Commentary on recent legal and athletic developments
Should you follow the news, the Supreme Court just made another ruling in the series of cases which will allow college NCAA athletes to profit from their personal athletic brand while still representing the university. This issue raises many concerns and just as many opportunities.
Background
A couple articles to help you get started:
From ESPN
From CNBC
The lure of professional athletics is not just competition at the highest level; it also provides an opportunity for individuals to prove themselves in a greater arena in front a bigger audience. Capitalizing on the crowd’s exposure, many professional athletes also choose to leverage their organizational skills with their personal brand by creating organizations around appearance fees, merchandise, and personal training camps.
Although participation in the NCAA often places individual student-athletes in the position of such exposure and fame, this ability to build personal wealth based on the personal brand has been off limits to students.
Pros. This limit is there for a reason: it keeps the students focused on their grades. This policy has also allowed universities to build and fund extravagant athletic facilities, teams, and staff salaries.
Cons. The previous law holds a legal barrier between highly talented, hard-working student-athletes and the substantial monies which are generated around their image and efforts.
What changed yesterday…
…is that this legal barrier has been vastly diminished. The decision changed direction on two issues:
Schools may now provide athletes with unlimited (yes, unlimited) non-cash compensation as long as it is related to education.
Student-athletes will also soon be permitted to accept payments from third-party endorsements in relation to their sport.
Implications
This means that the value of D1 recruitment just skyrocketed. Competition between high-school sophomores and juniors for spots on the team will climb. I interpret this issue to be relatively stable whose only effect will balloon athletic scholarship budgets, though potentially divisive if this budget grows out of proportion with athletic scholarships.
A whole new frontier is about to become available for accountants and business managers, namely the mountain of college endorsement deals and associated paperwork. It is this issue which I would like to focus on.
The issue of third-party endorsements encompasses large, league-wide deals as well as smaller, individual brand partnerships.
Similar to the pro NFL Players’ Association, we may see the formation of one NCAA-wide entity (or many conference-specific entities) The NFLPA, in addition to union representation for the professional athletes, handles large-scale brand deals and distributes the earnings to players. For example, the NFLPA represents NFL players in a deal with Madden NFL by EA sports, a video game which features realistic likenesses of the professional players. Each player whose image is represented receives a cut.
In addition to earnings from those large-scale representations, the door is now open for student athletes to monetize their own brand although this is difficult on their own. Professional athletes typically hire a business manager who organizes events and such, and the collegiates would be wise to do the same. Running this little business and reporting/tracking transactions requires more energy than most college students could afford to give it without compromising their grades.
Though I see this as the natural progression of events upon removing the student’s barrier to brand revenues, let us not forget that we live in an era of rapid and often unpredictable change which may lay these predictions to bare. However, as the trend seems to move towards “rightly compensating student-athletes” I maintain that with this distribution must come management, else extravagant and wasteful spending will consume our best young athletes.
We could probably agree that presenting a typical college sophomore with an endorsement check for any significant amount and no strings attached could easily be disastrous for the student, their psychological well-being, and their direct community. The ease with which earnings could be squandered and futures dashed is not to be underestimated.
I do not mean to make the case that every instance of presenting a sophomore with an endorsement check will end in disaster, but that it would be wise for young athletes to wisely build a base around their professional earnings. Particularly if they plan to pursue athletics, this base will provide them an edge as they enter the professional realm.
Speculation
Having worked previously in business management where my duties involved financial management for professional athletes, I was routinely involved with the execution of endorsement transactions and on multiple occasions in frequent communication with the NFLPA on behalf a client. With such a history, it is an easy leap for me to say that such business managements services will be necessary for student-athletes now that Supreme Court has opened the metaphorical flood gates.
I do not believe such a speculation to be too rash, however I will venture to say that these services will likely not be provided on an individual business manager-client relationships. Rather, these services will likely be provided by schools themselves as well as by the NCAA on the whole as each level attempts to leech a bit of the profits to their organization.
Conclusions
Schools would do well to invest in their athletic department staff’s capability to deal with this paperwork. Staff and students must be informed as to what this change means and how their school/team in particular will move forward.
Not discussed here is what this deal means for media production companies, such as the video providers who film the races, big games, and various meets.
