I need a primer on NIL - seriously

[TRU]

I can understand how the inequality of NIL could really mess up a locker room and team cohesion. But I really do not understand the mechanics of NIL payments and how they could affect coaching decisions. Can someone please help me understand this process?
1. According to the NCAA, NIL has to be separate from the university. Initially, it was supposed to be totally separate. A player, if successful, could go out and try to sell his NIL independently. So if a player does this and then tanks and the coach decides to pull him, he could go to the coach and demand to be put back in because he has this great NIL deal. Why would this argument sway a coach?

2. In the real world, the ADs are facilitating NIL payments to players through organizations like Yea Alabama. OK, but it seems to me that whomever is paying NIL cash is doing so because of one of two reasons. First, they may genuinely want to have that player represent them - say making a car ad for a dealer. Or maybe they are just using it as a way to buy and keep a great player. Pay them NIL for one appearance getting photographed and signing autographs at a charitable function perhaps. But in either case, would the person paying NIL insist that a player continue to play if they are not performing. In the first case, I imagine an ad like "Hi I am the QB that threw two interceptions and a pick six in our loss last weekend. And I love my Kia" would go over well. And in the latter case, if you pay for a great player that does not play great, is that not just a sunk cost from which you should move on?

3. How long are these NIL contracts? I would think for a year maximum. if so, and player does not perform would their contract get renewed? I certainly would not.

4. Doesn't the university hold a copyright on the uniform and logos? Can they restrict the use of these in any NIL deal? If a player was not performing, could you not prevent a player from using the university copyrighted material?

In all cases, it seems to me that there is an implied three way contract here. THE NIL doner agrees to pay the money. The coach agrees to play the player if they perform well. And most importantly the player agrees to perform as expected. If the player does not live up to his part of the bargain, the others do not need to do so either.

It seems like a coach has the final power here. He determines if the player is performing up to expectations and if not he can bench him. And he can ensure the NIL spigot gets turned off at the end of the contract year. Then it is don't let the door hit you in the butt on the way out.

 

[B1GTide]

The only rule - There are no rules.

 

[Elefantman]

You and everyone else is still trying to figure this out. It makes no business sense to shell out six figures to a college player that has not proven a thing. If you are a business owner who did such foolishness. Then go to your fateful employees at the end of the year and say, sorry no Christmas bonus, didn't do as well as expected. They will remember you blowing a ton of money on a bum player for your favorite team.

 

[cbi1972]

NIL is supposed to enable players to monetize their talents indirectly through endorsements, merchandising, and such indirect activity.

The lack of enforceable rules regarding this means that we essentially have 'pay for play' without real guarantees of pay OR play, such as could be defined with contracts.

LANK, for example, is part of how it is supposed to be done, with players creating business opportunities for themselves through branding. But even this can create conflict and hazards for the team, whether it is through formation of cliques or the process of managing the business taking mental energy away from academic studies and football preparation.

A wealthy booster doesn't necessarily care about getting a financial return on an athlete's name, image, and likeness. They would legally buy players if they thought it would help their team. There is no mechanism of which I am aware that can prove the value of player NIL to distinguish a genuine exchange of fair value from plain old buying players.

 

[TRU]

"A wealthy booster doesn't necessarily care about getting a financial return on an athlete's name, image, and likeness. They would legally buy players if they thought it would help their team."

Yes, but I would think that if they buy a player who is a cancer or a bust, wouldn't they want to toss him like a hot potato? Or are the boosters so stupid or arrogant they will continue throwing good money after bad? And how long do they commit to paying out NIL to a given player in general? With 18 year kids, it would seem to me to be imprudent to promise more than one year at a time.

I could see NIL devolving into paying signing or retention bonuses to players to get them or to keep them around. But what leverage does a player have if they do not perform as expected and the coach decides he wants that kid gone? I guess I do not see how the kids have leverage if they do not perform up to expectations.

 

[4Q Basket Case]

Originally, NIL was supposed to be just that -- compensation to the player for a business using the player's name, image or likeness. There was an NCAA rule against member schools paying players directly, which led to the creation of the collectives.

A couple of things changed quickly.

First, aTm tried to create a collective for which the donations would be tax deductible. The IRS called garbage on that and has specifically stated that donations to collectives are NOT tax deductible.

Second, the prohibition against direct payments didn't last long. Shortly after the NCAA got sued for it, and because they're 0 for the last zillion court cases, they said they wouldn't enforce the rule.

