Here is my three-part Law360 series on how proposals to allow college athletes to be paid for use of their names, images and likenesses, or NIL, are playing out in legislatures, courts and campuses...
Ball In Congress' Court As States Tackle NCAA Athlete Pay
Law360 (August 26, 2020, 9:41 PM EDT) -- When California Gov. Gavin Newsom signed a bill last September to allow college athletes to be paid for the use of their names, images and likenesses, he called out the NCAA for barring such compensation — and perhaps set in motion a broader movement that has the organization and Congress scrambling to react.
"I don't want to say this is checkmate, but this is a major problem for the NCAA," Newsom said in an appearance on LeBron James' show "The Shop."
Under the "Fair Pay To Play Act," which is set to take effect in 2023, California's state and private universities cannot stop college athletes from "earning compensation as a result of the use of [their] name, image or likeness."
"It is going to initiate dozens of other states to introduce similar legislation," Newsom said on James' show. "And it is going to change college sports for the better by having now the interest finally of the athletes on par with the interest of the institutions."
After the law was signed, the NCAA said it agreed "changes are needed to continue to support" college athletes, but that such cannot happen through a "patchwork" of state-specific legislation. The organization has since started the process of changing its rules, while insisting on a series of guardrails to prevent college sports from becoming a pay-for-play system.
Since then, however, both Colorado and Florida have passed similar legislation to allow college athletes to be paid for the use of their names, images and likenesses — often referred to as NIL. The NCAA says a total of 36 states have introduced similar bills, some of which go even further, such as by requiring schools to share ticket revenue with college athletes or pay them stipends.
With Florida's new law set to take effect next summer, the NCAA and the major college conferences are turning to Congress to step in and pass a federal law to both preempt the various state laws and protect the league and its conferences from further litigation challenging amateurism rules.
The question is: Will federal lawmakers act in time?
"I think there are a lot of important things going on in Congress, but I don't know how long the feds can just avoid the issue," said Jackson Lewis PC sports and employment partner Gregg Clifton. "It is no longer a backburner issue. I think it is moving more toward, 'We are going to do something about it.'"
Setting a National Standard
The NCAA has long enforced rules to protect its self-defined system of "amateurism," a nebulous concept that the organization argues distinguishes college from professional sports. The concept essentially boils down to the idea that NCAA athletes should not be paid to play beyond what it costs to attend college.
Those rules apply to the league's member institutions across the country, including all of the colleges at the highest levels of competition, particularly in football and men's basketball, which generate the majority of revenue for schools.
However, college sports has turned into a multibillion-dollar industry through lucrative television and media deals and corporate sponsorships, leading to growing criticism that athletes are being exploited.
College sports generated $14.8 billion in revenue in 2018, a 240% percent increase from 2003, according to statistics from the U.S. Department of Education Equity in Athletics Data Analysis. The NCAA makes $1 billion from the March Madness men's basketball tournament alone, mostly from its television rights deal with Turner Sports and CBS.
Only a fraction of this revenue goes to athletes themselves. Meanwhile, schools build lavish athletics facilities; coaches make hundreds of thousands, if not millions, a year; and schools gain publicity through the success of their sports teams. The average salary of a Division I football coach is nearly $2.5 million, according to statistics compiled by USA Today Sports.
While the NCAA's amateurism system has been challenged in court as an unlawful cap on potential athlete compensation, courts have generally found the system does not violate federal antitrust law so long as colleges are not prohibited from at least paying for the costs of attendance and other expenses tied to education.
Now, with some states enacting laws that will allow athletes to make money from their publicity, it could create a different set of rules for athletes in those states compared to the rest of the country. The NCAA has argued this could make it difficult for it and its conferences to conduct college sports on a regional and national basis.
"How is a conference even going to be able to enforce its rules effectively if you have schools in multiple states with multiple laws?" Clifton said. "Then the issue becomes, if I am a school, do I violate NCAA regulations? Does state law trump the NCAA? How do I handle that with my student-athletes? Do I discipline a student-athlete if they are violating an NCAA rule by doing something that is protected by state law? That is going to be an interesting discussion."
The momentum in state legislatures is being driven by two key factors. First, the idea that college athletes are being exploited and should be able to earn money, at least from third-party sponsors, has gained traction among politicians on both sides of the aisle in recent years. Second, lawmakers do not want colleges in their states to lose potential recruits to those in states where athletes are allowed to earn money.
But now that the issue has reached Congress, the NCAA and conferences are getting a chance to be heard, and federal lawmakers are taking a closer look at their arguments around how NIL pay could affect competitive balance. Will successful programs gain even more advantages? Or could colleges in bigger media markets gain advantages over those in smaller college towns?
