As college sports transform thanks to NIL, here is the state of play
The dawn of the Name, Image and Likeness era on July 1, 2021, served as a landmark moment in the history of college athletics, shifting the industry’s tectonic plates to finally allow student-athletes the opportunity to monetize their brands.
But that was only the beginning. More fundamental – and likely seismic – changes to the collegiate model are coming. The only questions: How fast? And what will the landscape and business model look like once the storm clouds recede?
This breakdown of the major issues, variables and stakeholders cuts through the noise and answers the question of where we are now amid this upheaval. It is a complex picture. Here is a look at the major forces and motivations at play, how they intersect and what key dates loom as the machinations of change continue in the coming months and beyond.
On3 will continue to update developments as necessary.
Why is the NCAA lobbying lawmakers on Capitol Hill?
The NCAA can see which way the wind is blowing. Public sentiment has shifted. Litigation and National Labor Relations Board activity is afoot (more on that later), moving in a direction the NCAA does not want. Rather, it wishes to cling to many of the central tenets of what remains of the so-called amateur model. It’s a model in which all revenue flows upwards as media rights dollars continue to escalate and football and men’s basketball coaches benefit financially with multimillion-dollar contracts.
After the high-profile O’Bannon and Alston cases, the NCAA sees a landscape in which it is much more vulnerable to legal challenges. Industry leaders such as Val Ackerman, the Big East commissioner, said college sports has been paralyzed because it can’t enforce rules, fearful of litigation.
The NCAA is much better positioned to lobby lawmakers for a federal NIL bill while led by new President Charlie Baker. Former President Mark Emmert was almost universally panned after a difficult tenure. But it remains a steep climb. The NCAA’s pursuit of a congressional lifeline has been hailed as a Hail Mary.
What specifically does the NCAA want?
The association’s wish list includes three main items: A uniform national NIL standard; at least limited antitrust protection and a formal federal designation that student-athletes are not employees of their schools, conferences or the NCAA.
On the NIL front specifically, Baker said recently that a registry of NIL deals, a certification process for agents and a uniform NIL standard are among the priorities. The NCAA wants a federal NIL bill that preempts state NIL laws, which have become increasingly aggressive in giving in-state schools competitive advantages.
Why is time running out?
The NCAA can hear the clock ticking. One reason is that the election cycle is almost upon us, which means it is paramount that the NCAA generates some legitimate traction in Congress by the fall. That is the timetable that Baker himself set.
More than that, there is ongoing activity on what many legal experts believe is a slow march toward student-athletes being designated as employees. That is a scenario that would dramatically reshape the college athletics enterprise and business model.
The plaintiffs in Johnson v. NCAA – former Villanova football player Trey Johnson and other Division I athletes – are asking that athletes be deemed employees subject to the Fair Labor Standards Act. That requires covered employees to be paid minimum wage and overtime pay. While the case’s focus is narrow, a determination that college athletes are employees would be monumental.
“It would fundamentally change the collegiate athletics model,” Mit Winter, a college sports attorney at Kennyhertz Perry in Kansas City, told On3. “It would have broad implications for other pending proceedings and for college athletics as a whole.”
A ruling in the plaintiffs’ favor, Winter said, would not automatically lead to the formation of college athlete unions, collective bargaining and revenue sharing, all elements the NCAA is determined to prevent. But it would lead to athletes being subject to various employment laws and workplace protections.
On Feb. 15, a three-judge panel for the U.S. Court of Appeals for the Third Circuit heard oral arguments in the case. The panel asked pointed questions and suggested that student-athletes are placed under a considerable level of control by participating in college athletics.
To be clear, the panel is only deciding whether Judge John Padova applied the correct standard by not dismissing the case when the NCAA pushed for it. If the panel rubber-stamps Padova’s discretion, the NCAA could appeal to the Supreme Court.
How significant is the NLRB complaint?
