NIL: Student-athletes' compensation surges forward

As the NCAA NIL — or name, image and likeness — policy approaches the end of its sophomore year, WTW set out to understand the current state of the NIL landscape. Specifically, we’ve looked to assess the makeup of the top 100 “valued” student-athletes and what actions are permitted by schools, including regulatory updates and NCAA guidance.

After being approved by the NCAA in June of 2021, NIL has drawn comparisons to the Wild West given the speed in which the market has grown and the aggressiveness with which sponsors have jumped on the opportunity to provide student-athletes with pay for endorsements. In the first 12 months (July 1, 2021, to July 1, 2022) after the NCAA permitted student-athletes to profit from their name, image and likeness, it is estimated that over $900 million was paid out to student athletes,^[1] and the industry is expected to grow from $1 billion up to $3 billion to $5 billion in the next five years.^[2]

First, it is worth noting that referenced NIL valuations do not necessarily reflect how much an athlete has already earned but rather an estimate of how much they could earn in the upcoming 12 months. On3, one of the most prominent sources for the latest NIL athlete and industry updates,^[3] uses an algorithm to assess the valuation of a student-athlete much like a Wall Street analyst would assess a stock’s future value, relying on three main inputs: 1) on-field athletic performance; 2) social media influence/connections; and 3) exposure, including sport and position played, school attended and academic year. It is important to keep in mind, however, that determining a student athlete's value is not an exact science. For example, one prominent student-athlete has the third-highest current NIL valuation ($2.8 million) yet has no immediate plans to sign his first NIL deal. The distinction between valuation and actual earnings is important to underscore. These valuations, or estimations of potential earnings, are the current primary reference as there are no legal requirements to disclose deal terms; tracking actual income for these athletes is difficult, muddying the waters for athletes, sponsors and universities alike.

NIL demographics

Within the current NIL top 100, the makeup is heavily skewed toward male student athletes (94%), with men’s football having a majority in both the top 100 and top 25 and a slightly higher median valuation than men’s basketball, which owns the second-highest concentration of student athletes. When comparing the total number of top 100 NIL-ranked student athletes by conference, the Southeastern Conference (SEC) continues its dominance; however, after the SEC, high school student athletes make up the second highest number of top ranked NIL valuations. Overall, more high school student athletes are ranked in the top 100 than either college freshmen or college sophomores. This indicates that sponsors may be looking to “invest” before these athletes even step foot on a college campus. In fact, two of the top three NIL valuations belong to high school seniors who have yet to play for a university.

Interestingly, the gender ratio of 94:6 (male to female) has improved from just a few months ago. In January 2023 only two female student athletes, both gymnasts, were in the top 100 (also in the top 15): one an Olympic gold medalist and the other an accomplished gymnast in her own right who is also a social media influencer with over 6 million followers. From January 2023 to May 2023, five women’s basketball players broke into the top 100 (all but one in the top 50).

Our team published an article earlier this year commenting on Pay Equity of Division 1 college basketball coaches, noting that both the NCAA and corporate sponsors have been investing in increased media coverage for women’s sports. After an exciting finish to both men’s and women’s March Madness tournaments, it is safe to say that this increased coverage had a direct impact in providing a well-deserved earning opportunity previously unavailable to these women. Notably, one of the gymnasts is no longer included in NIL rankings after making the decision to end her college career early and prepare for the 2024 Olympics full time; however, her final valuation would have landed her in the top 15.

WTW also analyzed the relationship between the valuation of student athletes and whether they had a family member who was a famous athlete, ranging from former professional league MVPs to other recognizable athletes with long professional careers. Of the 13 student athletes with a famous relative, we observed a roughly 30% higher median valuation when compared with the other 87. It appears that while having a famous parent can be beneficial on its own, it also may have an outsized impact on attaining a higher NIL value — or be the difference between a deal and no deal.

Connecting student-athletes with sponsors

What may be more interesting, however, is how these connections are made. While some student athletes may work with these sponsors directly, many work through an NIL collective.^[4] Some collectives simply act as a broker or middleman between student-athletes and sponsors, while others partner directly with the students. Often funded by boosters and donors, collectives may be set up as either a for-profit or not-for-profit organization, typically an LLC or 501(c)(3), respectively. There are three prevalent types of collectives:

1. Donor-driven collectives collect funds and pay student athletes directly for services in an NCAA-compliant manner (most common).
2. Marketplace collectives serve as brokers between student-athletes and businesses to connect; they may also serve as agent representatives for student-athletes.
3. Dual collectives are a combination of donor-driven collectives and marketplace collectives.

