Understanding the NIL Landscape and its Transformative Impact on Collegiate Athletics
By Tyler Seals, Partner, Smith Pauley
In the world of college sports, the game has changed—and not just on the court or the field. If you are a sports enthusiast, you have probably heard of the term “Name, Image and Likeness” or “NIL,” which has rapidly emerged as a significant component of the collegiate athletics landscape across all sports and levels of competition. This article provides a brief introduction to the NIL industry and notes several of the transformative impacts the NIL industry has had on the collegiate athletics system.
What is NIL?
The NIL structure is based upon the premise that every individual has the right to control the commercial use of his or her name, image and likeness. Stated simply, the legal framework of the NIL industry grants each student athlete the right to control and profit from his or her own personal brand, so long as the pertinent rules are followed.
Historically, student athletes were prohibited from monetizing their NIL rights or accepting gifts in exchange for use of their own personal brand. Those of us in Nebraska may remember the infamous “ham sandwich” story.
On May 6, 2000, then-Nebraska quarterback Eric Crouch made a campaign appearance for a Board of Regents candidate and in the course of making such appearance accepted a plane ride valued at $18.77 and ate a ham sandwich valued at $4. Doing so put Crouch in jeopardy with the NCAA, as at that time athletes in his situation would have been required to pay all their own expenses, otherwise it could be deemed that he received extra benefits not allowed under NCAA rules. He was temporarily suspended from the team after Nebraska learned that Crouch did not pay for the plane ride or the sandwich. He then donated $22.77 to charity and was thereafter permitted to rejoin the team. Fortunately, the rules have changed.
As of July 1, 2021, student athletes became entitled to earn compensation based on their name, image and likeness, subject to applicable laws, NCAA regulations and university policies. Under this new legal framework, student athletes can engage in endorsement deals, merchandise sales, autograph signings and monetize their presence on social media platforms. Often, student athletes become aware of these NIL opportunities by virtue of signing with an “NIL collective.” NIL collectives help facilitate NIL opportunities for student athletes, such as endorsement deals, autograph signing, appearances and the like.
The Transformative Impact of NIL on Collegiate Athletics
The introduction of the NIL industry has revolutionized the collegiate athletics landscape in many respects, including:
Leveling the Field. In the past, the national spotlight was on high-profile sports such as football and basketball. With NIL at the forefront, athletes participating in sports that do not typically generate significant revenue for universities (such as volleyball, gymnastics, baseball swimming or track and field, also have the opportunity to profit from their brand, thereby creating a more inclusive environment.)
Women in Sports. With significant social media following, female athletes stand to benefit enormously from NIL, potentially closing the revenue gap that has historically existed between male and female athletes.
Recruitment. The possibility of earning from NIL rights is now a major factor for recruits when choosing a university. It adds an entirely new dimension to the recruitment process across all sports.
Community Engagement. Athletes can engage more freely with their local communities through appearances, camps and local endorsement deals, enhancing their connection with fans.
This shift in the legal landscape has created new opportunities for student athletes across the country. As the field continues to evolve, we anticipate seeing more changes in the future. Stay tuned for more updates on the NIL landscape, as we continue to explore its implications and track its transformative journey in the world of college sports.
Tyler Seals is a partner with Smith Pauley. As a corporate law and mergers and acquisitions attorney, he guides his clients through the process of buying and selling businesses. Tyler counsels founders, management teams, owners, private equity sponsors and strategic acquirers through every stage of the M&A process. He has deep experience advising clients on all aspects of business transactions in a variety of industries and assists clients in negotiating deal structure and terms and organizing the due diligence process. He serves as outside general counsel for many startup companies and small business clients. Tyler has extensive experience helping these clients through the entity formation process, guiding day-to-day operational matters and providing practical and strategic advice regarding growth and exit opportunities. As you just read, he also is an expert and experienced attorney in the area of Name, Image and Likeness for collegiate athletes.