The Senate has already held three hearings this year on the issue, even as it grapples with the COVID-19 pandemic. Sen. Marco Rubio, R-Fla., introduced a bill in June to allow NIL pay, while Sen. Judiciary Committee Chair Lindsey Graham has said the committee will consider legislation this fall.
In the House, Rep. Mark Walker, R-N.C., introduced a bill in March 2019 to amend the tax code to remove restrictions on college athletes earning money for use of their NIL. Rep. Anthony Gonzalez, R-Ohio, a former wide receiver for the Ohio State University football team, has indicated he may introduce an NIL bill as well.
The NCAA is urging lawmakers to do a few things as part of a federal NIL bill, according to proposed language circulated to lawmakers that was reported by Sports Illustrated.
The organization wants the bill to codify that college sports are amateur and specify that college athletes are not employees. Its proposed language also seeks to explicitly preempt any state bills and block any "legal challenges originating from federal or state unfair competition statutes" or "state tortious interference statutes based on unfair competition concepts."
A key concern raised by the NCAA and major conferences is whether schools in states like California and Florida will have a recruiting advantage over schools in states that do not allow NIL pay.
Imagine a top college football recruit choosing between playing for Alabama, a perennial national championship contender under head coach Nick Saban, or UCLA, a solid program but one that has not had nearly the same recent success on the field.
If the athlete can go to UCLA and make money, it could completely change the calculus of the recruit's decision, especially with UCLA being in a major media market like Los Angeles where theoretically there could be more endorsement opportunities.
And allowing athletes to make money from their NIL raises further questions. At what point will sponsors be able to approach college athletes? How do you stop them from going after top recruits when they are in high school or otherwise influence a recruit's decision on which college to attend? There is even disagreement over the extent to which these interactions even should be regulated.
"It gets very complicated very quickly," said Tom McMillen, a former college and professional basketball player and former member of the U.S. House of Representatives who now serves as the president and CEO of Lead1 Association, a trade group representing the interests of college athletics directors.
McMillen said there was a "crescendo" last year into the beginning of 2020 where state lawmakers were rushing to propose and pass bills to allow college athletes to monetize their NIL.
"I think these are very complicated issues, from pre-enrollment to group licensing to conflicts of interest. It just gets very complicated very quickly," McMillen said. "Then you talk about antitrust, federal preemption, I think the issues are more complicated as you get into this. Congress is now spending more time on it. This is a serious deliberative process, but they are against the clock."
Others experts say the NCAA and conferences are making the issue harder than it needs to be. Variations in state law can be dealt with, and not every issue needs to be legislated. In other words, do not let the perfect be the enemy of the good, they say.
"I think there could be some difficult situations where one athlete can get paid for [NIL] at one school but another can't," University of Baltimore School of Law associate dean Dionne Koller, who testified before the Senate in July, told Law360. "But we already have that. You go to one school here or there and you get different deals. We expect that in every other area of our life, but suddenly here it has been deemed absolutely unacceptable. And the solution is to always strip athletes of rights and give the NCAA a blank check."
Weighing an Antitrust Exemption
The NCAA and college conferences have faced several lawsuits in recent years challenging various aspects of the amateurism rules. While these suits have only chipped away at the rules, they have been successful in forcing the league to confront the question of whether the rules act as unlawful restraints on athletes.
As part of the federal law being sought by the NCAA, the organization is seeking a safe harbor from such suits. Critics and some antitrust experts say that would give it an unnecessary exemption from federal antitrust laws that apply to almost every other industry.
"I want to be really clear that we are not seeking broad-based antitrust exemptions to do anything other than to try and resolve this particular issue," NCAA president Mark Emmert told the Senate Judiciary Committee last month. "If it is the case that we are going to have a patchwork of state laws, they are going to be conflicting as things currently stand — they are going to create significant disruptions in the recruiting process."
Rubio's bill would open the door for NIL pay, but it would also give the NCAA, conferences and schools protection from all causes of action "in any court" regarding the adoption of rules around such a system.
"The problem is that any rules the NCAA comes up with will be challenged on antitrust grounds because there will be some limits," said Matthew Mitten, a sports and antitrust professor at Marquette University Law School. "Whatever the NCAA comes up with, [opponents] will say, 'Well, you are prohibiting student-athletes from licensing their image to, say, boosters of the school or the school's own sponsors.'"
The organization may need some protection from further antitrust claims in order for college sports to work, said Mitten, who testified before the Senate Judiciary Committee last month. And it would likely face challenges to whatever rules it puts in place.
Perhaps more difficult for the NCAA, Mitten said, is that explicitly allowing athletes to be paid for their NIL — even if it is only from third parties — could undercut the organization's primary defense in antitrust suits: that not paying college athletes is key to what makes college sports so popular.