So there is no governing body over what has now become simple pay-for-play.

Don't try to make business sense of the payments to the players. They don't make business sense now, and might not ever. As others have already posted, some rich boosters (Phil Knight, Jimmy Haslam, the Lowder brothers, and Jimmy Rane, to name just a few) view several million a year to the players as pocket change.

They're not expecting a financial return on their payments to players. They're expecting to buy wins, plain and simple. Boone Pickens would have been on the list, but he died before pay-for-play became legal.

Regarding length of contracts, terms and conditions of payment, specific provisions for transfers, lack of production on the field, deficient academic performance, etc., etc. at infinitum -- it all depends on the contract. There is currently no consistency from one contract to the next at the same school, let alone amongst the various schools or conferences.

Sometimes, there isn't even a written contract -- which is at the core of the lawsuit a player filed against the University of Florida.

There is no implied contract. A donor who pays a player a boatload of money might try to pressure the coach to play him. But there is no contract by which the coach can be legally compelled to play the player.

Regarding a coach telling a donor not to give a certain player any more money: Assuming there is in fact a written contract between the donor and the player, that sounds to me a lot like tortuous interference -- a highly dangerous thing to do.

The coach can make his decisions about playing time and let the chips fall where they may -- he's not a party to the contract between the donor and the player. But if the coach knowingly and intentionally interferes with a contract that doesn't involve him, that opens him (and because he's an employee of the University, maybe the University itself) up to liability.

As B1G has stated, there are effectively no rules other than whatever written contracts might exist. Complicating that, (1) there are different laws in different states, and (2) it's about impossible to have a uniform approach stand up in court unless the feds are involved.

Which is why I've been pounding the table for a union and a collective bargaining agreement enforced by the NLRB for a long time now.

The chaotic / anarchic status quo isn't illegal, but it is unsustainable.

 

[BamaNation]

I could see NIL devolving into paying signing or retention bonuses to players to get them or to keep them around. But what leverage does a player have if they do not perform as expected and the coach decides he wants that kid gone? I guess I do not see how the kids have leverage if they do not perform up to expectations.

The leverage they have is that if they don't perform, they're still getting paid for the "contract" because NIL can't really be tied to play or performance or even, really, to enrolling/playing/staying at a particular school. So, someone who performs poorly may not get another NIL deal but they still got the first one(s). Most schollys are 4yr commitments from the school so if they don't perform and nobody else wants them in the transfer portal, then they get to stay and be - in essence - free-loaders on their scholly.

and as stated previously: First rule of NIL is there are no rules (that are truly enforceable) or at least don't seem to be any rules.

 

[dtgreg]

"A wealthy booster doesn't necessarily care about getting a financial return on an athlete's name, image, and likeness. They would legally buy players if they thought it would help their team."

Yes, but I would think that if they buy a player who is a cancer or a bust, wouldn't they want to toss him like a hot potato? Or are the boosters so stupid or arrogant they will continue throwing good money after bad? And how long do they commit to paying out NIL to a given player in general? With 18 year kids, it would seem to me to be imprudent to promise more than one year at a time.

I could see NIL devolving into paying signing or retention bonuses to players to get them or to keep them around. But what leverage does a player have if they do not perform as expected and the coach decides he wants that kid gone? I guess I do not see how the kids have leverage if they do not perform up to expectations.

Every team gives lavish recruiting visits to players they KNOW are signing somewhere else. Been doing it for decades. Cost of doing business.

 

[davefrat]

The only rule - There are no rules.

Yup...it's a free for all right now.

 

[Bama_N_Va]

The only rule - There are no rules.

Think of the NCAA like Harvey!!!!

 

[DawgAlum2054]

1. According to the NCAA, NIL has to be separate from the university. Initially, it was supposed to be totally separate. A player, if successful, could go out and try to sell his NIL independently. So if a player does this and then tanks and the coach decides to pull him, he could go to the coach and demand to be put back in because he has this great NIL deal. Why would this argument sway a coach?

While It is supposed to be separate from the University (like say Heisman house Dr. Pepper money) it is not this way. The funding is coming from boosters and their businesses, as we all well know.

A player is not demanding to play because of their NIL deal, the booster is. The booster committed a lot of money to bring the player in, and wants to ensure that future NIL deals are not wasted.


