From NIL to Paying Athletes, to Making Them Employees. What’s Next?

I recall the furor about paying college athletes for their efforts just a few years ago. Some said it was the end of amateurism in college sports, especially football. College amateur athletics used to be a moniker worth being proud about. Not so much anymore.

The amount of money that goes into college sports from boosters, donors, alumni, television advertising, sales of sports merchandise and so on opened the gates to allowing college athletes to make money from their name, likeness, and image (NIL). These deals are negotiated directly between the athlete and/or representative and the party looking to profit from NIL.

Profiting Off NIL

In a perfect world, NIL would be a great solution to a decades-old problem of college athlete compensation, but we don’t live in a perfect world. NIL has been taken advantage of by some schools, which causes rampant transferring and an unfair college football landscape.

Beyond football, NIL causes major problems with gender inequity, and it does not give everyone an equal chance to get fair or adequate payment. Hopefully, at some point, the NCAA will figure out how to make NIL fair and equitable for all student-athletes. However, I doubt it as, in college sports, especially football, the rich get richer while the poor stay stagnant with respect to attracting funds from external sources for their athletes.

Today we have the transfer portal, which could be a way for a star athlete to go to a school that attracts big bucks from their supporters. This made me think about loyalty. Is it ethically right to play at one school for one or two years and then leave for a more lucrative arrangement (more money from NIL agreements)? What message are we sending to student athletes when we promote such behavior?

OK, I thought. I wasn’t a fan of the push for NIL and find the transfer portal lacking in virtues such as loyalty. Does the student-athlete have a responsibility to stay at the college that recruited them; that invests money in developing their talent and providing an education; and what about not signing other players because the wannabe transfer was their first choice? Is this fair? Is it equitable? Should we care about sending these messages to the student-athletes?

NCAA Proposal

A couple of days ago, NCAA president Charlie Baker said he's ready to address the "elephant in the room" in college sports.

Less than a year into his tenure as president, Baker is pushing schools to take steps that would lead to a radical change in how they compensate and compete for athletes. He announced proposed rule changes this week that would allow schools to funnel more money to their players and create a new subdivision in which the wealthiest tier of college athletic departments could make rules that better fit their financial reality.

As reported by ESPN, Baker's proposal offers two new options for schools to provide money to their athletes.

First, all Division I schools would be able to sign name, image, and likeness deals with their athletes. For example, Alabama could pay a future quarterback to use his picture on a billboard promoting the team's upcoming season, or UCLA could pay its volleyball players for social media posts that encourage fans to buy tickets to an upcoming match.

The second mechanism for paying players would be through an "enhanced educational trust fund." Baker proposes creating a new subdivision for schools willing to set aside extra money for their athletes. To be part of the subdivision, schools would have to give a minimum of $30,000 per year to each of at least half their scholarship athletes -- essentially creating a minimum wage for some. For an average power conference athletic department, this would mean a minimum investment of roughly $7 million to $10 million each year, which in most cases would be less than 10% of their annual budget.

The NCAA says that trust dollars are meant to support athletes in career development or education opportunities, but under the current proposal, athletes would be free to spend the money however they want. The details of when athletes would receive the money need to be worked out. For example, must athletes graduate before getting a lump sum payment? -- would be up to individual schools to decide.

The $30,000-per-athlete price tag is a minimum. Schools could choose to pay more money to each athlete, and they could choose to pay more than half their athletes. Schools could also choose to pay different amounts to each player. The trust fund opens the possibility of a future where schools compete for talent with no cap on how much they could offer to their current students.

Essentially, the cost of paying athletes would fall on the university, rather than the collectives, and the amount that can be doled out is well into the millions. What message does this send? For me, it’s that we have a two-headed society: the rich (Division I schools) and the poor (others). It sounds like the society we have now from an economic perspective.

What impact might this have on the current NIL marketplace?

Under this new proposal, athletes would not lose their right to sign endorsement deals with other companies. However, experts believe there's a good chance that Baker's plan could significantly change the way that boosters inject money into the college sports economy.

The majority of money spent on NIL deals in the past two years has come from booster collectives, groups loosely associated with a particular school who use NIL deals as an incentive to play for their team. In some cases, these well-organized groups have become de facto outsourced payrolls for the teams they support, taking some control away from the athletic department itself. Baker's proposal would likely provide an incentive for some boosters to give their money directly to the schools.

"If passed, you would then have an avenue to go directly through the athletic department and have the department directly paying the athletes," said Casey Schwab, chief executive officer of Altius Sports Partners, a group that advises schools on NIL matters. "The collectives that solely exist as pass-through entities for booster dollars, those dollars would be redirected back to the athletic department so there would be no need for those collectives."