But others say the NCAA is merely taking advantage of the situation to grab a long-sought and unprecedented protection from antitrust scrutiny that is not afforded to nearly every other industry or even in most professional sports.
"I think the main issue … is how do you prevent NIL deals from being used as inducements to high school recruits or even transfers?" Ramogi Huma, the executive director of the National College Players Association, the advocacy group behind California's NIL law, told senators during a hearing in February.
"We are agreeable to a solution on that, but not one that gives the NCAA any kind of antitrust exemption ... [which] is really un-American," he added. "We are supposed to be about markets and free markets. Many of the people who benefit from college sports — coaches and ADs — they tap fully into the free market. College athletes should have the same economic freedoms."
Further, athlete advocates are quick to argue that gains in compensation and benefits to date have been a direct result of antitrust suits against the NCAA and conferences, forcing them to defend why it is necessary to maintain amateurism.
"The NCAA is far more restrictive than it needs to be in order to produce the product of NCAA sports," Koller, who urged federal lawmakers against an antitrust exemption in July, told Law360. "This is what the antitrust courts have recently been ruling — that the NCAA just overreaches. I think if we look at the numbers and follow the money, we can see why they overreach."
State NIL bills have come from both sides of the aisle, and the three bills that passed did so with bipartisan support. But in Congress, a divide is growing largely along party lines.
The bill from Rubio, a Republican, closely reflects the NCAA's concerns, calling for limited reform to allow for NIL pay but giving the organization ultimate authority in determining exactly how that happens.
"It is not very student-athlete or player-friendly in terms of what it provides," said sports attorney Justin Sievert of Vela Wood. "It is not going to reach the point of what players or player advocates want. The issue now that we are running into is that Florida's [state] bill will go into effect next July. We are talking about one year to figure this out on a federal level, or we are going to end up with the schools in Florida following a different set of rules."
Meanwhile, Democrats including Sens. Richard Blumenthal of Connecticut and Cory Booker of New Jersey, a former football tight end for Stanford University, are seeking broader protections for college athletes' health, safety and economic rights.
In August, they led a group of lawmakers that included Democratic vice presidential candidate Sen. Kamala Harris of California and Sen. Bernie Sanders, I-Vt., that unveiled a framework for a potential college athlete "Bill of Rights."
Though they have yet to introduce formal legislation, the lawmakers said the bill will greenlight NIL pay, allow athletes to be able to negotiate revenue-sharing agreements with schools and conferences, and include other sweeping reforms to give athletes greater bargaining power.
And the partisan divide could deepen over the issue of the safe harbor for antitrust protection. Further complicating the political dynamics, the issue is playing out during an election year and amid the COVID-19 pandemic.
"There is very little time left in this year to legislate," McMillen said. "It depends on the election. It depends on who is the president. There will be a lot of political wins here that will make a difference in how NIL plays out."
--Editing by Philip Shea and Emily Kokoll.
Courts Referee NCAA Athlete Pay Fight As States Mull Change
Law360 (September 4, 2020, 4:51 PM EDT) -- The NCAA sent shock waves across college sports earlier this year when it agreed to change longstanding rules blocking athletes from earning money from sponsorship and endorsement deals, a new dynamic that could make it harder for the organization to defend its amateurism system in the courts.
When then-NCAA Board of Governors chair Michael V. Drake announced the move in April, he acknowledged that "allowing promotions and third-party endorsements is uncharted territory."
But the NCAA has yet to implement the new rules, instead instructing its divisions to explore what regulations must be put in place to ensure that college sports does not become a "pay for play" system. The NCAA has spent most of the last decade in federal court defending amateurism as inextricably tied to the popularity of college sports.
"The evolving legal and legislative landscape around these issues not only could undermine college sports as a part of higher education but also significantly limit the NCAA's ability to meet the needs of college athletes moving forward," Drake, who has since retired as president of The Ohio State University, said in his April statement.
Even as it looks to Congress to take control of the issue, the NCAA is girding for major court battles that could further upend the status quo. One pending suit in California federal court alleges the NIL restrictions do not enhance consumer demand for college sports or advance any other claimed procompetitive purpose.
"Now that we have this evolving factual record, we believe it is time for the court to look at the NIL litigation with new eyes," Steve Berman of Hagens Berman Sobol Shapiro LLP, representing the athletes in that case, told Law360.
Wave of Litigation
The NCAA's planned change follows two major Ninth Circuit rulings in the past five years that have scrutinized its system of amateurism and found that some of its restrictions lack justification.
The first case targeted limits on athlete NIL pay, resulting in a $60 million settlement with the NCAA and video game maker Electronic Arts Inc. to end claims that the company was unlawfully using the likenesses of college athletes without permission in its popular NCAA college football and men's basketball video games. EA has not released a new NCAA video game since 2013.
