Athletics in higher education is a world of its own in many respects. Risk managers often see the unique challenges that can be presented in this area from coaching compensation, NIL (name, image and likeness) issues, event cancellation to TBI (traumatic brain injury) or allegations of other injuries. While not all of it is within the traditional scope of a risk manager, this article provides some brief insights to NIL as well as some solutions that can be offered through very unique products and understanding of your policies.
The concept of NIL rights allows college athletes to profit from their personal brand. Here are the key aspects of NIL:
- Name: This includes the use of an athlete’s name in endorsements, advertisements and promotional materials.
- Image: This covers the use of an athlete’s photograph or likeness in various media, such as social media posts, commercials and product packaging.
- Likeness: This involves the use of an athlete’s persona or identity, which can include things like video game avatars, caricatures or other representations.
College athletes can engage in various NIL activities such as:
- Endorsement deals: Partnering with brands to promote products or services
- Social media promotions: Earning money through sponsored posts on platforms like Instagram, Twitter or TikTok
- Public appearances: Getting paid for attending events, signing autographs or speaking engagements
- Merchandising: Selling personalized merchandise, such as clothing or accessories with their name or image
These opportunities allow athletes to capitalize on their fame and talent, providing them with financial benefits while still in college.
Important NIL legal challenges and milestones
- Early legal challenges: The journey began with lawsuits like the one filed by former UCLA basketball player Ed O’Bannon in 2009 (O’Bannon v. NCAA, 802 F.3d 1049 (9th Cir. 2015)). O’Bannon argued that the NCAA violated antitrust laws by not allowing athletes to earn money from the use of their likenesses in video games and broadcasts.
- NCAA v. Alston ((141 S.Ct. 2141) (2021)): This pivotal Supreme Court case in 2021 further challenged the NCAA’s restrictions on athlete compensation. The court ruled against the NCAA, stating that its limitations on education-related benefits for athletes were unlawful.
- State legislation: Several states began passing laws that allowed college athletes to monetize their NIL rights, putting additional pressure on the NCAA to change its policies.
- NCAA interim policy: On July 1, 2021, the NCAA implemented an interim policy that allowed athletes to profit from their name, image, and likeness. This marked the official start of the NIL era.
- Formation of NIL collectives: Shortly after the policy change, booster-funded organizations known as NIL collectives began forming. These collectives play a crucial role in helping athletes secure deals and manage their NIL opportunities.
- Ongoing developments: The landscape of college athletics continues to evolve with NIL, as athletes now have the ability to sign endorsement deals, obtain sponsorships and earn money from social media posts
Recent NCAA NIL settlement: A landmark decision
The NCAA has agreed to a monumental settlement of over $2.78 billion to resolve three significant antitrust lawsuits: House v. NCAA (545 F. Supp. 3d 804 (N.D. Cal., 2021)), Hubbard v. NCAA (4:23-cv-01593) (N.D. Cal.,2023), and Carter v. NCAA (4:23-cv-6325 (N.D. Cal., 2024).
- Back-pay damages: As part of the settlement, approximately $2.78 billion will be distributed as back-pay damages to former Division I athletes. This compensation addresses past grievances related to the use of athletes’ NIL without proper remuneration.
- Future revenue sharing: The settlement introduces a future revenue-sharing model between power-conference schools and athletes. This means athletes will now receive a portion of the revenue generated by their sports.
- Increased benefits: The agreement also includes enhanced benefits for student-athletes from their institutions. This encompasses additional NIL opportunities directly with the institution and the removal of scholarship limits, replacing them with roster limits.
- Implementation timeline: The settlement received preliminary approval from a judge, and athletes can start applying for payments beginning October 18, 2024.
This settlement represents a transformative moment in college sports, ensuring that athletes are fairly compensated for their contributions and the use of their NIL.
Future NIL implications
- Recruiting will change: Effectively, NCAA Division I and specifically the Power 5 schools, will be able to pay student-athletes to play at their schools. In practical terms, this means that the top schools will have a stronger pull in recruiting five-star athletes, which will impact competitive balance.
- Athlete-University relationship: As direct payments from the university to the athlete are allowed, that will change how the relationship is viewed. Does this create more of an employer/employee relationship and are the athletes views a university representatives?
- Impact on collectives: Off the heels of the State of Tennessee and Commonwealth of Virginia v. NCAA and the NCAA’s board of governors’ vote to end “amateurism” rules, collectives may have a modified role in the NIL landscape. The settlement decision, on paper, lessens the need for schools to avail themselves of collectives as a means of paying student-athletes.
- Universities will need to address title IX compliance: Title IX requires that universities maintain policies that do not discriminate based on sex, gender identity or sexual orientation. The new revenue-sharing model will have to be applied equitably to universities’ athletic programs.
- State laws will be amended: As of January 2024, there are more than 20 state laws that require disclosures of NIL agreements by student-athletes. The House settlement will have a direct impact on states’ desire to increase transparency in NIL deals.
- Sports programming may be cut: Generally, football and basketball are the two primary sports that fuel athletic department budgets for schools in the Power 5 conferences. To the extent that athletic departments are unable to increase revenue from advertisers to help pay student-athletes across all programs, they may consider eliminating non-revenue sport, such as wrestling or swimming, from their departments but will need to remain compliant with Title IX obligations and may face legal challenges from participants in programs slated for elimination.
- Wealthier schools will command better talent: Similar to the professional leagues, where teams such as the Mets and the Yankees have considerably higher payrolls than the A’s and the Pirates, collegiate athletic departments with larger budgets will be able to command better talent by offering them more lucrative payments and NIL deal opportunities. While this exists today, we believe it will be exacerbated by the settlement.
WTW is proud to say we handle many Divisions I athletic exposures. Through our Sports and Entertainment segment, we work with over 75 athletic departments to manage risks. This experience allows us to take an extremely proactive and consultative approach with our clients. We go beyond the transactional aspects of insurance broking and offer unique expertise to accommodate demanding service requirements implement niche programs.
Disclaimer
WTW hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, WTW offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).
