The Evolution of Entities Paying College Athletes: Marketplaces, Collectives, Universities and Broadcast Media

January 4, 2024

NCAA President Charlie Baker unveiled a strategic proposal in December 2023: the creation of a new subdivision within Division I that would grant high-resourced universities the ability to compensate athletes through an “enhanced educational trust fund” and direct NIL licensing agreements.

In what has been an ever changing landscape, this proposal marks yet another shift in the NIL world as we continue into year three. We are entering into a new phase of NIL – NIL 3.0 – which will bring with it a new set of opportunities, challenges and requirements. Before we step into the future, however, it’s important to consider how we have arrived here. While these past two years have gone fast, they have been filled with a number of key shifts and changes. Let us start with how it all began. 

NIL 1.0 – The Age of NIL – Marketplaces (July 2021 to March 2022)

The first year of NIL brought with it more questions than answers. As administrators began to transition into NIL, they quickly looked for solutions that would help provide their institutions and athletes with tools and resources to navigate this space. What they found were marketplaces.

Marketplaces were a particularly promising solution during this time because they aligned with Title IX, gender equity and gave opportunities to each athlete who wanted to participate. Within this model, athletes explored individual engagements through direct partnerships, mostly social media promotions and the occasional appearance. Soon there were dozens of marketplace options all looking to help facilitate NIL deals for student-athletes. 

The optimism surrounding NIL quickly faced a reality check with the rapid influx of athletes into marketplaces.  The once promising landscape became oversaturated and difficult to navigate. The buzz surrounding NIL was filled with enthusiasm and promises of thousands of dollars to athletes, however, it became apparent that the average deal value fell below anticipated figures – typically ranging between $50 to $200. Notably, the top 1% of athletes, those earning thousands of dollars, engaged in NIL through agents rather than marketplaces. Further, when you have an athlete on 4-5 different marketplaces it can become tedious for brands to engage with them. Despite high expectations,The marketplace model, originally celebrated for its democratization of opportunities, came under scrutiny as non-top-1%-athletes faced limitations in deal volume. While marketplaces provided a platform for exploration and visibility, the heightened competition diminished deal values, which emerged as significant hurdles. It was during this time that it became clear athletes needed more support to navigate this space – particularly with knowledge like brand building, education, deal facilitation, etc. The dynamics of athlete-marketplace interactions shed light on the evolving nature of the NIL ecosystem, with athletes increasingly recognizing the need for adaptability to thrive in future NIL deals. 

Athletes and businesses needed to pivot their strategies, realizing that success in NIL ventures hinged on more than passive marketplaces – there needed to be additional support and human capital to ensure the value that existed for these athletes was unlocked. 

The need for adaptation and increased deal flow led to the rise of NIL collectives. Collectives could offer athletes greater financial rewards and a structured approach to the complex world of NIL deals. 

NIL 2.0 – The Age of Collectives (April 2022 to December 2023)

I wonder what the world would look like now if instead of the “Gator Collective,” they named themselves the “Gator Student-Athlete Marketing Agency.” But the fact is, it didn’t take long for everyone to take notice of what was going on in Gainesville. The collective model was upon us and soon you had dozens of collectives popping up across the country.

The emergence of collectives introduced a new chapter of NIL, providing drastically increased opportunities for student-athletes. The collective approach offered a new alternative, presenting athletes with both a support system and direct access to NIL opportunities that far exceeded the output of the marketplaces they were users of. Athletes, between their class, personal, practice and game schedules, found value in having a third party offer services to help streamline deal negotiations, educate them on contracts, finances, personal branding, and the procurement and consolidation of NIL dealflow. 

Despite some bad actors, contracts and deals along the way, collectives found a way to engage athletes with tens of millions of dollars in deal volume and tens of thousands of hours in community service engagements, along with life changing opportunities for those athletes and their communities.

As the narrative of NIL underwent transformation, the spotlight shifted from individual pursuits to collective branding efforts that resonated with the communities that these organizations are a part of. NIL collectives are steering the conversation through a more communal approach, emphasizing not only the success of individual athletes but also the impact they can have on their communities This shift in narrative aligns with the broader societal trend of valuing community driven initiatives, further positioning collectives as key players in reshaping the NIL narrative in college athletics.

