In the new NIL world, donor-led collectives are having a moment. The question: Will this moment last? Some NIL industry leaders say no.
“Collectives are going to be an era, not a sustainable thing that lasts for the next few decades,” Jim Cavale, founder and CEO of INFLCR, told On3.
Over the past few months, more than 30 school-specific collectives have launched nationwide. Founded by alums, boosters and/or former school administrators, they pool funds from donors to help create NIL deals for a school’s athletes, typically through autograph signings, meet-and-greets or endorsement deals. All Power 5 schools are expected to be associated with at least one collective, which operate independently of the school, by the end of the year.
But Cavale is among those who believe this new dynamic has created and exacerbated a sense of “FOMO” (fear of missing out) among some athletic directors.
Industry sources say a Power 5 school’s affiliated collective will need to amass a minimum of $5 million annually if it hopes to keep pace with rivals. And the most ambitious collectives, those seeking seek to carve out more substantial recruiting advantages, are aiming to raise annual totals upward of $25 million. That’s big money. And if this model succeeds in attracting top recruits in this “Show Me the Money” NIL recruiting age, the onus will be on the well-heeled boosters to not only maintain that level of support but at times increase it. Is that level of financial support sustainable?
“Whether collectives can annually raise the massive amounts of money — $5 million to $25 million — that are predicted to be needed for them to operate effectively is a real question for this new industry,” Mit Winter, a Kansas City-based sports attorney, told On3. “When you initially hear these numbers, the instant reaction is that this won’t be sustainable. But as we know, some people are willing to invest large amounts of money to see their school have successful athletics teams. I think these numbers will be sustainable for some collectives, but obviously not all.”
Calling collectives a foundational piece of the NIL ecosystem, Jacksonville-based attorney Malik S. Jackson, who counsels clients on NIL matters, told On3 “the next facet of NIL collectives’ development will be the interplay between for-profit and not-for-profit entities in the NIL space.” He said collectives annually amassing “$5 million to $25 million is a drop in the bucket of NIL when considering the costs, revenue and value of being a booster for any given university. NIL collectives now provide a new mechanism for boosters and NIL compensators to create value for athletes that is not rooted in tax-deductible donations but creating profit.”
Concerns about legitimacy of some collectives
Cavale, whose company has more than 200 Division I college partners and works with a network of more than 70,000 active athlete users, believes in a few years there may be some regulations to provide guardrails for collectives. But there are not any with teeth now.
So in this Wild West era, ambitious collectives are moving quickly to take advantage of the landscape, pooling multimillions in funds, hoping to secure attention-grabbing recruiting classes that could quickly alter the trajectory of a program. What’s an athletic director to do if his school is not associated with a collective that wields substantial financial muscle?
“I feel for leaders in college athletic departments, especially athletic directors, some of whom who have been in their seat for 10- or 20-plus years, who are being made to feel as if their department is a failure just because they don’t have … tens of millions of dollars going to their student-athletes for NIL deals from some collective,” Cavale said.
Cavale recognizes that collectives are leveraging donor money to find creative ways to compensate student-athletes for NIL transactions. But the jury remains out on the legitimacy of some. The reality, Cavale said, is athletic directors don’t have in-house staff supporting the services side of NIL and the business practices of the student-athlete.
“And so they’re somewhat in the dark and they’re left to think the worst,” Cavale said. “I feel for them because it’s creating ‘FOMO,’ it’s creating fluff in a lot of the things that we read that could make them think that they’re actually doing worse than they are.”
Tom McMillen, the former U.S. Congressman, University of Maryland basketball star and now CEO of LEAD1, which advocates on behalf of the 130 FBS athletic directors, sees two sides with donor-led collectives. First, there is displacement, with some funds being siphoned to collectives that otherwise would be directed to athletic departments in traditional donor-driven contributions. The other side is the notion that “this is all new money and is going to raise all the boats,” he said.
In the meantime, some deep-pocketed founders are trumpeting their potential to create the biggest, the best and the most ambitious seven-figure collectives created.
“There is a little euphoric reaction to this, so it may settle down,” McMillen told On3. “… I think there will be some displacement in the beginning. I think the booster thing will settle down. And I think bigger brands will eventually get into this.”
Funding could become an issue
Cavale believes in time schools will figure out how to bring many of the services that collectives provide in-house and in accordance with university and state regulations. That would provide more support for student-athletes with NIL deal-making, fulfillment of deals and business management than schools are providing today — and that all will be increasingly feasible as state NIL laws continue to be repealed or amended nationwide.
“The question is not whether collectives are legit or not,” Cavale said. “It’s more of what are collective solving that the school should probably start solving themselves? And how will they start doing that with staff they hire or maybe an organization like Learfield that is focused on athletes that is contracted?”
With the dollar figures being bandied about, Winter sees two ways for a collective to annually raise these amounts. One is to be affiliated with a school that has at least a few very wealthy alumni or boosters who are loyal fans of the school’s athletics teams. These individuals could annually fund the collectives on their own. The issue with this funding method, he said, is that the collective is at the mercy of these individuals and they could decide to not fund the collective in a given year.
“A solution I’ve heard mentioned by some collectives is to initially amass a very large sum of money, invest it, and then going forward attempt to fund the collective — or at least a portion of it — with the annual returns on that money,” Winter said. “Under this scenario, the collective would be dependent on consistent positive returns on the invested money.”
A second way a collective could annually raise a large amount of money, Winter said, is through a subscription model. If a school has a large fan or alumni base, and the collective manages to get a significant portion of that base to contribute monthly or annually to the collective, it could result in a large pool of money. This model probably only works for the biggest schools — blue-blood programs such as Ohio State, Texas, Alabama, etc. — Winter concedes, and even then it probably couldn’t fully fund a collective on an annual basis for the dollar amounts being discussed.
“Option one is the most surefire way to amass these large amounts of money,” Winter said. “But it’s likely that not every collective is going to have those individuals willing to make these large donations, especially when they’re probably already making large donations to the school’s athletic department.”
Dale Hutcherson, a Memphis-area attorney who specializes in sports and trademark law, expects the sustainability of collectives to likely fluctuate based on various factors, including program success and economic and geographic variables.
“Sustainability could be an issue as it relates to ensuring donors continue to give back — especially if the given school is not as successful,” Hutcherson wrote in an email. “[And] if there is too much of a shift in power based on these collectives and their influence within the recruiting process, we could see some form of regulation on the horizon — especially since the collectives could be perceived as straying from the intent that was behind allowing athletes to freely make money off of their Name, Image and Likeness.”
Amid the FOMO age in the NIL space, patience can be a virtue. And, some say, it’s not necessary for college administrators to make impulsive moves merely because their fan base is ticked that deeper-pocketed rival-school boosters have assembled an ambitious collective. Don’t lose sight of the long-term vision.
“I don’t think anyone is falling behind because I think the ones that are very aggressive right now, there’s potential negative consequences that no one is talking about,” Peter Schoenthal, CEO of Athliance, told On3. “If you’re making all these promises, you might have a great recruiting class, but maybe half that class transfers in six months.
“The ones that are being conservative are looking at the landscape and setting proper expectations. Maybe the first two years their recruiting classes might drop five or six spots, but they might have higher retention. I don’t think there is a right or wrong approach right now. Beauty is in the eye of the beholder.”