In this week’s Film Room, we:
- Explore dynamic NIL sponsorship opportunities in the context of a recent Sports Business Journal article
- Break down a recent court decision on another eligibility rule challenge
Dynamic NIL deals create new opportunities for institutions and student-athletes
As college athletics continues its multifaceted evolution, sponsorship and revenue generation considerations become even more determinative of competitive outcomes.
With institutional payments to student-athletes capped and third-party NIL uncapped, it’s incumbent on institutions to think critically and creatively about sponsorship and related opportunities that recent rule changes create for their student-athletes. A recent article in the Sports Business Journal highlights innovative thinking at the University of Kansas in connection with mixed-use developments involving the football stadium.
While the article doesn’t describe related third-party NIL considerations, such projects offer institutions a built-in opportunity to facilitate game-changing third-party NIL deals for student-athletes. Now, for the first time ever, institutions can go to market with student-athletes—and the payments from third parties to student-athletes in connection with such deals are subject to no cap. See Article 3, Section 3(c) of the House Injunctive Relief Settlement:
“If the Member Institution elects to sub-license to a third party any rights it has secured through a direct contract with any individual student-athlete, the proceeds of third-party NIL licenses or sublicenses procured for the student-athlete by the Member Institution or its designee/subcontractor for the student-athlete will not be counted against the Pool, nor will any other third-party payments made directly to a student-athlete be counted against the Pool.”
Dynamic sponsorship deals that leverage combined opportunities for institutions and student-athletes will swing the competitive balance at the highest levels of college athletics, now and into the future. While not subject to a cap, such deals are subject to review by the College Sports Commission (CSC) for a valid business purpose and to determine whether they are within a reasonable range of compensation (if the third-party payor is an Associated Entity/Individual). Given the importance of these deals, it’s imperative that they’re structured in a manner that aligns with both CSC regulations and existing institutional agreements.
Recent eligibility challenge denied
Last week, a federal court in Louisiana upheld the application of the “five-year rule” to the plaintiff, Stanley Hamilton, a track and field student-athlete who enrolled in college in 2019 but did not begin competing until 2022.
The plaintiff argued that applying the start date for the five-year rule upon enrollment in 2019 when the student-athlete didn’t begin competing until 2022 amounted to a violation of the antitrust laws. The court denied the plaintiff student-athlete’s request for an injunction, noting, courts have “consistently held that the NCAA’s eligibility rules are reasonable” and the “Sixth Circuit found that the NCAA ‘eligibility rules … are all explicitly non-commercial.’” (at 11).
[View source.]
