When NIL Turns Into Payroll
It's a rainy Sunday afternoon so I started playing around with some numbers on what a future NIL-based payroll would look like in college football, and specifically how much money would it take to establish the same level of dominance that programs like Alabama and Ohio have today.
This is of course all speculation, but I've made some basic assumptions.
For starters, I've assumed that affiliates of the universities will raise permanent NIL funds to establish the equivalent of salaries in college football. For example, an affiliated entity of Michigan might raise $300M in order to pay out $21M per year in "NIL" payments to football players (so clearly paying out 7% a year which could be replaced by investment earnings or new fund raising, etc...)
I've also assumed that players will sign contracts with those affiliates out of high school, and the value of the contracts will roughly equate with recruiting rankings. For the sake of argument, I've assumed the following annual "NIL" salary by recruiting level:
5*: Avg. $1,400,000 with range of $800,000 - $2,000,000
High 4*: Avg. $700,000 with range of $600,000 - $800,000
Mid 4*: Avg. $500,000 with range of $400,000 - $600,000
Low 4*: Avg. $300,000 with range of $200,000 - $400,000
High 3*: Avg. $150,000 with range of $100,000 - $200,000
Low 3*: Avg. $75,000 with range of $50,000 - $100,000
Finally, I've assumed that schools will pay "NIL" salaries to 70 players, which is obviously less than the 85 scholarship players today.
Based on the above, for Michigan to retain a roster of 70 players with the same average recruiting level as its 2021 class, which ranked #14 in the country according to ESPN, the annual salary would be $19.3M which would require a permanent NIL fund of $276M. It seems totally realistic to me that 14 or more programs can raise a permanent fund of $276M or more. (For comparison sake, Stephen Ross has donated $400M to Michigan to date, and that's one donor).
The most expensive class in 2021 according to the above would be Ohio's class, which if spread across 70 players would require an annual salary of $41.3M, and a permanent NIL fund of $590M.
I suppose the key question as we head into this new world of NIL is whether anyone will be able to raise 2x what Michigan will be able to raise in order to maintain the sort of recruiting dominance that Ohio, Alabama and Georgia has over Michigan today. It's going to be wild, but my intuition is that Michigan won't end up with a payroll that is 50% of whoever the "top" schools end up being. But it does mean more in the $EC, and there are families out there with Wal-Mart money, and the universities may end up interacting with the NIL affiliate funds in different ways, so we'll see....
January 9th, 2022 at 2:05 PM ^
Thanks for doing this. I am sure we can all debate your assumptions but it is great way to start the conversation with a little more meat on it.
That being said, there has to be some form of cap or something. I know baseball does not have a salary cap. But the luxury tax acts like one. The competitive balance is already out of whack in football but that is really at the very top. I don’t know how many programs could afford to do this in the us10 -15? When does it end? Much like yankees of the 70’s if an owner is not interested in return or willing to put his personal money into the business you can buy the market. HOw long will it take for the 5 star freshman to make more than a second round draft pick on a rookie contract. A first round contract?
Once again, thanks for doing this. Will be interesting to see all the angles none of us have really thought of brought up.
January 9th, 2022 at 8:25 PM ^
There will never be a cap for 2 reasons:1) the NIL system is by design outside of the universities. How can you cap something that is outside of your own system? 2) any attempt to limit the earning power of these kids will fall under antitrust laws, likely lose in court and be deemed illegal.
January 9th, 2022 at 9:28 PM ^
Yes, a cap is not possible. Also, there isn’t going to be a $300m fund to pay from every year. Donors will be paying each year, why would they make a huge donation up front? Also, the amount donors are willing to pay will fluctuate based on their happiness with the program, and their belief in the product. They will also want something real in return. Such as promises the players won’t transfer, input on coaching hires, and meaningful ad placement.
January 9th, 2022 at 9:44 PM ^
I don't agree that a fund won't be created. While one donor may not be willing plop down that much without all of the extra incentives you listed, I could absolutely see an NIL trust get built up over time that will be a source of forever funding. The best part about having the fund will be that it will distance donors from the actual program, meaning that once the fund is there, the program will not have to give in to ridiculous demands since it will have the security of the trust fund itself.
Now, getting it fully funded may be a different story, but I could also see a lot of small time donors willing to put money into, not unlike a grassroots political campaign. 400,000 alumni with countless other fans of the school could chip in $5-100 every so often. Spread out over a big enough population, that can add up quick.