While many of these collectives were started through a collection of wealthy donors underwriting the cost of operations and athlete payments, donor fatigue soon started to creep in. As such, many collectives looked to connect more broadly within their community and the fans, and local businesses that make it up. Collectives provide a unique opportunity through the use of memberships, to allow the community to actively participate in the success of their favorite athletes. Fans can enjoy exclusive perks, including personalized content, behind the scenes access, and virtual or in-person meet and greets. Businesses can leverage athletes’ NIL to promote their products and services. This engagement not only strengthens the bond between athlete and community, but serves as a tool for athletes to build their personal brand.

Through this shift, Basepath and other NIL software companies including Opendorse and INFLCR discovered that over 75% of all NIL payments to student athletes come from collectives rather than brands. Many NIL marketplaces looked to pivot their product and service offerings to better serve collectives, while Basepath was built to serve collectives from the start. The realization prompted a strategic recalibration.

Further complicating the NIL landscape, over 30 states have enacted NIL laws, drawing inspiration from California’s Fair Pay to Play Act. These state laws, while sharing the common goal of financially supporting student athletes, exhibit significant variations. Differences include the scope of permissible activities, the role of universities in facilitating NIL opportunities, and the parameters for athlete compensation. Some states provide a broad framework allowing a range of commercial activities, while others adopt more restrictive measures. The diverse approaches underscore why the NCAA continues to work towards comprehensive NIL regulations through congress to preempt these state laws. 

Interestingly, the question arises: why can’t universities themselves directly compensate athletes in a manner similar to collectives? This question becomes more poignant as several collectives forge partnerships, becoming the “official sponsored collective” of universities. The nature of these partnerships raise questions about the evolving relationship between universities, athletes, and collectives, blurring the lines between independent entities. 

And then Charlie Baker spoke.

NIL 3.0 – The Age of Coalescence: Striking a Balance (January 2024 to 2025?)

President Baker’s proposal to create an FBS subdivision that permits schools to directly compensate athletes through a trust fund and NIL is the first proactive step taken by the NCAA to bring NIL back to the universities. Universities are now navigating the delicate balance between their ongoing pursuits and the burgeoning landscape of NIL opportunities. 

For those that have followed the press conferences and statements from coaches on what a player costs or how much it takes to build a team, it isn’t a shock that a psuedo-free agency has emerged within the current model. Student-athletes are making decisions based on their livelihoods and careers, akin to professionals. The narrative of this new era aligns with the trend of assessing one’s value and situation and weighing it against opportunities elsewhere – an experience that has been compounded by the transfer portal. Student athletes are increasingly leveraging their competitive performance and marketability as a factor in deciding whether or not to enter the transfer portal.

As athletes seek environments that align with both athletic and financial aspirations, so to are conferences navigating shifts in team compositions and financial opportunities. The recent exodus of nine Pac-12 teams, largely driven by dissatisfaction with their TV rights deal, further underscores the transformative impact of immense financial implications that are weighing on the overall landscape of college athletics. 

In the wake of all of this, NCAA president Charlie Baker has proposed rule changes allowing Division I schools to directly pay their athletes through an “enhanced educational trust fund” and direct NIL licensing agreements, decoupled from educational resources. This proposal is a progressive framework, challenging the foundational tenet of the NCAA’s business model that prohibited non-academic-based compensation for student-athletes. The proposal, aimed at sustaining the best elements of the student-athlete experience, introduces a new subdivision where schools can create their own rules, including those regarding recruiting, transfers, and roster size. To be part of this subdivision, schools would contribute annually to a trust fund for athletes, reflecting a shift towards a more comprehensive and equitable compensation model.

Baker’s proposal serves as a conversation starter. The proposal is positioned as a starting point to catalyze discussion and further refinements in and around NIL rights. Additionally, while Baker’s proposal emphasizes gender equity and compliance with Title IX, the intersection of university-led NIL partnerships, booster involvement, and administrative control raises complex questions. Namely, where does this leave collectives?

In states where NIL laws provide more latitude you can already see a world in which collective and athletic departments are beginning to find ways to come together to support the NIL needs of both the student-athlete and institution. Places like Missouri, Arkansas, Texas, etc. have examples of foundations working with their collectives, or on their own, to drive NIL deal flow and continuity within their campuses and communities.

