What are NFTs and why are they becoming a big part of NIL deals?

On3 imageby:Jeremy Crabtree04/06/22

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As student-athletes in college and high school look for creative ways to make money off their Name, Image and Likeness, more are turning to the world of non-fungible tokens. But what exactly are NFTs and why are they becoming a big part of NIL deals?

In the past few months alone, there have been NFT deals struck with the Kansas and Kentucky basketball programs. In addition, more than 50 of the top athletes in college sports signed NFT deals with The Players’ Lounge. Furthermore, Tim Tebow started a company that’s focused on creating NFTs through a partnership with INFLCR’s more than 100,000 student-athlete and 200 institution partners.

What is an NFT?

Before figuring out why they are becoming a thing when it comes to the NIL, it’s probably best to get an understanding of an NFT.

An NFT is a digital asset that represents real-world objects like art, music, in-game items and videos. They are bought and sold online, frequently with cryptocurrency.

Although they’ve been around since 2014, NFTs are gaining notice now because they are becoming an increasingly popular way to buy and sell digital artwork. More broadly, NFT sales totaled $25 billion last year. It comes one year after seeing only $95 million in sales in 2020, according to data collector DappRadar.

NFTs aren’t just for high-end collectors. Some tech-savvy buyers are purchasing them as a way to support their favorite artists, athletes or celebrities. Others are just hopping on a booming trend in the hope that the value will increase.

Investment companies, like Hartford Funds, warn their customers that NFTs have some major risks, too. “They’re unregulated. The mania surrounding them may lead to volatility: buyers may purchase an expensive NFT only to discover later that it’s not worth much,” Hartford Funds says in a post on its website. “NFTs aren’t readily exchangeable for cash, so liquidity is an issue. With so many people trying to ‘get in early,’ and pushing prices to exorbitant highs, some worry that this market isn’t sustainable.”

That said, DappRadar lists on its website 128 NFT collections that have a market cap of more than $20 million. Four even have a value of more than $1 billion.

Why are NFTs linked with NIL?

When laws changed allowing student-athletes to make money off NIL, student-athletes began to explore different ways to monetize their brands. Some turned to traditional forms of brand building through commercials and other endorsement deals.

But some savvy student-athletes and collectives – groups of boosters that pool funds together from boosters and businesses to help facilitate NIL deals – have gravitated toward the booming NFT market as ways to make money.

The actual NFTs come in two different types:

  • Student-athletes work with companies – such as Tebow’s Campus Legends, Dreamfield or Candy Digital, which has deals with stars like Clemson’s D.J. Uiagalelei – to create collectible digital artwork that features the player’s name, image or likeness, much like a baseball card. Their value will fluctuate on the collectability. But student-athletes can also benefit in perpetuity from sales of NFTs featuring their intellectual property.
  • A NIL collective sells a limited number of non-player-specific NFTs, then split the profits with student-athletes in that market. Deals like this were wildly successful with 13 Georgia football players after the Bulldogs won the national championship. Those NFTs featured an artist-rendered bulldog.

There’s NIL money to be made off NFTs

Moving forward, Deloitte Global projects that NFTs for sports media will generate more than $2 billion in transactions this year. That’s roughly double the figure from last year. By the end of the year, four to five million fans globally will have owned an NFT sports collectible. And NIL experts agree NFTs are going to be big revenue drivers for student-athletes.

“There are new college athlete-focused NFT projects and businesses popping up every week, and there are more on the way,” said Mit Winter, a sports attorney at Kansas City-based Kennyhertz Perry LLC. “And I think this makes a lot of sense. I’ve always viewed NIL and NFTs as a perfect match.

“College sports fans are very passionate about the teams they cheer for. They often want to own something to commemorate a certain player’s career or a special moment for a player or team. NFTs make it easy for fans to own those moments forever, while at the same time supporting their favorite athletes through NIL payments.”

More on NFTs and their growing impact

For more on NFTs and the NIL check On3’s Eric Prisbell has also written extensively on the subject:

  • Amid the fast-evolving NIL era, what it means to be a fan is changing equally as fast — and now involves more than merely joining a program’s booster club. If you want to enjoy the full array of perks enjoyed by the most committed fans of your alma mater, the best way may be by purchasing a school-specific NFT as part of a broad NIL deal for the program’s athletes. MORE
  • Learfield, the collegiate media and technology services leader, is entering into a partnership with technology company Recur to lay an industry-wide foundation for stakeholders as they look to tap into opportunities within the fast-emerging NFT sector. MORE