In that case, former UCLA basketball star Ed O'Bannon continued to pursue claims against the NCAA. The Ninth Circuit in 2015 held in O'Bannon v. NCAA that the NCAA rules are anti-competitive and subject to scrutiny under federal antitrust law but allowed the organization to limit athlete compensation to no less than the cost of attendance.
During the course of the litigation, the so-called Power 5 conferences allowed their schools to offer aid up to the full cost of attendance — typically thousands of dollars more than what the NCAA had limited. College athletics directors have recently testified before Congress that the value of a financial aid and scholarship package for an athlete on full scholarship can be as much as $75,000.
In May this year, the Ninth Circuit in Alston v. NCAA upheld a ruling that could further loosen the NCAA's restrictions and allow schools to offer athletes even more in education-related benefits. That could include study grants, guaranteed graduate school scholarships and even potential cash awards for academic achievements.
The NCAA has said it believes the Alston ruling "is inconsistent with both Supreme Court precedent and the Ninth Circuit's own decision in the O'Bannon case" and has petitioned the U.S. Supreme Court to review the case. However, the high court refused to halt the ruling while the justices consider whether to weigh in.
While the NCAA continues to fight the Alston decision, some of the athletes' attorneys have filed a new proposed class action again challenging the NIL restrictions. In the new suit, House v. NCAA, the lead plaintiffs, Arizona State University swimmer Grant House and University of Oregon women's basketball player Sedona Prince, say the NCAA's April promise to revise its NIL policies is "vague, indefinite and non-committal."
The suit points out that there are more than 100 Division I college coaches who make more than $1 million per year, and the median salary for athletic directors is $500,000 per year. Colleges additionally bring in millions more each for rights to televise basketball and football games and from contracts with shoe companies like Nike, Adidas and Under Armour to have their athletes wear those companies' products.
Berman, who is also representing the athletes in the House case, noted that since last September, at least four states have passed laws that will prohibit colleges in those states from stopping players from earning money from third parties in the form of endorsements, sponsorships or for other uses of the athletes' NIL while they are in school, putting those states in direct conflict with NCAA rules. Dozens more are considering similar legislation.
"What it means to me is that the legislatures are recognizing that (a) it is not fair for the students not to get paid, and (b) it undermines the NCAA's main argument that if we pay the athletes one penny over the cost of going to school it will turn them into pros and will ruin demand for the sport," Berman said.
While athletes have achieved some gains, the federal courts have still deferred to the NCAA's amateur system and have refused to bar the organization from imposing some restrictions on pay.
The issue has turned on the NCAA's claim that amateurism differentiates college sports from professional leagues like the NFL and NBA and is key to maintaining consumer demand. College sports fans want to see athletes "playing for their schools and the love of the game, not for pay," the NCAA argued in the Alston case.
"Sports are popular to begin with. But the attraction of college sports goes further," the NCAA told the judge in the Alston case in a written opening statement during a bench trial. "Students are attracted to the competition for their school by fellow students with whom they identify. Alumni and others with school affiliations or sympathies are attracted by seeing students compete for the schools they support. And even fans with no particular school connection are attracted by the human interest of seeing the amateur student competition."
Even though the NCAA is relenting on its strict rules prohibiting NIL pay, it wants to maintain this distinction by imposing guardrails that would prohibit schools from paying athletes or arranging sponsorship deals, stop school boosters from paying athletes just to play at or stay at their school, and prevent athletes from using school logos in marketing themselves.
But courts in the Alston case were not convinced that allowing greater compensation for college athletes would undermine fan interest. U.S. District Judge Claudia Wilken noted that the NCAA and conferences "provided no evidence that NCAA bylaws limiting compensation are enacted based on any analysis of consumer demand."
In her ruling, Judge Wilken said she was persuaded by the athletes' expert opinions, which argued that the increase in allowable benefits at least up to the full cost of attendance had "no negative impact on consumer demand," and that increasing benefits in other ways would not stop fans from going to games or watching on television.
More recent data seems to support that argument. For instance, despite rating drops for the NBA and other professional sports last year, college football saw its best ratings in 30 years, highlighted by a 24% year-over-year increase for Southeastern Conference football games featured on "The SEC on CBS," according to a report in The Athletic.
But the Alston case did not answer the ultimate question of whether allowing more compensation for college athletes will necessarily harm consumer interest, let alone whether the NCAA's current rules, which limit third parties from paying athletes, are reasonable.
"There are a lot of complicated issues in antitrust law and even involving the NCAA," said Marc Edelman, a law professor at Baruch College of the City University of New York who has published scholarship on the regulation of the NCAA. "However, the anticompetitive effects of the NCAA restraints on name, image and likeness rights is not a complicated issue."
