On July 1, 2021, the National Collegiate Athletic Association (NCAA) changed the rules allowing college student-athletes to profit off their names, images and likelinesses (NIL).
Since going into effect, it is already having a substantial impact on college recruiting, student-athletes careers and the college environment in general.
Why It Matters: Sports are big business in America, and such a drastic change could reshape college prospects for tens of thousands of student-athletes.
To help break this down, Valiant Management Group Founder and CEO Jared Wangler talked with Benzinga about the changing college athletics environment. Valiant Management Group is the top NIL Agency for University of Michigan (U-M) athletes and works with U-M athletes to maximize their earnings attending the university.
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For decades, student-athletes had their compensation severely depressed by the NCAA while the NCAA and colleges around the country profited by tens of billions. According to the NCSA, only 1% of student-athletes receive a full scholarship. The U.S. college sports market is valued at roughly $18.9 billion, according to some sources. This includes the NCAA’s $1.16 billion in revenue in 2021.
To put this in perspective, the average cost of tuition is $19,020 per year, and there are roughly 480,000 NCAA athletes, so it would require roughly $9.1 billion per year for every NCAA athlete to go to school on a full ride. But the NCAA awards just $3.6 billion per year in scholarships to student-athletes, and previously only schools and other institutions were allowed to profit off of student-athletes’ NIL — not the athletes themselves.
That is quickly changing for student-athletes around the country. Valiant Management, for example, was founded in 2021 but has already landed over $4.1 million dollars in NIL deals for U-M athletes. This provides much-needed income stream for student-athletes to help them pay for education and changes the dynamic for student-athletes entirely.
With such a small percentage of athletes receiving full rides, in many instances, college wasn’t economically feasible. Athletes would previously have to drop out early because of the cost, drop out to try their chances at a professional league or not to go to school to begin with.
According to Wangler, these NIL changes are actually altering these trends in a positive manner, and encouraging student-athletes to finish college. Previously, if athletes had a shot at getting drafted, it was a pretty lopsided decision: Stay in college and make no money, or try for the NFL and hope it works out. But few student-athletes go pro, and this can be a long-term recipe for failure. Now, athletes can make respectable money in college, finish their degrees, then look to go pro, which can help set them up for long-term success.
So what are these NIL deals? According to Wangler it “largely depends on the athlete.” For a star quarterback, you can get brand deals, trading cards and memorabilia. For smaller players, some of these deals are available, but it depends on trends in sports and how much a player is willing to take for a deal.
One thing is clear: There is a lot of money to be made. Since Valiant launched in 2021, it has made athletes as much as $4.1 million dollars. The company primarily focuses on U-M’s football and basketball teams and plans to expand to more U-M sports.
The rules around NIL are left up to the states. If the states are silent, they defer to the colleges. The environment is quickly changing as everyone works to figure out the right model. For example, U-M doesn’t directly pay students to attend for NIL deals; instead, it works with Valient to foster a competitive third-party NIL environment.
The University of Tennessee made headlines earlier this year after signing quarterback Nico Lamaleave to an $8 million NIL deal.
While colleges as a whole haven’t definitively taken a specific stance on this, Wangler said NIL is quickly becoming one of the top considerations for new recruits. Coaching environment, gyms, college rank and program potential are still important, but money talks.
Each program is taking its own approach to this, and Wangler said it would be foolish for a school not to be developing an NIL program in the current environment.
Nobody can predict what the future of college athletics recruiting will look like, but it’s clear NIL will be a big part of it.
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© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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