Academic institutions and school staff are not currently permitted to directly influence or have a financial stake in collectives. And while collectives are not allowed to interfere in the recruiting process or transfer portal, most major Division 1 programs have at least one associated collective, and the role they play is evolving in real time. For example, one not-for-profit school club announced plans to sign $25,000 one-year deals with 100 players on the football team to complete community service and other charity work locally. Conversely, the first player-led collective/club was created by one major program’s football players, bypassing the middleman and directly going to consumers, offering one-year memberships for $199 for special access for up to 4,000 members, with such benefits as team meet-and-greets, members-only tailgates and access to player-created content. Proceeds from membership dues go directly to participating football players.

Regulatory updates

Absent new regulations, the Wild West comparisons are unlikely to abate, though the NCAA did release updated guidance in October 2022 of what was permitted or forbidden.^[5]While far from an all- encompassing list, this interim guidance drew clear lines in the sand on what actions the NCAA deems to be out of bounds for academic institutions or school employees. In the absence of federal oversight, six states (as of June 2023) have individually proposed legislation that would shield schools that defy NCAA guidance.^[6] While the specifics of each bill differ, all would seemingly allow schools to be active participants in student-athlete NIL deal negotiations, directly contradicting NCAA guidelines.

NCAA guidance, as of October 2022

Current non-permitted actions:

• Negotiate on behalf of either an NIL entity or student-athlete to secure opportunities.
• Provide free equipment or services (e.g., cameras, graphic design, tax preparation) unless the same offering is available to the general student body for free.
• Allow student-athletes to promote their NIL activity while participating in required athletics activities, including pre- and post-game activities, press conferences and on-court/field celebrations.
• Allow school staff to be employed by or have an ownership stake in an NIL entity.

Current permitted/encouraged activities:

• Provide education and guidance to enrolled student-athletes on such topics as social media practices, entrepreneurship, financial literacy and taxes. NIL education may also be provided to prospects, boosters and collectives.
• Require reporting of NIL activities to the athletic department, when permitted by local/state law.
• Inform student-athletes of potential NIL opportunities, as well as work with an NIL service provider to facilitate and administer a match-making marketplace.
• Promote student-athlete NIL activities in advertisements, provided the student-athlete or NIL entity pays the going rate for the advertisement.
• Allow school personnel (including coaches) to assist an NIL entity with fundraising; however, they may not donate directly to or receive payment from those entities. Schools cannot request that donated funds be directed to a specific sport or student-athlete.
• Allow tickets to be provided to NIL entities through sponsorship agreements only if the terms of agreements are the same for other sponsors. Tickets/suites may not be offered as incentive to provide funds to an NIL entity.

In evaluating 96 disclosed deals for NIL student-athletes in the top 25, we found that retail/apparel, food and beverage, and automobile companies (including local dealerships) make up nearly two-thirds of all deals. Surprisingly, memorabilia companies, including auction houses and NFT producers, made up only a small portion of the sponsors of the NIL top 25. Unfortunately, deal details, including payments and deal duration, are generally not made publicly available, and there is typically no requirement to publish such information.

Conclusion

Once the NCAA permitted NIL deals to student athletes, a deluge of money that had been waiting for decades to legally pay student athletes flooded the market; however, all stakeholders in this nascent industry need to stay abreast of latest trends and regulations — a challenging endeavor given the constantly changing landscape.

Sources

1. “How much athletes earned in the first year of new NCAA rules,” Josh Schafer, Yahoo Finance, July 1, 2022. Return to article undo
2. “About On3 NIL Valuation, Brand Value, Roster Value,” Shannon Terry, On3, July 29, 2022. Return to article undo
3. All valuation data sourced from On3 database as of May 25, 2023. WTW has no affiliation with On3 and makes no claim to ownership of valuation data.. Return to article undo
4. “About Collectives,” Pete Nakos, On3, July 6, 2022. Return to article undo Return to article undo
5. “D1 board approves clarifications for interim NIL policy,” Meghan Durham, NCAA.org, October 26, 2022. Return to article undo
6. “State NIL Laws Aim to Shield Colleges That Defy NCAA,” Christina Stylianou and Gregg Clifton, Law360, June 2, 2023. Return to article undo

Authors

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Joe Pannullo

Senior Associate, Executive Compensation & Board Advisory (New York)

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Erna Gashi

Analyst, Work, Rewards & Careers (New York)

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Russell Wilson

Senior Director, Executive Compensation and Board Advisory (Atlanta)

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