The majority of money the collectives are spending now goes to football players, according to multiple industry experts (most estimates are upward of 80% to 90%). If collective donors instead start providing that money to schools to distribute to their players, the schools would have to make sure it is distributed more evenly between men and women.

Some collective operators say Baker's proposal might slim down their operation and allow them to focus on finding NIL deals for the biggest star athletes at their schools, while the athletic department's direct payments would take care of other players. Others believe that some collectives could pivot to representing athletes when negotiating their athletic department-paid NIL deals with the schools.

Do these proposed rules comply with Title IX?

Title IX prohibits sex-based discrimination in any educational institution that receives federal funding. For college sports, which means schools must provide equal opportunities and benefits to men and women athletes. Baker's letter to the NCAA schools said these proposals would help to improve gender equity in college sports by more evenly distributing some of the money that flows to athletes. I’ll believe this when I see it. As they say, “the devil is in the details.”

A judge would likely have to decide exactly how these unprecedented payments to athletes fit into Title IX, but past rulings about other benefits that schools give to their athletes do provide some helpful guidance.

For the trust fund money, Title IX law would likely dictate that schools distribute a proportionate amount to women and men. For example, if a school's total trust fund for athletes is $10 million and half of its varsity athletes are women, then $5 million of that fund would go to women.

For the NIL deals, schools would have to at least provide equal opportunity to their athletes. It's unclear whether the courts would say those deals would have to pay out equal dollars to men and women. Some schools could argue that there are legitimate, non-discriminatory reasons for paying more to star players if they can show those players have an objectively higher value in the endorsement market. And how will this be determined???

Why would schools want to pay their athletes using these rules?

These proposed new forms of pay to college athletes would come from a trust fund—a new top-tier subdivision of college sports that would have the power to create a new set of rules, including how the schools recruit, how athletes in the subdivision use the transfer portal and how athletics departments use their large pool of resources.

Schools that operate the proposed trust funds would be part of the new top-tier subdivision of college sports that would have the power to create rules for a wide range of issues. Those rules could dictate how the schools recruit, how athletes in the subdivision use the transfer portal and how the athletic departments use their large pools of resources. If that subdivision, for example, wanted to allow teams to expand roster sizes or coaching staffs, or even add things like in-helmet speaker systems for calling plays on the football field, they would be able to do so without the rest of Division I's approval.

It will take time to sort it all out. In the meantime, I suggest the schools, NCAA, college supporters who give lots of money to the schools (the wealthy subdivision), and other interested parties think about the following:

• Does the system proposed by Baker create a class system in college sports?
• Will it create more divisiveness in recruiting, felt mainly by schools that can’t muster the resources to set up a trust fund or can’t attract NIL sponsors?
• Will the proposed system create more equity in college sports?
• Will the proposed system widen the transfer portal?
• How can we be sure some of the monies in the trust fund will be used for educational enhancements, and not just collegiate sports?
• According to the NCAA, trust dollars are meant to support athletes in career development or education opportunities, but under the current proposal, how will we know whether athletes won’t just spend the money however they want?
• Is the NCCA creating an ethical slippery slope where new proposals will follow the one discussed by Baker? What’s next? Will collegiate athletes become “employees,” and paid as such?

It seems the idea that teamwork, a strong work ethic, and fighting for a common goal, the essence of sports, will give way to how much money can I make from NIL deals and payouts from the trust fund.

I imagine college football coaches support Baker’s proposal. I think they welcome the opportunity to control the funds. Is it because they want to make sure there is gender equity pay? I doubt it. That will have to be forced upon them. Is it because they want to be sure that student-athletes in sports that do not attract booster/alumni funds get a pay day just like the chosen few athletes. No way.

These and other questions much be raised during the deliberation process before the NCAA adopts the proposal or something else. It would be a good idea to gather stakeholders from different parts of society, and not rely solely on the coaches, to get a meaningful dialogue going.

Let me conclude with an observation from someone who taught at the college level for 40 years—me. Given the bureaucracy that will be developed if the NCAA proposal goes through, universities will have to add new faculty, a new administrative system, and support services to maximize the new pay sy6stem. What does that mean for other programs on campus?

Blog posted by Dr. Steven Mintz, The Ethics Sage, on December 7, 2023. You can sign up for his newsletter and learn more about his activities at: https://www.stevenmintzethics.com/. Follow him on LinkedIn at: https://www.linkedin.com/in/steven-mintz-aka-ethics-sage-98268126/recent-activity/all/.