Sponsors Will Determine the NIL Marketplace
It’s been a week since Name, Image, Likeness became (sort of) the law of the land. And based on my experience - and recent interviews with close to 50 sponsors of leagues, teams, and athletes - I am quite sure that this first wave of educating student-athletes on NIL is insufficient and maybe even detrimental to their success. If we want NIL to work for as many student-athletes as possible, we need to give them the right playbook - the brand sponsor playbook - so that they have a chance to reap the financial rewards of NIL and so that even those who don’t will still learn something valuable about the business of sports, marketing, and entrepreneurship.
[As uncomfortable as it makes me feel, I need to say this for the sake of credibility: For 20+ years I represented some of the biggest brands in sports in their athlete sponsorships. From the mid-90’s until 2019 when I sold my sports marketing agency, I worked on behalf of Pepsi, Gatorade, Gillette, Ford, Nike and other Fortune 500 brands. I consulted on deals that my brand sponsor clients made for Michael Jordan, Dale Earnhardt Jr., Shawn White, and over 200 other athletes.]
WHY NIL IS GOING TO DEVELOP SLOWLY FOR STUDENT-ATHLETES
With media coverage in every major news outlet about this new marketplace, brands have largely been silent - here’s why:
Because there is no urgency for brand sponsors. The supply side of this new marketplace is now flooded with over 480,000 student-athletes. To put that in perspective, there are only about 10,000 professional athletes in the U.S. of which about 5,000 are in the four largest leagues (NBA, MLB, NHL, and NFL.) In others words, the market just increased in size by 4,800%, so brands don’t feel any pressure to act right away.*
Because brand sponsors are sophisticated, calculating, and risk-averse organizations. Few in corporate America like to be first and risk establishing an inflated market. Student-Athletes - with the use of data from the tech platforms provided by their institutions - can try to set the market prices, but the brands have both the money and an oversaturated supply. So brands will set the market when they feel more confident.
Because brand sponsors don’t sign athletes without an activation plan. Sports marketing is a hundred year old industry. For the first 80 years or so, brands were willing to simply pay athletes and hope that their “association” with the athlete would yield something positive. But since the 1990’s, the industry practice of “activation planning” has become the standard. Brand sponsors develop activation plans (usually before signing an athlete) to ensure that for every dollar they invest, the relationship yields 3x, 5x, or even 10x in sales, brand equity, or some other quantifiable metric.
*Yes, I know there have been a handful of deals during the last week; Boost Mobile did one on July 1 which got them a lot of PR, which was the activation plan.
WHAT EVERY STUDENT-ATHLETE SHOULD KNOW ABOUT SPORT SPONSORS
See that pie chart above? That’s the baseline. Depending on their industry, marketing budget, sales channels, and a host of other factors, each brand sponsor has their own spin on this template, but this is the the foundation. Brands have figured out that these are the four ways they make money once they have sponsored the athlete:
Online (Social Media, Content)
This is the low hanging fruit for a student-athlete endorsements, which is why it’s been widely covered in the media and emphasized by the athlete endorsement technology providers like Opendorse and others. But even here, the future is unclear. Estimating a student-athlete’s potential earnings is tricky business when those estimates are based on pro athlete and social media influencer “comparables.” These estimates may prove to be true, but again, the demand side (brand sponsors) will set that price and right now we just don’t know.
At Live Events
How pro athletes are utilized by brand sponsors at live events varies, but let’s use a simple example: brands often use their sponsored athletes to do autograph signings or meet & greets at the event in which they are competing (you see this often at a tennis or golf events.) If the brand is not allowed on-site at the event, they might bring the athlete to an off-site location like a retail partner (for example: a beverage brand may have an athlete sign autographs at a nearby convenience store or restaurant franchise where the beverage is sold.) For student-athletes, this type of activation is neither permissible or practical. They are not allowed to engage with a sponsor during their team activities and leaving that team activity is impractical. Given the importance of live events, this is tactic that brand sponsors are trying to resolve.
On Air (Broadcast TV, Streaming)
When a pro athlete is signed by a brand - and if the that brand uses any type of TV advertising (or video) - one of the first things they will do is produce content featuring their new sponsored athlete. When we say “on air”, we mean anything from broadcast television to cable to streaming. But no matter where the content will air, it’s time-consuming and costly to create. One of the questions that brand sponsors are struggling with is whether a college student-athlete (often with limited name recognition to anyone other than their rabid fans) warrants such a huge investment of time, people, and money.
At Retail (On-pack, POP)
Retail activation is the holy grail for most sports sponsors. You think we live in a digital world, but that’s not entirely true. For example, of the NFL’s top fifteen sponsors, ten of them sell “stuff” (like tires, deodorant, pizza, and candy bars) in brick and mortar retail environments. Brands rely heavily on athlete sponsorships to generate foot traffic into those retailers to sell more of that “stuff!” As part of this athlete retail activation, brands put athletes “on-pack” (on the actual package; think chips or cereal.) Sometimes they put the athlete on “POP” or point-of-purchase - a kind of in-store visual reminder that often nudges the consumer in the brand’s direction at the moment of purchase. Brands are struggling to decided whether student-athletes warrant the risk, with many retail activations requiring up to a year of planning and production before getting into stores.
Coming Soon: Part 2/What Student-Athletes Can Do to Improve Their Chance of Success with NIL
In Part 2, I’ll outline a few way in which student-athletes can position themselves as multi-channel marketing partners - not just a social media influencers - and become viable options for brands.