January 10th, 2022 at 10:42 AM ^
I think the blue blood programs like Michigan, Notre Dame, USC, Texas, etc. will push really hard for permanent funds or something very similar. They are going to want consistency and structure to make this manageable. If they can't get permanent funds, then I could see them raising funds for each class - like raising $25M for the recruiting class of 2023 and disbursing it over 4-5 years, and then raising it again for the class of 2024 so it becomes a consistent thing.
January 11th, 2022 at 1:48 PM ^
How can you cap something that is outside of your own system?
The NCAA doesn't control earnings, but eligibility. It might be able to rule that a player who earns more than X amount of dollars forfeits his amateur status, and thus NCAA eligibility.
January 11th, 2022 at 6:06 PM ^
Why? On what basis? It would never stand in a court of law.
There is no cap on endorsements in any professional sport.
January 11th, 2022 at 10:56 PM ^
Nope. You can only do that if you negotiate caps with the NCAA equivalent of the NFLPA, which isn't going to happen because there are too many players. Any imposed cap is an illegal restraint of trade. Restraint of trade is only legal if the restriction applies directly to job requirements.
January 9th, 2022 at 10:54 PM ^
That amount of money might keep some players here for four or five instead of leaving early unfortunately, how many of those players are truly student-athletes, and what kind of meaningless, sham degrees will they pursue?
Without a cap, this is just a disaster in the making
January 11th, 2022 at 6:07 PM ^
They were already earning sham degrees anyway, so at least they can make market rate cash.
And if schools like them enough, they'll extend 5th year options.
Players being rightfully payed market rate is great.
January 11th, 2022 at 10:59 PM ^
Without a cap, this is just a disaster in the making
With or without a cap, this is a disaster. It's an unavoidable one, however, without there being a minor league that would meet the money needs of the relatively few players that actually have the ability to draw in fans and make a team profitable.
January 9th, 2022 at 2:17 PM ^
To my understanding Universities are not permitted to collect, administer or directly distribute NIL funds. They can't sign players to endorsement deals nor set performance goals.
Following the reported approach of aTm, they are facilitating donors creating networks to coordinate these activities. How involved the school will be anyway remains to be seen.
As with before NIL, the willingness of schools to follow the letter of the law, and of the ncaa to do anything about violations, is going to be the question.
January 9th, 2022 at 2:27 PM ^
Fair point, and by "affiliate" of the university I just mean that they interact with the coaching staff in decision making, but otherwise act independently. I would hope there are rules that restrict the universities from directly funding the affiliates or supporting them directly with fund raising, etc.
January 9th, 2022 at 3:12 PM ^
Agreed. The "legal" infrastructure needs poured first and it seems like we our behind the curve already. I like the OP's stab at what it might look like in regards to a compensatory schedule.
January 9th, 2022 at 6:14 PM ^
Everyone is focusing on the manner in which the players collect their money. I’m certain the question at the Regents level is more about how the university is going to take a vig.
January 10th, 2022 at 2:10 PM ^
With all these 18 to 20-something young adults collecting massive amounts of cash, I predict it won't be long until we see the IRS involved. The young adults have no idea of the tax implications and there likely aren't any tax withholdings -- like we all see on our payroll checks. It could get ugly real fast for some kids.
January 12th, 2022 at 3:29 PM ^
I've long thought about that, and why I don't agree with those that think NIL will level the playing field by removing "bagmen". That said, tax advisory is a service the University needs to be providing.
January 9th, 2022 at 2:48 PM ^
Good starting point for a discussion, BiG. One of the many interesting topics will be the amount of $ the players get yearly.
Never mind ethics or legality for a moment. I wonder if it would be possible to arrange contracts with players such that they sometimes get a little more money as collegians in exchange for a % of future (NFL) earnings? Along with that, would it be possible for a random unmoneyed schlub like me to earmark my $50 for (say) Keon Sabb?
January 9th, 2022 at 3:23 PM ^
I was thinking of something similar but a bit different. A bunch of 5* prospects go to the same school signing contracts with each other to share a portion of NIL and future NFL money. It would be like insurance. A few will get injured and not make it but still receive a few percent of others compensation in the long run.