Edelman described the NCAA's system as "a classic cartel third-party boycott against athletes."
"It would be very difficult to argue successfully that any of the harm that the NCAA purports from allowing a free market in this context would actually come into play," he said. "If anything, one could argue that it could increase the popularity of college sports by keeping star athletes on the teams for a longer period of time."
College basketball, in particular, faces an annual exodus of top talent as players leave for the pros before their NCAA eligibility is up, even if they are not guaranteed to have a long NBA career or cannot break into the league. The number of college seniors drafted by the NBA has gradually decreased over the past few decades. There were 12 college seniors drafted in 2019, down from 21 a decade earlier, according to data compiled by RealGM. There were 42 seniors drafted in 1995.
Meanwhile, more and more top recruits are choosing to bypass college altogether for professional opportunities either overseas or in the revamped NBA G League developmental system. Last year, one of the top college basketball prospects, R.J. Hampton, chose to play professionally in New Zealand and prepare for the 2020 NBA Draft this October.
In 2018, five-star recruit Darius Bazley committed and signed to play at Syracuse University and then decided to join the G League. He ended up taking a paid internship with athletic shoemaker New Balance worth a reported $1 million. He was ultimately picked 23rd overall in the 2019 draft and now plays for the NBA's Oklahoma City Thunder.
If players were able to make money from their NIL while in college, there would be fewer young stars who choose to leave college early or avoid the NCAA altogether, some experts say. That could improve the quality of the college game and ostensibly increase fan interest.
The NCAA is slowly coming around to that point of view, but experts say that might not have happened in the absence of legal pressure. And the NCAA, perhaps sensing that courts are becoming more reluctant to give it deference under antitrust law, is now seeking an antitrust exemption or "safe harbor" from further lawsuits as it looks to rewrite its NIL rules.
There is also some evidence to suggest that not paying college athletes actually hurts demand among fans.
Sixty percent of respondents to a Seton Hall Sports Poll, conducted in April 2019 by the Sharkey Institute in the Seton Hall Stillman School of Business, said they believe college athletes should be able to earn money from their NIL. The support was even greater among younger respondents, with 80% of those ages 18-29 saying they believe athletes should earn such pay.
"At some point, if they start paying these [athletes] too much that it hurts demand because the public thinks they are no longer amateurs or no different than pros, then the payments will begin to ratchet down," Berman said. "That is what competition is about."
Leaning on Lawmakers
In the wake of the recent court setbacks, the NCAA has turned its focus to Congress, urging lawmakers to step in and preempt the state laws being passed to allow NIL pay.
Experts say the NCAA still has a card to play if its legislative effort falls short: seeking to have the state NIL laws struck down in court as unconstitutional under the legal doctrine known as the Dormant Commerce Clause. Congress is given power to regulate interstate commerce, and states cannot interfere with that power by passing laws that discriminate against or unduly burden interstate commerce.
"You basically impede commerce by creating a multiplicity of rules," said Fordham University sports law and ethics professor Mark Conrad. "There was some talk that they would challenge California, but they have not done that yet. It is always possible if these states have 20 different laws."
The NCAA has been successful in the past in getting state laws that conflict with its rules struck down. In 1991, Nevada passed a law interfering with the NCAA's rules-enforcement power, after a decadelong legal fight between the organization and University of Nevada, Las Vegas men's basketball coach Jerry Tarkanian.
Tarkanian sued after UNLV was hit with a so-called show-cause order for a recruiting violation that essentially would force the university to fire him or suspend him for two years, alleging the NCAA infractions process lacked due process. The punishment was enjoined for over a decade during the litigation, which ended with the U.S. Supreme Court ruling in 1988 that the Due Process Clause does not apply to the NCAA because it is not a state actor.
The Nevada law required the NCAA or "any" national college athletics body to provide due process to athletes, coaches and institutions in disciplinary proceedings. It also gave Nevada courts authority to enjoin proceedings and blocked the NCAA from kicking out schools for complying with the law over the NCAA.
The NCAA challenged the law in court, alleging it violated the Commerce Clause and the Contract Clause of the U.S. Constitution. The Ninth Circuit agreed in NCAA v. Miller , ruling that the law "goes to the heart of the NCAA and threatens to tear that heart out."
"Consistency among members must exist if an organization of this type is to thrive, or even exist," the court said.
Many commentators predicted that the NCAA would pursue a constitutional challenge immediately after California enacted its law, and indeed the NCAA threatened as much. Instead, whether due to frustration with the courts or another reason, the NCAA has prioritized lobbying over legal action.
"I still don't rule that out," attorney Tim Nevius of Nevius Legal, a former NCAA investigator who now represents college athletes. "I think they are discussing potentially filing a lawsuit to challenge that, but it seems to be their course of last resort."
