Eyeing Future Profits

New businesses focused on the marketing rights to the name, image and likeness of college athletes are emerging in anticipation of an NCAA rule change, which has yet to be adopted. Some university officials are concerned bad actors in the market will take advantage of athletes.

January 14, 2020
 
Tom Pennington via Getty Images

Companies are moving quickly to capitalize on a market that does not yet exist based on the prospect of college athletes being able to earn compensation for the use of their name, likeness and image.

Officials in the National Collegiate Athletic Association are still in the early stages of discussion about permitting athletes to profit from their personal celebrity, sponsorship deals and other benefits of using their name, image and likeness, or NIL. The association’s division leaders and a working group exploring new guidance and policies will not report updates to the NCAA Board of Governors until April. The NCAA has also said that any updated guidance should be “consistent with the collegiate model,” which doesn’t suggest much significant change to the current structure, said Audrey Anderson, litigation counsel for the law firm Bass, Berry & Sims, who specializes in athletics department issues.

But two companies noted in Sports Illustrated’s “Sports Business Predictions for 2020” have already developed business models based on potential NIL benefits.

Without knowing what future NIL guidance -- or state and federal laws -- will look like, the companies are nonetheless betting on the potential for future profits, Anderson said.

“Everybody’s breathless” waiting to see what NCAA leaders will propose, she said. ​“The entrepreneurs are obviously going to be entrepreneurial, but it’s still risky to try and figure out how the rules are going to settle.”

One company, StudentPlayer.com, is a new crowdfunding platform similar to GoFundMe.com that will allow anyone -- college sports fans, alumni and large companies -- to donate funds to a specific collegiate athletic program or player position. The company’s founder, Zachary Segal, said StudentPlayer.com will “democratize” the college sports economy and compared the process to making political campaign contributions. All donations, listed by institution and sports team, will be made public on the website, he said.

He said a $10,000 donation has already been made by TocoWarranty.com, an auto repair insurance company, to 10 Division I football teams for each of their starting quarterback positions, including Louisiana State University, Clemson University and the University of Oklahoma.

One athletics department -- Minnesota State University at Mankato -- last month requested its institution be taken off the website due to concerns about how prospective donations could impact the eligibility of players under current NCAA rules for NIL benefits, according to a letter to Segal. Segal said it may have been a misunderstanding on Minnesota State’s part, and he assured the university's athletics department that the funds would be held in escrow until rules or laws are in place that permit college athletes to be paid.

“While the NCAA name/image/likeness concept is under review at both the association level in addition to various state laws that have been passed, the fact remains that current NCAA legislation has not been altered to the point that this would be a permissible activity for student-athletes to benefit from,” said a Dec. 13 letter from Shane Drahota, associate athletic director of compliance and student services at Minnesota State. “Therefore, it has the potential to cause eligibility issues for our student athletes.”

Drahota and other officials from the university's Department of Intercollegiate Athletics declined to comment further.

Oklahoma’s athletics department will monitor the site to be sure that players are not receiving the funds and violating current NCAA bylaws or state law, said Jason Leonard, executive director of compliance. But Leonard said he saw no reason to send a cease-and-desist letter to the site because it does not use athletes’ names or Oklahoma trademarks.

“I’ve never seen anything like this,” Leonard said. “They aren’t using any of our students’ name, image and likeness at this time, and why someone would contribute to this is beyond me.”

The site had raised a total $103,333 as of Jan. 13. College teams and athletes won’t be obligated to accept money offered to them once NIL rules permit it, but if they do, players will make a video or social media post in exchange for endorsing an advertiser, company or StudentPlayer.com itself, Segal said. He noted some uncertainty about how each contribution will work and said the endorsements will vary on a case-by-case basis.

“Athletes will be required to promote StudentPlayer.com and a few other advertisers as well,” Segal said. “Those other advertisers will vary by team, sport, school state, a number of criteria … This is a centralized place to make it easy for the athlete to understand what funding opportunities will be presented at different universities.”

Larger institutions with larger fan bases may have an advantage, but allegiance to an athletic program can also motivate contributions, Segal said. He’s excited to see what opportunities StudentPlayer.com could bring to smaller or lesser-known college sports programs. Segal said StudentPlayer.com will make most of its profit from advertising dollars made on the site, and “when someone contributes to the athlete, the money will be going to the athlete, not us.”

If and when NCAA rules allow athletes to accept sponsorship deals, Segal said he worries agents hired by athletes “can strike all kinds of deals and they could be highly unfavorable for the student athlete, given the intense time commitment of being a student athlete, and that’s before even considering being a student.”

“We’re really hoping that this does make it so that the student athletes don’t feel compelled to spend their time off the field running around and getting endorsements that take away from the college experience,” Segal said.

Another company, Nameimagelikeness.com, that would provide legal representation to athletes, was recently started by Dustin McGuire, a family practice lawyer in Illinois and former Division I men’s basketball player for Saint Louis University. His company could help athletes navigate sponsorship deals and provide other opportunities to profit from their NIL, such as fan autograph exchanges and social media advertising. McGuire does not believe the NCAA’s October 2019 decision to allow players to benefit from NIL will change much about how the collegiate model operates. He says state or federal law will more likely prevail.

Governor Gavin Newsom of California signed the Fair Pay for Play Act into law in October. The legislation supersedes NCAA guidelines and allows college athletes in the state to profit from their NIL beginning in January 2023. Several other states and a handful of federal lawmakers drafted or proposed similar legislation in 2019.

“The NCAA is not going to give rights -- those rights are going to have to be fought for,” McGuire said. “They’ve already indicated that those laws would be challenged on a constitutional basis … I decided to go ahead and introduce the website because California did pass its law.”

The NCAA declined to comment.

The motivation of firms and agents who want to represent college athletes in sponsorship deals has been a concern of NCAA leaders and legislators drafting bills to push the association to allow NIL rights.

Ensuring students are represented “fairly and honestly” will be one of the main questions asked by former and current NCAA stakeholders who want a say in how the new guidelines are written, said Walter Harrison, a former president of the University of Hartford who chaired the NCAA’s Board of Governors for three years. Harrison is co-chairing the Student Athlete Issues and Education Committee for the Knight Commission on Intercollegiate Athletics, which plans to deliver recommendations to the NCAA in early April, he said. The commission met on Jan. 13 to discuss what it plans to report to the NCAA, Harrison said.

“I don’t want to be overly paternalistic, but I would hope that student athletes would not be exploited and would actually be able to benefit from their name, image, likeness -- that’s something we’re all thinking about with this,” Harrison said. “I’m one of those people who believes that if you open a market, there are going to be all kinds of people who want to come into the market … If they’re not represented by somebody, are they even more likely to be taken advantage of by companies?”

McGuire rejected the suggestion that he, as a representative of college athletes, would try to take advantage of them, but he said that in any industry there will be bad actors.

“That’s all the more reason that agents are needed -- there are professionals like myself out there to help,” McGuire said.

Some university and NCAA officials assume that when agents want to help represent athletes, they are acting nefariously, "and it doesn’t have to be that way," McGuire said.

“It is a very large opportunity -- athletes need to realize that they’re a business,” McGuire said.

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