As athletic departments are unchained from the historical restrictions that have tethered them to the sidelines, we will begin to see a world in which more and more of these collectives and institutions will come together to further enhance the opportunities for student-athletes. Certainly there are a number of ways in which this relationship will shape up but the most common outcomes will likely looks something like this:

  • Collective serves as the Student-Athlete Marketing Agency for the institution
    • Fundraising responsibilities shift from collectives to the institution
    • Athlete management and marketing activation stay within the collective
  • NIL Operations are fully in-housed
    • Fundraising, athlete management, and marketing activation all shift from collectives to the institution
  • NIL Operations are in-housed except for those athletes that remain underpaid to their true market value
    • Where Athletic Departments are not able to equitably facilitate disbursements to student-athletes, the collective will be relied upon to provide additional opportunities to athletes that have higher market values than what the institution is able to pay them.

NIL 4.0 – The Age of Rev Share: A Win-Win for All (2026 and beyond)

The proposed changes by Baker, allowing direct NIL deals between schools and athletes, underline the potential for a comprehensive and equitable compensation model. Athletic directors, conference commissioners, and legal experts envision a future for negotiated agreements between conferences, the NCAA, and media outlets. As various revenue-sharing models emerge, the role of conferences, schools, and collectives in compensating student-athletes directly contributes to the dynamic landscape of NIL collaborations. 

The sentiment among coaches and athletic directors regarding revenue sharing and broadcasting NIL in college athletics is undergoing a gradual transformation. Jim Harbaugh, head coach at the University of Michigan, is one of the most outspoken advocates for revenue sharing. “I want them to be treated with the respect and dignity that they deserve,” Harbaugh said regarding Broadcasting NIL (BNIL). “What I don’t understand is how the NCAA, television networks, conferences, universities and coaches can continue to pull in millions, and in some cases billions, of dollars in revenue off the efforts of college student-athletes across the country without providing enough opportunity to share in the ever-increasing revenues.”

Bills in several states propose requiring state schools to share a portion of their television revenue with athletes, changing financial dynamics in college sports. Advocates distinguish between NIL and revenue-sharing models, emphasizing the necessity of exploring new directions. The evolving openness to these ideas signifies a recognition among sports leaders of the potential impact such models could have on the landscape of college athletics.

However, The redistribution of revenue to fund athletic departments may lead to disparities across schools, affecting budgets, competitiveness, and growth. This could have an outsized impact on smaller schools and non-Power 5 conferences already straining to make ends meet..

Moreover, concerns about the impact on individual athletes and potential dilution of earnings highlight challenges associated with collective revenue sharing. The model’s impact on Title IX compliance and the distribution of funds raises concerns about gender equity in collegiate sports, emphasizing the need for careful consideration in the implementation of revenue-sharing models. These types of issues are leading folks like Chip Kelly to say that a potential outcome includes the bifurcation of sports like football from the rest of the existing college athletics model. 

Balancing the interests of individual athletes, universities, and the broader sports community will be crucial in shaping a sustainable and equitable future for college athletics.

Embracing the future of NIL and College Athletics

In the ever-evolving landscape of collegiate sports, NIL has laid the foundation for a future where the dynamics between athletes, universities, and the NCAA are poised for a shift. From the initial excitement and chaos of marketplaces in NIL 1.0 to the collaborative strength of collectives in NIL 2.0, the narrative has shifted towards universities grappling with the delicate balance between academics and the burgeoning opportunities of NIL 3.0. Now, with the proposal of a new subdivision and the prospect of TV revenues being shared with student-athletes  in NIL 4.0, collegiate sports is at the threshold of major change. 

As the “wild wild west” of NIL gradually gives way to a more structured and strategic approach, the journey reflects the resilience and adaptability of athletes and the stakeholders involved. The rise of collectives highlights a shift toward community-driven initiatives and their, impact on their local communities. This communal perspective, combined with the potential of direct compensation for athletes through enhanced educational trust funds and NIL licensing agreements, paints a picture of a more inclusive and equitable future.

As the NCAA contemplates these transformative changes, questions linger about the potential ramifications on university roles, Title IX compliance, and the overall financial landscape of collegiate sports. The proposed revenue-sharing models introduce complexities that necessitate careful consideration to ensure fairness and sustainability. The delicate balance between the interests of individual athletes, universities, and the broader sports community must be maintained to shape a collegiate sports ecosystem that thrives on equity, opportunity, and responsible financial practices.

As college sports navigate through these phases, it is imperative to embrace the lessons learned, address challenges with foresight, and collectively build a future where the pursuit of excellence on the field aligns with the empowerment of student-athletes. The NIL journey is a testament to the resilience of an industry in transition, and the path forward requires collaboration, innovation, and a commitment to the principles that define the essence of collegiate sports.