On May 18, the NLRB’s Los Angeles office filed a complaint against the NCAA, Pac-12 Conference and USC for unfair labor practices. Mori Rubin, the NLRB Region 31-Los Angeles Regional Director, issued the 11-page complaint against the three respondents as joint employers of Trojans football and men’s and women’s basketball players. The complaint reflects NLRB General Counsel Jennifer Abruzzo‘s decision to litigate the case.
“The conduct of USC, the Pac-12 Conference, and the NCAA, as joint employers, deprives their players of their statutory right to organize and to join together to improve their working and playing conditions if they wish to do so,” Abruzzo said in a statement.
In early June, all three parties issued formal responses to the complaint, denying that student-athletes are employees. The NCAA called for the case to be dismissed. There will be a hearing with an NLRB Administrative Law Judge on Nov. 7 in Los Angeles.
As Winter noted, the complaint is especially significant because it’s alleging a joint employer theory, which means that a decision in the NLRB’s favor would be applicable to college athletes at both private and public schools. Either one of these outcomes – Johnson or the NLRB – could further push college sports toward an employee model. That could open the door for collective bargaining and possible revenue sharing for athletes.
What else is happening at state level?
Keep your eyes on Assembly Bill 252 in California, also known as the College Athlete Protection Act. It was proposed by Assemblyman Chris Holden (D-Pasadena).
The bill is significant because athletes could potentially receive annual payments of up to $25,000 from their schools. The pool of money available to athletes in each sport would be determined by the amount of revenue attributed to each sport under the U.S. Department of Education‘s athletics financial reporting system, according to USA Today.
The concern is this could limit athletic opportunities for female athletes in California and potentially beyond if other states move in this direction. However, the bill includes a provision that allows for the adjustment of the amounts athletes would receive in different sports to comply with Title IX requirements. While sitting on a panel at the Future of College Sports Summit, Baker said the California bill “would probably knock out Division II sports.”
Some aspects of the bill have been amended to address concerns about women’s sports. Those changes have largely not yet been revealed. The bill must still pass through the State Senate before landing on Gov. Gavin Newsom‘s desk.
Why is House v. NCAA important?
The antitrust lawsuit could be monumental. It seeks damages for athletes who couldn’t benefit from NIL opportunities before July 1, 2021. It also asserts that athletes should be compensated for media rights revenue.
According to a legal filing from the NCAA and top conferences, USA Today reported, current and former college athletes are seeking more than $1.4 billion in damages in the suit. A critical aspect that is expected to be determined this fall is whether U.S. District Judge Claudia Wilken will grant the athletes’ request for class-action status.
If the class-action status is granted, damages would be based on the collective claims of thousands of athletes, potentially totaling $4.2 billion or more. If it is not granted, then it would apply to any damages for the three plaintiffs: Arizona State men’s swimmer Grant House; former Oregon women’s basketball player Sedona Prince; and former Illinois football player Tymir Oliver.
Media consultant Ed Desser is cited claiming that the value of the use of athletes’ NIL in college sports TV contracts is 10% of the total broadcast revenue for each conference. A hearing on class certification is scheduled for Sept. 21.
How much progress is being made in Congress?
The NCAA has been lobbying Congress for four years. More than a dozen bills have been proposed. None has even gone to a vote. There are five primary bill proposals whose drafts have been circulating. Here is a synopsis of each.
Democrats typically want a broader bill, while Republicans are pushing for a more narrowly focused one. There is little consensus. Rep. Gus Bilirakis (R-Fla.), who proposed a narrowly focused bill, told On3’s Pete Nakos, “You know how government works. You gotta build consensus. I work on both sides of the aisle and have a reputation of getting things done. I want to make this a priority to save the integrity of college sports.”
Why do collectives play a large role in this?
There are two trends that warrant watching: First, Texas A&M and Arkansas are believed to be the first schools whose booster organization also is directly fundraising for NIL opportunities for student-athletes. Other schools in the SEC footprint, especially in Missouri and Oklahoma, are also aggressively pursuing similar organizations.