2. In the real world, the ADs are facilitating NIL payments to players through organizations like Yea Alabama. OK, but it seems to me that whomever is paying NIL cash is doing so because of one of two reasons. First, they may genuinely want to have that player represent them - say making a car ad for a dealer. Or maybe they are just using it as a way to buy and keep a great player. Pay them NIL for one appearance getting photographed and signing autographs at a charitable function perhaps. But in either case, would the person paying NIL insist that a player continue to play if they are not performing. In the first case, I imagine an ad like "Hi I am the QB that threw two interceptions and a pick six in our loss last weekend. And I love my Kia" would go over well. And in the latter case, if you pay for a great player that does not play great, is that not just a sunk cost from which you should move on?

Sometimes yes. The politics that a head coach has to go through are unimaginable.

3. How long are these NIL contracts? I would think for a year maximum. if so, and player does not perform would their contract get renewed? I certainly would not.

This is pure chaos is. Contracts and income reporting

4. Doesn't the university hold a copyright on the uniform and logos? Can they restrict the use of these in any NIL deal? If a player was not performing, could you not prevent a player from using the university copyrighted material?

Yes, if it was an ad for something that would hold the University in a negative light. Think of Jenny from Forest Gump and her college sweater (biggest villain in cinematic history)

In all cases, it seems to me that there is an implied three way contract here. THE NIL doner agrees to pay the money. The coach agrees to play the player if they perform well. And most importantly the player agrees to perform as expected. If the player does not live up to his part of the bargain, the others do not need to do so either.

If a coach does not live up to his expectations, is his contract still paid? As long as they are not fired for riding on a moped with their girlfriend or other similar causes, a contact is a contract.

It seems like a coach has the final power here. He determines if the player is performing up to expectations and if not he can bench him. And he can ensure the NIL spigot gets turned off at the end of the contract year. Then it is don't let the door hit you in the butt on the way out.

Absolutely, but you also have to deal with players negotiating contracts with other schools trying to steal your players away with money



One small fix, you only get 1 transfer and then you must sit out a year if you transfer again. Also, the year counts towards your eligibility. This would not count for a grad transfer.

 

[Easttexastide]

Also from what I have been led to believe our NIL because of lank has become even more crazy. Lank is set up to give other players money unlike most NIl which has effectively made Milroe some players boss.

On another note I know the collective was ruled no tax deductible but if I own a car dealership and on paper I want a player on paper to speak for my dealership I don't see how I wouldn't be able to write that off as a advertising expense. So if I'm giving 100 thousand I'm really only giving 65,000?
.

 

[cbi1972]

Also from what I have been led to believe our NIL because of lank has become even more crazy. Lank is set up to give other players money unlike most NIl which has effectively made Milroe some players boss.

On another note I know the collective was ruled no tax deductible but if I own a car dealership and on paper I want a player on paper to speak for my dealership I don't see how I wouldn't be able to write that off as a advertising expense. So if I'm giving 100 thousand I'm really only giving 65,000?
.

If you are doing this as a car dealership, you're not an NIL collective, so presumably the rulings regarding tax deductions for collectives do not apply?

 

[4Q Basket Case]

If you are doing this as a car dealership, you're not an NIL collective, so presumably the rulings regarding tax deductions for collectives do not apply?

Maybe. Maybe not.

If the money gets big enough for the IRS to get interested, they could declare it a sham and treat the payment as a gift in excess of the statutory limit. And the IRS wouldn't be interested in a single rich guy as much as they would be a slew of rich guys all over the country avoiding tax liability for companies they own or have effective control.

In that case, it could incur a gift tax and could start to affect the donor's estate tax exemption. And it doesn't matter who the recipient of the gift is. Could be what most of us would normally call an "heir." Could be a total stranger you felt sorry for. Could be a football player who you gave money in exchange for a no-show "job" at your company.

This stuff can get really ambiguous and really complicated really fast. Goes back to the fact that there are no rules, and nobody thought the money would get this big this fast.

Tick off the IRS and it gets serious. Ask Al Capone about that.

This is what happens when well-intended policies don't get thought through. Thank you, NCAA.

 

[Bama_N_Va]

I'm curious 4Q, why blame the NCAA? It seems to me that its been US Courts not thinking about the second and third order of effects from its decisions... I could be wrong here...

 

[4Q Basket Case]

I'm curious 4Q, why blame the NCAA? It seems to me that its been US Courts not thinking about the second and third order of effects from its decisions... I could be wrong here...

I don't blame the NCAA for the whole issue. I do blame them for dithering away credibility on small-minded tit-for-tat and for not seeing the writing on the wall and making appropriate adjustments way before we got to the current anarchy.