January 9th, 2022 at 3:33 PM ^
"A bunch of 5* prospects go to the same school signing contracts with each other to share a portion of NIL and future NFL money". Sounds like communism.
.
January 10th, 2022 at 3:55 PM ^
Actually, this sounds like one of the few times that trickle down economics works. If the billionaires get into six digit bidding wars over high school kids then the rest of us win.
January 11th, 2022 at 11:02 PM ^
That could have happened at any point in the past. But it didn't. You think that maybe there's a reason for that?
January 9th, 2022 at 6:17 PM ^
I think one of the interesting angles could be companies like Nike making contributions to the permanent funds in return for guaranteed endorsement contracts if the players go to the NFL. I could actually see a high percentage of the permanent funds coming from corporations in various forms.
January 10th, 2022 at 3:06 PM ^
Don't forget the inflation of player salaries. If Alabama knows that TAMU is offering $2M for that 5 star, do they now offer $2.5M? Boom, now the going rate for a top prospect just rose half a million.
January 16th, 2022 at 5:20 PM ^
No. Bama offers $2,000,001.00 and a nice Casio. Baby steps.
January 9th, 2022 at 4:11 PM ^
By watching college football, specifically Michigan, am I contributing to the NIL payment system or am I only contributing if I purchase something endorsed by the athlete? This is important, because if I'm contributing just by watching, I may need to reconsider my choices.
January 9th, 2022 at 11:36 PM ^
Kids getting CTE while the B1G gets BILLIONS, you're cool with. Those same kids getting some money for their effort and you're clutching your pearls?
January 9th, 2022 at 6:04 PM ^
Hey man - you live in Greenville, SC? I just moved here 2.5 years ago...reply if there is some alumni presence or football game group watching occurs that you are aware of...thanks for posting and Go Blue
January 9th, 2022 at 6:20 PM ^
I've been in Greenville for about 5 years, and I don't know of any Michigan bars here or anything similar. If we could get a watch group started I'd definitely give it a shot, although I only know like 1 or 2 other alumni here and not sure if they'd be up for it.
January 10th, 2022 at 8:43 AM ^
Cool...If you ever find out about anything or start something, please email me...
jbrose_2000 (at) yahoo.com
take care
January 10th, 2022 at 2:18 PM ^
I lived in Spartanburg for a while, right out of college. This was back when Greenville and Spartanburg were separated by a lot of unoccupied land! Had a great time and the people were all so nice to a young "Yankee" (but I'm a mid-westerner!)
January 9th, 2022 at 8:34 PM ^
Hopefully this effectively diverts $ that had been going towards stadia / locker room renovations (to indirectly entice players) directly to players.
I'm sure UM Development is furiously calculating how many NIL donors would otherwise not give to the university, versus NIL donations that directly siphon money that might otherwise go to the university's "main endowment".
In this sense, another handicap for the Michigan AD.
Prob much more obvious that, for Alabama, NIL donors /= general donors and NIL --> better team --> more college applications (improving their % accepted and ranking) and other uni wide benefits. Whereas I'm guessing much less obvious how the Michigan FB team's success/prominence benefits the university at large... who knows, certainly not me.
January 9th, 2022 at 8:50 PM ^
Once this gets rolling, I don't think the schools will be able to do much to get in it's way. Some schools might find more ways to support it than others, such as by giving the AD more administrative resources to help while other schools push the admin costs back on the permanent fund, but schools won't be able to stop it.
January 9th, 2022 at 10:40 PM ^
You may well be right.
I'd think that the university would exert "soft influence" with how the biggest donors ("Ross" type) approach it, but maybe not.
January 9th, 2022 at 10:56 PM ^
We are too above this - this is Michigan fergodsakes. $150K is our ceiling.
January 10th, 2022 at 6:23 PM ^
Clap, clap!
January 10th, 2022 at 7:53 AM ^
5*: Avg. $1,400,000 with range of $800,000 - $2,000,000
So you suggest paying a RECRUIT on average more than an OC/DC (who’s dedicated many years to his trade) based on recruiting services ranking?
WTF is wrong with people. We’ve gone way beyond “spending money”!
It is going to be fun the next several years watching things unfold. Where there’s money changing hands the corruption litigation will follow! (Yeah I know, there’s already corruption.)
I’d prefer the NFL develop a minor league and let players get whatever they can. Most will opt for the college route because (almost) nobody will follow a minor league. (But that ain’t happening.)