--Editing by Brian Baresch.
Big Money On Campus: Athletes Seek Cut Of NCAA's Riches
Law360 (September 17, 2020, 6:44 PM EDT) -- Katelyn Ohashi "broke the internet" last year with an exuberant perfect 10 gymnastics floor routine. Within days, a video of her January 2019 performance had grabbed 750,000 views on YouTube and was trending on social media, turning the UCLA gymnast into a recognizable sensation.
A professional athlete might have leveraged the newfound fame for endorsements or turned into a paid social media influencer. But Ohashi was not able to capitalize while at UCLA under NCAA amateurism rules that strip college athletes of their right to earn money from the use of their names, images and likenesses, or NIL.
"I was handcuffed by the NCAA rules that prevented me from deriving any benefit from my own name or likeness regardless of the fact that after my final meet, I had no pro league to join," Ohashi said in a video op-ed published by The New York Times last October that again received widespread attention
Meanwhile, UCLA was able to promote the performance on social media, gaining valuable publicity for the school. The video of Ohashi's perfect-10 routine, posted by UCLA Athletics on YouTube, has been viewed more than 126 million times over the past year and a half. A tweet from UCLA gymnastics has nearly 700,000 likes and more than 200,000 retweets.
"The NCAA is a billion-dollar industry built on the backs of college athletes," Ohashi said in the Times video. "How different would things be for me had I been able to use my image and name my last year of school in order to promote the things I want to further my future?"
The NCAA has relented somewhat, announcing earlier this year that it will reform its rules to allow athletes to be paid for the use of their NIL while keeping some guardrails in place to ensure that college sports remain an amateur system.
However, with states opening the door for less-restrictive opportunities through legislation, college sports are undeniably changing. The question is how much.
"It is a Pandora's box," said sports marketing attorney Bob Wallace Jr., chair of the sports law group at Thompson Coburn LLP, noting that NIL pay could become a way for boosters to compensate athletes just like professionals.
"Then it becomes a question of what was initially the purpose of regulating amateur athletes," he said. "I don't have the answer, but I think we do need to think about how we let student-athletes cash in a little bit on their unique skills."
Money To Be Made
In April, the NCAA Board of Governors adopted a set of recommendations from a special working group to allow athletes to be paid for use of their NIL. The move ostensibly opened the door for sponsorship and endorsement deals, but with guardrails to prevent college sports from becoming "pay for play."
Those guardrails say NIL compensation should represent "a genuine payment for use of their NIL, and [not be] simply a disguised form of pay for athletics participation" and that "schools and conferences [should] play no role in a student-athlete's NIL activities." The working group also said steps must be taken to ensure "schools or boosters are not using NIL opportunities as a recruiting inducement" and that third parties are regulated.
Those rules are more restrictive than what state NIL bills would allow. But maintaining the distinction between NIL pay and "pay for play" is easier said than done.
"These are rights that all of us enjoy: the rights of publicity," said University of Baltimore School of Law associate dean and law professor Dionne Koller, who directs the school's Center for Sport and the Law. "We own our name, image and likeness. These are rights that are stripped away from athletes when they come to college. I think the starting point for me is that these aren't the NCAA's rights to give or take away. These are rights that you come to college with and that every student has. "
College sports, particularly football and men's basketball, generate significant revenue from fans who pay to watch college athletes compete in person or see ads on TV, and also buy merchandise and other collectibles. Division I college athletics programs generate tens of millions per year in revenue, with top schools bringing in as much as $200 million or more, according to data collected by USA Today.
At the same time, under NCAA rules, an athlete can lose eligibility to play if he or she "accepts any remuneration for or permits the use of his or her name or picture to advertise, recommend or promote directly the sale or use of a commercial product" or is paid to endorse "a commercial product or service."
An athlete is further prohibited from leveraging "the publicity, reputation, fame or personal following that he or she has obtained because of athletics ability." The rules even place a duty on the college athletes themselves to police use of their NIL to ensure it is not being used for commercial purposes.
Five states — California, Colorado, Florida, Nebraska and New Jersey — have passed laws that seek to negate these restrictions by prohibiting schools in their states from revoking a college athlete's eligibility if they do accept money for a sponsorship or endorsement or other use of their NIL. Other states are considering similar measures. Florida's law is set to take effect first, on July 1, 2021.
While these bills do not call for schools to pay athletes directly, they do open the door for third-party businesses independent from the schools to pay athletes to endorse their products or services.
"When you look at the value that the individual athletes bring to the campus, it is time that they be given the opportunity to realize that value and to remove those restrictions so that the same opportunities that anyone else on the college campus has, the athletes have," said Dustin Maguire, an attorney and former Division I college basketball player who founded nameimagelikeness.com, a marketing service for college athletes.