This was coming bigger than the sunrise for years. Rather than recognize the weakness of their position, they continued to act like the USOC under Avery Brundige (look it up if you're not familiar). Never mind an untenable position, they refused to budge a nanometer and as a result gave up all control over the final outcome.

Compounding their vulnerability, they had a long and storied history of arbitrary and internally inconsistent punishments. So they had squandered what credibility they might have had, starting with Antonio Langham's cocktail napkin in the wee hours of January 1, 1993, losing a then-unheard-of seven figure defamation settlement to Tom Jones, and ending with UTe and UNC getting off scot-free in the face of blatant academic fraud.

Cam Newton and a 9-0 dope slapping from SCOTUS just put a merciful ending to an already-dead organization. The NCAA is now an event-planning organization. It does the NCAA basketball tournament and championship tournaments for a bunch of non-revenue sports. It doesn't really do anything else.

The NCAA couldn't have prevented the transition to open and market-based payments to collegiate athletes. They could have led an effort to manage it into an orderly process with the cooperation of College Presidents and ideally Congress. Instead they squandered credibility on vengeance-driven persecutions, blatant favoritism toward certain members, and wildly inconsistent rulings.

In the end, due to their own actions, they became as irrelevant to collegiate athletics as the square root of -1.

So when the inevitable mud-storm hit the fan, they had no viable standing to do anything.

It could have been managed into something resembling an orderly transition. But the NCAA had long ago forfeited the credibility necessary to perform that function.

That's why I blame the NCAA for much of the chaos we currently deal with.

 

[Easttexastide]

I also blame the NFL who has pressured congress and has certain anti trust protections I guess it would be called where players can't turn pro until after 3 years of college. If you could draft 18yr Olds they would t be expecting to get paid millions at the college level. But since we are stuck being a unpaid minor league for them things won't change. Sweet get you get to see how they developed handle adult things for free. Not to mention with big nil contracts you get to see how much kids really want it. How they do when they have plenty of money if they continue to work hard.

 

[cbi1972]

Maybe. Maybe not.

If the money gets big enough for the IRS to get interested, they could declare it a sham and treat the payment as a gift in excess of the statutory limit. And the IRS wouldn't be interested in a single rich guy as much as they would be a slew of rich guys all over the country avoiding tax liability for companies they own or have effective control.

I had to go look up the decisions I was referring to, and it had to do with collectives being denied tax exempt status, something a legitimate business shouldn't even be trying.

That doesn't mean a business can claim bogus expenses, but they should be able to claim legitimate ones, and of course should be careful.

 

[KrAzY3]

I said before this went into effect that this was being done in the worst possible way. The issue was it is all based on a California law which specifically forbid the university from interfering. This meant any guardrails, any limitations, any meaningful oversight wasn't allowed. The NCAA capitulated completely and basically just used the California law as it was written to open Pandora's box (another term I used at the time).

I think part of the issue is some people were so enthused at the prospect of players being paid that they just overlooked, or didn't want to acknowledge the really big downsides.

What are the really big downsides? Well, for most players their actual NIL value is tremendously low. I mean how much is the right guard at an random team really going to be worth? How many fans even know his name much less would purchase a product because of him? With rare exceptions, they are barely worth anything. Basically, if NIL was only actual NIL a majority of college players would see practically nothing from it.

But there are boosters, and anyone could see this coming from a mile away. I kept bringing up Phil Knight (Oregon does look good, don't they? Coming off a #3 class which I believe is their highest ever), but this really opened things up to the seedy underbelly of the college world type of boosters. There is nothing keeping them away from the players now, they just can write a check for anything really, it could be a birthday party appearance, and the real terms can be anything they both agree on in private.

The key here is when you read NIL, just understand that generally speaking it's a booster paying a player to go to a particular school. That's it, and that's where these deals have fallen through. Players have left schools when they were not paid what they felt they were owed, that's NIL.

Then, when the NCAA tried to at least keep the universities out of this, as per NCAA rules (the schools can't entice recruits with money), schools like Tennessee just threatened to sue and had the politicians back them up. So now, there's no enforcement whatsoever and there's really no putting the genie back in the bottle.

This is college football now and what a lot of people asked for, sadly I don't think a lot of them really grasped the underlying economics of college football (it's always been heavily subsidized by boosters, it's not as profitable as some people think) and thought this was all a for profit model. It's not though. It's a sport driven by donations.

 

[Cruiser]

The effect of NIL? Oregon has FOURTEEN transfers starting