January 10th, 2022 at 9:35 AM ^
Ultimately those salaries will be set based on how much NIL money comes into college football, but I think $1.4M for a top 20 recruit could easily happen. For comparison sake, a four-year contract in the NFL for picks 5-10 overall average about $7M per year. So I scaled that at 20% as a rough guess.
Compensation levels in sports are just on a different level. How does a DC make $2M per year? It's all insane.
January 10th, 2022 at 2:20 PM ^
Have you seen how much money "unproven" first round draft picks make? It's more than their coaches. This is not some wild new reality for sports.
January 11th, 2022 at 11:30 AM ^
How many kids that are fringe 4 or 5 stars will have agents that start slipping money to the recruiting services to get that bump? There is always a way. Makes me sad.
Go Blue!!!!
January 27th, 2022 at 6:27 AM ^
Exactly. Now that recruiting rankings are worth real money, I don’t think we can trust them anymore. They are probably for sale; at least we need to be much more cognizant of the fact now than a year ago IMO.
January 10th, 2022 at 11:35 AM ^
This whole thing is so convoluted. I have no issues with players making money. But this is all still being done under the umbrella of “amateurism.” It would be simpler if there was minor league football that everyone was already invested in, but there’s really no way to work backwards. Instead, we’ve got “charitable” funds being created to pay players to attend schools and a sham organization that has no way of enforcing its own rules.
January 15th, 2022 at 8:46 AM ^
You are correct that NCAA is unlikely to have any capacity to be the the Fbi & iRs of NIL.
January 10th, 2022 at 12:47 PM ^
Maybe someone has brought this up, or maybe not, but does this change the landscape of insurance policies? For a long time, that star senior got insured against injury and the loss of future earning potential. Is there some system that should be looked at that takes recruiting ranking and performance on field in to account and sets the market or rates for each individual player?
January 10th, 2022 at 2:25 PM ^
Interesting analysis. Don’t donors get preferential tax treatment for donating directly to the university? I don’t think that would apply to NIL deals. Not sure if that would impact donor decision making either way…
January 10th, 2022 at 6:20 PM ^
That tolling you hear in the background is the funeral dirge of college sports. Go ahead and wave the white flag and make the colleges the minor leagues for football and basketball. The fact of the matter is the athletes were being compensated in the six figure range, the net value of that compensation was completely within the control of the player. Be serious and get an engineering/law/pre-med degree huge future value, get an ethnic studies degree and join the teachers union wandering around wondering why the administrations were serious when they offered the salaries they do. For the non-revenue sports, well we will just try and figure out a funding profile that makes sense.
January 10th, 2022 at 7:42 PM ^
College leagues already were acting as minor leagues for their professional counterparts. The only difference here is the athletes generating billions at the collegiate level get a fair slice of that pie and are no longer being paid in company scrip (tuition) or in shady, under the table deals that could land them in hot water.
January 11th, 2022 at 12:52 PM ^
Ah yes, the "fairness" doctrine. Other than the coaching payroll, exactly who is making all this money. Institutions are not people so the revenue in is not going to personal accounts. For the most part the athletic budgets are supplemented by the revenue sports income to pay for the non-revenue sports scholarships and into the University general fund for building things like the Central Campus Rec Building (yes I am exposing my age as I think I heard that the CCRB had been replaced and torn down, just as Waterman gym was demolished before). Your comments about athletes getting their fair share, as someone who paid their own way through school, taking that burden off my shoulders sure as hell would have meant a great deal. Also, most scholarship athletes realize that college is the end of the road for sports paying the way. SO, we have agreed to destroy the structure of college sports to cater to that small percentage of players that rationally will go pro. I realize that this next statement will be so far out of line with this body as to be ludicrous, but I would be just as happy to have a lower "quality" (but competitive across the board) of play in college, and let the NFL and NBA worry about the 5*s who are in it to go pro
January 11th, 2022 at 5:58 PM ^
You think coaches are the only actors in this system seeing huge profits?! All the billions of dollars and its just coaches?!
January 11th, 2022 at 6:11 PM ^
Why are you comparing yourself with these revenue generating players?
You didn't play football and generate billions in TV money, so why would you expect players to be treated the same as you?
This is America. Capitalism. You get payed market value.
Comments