NIL: Are Brands Seeing Any Value?

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Hey Friends,

New rules enabling college student-athletes to profit off their name, image, and likeness were implemented just five months ago.

But with several top players battling injuries and poor performance throughout the season, many people are now pointing to on-the-field struggles as a cause for concern.

Oklahoma QB Spencer Rattler was given two vehicles valued at $70,000 (2021 Dodge Ram 1500 TRX) and $43,000 (Dodge Charger Scat Pack). He signed a sponsorship deal with Raising Canes, and with expectations that he would earn upwards of $1 million as a first-year starter, he instantly became the face of the NIL market.

But then Rattler struggled to open the season, was benched in favor of true freshman Caleb Williams, and has now entered the transfer portal, leaving Oklahoma just months after entering the season as the favorite to win the 2021 Heisman Trophy.

And he isn’t the only example. Clemson QB DJ Uialgalelei signed a national advertising deal with Dr. Pepper. Miami QB D’Eriq King started his own clothing line and signed agreements with 6+ companies, including the NHL’s Florida Panthers.

Oregon DE Kayvon Thibodeaux signed a deal with Nike and launched his own cryptocurrency. And Quinn Ewers, the #1 high school recruit for 2022, left high school a year early to enroll at Ohio State and signed a reported $1.4 million autograph deal.

The bad news? All of those players either underperformed, got injured, or ended up entering the transfer portal, further fueling the fire that NIL is a risky market.

But here’s my question to the people complaining — did you really not think the endorsement market for college athletes would be riskier than professional sports?

We are talking about 18-to-21-year-old kids, some of which have never played a snap of college football and just arrived on campus weeks earlier, that are being handed (hundreds of) thousands of dollars with the expectation that they will perform.

Injuries can happen to anyone, in any sport, at any time. We know that. But professional sports are inherently less risky when allocating a marketing budget. The players have proven themselves, both on-field and from a popularity perspective, which mitigates risk and enhances the chance for success.

There will obviously be some sponsorship misses in college sports. Still, that doesn’t mean the deals aren’t valuable from a return on investment (ROI) perspective.

Take Spencer Rattler, for example. Not only have most brands said that the majority of ROI comes from the initial announcement — ESPN, Bleacher Report, CBS, Fox Sports, and others tweeted & wrote articles about it — but he still has 500,000 followers on social media. That will help get them the engagement they need.

Oh yeah, and what about players like Alabama’s Bryce Young, Ohio State’s C.J. Stroud, Michigan’s Aidan Hutchinson, and Pittsburgh’s Kenny Pickket? All of which are Heisman finalists and presumably significantly outperformed their estimated NIL earnings of ~$50,000 to ~$1 million just by being on the stage in New York.

Should people feel bad that they didn’t make enough? No, of course not. This is a free market, and they could go out and earn precisely what everyone else did.

There will always be arbitrage opportunities but think about it this way. In every other major North American sports league, the best & highest-paid players make significantly more in salary than the best coaches.

For example, Patrick Mahomes will make $45 million this year, and Bill Belichick reportedly makes ~$18 million. Stephen Curry will make $46 million this year, and Gregg Popovich reportedly makes ~$11.5 million. Max Scherzer will make $43 million next year, and Joe Maddon reportedly makes ~$6 million.

But Nick Saban earns more than $10.5 million annually, while his starting QB and current Heisman favorite Bryce Young will earn $0 in salary this year.

Of course, these student-athletes get a full scholarship and can now profit off their name, image, and likeness. But with five college football coaches (Brian Kelly, Lincoln Riley, Mel Tucker, James Franklin, and Mario Cristobal) signing deals collectively worth $500 million in the last month alone, you could certainly make the argument that this isn’t amateur athletics anymore.

My guess is that this will work itself out. The debate between whether student-athletes should be paid or not isn’t going away, but the new rules aren’t either.

I hope everyone has a great day, and we’ll talk tomorrow.

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THE JOE POMP SHOW: My conversation with Darren Heitner is live!

Darren Heitner is the founder of Heitner Legal and an expert on all things name, image, and likeness.

In this conversation, we discuss:

• How NIL rules have changed

• Which athletes will make $1 million-plus this year

• The school paying athletes $2.5 million in academic bonuses

• How brands are determining the success of these deals

Listen, subscribe, share, and enjoy!

You can also watch the YouTube video below.