'A Brave New World'
Experts say easing NIL restrictions could allow athletes to realize economic value that under the current system is reaped mostly by schools.
Traditionally, the value of a college athlete's NIL was seen as the ability to sign autographs for fans for money, sell memorabilia or make paid appearances at local businesses, often car dealerships. But the influence of social media is completely changing the game, increasing the value of personal brands and providing even more opportunities for athletes to be able to profit.
"It is not the same old publicity rights when I was in school. Today, social media is so predominant now that these [athletes] can make money just doing postings every day," said Tom McMillen, a former college and professional basketball player and former member of the U.S. House who is now president and CEO of Lead1 Association, a trade group representing the interests of college athletics directors. "It is a brave new world out there, and college sports need to be nimble enough to adjust to it."
But just how much are athletes worth? Experts say the value of a college athlete could be anywhere between a few hundred dollars per year to more than $1 million. It depends on several factors including the sport, the school's geographical market and the player's social media following.
Depending on the ultimate contours of NIL changes, top athletes, like last year's No. 1 overall NBA draft pick Zion Williamson, may command sponsorships from Nike and other national brands while still playing collegiately. Williamson signed an endorsement deal with Nike's Jordan Brand for a reported $75 million, the richest deal ever for an NBA rookie, just months after finishing his freshman season at Duke University, which is sponsored by Nike.
The athlete branding and marketing company Opendorse Inc. estimates that the two top contenders for this year's Heisman Trophy, Ohio State University quarterback Justin Fields and Clemson University quarterback Trevor Lawrence, have average annual earning potential of more than $1.2 million dollars from NIL deals.
Fields could earn $11,382 per sponsored Instagram post and $1,586 per Twitter post, alone, while Lawrence could earn an estimated $10,864 per Instagram post and nearly $1,000 per Twitter post, according to Opendorse.
Money could be generated for whole teams if the athletes are allowed to package their rights into group licensing deals, something which the NCAA working group recommended against but that several proponents have said is low-hanging fruit.
And it is not just football and men's basketball. Opportunities exist for athletes of all levels of popularity across sports, and for female athletes.
In 2018, former University of Notre Dame women's basketball player Arike Ogunbowale was invited to compete on ABC's uber-popular celebrity competition "Dancing With the Stars" after she gained attention for hitting back-to-back game-winning shots in the NCAA women's Final Four. She was allowed to participate and keep prize money, but only after seeking a special waiver from the NCAA that limited her ability to market herself on the show.
NIL opportunities could allow athletes like Ogunbowale to parlay publicity from a big performance into being a social media influencer while in school. Others may have developed a social media following for reasons separate from or tangentially related to sports. Ogunbowale now plays professionally for the Dallas Wings of the WNBA.
Capitalizing on publicity while in college is especially important for female athletes like Ohashi, who may not have an opportunity to go pro after college, proponents say.
"It is not the car dealership anymore," said Koller, who testified before the U.S. Senate this year on the NIL issue. "This opens up enormous opportunities for women athletes to bring more attention to their sport generally and build fan interest in their sport and build individual interest in their own brands."
Some entrepreneurs are seeking to capitalize on a new potential regime where athletes may be paid for NIL. Student Player LLC launched this year with the goal of allowing fans to contribute money to specific schools and teams to attract better players. The money is pooled and distributed to the college athletes after they complete various endorsements.
Student Player founder Zachary Segal told Law360 the idea is to provide a way for athletes to see which schools would give them the best NIL opportunities and give college sports fans more ways to engage directly with their favorite schools and feel part of the team.
The company has already raised more than $100,000 in fan "contributions" since launching despite the poor economy amid the COVID-19 shutdown.
"I think that fans will have an appetite to contribute money in a way that it goes directly to the players," Segal said. "And the players know that if they go to this school instead of their competitor, this is the sponsorship offer that is going to be waiting for me. That is going to be a very compelling factor in someone's decision of where to attend college."
Though this seems to conflict with the NCAA's desire to not allow NIL to become a recruiting inducement, Segal said the company's goal is not to compromise any athlete's eligibility and no offers will be made "until it is legal and permissible to do so."
"I think that there is a fear that the status quo will change, but my hope is that the status quo will change because the current system is not equitable, it is not fair, and it treats student-athletes differently from every other student on campus," Segal said. "If student-athletes are students first, then they should have the same rights that every other student currently has, whether they are on scholarship or not."
The Booster 'Boogeyman'
With all of these economic opportunities, the overarching concern is that companies and boosters will exploit these new ways for college athletes to make money simply to pay athletes to play at a certain school or stay in school, turning college sports into a de facto professional pay-for-play system.
