Realignment, 12th Man+ Fund & "Saving College Sports" | NIL Blitz: Aug. 7 - Aug. 13
Happy Monday y'all! Welcome to the first installation of the NIL Blitz Newsletter.
A ground rule on formatting to be aware of is that I keep it to the 5 topics I feel as most crucial to understand from the week prior. Not everyone working in the industry is fortunate enough to keep a close eye on all breaking news, so my hope is that this will consolidate the slew of headlines.
I also try to hone in on the NIL perspective of each topic - not to ignore others that may be equally (or more) important - but for the sake of brevity.
(Unfortunately/Fortunately we are starting off with one of the longest issues yet - conference realignment.)
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1. Conference Realignment + NIL ??
2. Texas A&M's 12th Man+ Fund Takes a U-Turn ??
3. Arkansas AD Makes a Play for College Sports' Survival ??
4. High School NIL Controversy Grows ??
5. Webinar Alert: Dive into NIL Collectives ??
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1. Conference Realignment
By now, I'm sure you've caught wind of the conference realignment situation. Important contextual questions to have answers to...
Q: What caused this?
Money and the prospect of controlling a financially stable future.
College sports, like higher education, is a business and it requires money to survive. Wind back the clock 40 years ago , and there was a first-domino Supreme Court case which "unbridled" college sports to grow into the industry it is today. Conferences could begin negotiating their own TV contracts separate from a national, NCAA TV contract deal.
Think about the components and players in this -- athletic departments (motivated by on-field success), schools (dedicated alumni with a lot of pride), and conferences (vouching for the most eyes and attention) -- EVERYONE wants to win. The beauty of competition is that it pushes everyone to be better; but it also means there are people who win and lose.
In this case, the desired outcome (large media contracts) were available outside of the Pac-12, so they left.
Q: Did NIL play a role in it?
No, NIL was a byproduct of this commercialization of sport and a long-delayed right for student-athletes. This is very important to understand for two reasons.
(1) At its core, the word athletics is derived from the Greek word "athlos", meaning "contest" or "task". A contest requires a contestant, aka an athlete. Spend time racking your brain trying to think of one "sports organization" that could exist without athletes and you will not find one. Sports need athletes.
So, as college sports has grown astronomically into the multi-billion dollar industry it is, the pie keeps growing but athletes' and athlete advocates believe the athletes (again, the core of sports in general) deserve a slice; because, no athletes, no pie. NIL became that slice... for now.
(2) NIL has shown no significant negative impact on donations to schools . However, it did mark a push spike in "athletes' rights" which have always been a driver for change in the industry. For instance, if schools feel athlete employment is impending and their pocket book will take a toll from paying athlete salaries, then they will absolutely look for more sustainable avenues for funding the model.
Q: How does this impact schools + NIL?
Schools are the ones with the bargaining power for one main reason - athletic prowess. Sure, the schools' market and "brand" go a long way, but ultimately both of those are driven by athletic success of their programs.
What leads to better athletic success? Athletes and coaches.
What leads to attracting better athletes and coaches? Athletic success.
A catch-22 (and there are anomalies), but think about this -- in a hyper-competitive industry, what can help schools separate from one another? NIL is one way.
If a school (an entity of higher education, operating as a business) has a goal of secured financial future, then the goal is a good conference. If the goal is a good conference, then the goal of the school is to have a strong media market . If the goal is to have a strong media market, then the goal of the school must be athletic success. If the goal of the school is athletic success, then the goal must be attracting coaches and athletes. If the goal is to attract top coaches and athletes, then the goal (in this day and age) is to succeed in NIL.
NIL is a "must have", bottom line topic for schools. It feeds into their financial future.
Q: How does this impact collectives + NIL?
Collectives are the main driver of NIL in the Power 5 market. A "keeping up with the Joneses" mentality trickles into all aspects of the transition as uber-competitive schools will do whatever they can to avoid the college athletics version of Premier League relegation - being left alone with no media rights deals.
Ultimately, collectives will have to step up their game. Competition breeds excellence. (Read more on "How does this impact college sports as a whole?" below.)
Q: How does this impact athletes + NIL?
Before touching NIL, I would be remiss to acknowledge what an incredible change it will be for athletes amid conference changes. Missouri Head Football Coach Eli Drinkwitz talked at length about athlete mental health, especially for athletes who frequently play mid-week games (think baseball/softball) who may now have cross-country flights while still being expected to juggle (wanted to say "prioritize", but that is not the case) academics.
University of Michigan regent Jordan Acker underscored this by saying, "It will take less time for our student athletes in non-chartered travel to go from Ann Arbor to London than it will to Eugene. Should we consider adding University College London to add another TV window?" Many star athletes chimed in sharing the same sentiment. Mental health is a very, very big topics for athletes right now - even in competitive sports which are more often than not argued as a privilege, not a forced path.
All that said, this is not to ignore benefits athletes will receive on top of existing ones, too, such as new travel and increased amenities. This will be supplemented as reasons why conference realignment is a cool thing. Nonetheless, if this isn't one of the final nails in the coffin towards athlete employment, I don't know what else could be. (Read more on "How does this impact college sports as a whole?" below.)
On the NIL front, the main impact here would be an increase in national exposure for athletes. For example, southern California college athletes will now find themselves in the upper midwest and East Coast regions where that nationwide exposure did not previously exist.
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Q: How does this impact the trajectory of NIL?
Big question, but the demand for monetizing athlete NIL will grow. The aforementioned spark of national awareness of athletes (Brand), competitive nature of collectives in new conferences (Collective), and interesting new changes to longstanding rivalries (Fans) cover all three main segments of the market.