This is a test case, and the eyes of the college sports world are watching. Donor-driven collectives over the past two years have operated independently of the respective universities they are affiliated with. But school-friendly state NIL laws are greasing the skids for collectives to become more tethered to a university’s fundraising arm and for schools to have more control over how the pooled donor funds are distributed among athletes for NIL activities.
The 12th Man+ Fund is a quasi-collective at A&M that operates under the umbrella of the 12th Man Foundation, the school’s fundraising arm. Donations to the 12th Man+ Fund provide boosters with priority points. As part of the quid pro quo in the NIL deal, student-athletes will promote the 12th Man Foundation.
If this initiative is a success, expect other schools to follow suit, as state law allows. But as NIL activities move more in-house, expect Title IX concerns to bubble up if male and female athletes are not receiving comparable benefits.
The other issue to watch comes on the heels of the 12-page memo issued in June by the Internal Revenue Service (IRS). It stated that nonprofit NIL collectives are not tax-exempt. Some 80 out of the roughly 200-plus school-specific collectives established nationwide have been granted nonprofit 501(c)(3) status. In the wake of this guidance by the IRS, the future of nonprofit collectives is uncertain. At issue is whether the nonprofits are fulfilling duties – such as acting as a legitimate charitable organization – that warrant them being granted 501(c)(3) status.
What’s the latest with state NIL laws?
An increasing number of states are moving to enact sweeping NIL reform that accomplishes one of two things (or both): create a competitive advantage for in-state schools and athletes on the NIL front; provide cover from any attempts by the NCAA to police NIL activity within state borders.
Of significance was a bill – House Bill 2804 – signed by Gov. Greg Abbott in June in the bellwether state of Texas. It becomes law on July 1. The revised Texas legislation includes a number of provisions that are school and student-athlete friendly. But the most notable change appears to provide cover for state schools from being punished by the NCAA for any NIL-related violations, including any committed by collectives that have been set up to support student-athletes through deal facilitation.
Additionally, lawmakers in Arkansas, Colorado, Missouri, Montana, New York and Oklahoma have sponsored or passed bills in recent weeks to prevent the NCAA from launching investigations into NIL activities. Plus, NIL entities in Arkansas and Texas have opened the door for compensation models that have a closer connection to the school which is against the NCAA’s policy.
Baker has taken notice that the state laws attempt to circumvent – or ignore – NCAA rules.
“They say screw the NCAA,” Baker said. “Screw the conference. Screw their rules.”
He elaborated on the patchwork of state laws that are now undergoing sweeping changes as state legislators continue to push the envelope.
“When you have 30 states with different standards and different rules and different laws around NIL, and very few conferences that don’t cross multiple state lines, the whole questions about how you create a competitively-level playing field, which between and among teams in different conferences, skip the question about across the country, gets enormously complicated,” Baker said. “I think it was a big mistake for the NCAA not to do a framework around NIL when they had the opportunity. I think there were too many people in college sports that thought no rules would work well for them. And what everyone has discovered is no rules, no transparency, no accountability, no framework doesn’t work well for anybody.
John Holden, an associate professor at Oklahoma State that specializes in the rights of student-athletes, told On3’s Jeremy Crabtree that the reformed state NIL law in Texas “could signal a tipping point. Anytime Texas, California or Florida do something in college sports, other states are going to start making moves. No one is going to want to be left out.”
SEC Commissioner Greg Sankey has been the most outspoken regarding the patchwork of state NIL laws.
“We cannot do this on a state-by-state basis any longer,” Sankey said.
What do the student-athletes want?
Good question. Current Power 5 athletes from major revenue-producing sports like football and men’s basketball did not take part in recent NIL-focused hearings on Capitol Hill. Bilirakis, the chair of a subcommittee of the House Committee on Energy and Commerce, has quickly become one of the most vital figures in the fight for NIL reform.
