Attorney and Sports Business Reporter Kristi Dosh joined Basepath Co-Founder and CEO Thomas Thomas Jr. for a revenue sharing workshop. The 70+ webinar registrants and audience members consisted of universities, collectives, sports attorneys, accountants and more. The workshop concept allowed for questions and interactions in real-time.
House v. NCAA Settlement- 3:45
The settlement process has reached a crucial juncture, with the long-form settlement not yet filed as anticipated. While no court deadlines have been missed, this delay has raised concerns, particularly as plaintiffs’ attorneys attribute the holdup to the NCAA. When the settlement was initially announced in June, it was clear that many details needed to be ironed out, particularly regarding back pay and future revenue sharing.
Moving forward, schools and FBS programs will need to rework their budgets if implementation occurs in 2025. Institutions are now facing the challenge of making strategic decisions and developing plans based on broad concepts, even though many finer details remain unresolved. Waiting for the final long-form decision isn’t a viable option, as it could leave schools at a disadvantage in recruiting efforts. Planning based on the current big-picture understanding is essential to stay competitive and proactive in this evolving landscape.
Operationalizing the house settlement- 6:30
Many Power Five institutions have publicly announced their commitment to funding NIL to the maximum salary cap, signaling to their fans that significant monetary contributions will be required. This approach also offers a recruiting advantage, as schools that fully fund their NIL programs can attract top talent. Meanwhile, Group of Five schools are grappling with how to finance their participation in NIL and what level of involvement fits within their budgets.
Concerns are rising about how revenue sharing will impact existing projects, particularly facilities upgrades. There is uncertainty about whether funds will be diverted from these projects to support NIL initiatives. In response, athletic directors are exploring creative funding solutions, including licensing endeavors and co-branded merchandise, to secure the necessary resources without compromising their ongoing commitments.
Collective relationships going forward- 8:52
In recent weeks, we have seen formal contracts established between foundations and collectives at schools like Nebraska and LSU, solidifying their partnerships. Another emerging trend is the agency model, where the collective operates as a marketing agency. Virginia stands as an exception, as it does not facilitate direct payments to athletes. Many schools have their foundations reaching out to donors and handling the groundwork for NIL initiatives. However, in most cases, these foundations direct the donors to the collective to make the actual payment, rather than handling the funds themselves, due to considerations such as Title IX compliance.
Over the past 6-9 months, athletic departments have been exploring the possibility of directly accepting NIL funds and then paying an external agency (collective or otherwise) to act as a marketing agent. This agent would then secure deals for the athletes. Several schools have already updated their websites to reflect this new approach. Additionally, there is a growing trend of hiring new employees with marketing backgrounds into collectives, as many collectives were not initially set up to function as marketing agencies and now find themselves needing to restructure to meet these demands.
How to structure NIL as an athletic department- 17:40
The athletic department cannot instruct the agency to find deals for particular athletes, as Title IX would apply if the department is receiving the money and then giving it to the agency. Even with Title IX in play, the agency may struggle to secure equal deals for male and female athletes. It’s crucial for the entire athletic department—coaches, administrators, and staff—to be aligned on this matter. Coaches cannot independently communicate with the agency, directing them to secure a specific amount of money for certain athletes under threat of them leaving. The legal risk arises if someone from within the athletics department directs the outside agency’s actions.
The main risks for in-house NIL management are related to Title IX, employment status, FOIA, and 501c3 status. Title IX has already been a topic of discussion regarding NIL, and in the context of revenue sharing, there is debate among attorneys about whether Title IX requires equal opportunities and dollar amounts, or just equal opportunities. Revenue from broadcasts, ticket sales, and sponsorships—comprising 22% of the average Power 5 revenue in these categories—is generated by the athletes, which is why they are compensated for the use of their NIL in these broadcasts.
Employment status is another concern. If athletes are paid directly and included in revenue sharing, they could have a strong argument for employment status. The wording in the House settlement must be carefully crafted to avoid future employment issues.
FOIA (Freedom of Information Act) requests pose another challenge. There has been extensive discussion about whether athletes’ NIL deals disclosed to the athletic department are subject to FOIA requests. As of now, personal information is being redacted, but FOIA requests have always been a contentious issue, with schools reluctant to disclose information unless absolutely necessary. Moving forward, all NIL-related matters will be subject to FOIA requests, though more redaction of personal information is expected.
Regarding 501c3 status, after the IRS issued a warning to 501c3 collectives in 2023, there was an assumption that no new 501c3 collectives would be approved. However, this has not been the case. Holding 501c3 status does not mean these collectives are in the clear with the IRS, and they may face further scrutiny. Many collectives have dissolved their 501c3 arm to avoid these potential issues. Not all money raised by a 501c3 should go directly to student athletes, instead it should also support your charitable mission and the charities supported by the collective.
Other concerns- 31:00
There are concerns that the back pay required by the settlement will place the NCAA in a difficult position, particularly for Division 2, Division 3, and non-football-playing Division 1 schools. These schools might find themselves diverting resources to Power 5 athletes, leaving their own issues unresolved. The NCAA is being strained over problems primarily affecting Division 1, with a potential ripple effect on smaller schools. Many athletes do not fully understand the revenue-sharing aspect, and each school will determine who receives these funds differently. High school recruits will have to consider these factors when deciding which college to attend, as the compensation package will play a significant role in their decision-making process.
Young athletes and their parents will need to have informed conversations and ask the right questions about NIL and revenue sharing. Moving forward, it’s essential to have someone on staff who can negotiate revenue-sharing deals with agents and explain these complexities. This approach will ensure that recruits and current athletes are well-informed and better equipped to handle revenue sharing compensation.