There is also a feasibility of conferences using this time to reign in consistent NIL rules within their conferences , as Michael McCann pointed out.
Think about this too -- many nay-sayers to NIL claimed it would "kill college sports" because athletes would be seen as professionals and fans would lose interest. After two years, that has shown inverse results. If the ultimate outcome of this is a professionalized minor league system where athletes are employees, that still doesn't change the fact that millions of Americans have a vested interest in seeing their alma mater win on Saturdays. (Read more on "How does this impact college sports as a whole?" below.)
Q: How does this impact college sports as a whole?
There is too much to type here, but let me summarize thoughts pieced together from above.
2. Texas A&M 12th Man+ Fund "discontinues" NIL operation
Last week, Texas A&M's fundraising arm sent a letter to donors informing them of the discontinuation of the NIL 12th Man+ Fund. Citing the IRS memo which surfaced in June , the foundation acknowledged there was a larger mission of their operations which they seek to preserve.
In other words, the risk of losing their 501(c)(3) charitable status as an entity and the tax deductibility for all of their donors - not just contributors to the NIL arm - was not worth the reward. The 12th Man Foundation reported over 16,000 active members in their most recent annual report , and they consistently rank among Top 10 FBS schools in athletic department donations .
So, what does this mean? Three things...
(1) The silver bullet model to "bring the collective in-house" which would in turn create NIL collective sustainability is highly unlikely to prevail. For Texas A&M to change course given their state law carve out and despite being viewed as one of the boldest in the space, I find it hard to imagine any other institution would try to make it work. On top of that, there are only 8 known Power 5 schools in the country whose foundations are setup in a way that could allow it in the first place, setting aside the IRS concerns.
(2) This is good news for the NCAA, as it backs the interim policy's stance against institutional involvement. In fact, NCAA President Charlie Baker went on record saying , “In the context of what NIL is supposed to be about and how it is supposed to work and what it is supposed to provide, which is a service for an entity that is basically making what we’d describe as a business expense … yeah, it should be treated as a taxable event.”
(3) Foundations will have to find news ways to innovate. Alluded to in the letter to donors, A&M's foundation will explore "expanding its marketing outreach" related to NIL. As a reminder, in the NCAA's October 2022 guidance it was clear that staff members could assist in raising money for collectives, request donations to a collective, and provide donor contact information to collective operators. So for schools interested in a more tactical approach to collective fundraising, not all hope is lost.
3. Arkansas AD Yurachek's op-ed on "saving college sports"
Yesterday, Arkansas AD Hunter Yurachek took to the keyboard in an op-ed in the Arkansas Democrat-Gazette where he spoke his mind on the desperate need for Congressional intervention to save the Olympic model. Acknowledging the benefits of NIL, Yurachek also believe it was the first of many dominoes leading to revenue sharing: "While college athletes benefiting from their name, image, and likeness has been widely accepted as a net positive for the athletes, what is on the horizon, thanks to California, puts the entire system at risk and threatens the viability of every non-revenue collegiate sport."
Yurachek is not alone in these beliefs - and I don't think these frequent op-ed pieces from leaders in the industry are just lip service to politicians. There is genuine fear in the direction of this model.
Let's think about it: Johnson v. NCAA, California's Revenue Sharing Bill, the NLRB complaint and House v. NCAA could all realistically come to a head within the next 36 months. The budgetary impact for an athletic department could very quickly range from an additional $15M to $40M, not including distribution reductions, etc. (I was doing estimations over the weekend and I believe these projections may even be conservative.)
The bottom line is that budgets for athletic departments are going to change. College sports is, has, and will continue to change, too. If you're an AD or CFO at a Power 5 school in particular, I think the conversation for the next two years is around...
(1) Saving for any impending damages, athlete payouts, etc., by limiting excess spending and slowing capital projects.
(2) Identifying external revenue sources (e.g., Florida State ) and seeking Olympic/professional league backing to secure a future for non-revenue generating sports.
The push for Congressional intervention is certainly an approach to keep stability in the current model, but I do believe, even if the current model is thrown on its head, there will still be 18-22-year olds competing in high level athletics in America - that's not going away - it just will look a little different.
(I've got a whole bunch of thoughts on all this but that's for a different NIL Blitz ?? )
4. High School NIL: Georgia, Florida and Alabama inch closer
Strong indications were reported last week by Darren Heitner that Georgia, Florida, and Alabama's high school associations are all monitoring NIL very closely. Robin Hines, the executive director for the GHSA, indicated he would have an NIL proposal ready for his Executive Committee meeting in the fall , and that has put neighbors Florida and Alabama on notice for fear of athletes jumping state lines for better rules.
The Athletic reported last September the story of Penn State commit T.A. Cunningham (originally from Georgia) finding himself ineligible and sleeping on couches in California as he left home to go West where NIL rules were more favorable. I would be shocked if this story is not resonating among decision makers in all three associations.
As it sits today, 35 high school associations permit NIL, 7 states are considering, and 9 continue to prohibit.
5. NIL Collective Conversations - Webinar this Thursday!
Free this Thursday from 4-5pm ET? Opendorse is hosting our first ever Collective-specific webinar, and it includes guests from Midnight Ride (UMass), Dam Nation (Oregon State), Every True Tiger (Missouri), Sun Angel (Arizona State), FirstTeam Sports Consulting (10+ collective partners), and The Volunteer Club (Tennessee).
Topics will include The Collective Association (TCA), activations, operations, fundraising and the athlete impact from NIL. I've had a chance to peek at the material ahead of time and I'm genuinely pumped for this one (and I don't say that about many webinars, ha).
If you'd like to tune in, it is open to the public and you can find the RSVP link here !
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Thanks for reading - have a great week!