The NCAA broadly defines a "booster" as someone who is a "representative of the institution's athletics interests," including those who have donated to the athletics department or have otherwise been engaged with promoting, and already sets out guidelines regulating contact with and gifts for athletes and recruits.
However, many say there are ways to limit pay-to-play under a system that allows athlete pay for NIL without too many new rules or guardrails. Disclosure is key.
"Then it would be very, very easy to see who has a market deal and doesn't," said Koller, noting the possibility that issues with boosters paying athletes could prompt further rule changes. "But again, this is the booster boogeyman."
McMillen said there should be some sort of independent, third-party entity where deals are registered and monitored. He proposes a system that could function similarly to the U.S. Securities and Exchange Commission's EDGAR corporate disclosure system. It could be backed by technology that immediately detects and red-flags deals that seem to fall outside the market norm and identify bad actors.
"Sunlight is the great disinfectant," McMillen said. "The question really gets down to fair market value. You want kids to be able to monetize their publicity rights, but based on fair market value. There are ascribed markets for social media — you have a value ascribed to 100 followers — there are values for appearances, there are values to things."
The underlying issue for schools is a fear that if boosters and companies can pay athletes directly, they will shift the marketing dollars that they typically provide the schools to the athletes themselves. This could strain athletic budgets, particularly as schools deal with the cancellation of games due to the COVID-19 pandemic, and force them to drop non-revenue-generating programs, particularly women's sports, critics of greater NIL rights argue.
In written testimony to the Senate Judiciary Committee in July, Clemson University Director of Athletics Dan Radakovich said the school is "concerned with the potential impact that booster participation in NIL deals will have on lower-profile sports."
"Should boosters shift their funding and focus to NIL compensation for individual players in high-profile sports, many athletic programs could struggle to fund lower-profile sports," Radakovich said. "Both outcomes — the disruption of recruiting rules and revenue shifts away from lower-profile sports — would be bad for the vast majority of student-athletes."
Several schools have dropped sports programs amid losses caused by canceled games and tournaments due to COVID-19.
Ohio State director of track and field and cross country Karen Dennis told another Senate committee this month she fears that opening the door to NIL pay would force schools to cut programs and that the U.S. Olympic teams would be "decimated."
Many proponents of greater NIL rights for athletes question whether this is merely a matter of budgeting, suggesting schools could simply spend less on extravagant locker rooms and coaching salaries. And they say NIL opportunities could be a win-win for the schools and the athletes.
"Say name, image and likeness had passed in a way that Zion Williamson could have marketed himself and that schools would have been able to work with athletes," said college sports attorney Justin Sievert of Vela Wood. "There is a benefit to Duke to work with Zion to use him in commercials or whatever it would be. It helps both sides."
Title IX, a federal law that requires schools to generally provide equal athletic opportunities for men and women, could be an impediment in that companies may want to spend more to sponsor football and men's basketball players. Assuming schools are able to comply with Title IX, there is value for a school to partner with a high-profile athlete and potentially generate more revenue, though the schools and the NCAA have resisted such a change.
"I think it makes sense," Sievert said. "At some point, you have to look at this and say, 'How can we use the new way of doing things to our advantage?'"
The New Athlete Experience
Regardless of the extent of NIL reform, the conception of the college "student-athlete" is changing.
The Ninth Circuit this year in Alston v. NCAA struck down NCAA rules that limit education-related benefits, including benefits that extend past an athlete's career such as a guaranteed scholarship to graduate school.
This is a huge change for the athletes alone, Maguire said. When combined with the impending loosening of NIL restrictions, the benefits could be even longer-lasting.
"I think it is incredible because the value that an individual athlete gains from building their brand is going to have the opportunity to extend past their playing career," he said. "It is going to be brand new for college athletes."
With these improved benefits comes greater responsibility. Experts say NIL pay will be taxable. Athletes also must be smart about which sponsorship or endorsement deals they take and what the implications could be for their personal brands and legal liability, such as in the case of a false-advertising claim for backing a certain product.
"There will be a lot of people who will take money and they will regret that they did," said Edward Schauder, a corporate and sports attorney handling licensing and marketing issues at Phillips Nizer LLP. "No matter how much money these guys make, they are really going to need professional guidance that they really don't fall for a common pitfall."
If colleges provide that sort of education, it will give them an even greater role in preparing athletes for successful post-graduate careers. That would help fulfill the primary mission of universities, Maguire said: education.
"The idea is that this is going to be something for the athletes that helps them prepare for the next stage in their life," Maguire said. "If professional sports do not come to fruition and the college career is all there is, the question for the athletes is: How do you use these four years to build and capitalize on your brand? How do you use that to benefit you for the rest of your life?"
--Editing by Brian Baresch.