Bilirakis played a pivotal role in organizing March’s legislative hearing on college athletics. And he would like to hear some more insight from athletes before the bill is put up for debate on the floor. The Congressman plans to have a second hearing before August, which would possibly set the stage for a historical fall in D.C.
“I’d like to see a second legislative hearing before August, and move the ball forward,” he told On3 in June. “I’m open to it. But again, more than likely, the priorities are to talk to the athletes. Current athletes … We’ll have at least two to three more student-athletes on the committee.”
Baker’s messaging on this front has carried a paternalistic hue. He has said that there are not very many student-athletes who want to be employees.
Why won’t NCAA take lead on creating a new model?
Being proactive has never been part of the NCAA’s DNA. It typically only acts when forced to. Legal experts advise that the association would be best served to get out in front of this category-five storm – before it’s too late – and play a role in creating a new model, perhaps one that includes revenue sharing.
Without elaborating on specifics, Baker during the LEAD1 spring meetings acknowledged the differences between playing Power 5 revenue sports and virtually everyone else competing in college sports at various levels.
“My view is everybody needs to acknowledge that, right?,” Baker said. “This is not that. The field may be the same size, the court may be the same size, the rink may be the same size. But what’s actually going on there is profoundly different than what’s going on in all these other places. And we have to create a framework, an operating and regulatory framework that doesn’t just sort of acknowledge it, but embraces it.”
If there is a Plan B, should the NCAA’s efforts with Congress fall short of a lifeline, specifics have not yet been laid out.
Where does Title IX fit into this?
Title IX is the federal law that bars discrimination on the basis of sex for any educational program or activity receiving federal financial assistance. As NIL increasingly moves under the university’s umbrella, as the sport inches toward an employee and revenue-sharing model, the 50-plus-year-old law promises to figure into decisions and oversight.
Some believe a reckoning is on the horizon. Sarah Wake advises universities on athletic compliance issues in her role as an attorney at McGuireWoods. When asked during a LEAD1 panel about Title IX concerns if athletes are deemed employees, Wake said, “I’m 100% positive – like, I’d bet my shoe collection on it, right – Title IX applies to employees. Period. Full stop. End of story … You just can’t eradicate women’s sports and have that like not be a problem.”
There are other concerns.
“Do we have to pay the men the same as the women? If you’re a school that receives federal financial assistance …,” Wake said, “then, yeah, you’re going to have to be a little bit careful to treat the men and the women differently under Title IX.”
Another area that could raise Title IX concerns is if a university establishes too close of an affiliation with a donor-driven NIL collective. Wake said she’s “very concerned” about those relationships that could develop. She said the more entrenched a school gets with a collective, the more problematic it is.
Her advice to colleges: “Stay out of it. Don’t touch it with a 10-foot pole.”
Can institutions operate under same proverbial Big Tent?
There are mounting questions about how every university can work, function and co-exist under the same giant roof. The massive gulf between schools is widening. Institutions are disparate in resources, revenue, missions and staffing – the question is what should be done about it?
Should Power 5 college football be spun off as a separate entity, apart from the NCAA?
Are we destined for a mega-conference era, where the SEC and Big Ten essentially become like the AFC and NFC in the NFL?
While the College Football Playoff is expanding to 12 teams, the composition of the field is likely to be dominated by teams from those two leagues, which are lapping the field in media rights revenue. Baker has acknowledged that the three-division model may be antiquated for modern-day college athletics.
No one has articulated the issue better than Betsy Mitchell, the athletic director at Division III Cal Tech. Before the January 2022 vote in Indianapolis in favor of the new NCAA constitution, several college officials publicly expressed issues with and opposition to the new constitution during the open forum with membership.
Mitchell questioned why multiple constitutions aren’t needed, given the growing disparity among the more than 1,100 member schools, asking, “Why are we still trying to stick together?”
In the end, given the vastly disparate interests of member schools, that is the seminal question.
“The process by which we arrived here has been highly scripted and included moments of strong-arming and arm-twisting,” Mitchell said. “We do not have one model of college sports. Those days are long over.”