players cannot wear Adidas team gear while making commercial endorsements or promotional appearances.

But if a player has a contract with another clothing or shoe company, they are free to wear those during their free time, doing autograph sessions, and in personal Instagram posts.

Gray said the NIL program is important because potential recruits are not following the official team social media. They are following individual athletes. “People follow people,” he said, and 14 of the top 20 NIL “influencers” are women, not men.

Some inconsistencies are beginning to develop, especially when it comes to collectives. This was highlighted by the Nick Saban and Jimbo Fisher exchange earlier this month. Pany and Gray said it may be a good thing because players would have to do promotional work to receive the funds from the collective, which is a pool of funds raised by alumni and donors. It may also eliminate the under-the-table money that was being funneled to athletes.

It may be a bad thing because it may allow those teams that are already consistent powers in different sports to enhance their positions. For example, a baseball team has 35 players but the NCAA limits the number of scholarships to 11. But a collective would allow all 35 players to receive funds through endorsements and other deals.

There was also some speculation that the athletes are entering the transfer portal may be looking at bettering their positions through NIL deals. However, it doesn’t appear to be happening. Most athletes are transferring down, Pany said. Transferring up “isn’t happening.”

And, once an athlete enters the transfer portal, she explained, they lose their spot with the current team. That means 50% percent the athletes who have entered the portal this year “don’t have a home.”

NCAA Division II and III athletes can also make NIL deals. It may not be anything major, but those athletes could be seen as local influencers on their campus or in the community. It’s possible, Gray said, that a local restaurant may want to strike a deal with that athlete to endorse their hot wings on Instagram.

Along with the NIL discussion, the American Government classes had opportunities to discuss the matter further in regard to the Supreme Court decision, state laws, a potential federal law, which the Power 5 conferences are advocating. And the Introduction to Innovation classes explored the value propositions now available to student-athletes, boosters, and colleges.

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