NIL Has a Student-Athlete Valuation Problem
Read time: 4 minutes
If you are a gamer, you probably already know that after nearly 10 years of being dormant, video game-maker EA Sports plans to launch a college football game in 2024.
If you are not a gamer, you may have learned about the game when news broke of The Brandr Group filing suit against EA a few days ago.
The suit has brought to light EA’s offer of $500 for student-athletes who agree to provide their name, image, and likeness for use in the game. That news is sure to strike some NIL observers as a low-ball offer.
I think it’s worth a deeper examination, because understanding how brands - not NIL agents, not families, and not Collectives - value student-athletes is one of the biggest challenges facing the NIL ecosystem.
How some in the NIL ecosystem would like to value athletes
First, when I say NIL’s got a valuation problem, it’s important to state that I’m not referring to any specific NIL valuation model. While I may not always agree with the projections, I support models like On3.com’s NIL Valuations because they follow a rigorous formula.
Rather, the problem I’m referring to is the emotional, knee-jerk reaction many in NIL circles have when they hear a compensation figure they deem to be unfair based on their perception of fair market value.
In objecting, they often point to one of the following:
The size of the brand’s industry
The brand’s sales or the sales of the product in question
Previous deals that brand may have been engaged in
For example, I’ve seen those opposed to EA’s offer cite the video game industry revenues of $347 billion worldwide (Statista 2023) and the last EA Sports NCAA Football game’s $125 million in revenue (Sports Illustrated.)
While some data may be invoked, these are largely emotional arguments and brands don’t base value on emotion.
Minor recognition, little influence, minimal impact on sales
What many of us in NIL find hard to admit, because we want to see student-athletes’ have financial success, is this: most student-athletes are not recognizable to anyone other than the local fans of that university’s teams.
Without recognition, there is a lack of influence. And with a lack of influence, an athlete’s ability to positively impact sales is minimal.
Last week, I surveyed over 3,000 consumers among three different fan profiles. I asked consumers to name as many college football players as they could from any of last year’s final top 25 AP College Football Rankings.
I even gave them the rankings as a reminder.
From a total pool of 25 teams or 3,125 student-athletes (125 players x 25 teams), here were some of the results:
From a survey of 1,000+ self-described college football fans; the average fan could name 4.3 college football players
From a survey of 1,000+ college students; the average college student could name 1.4 college football players
From a survey of 1,000+ self-described “gamers;” the average gamer could name .9 college football players
Will college football fans, college students, and gamers be the only consumers of EA Sports college football game when it launches next year? No, but they certainly make up three important profiles.
And yet, none of those groups could name even 5 players total from all of the rosters of major college football.
This doesn’t mean that football student-athletes’ NIL doesn’t have value. Of course it does. Using real players adds to the game’s authenticity. But it would be hard to make the case that any but a few of the 10,000 football student-athletes offered the EA deal will directly help the game’s sales.
How brands value student-athletes
Which leads me to how brands largely determine value in a student-athlete: their potential to drive incremental sales.
Of course there are things brands take into account before projecting impact on their sales. Things like a student-athlete’s (1) marketability and personal brand, (2) audience reach and demographics, and (3) brand relevance and alignment.
But given the survey data above, it’s hard to justify factoring in these criteria.
Again using the EA example, it’s almost inarguable that the game will sell regardless of whether or not student-athletes provide their NIL (our culture loves video games and football is the #1 sport in America).
So the question becomes, what will the participation of football student-athletes mean in terms of increasing or adding to the sales that would have happened without their inclusion.
I don’t know the number. Maybe it’s $500 per athlete. Maybe it’s $10,000 per athlete.
Maybe there shouldn’t be a licensing deal at all and EA should only do NIL deals with the handful of recognizable and influential student-athletes that will impact the game’s sales.
Whether it’s a giant like EA or a tiny car wash in a college town, brands will determine value based on everything from clicks to foot traffic and anything else they think will lead to sales.
If we want compensation to increase, it’s up to student-athletes and those who support them to adapt.
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Bill Carter is an NIL Consultant, Educator, and Speaker. He is a NIL Columnist for Sports Business Journal and teaches NIL in College Sports at the University of Vermont’s Grossman School of Business. Click here to read about Bill’s NIL Consulting and NIL Education for sports organizations, universities, and brands.