How to read an NIL story in 2022:

Good morning, and thanks for spending part of your day with Extra Points.

A few very quick housekeeping items:

1) I'm going to experiment with a new publishing schedule here in July. For this month, EP will publish four days a week (two free, two paid), and Going For Two will publish once a week. I'll take stock of everything near the end of the month to see what tweaks need making as we ramp into the Fall sports season.

2) A few weeks ago, I teased that we would run an Envelopes Of Cash Tournament. This tournament will run this month, and will be open to all paid Extra Points subscribers. Sign up information will publish later this week in the paid EP newsletters. The champion will get a free physical copy of the game, and perhaps, yes, maybe even an actual envelope of cash.

Paid EP subscribers also get free Extra Points stickers, access to our Discord channel, and every single EP newsletter we publish. This week, barring Notre Dame joining the Big Ten or something, I'll have a reported mid-major realignment update, some important published research to share, and more. You can support the entire EP operation with a paid subscription here:

Okay! Enough ads. There's something I've been wanting to write about here for months.

You'll be forgiven if you missed this amid the sea of conference realignment stories over the past few days, but we're now a year into the NIL era. Plenty of outlets have written thoughtful stories about what's changed in college sports, and where the industry may go from here.

But I think the biggest NIL story in recent memory actually published a few days earlier. And I share this not because I want to pick on the authors, but because I think it illustrates a LOT about how NIL is actually working, and what fans, and industry, really need to know about future stories.

On June 26th, On3 reported that Jaden Rashada, a four-star QB recruit, committed to Miami. That would be a big deal to recruitniks and Miami fans, but what really elevated this to national consciousness was the claim in the story that Rashada "left millions on the table" in potential NIL money, despite accepting an NIL deal "worth $9.5 million."

A few days later, On3 published another report, one that refuted many of the major claims in the original story. The updated report includes quotes from Rashada, who said that “All reports of my decision involving a NIL deal is inaccurate."

The updated story also included quotes from LifeWallet owner John Ruiz, the man signing many South Florida athletes to substantial NIL deals, also denying any contract with Rashada. The full story also digs into the various social media fighting from various attorneys, confusion with an NIL consultancy run by a 19-year-old and a 22-year-old, and allegations that a whole bunch of people are lying.

It's the perfect NIL story, in my opinion.

I've written a LOT about NIL. I've covered these proceeding since before state laws were passed and NCAA guidelines changed. I've done deals with athletes, talked to just about every major marketplace and attorney, talked with athletes from P5 to D-III, and with ADs from the Big Ten to the NAIA.

Based on those experiences, here are a few key things that I think everybody needs to keep in mind when they read, or write, an NIL story.

Everybody is selling something

There are about a half-dozen or so lawyers that most outlets reach out to when they need a quote about NIL. Beyond those lawyers, typically, the same handful of marketplace CEOs, technology company CEOs, consulting firms, etc. are used as experts.

Those folks really are in the weeds more than most ADs, athletes or reporters. But almost all of them are also selling something, and readers and writers should keep that in mind. If a company makes money by facilitating deals between athletes and brands, well, they're probably going to talk up the growth (or valuation) of that side of the market. If a company is loath to work with collectives, and say, only works with universities, well, they're likely to give you a skeptical perspective on collectives. We shouldn't be surprised if a trademark attorney tells the world that athletes should really retain the services of trademark attorneys.

The advice and perspective of these individuals isn't necessarily wrong. But it may also be self-interested, and readers and writers should ask themselves if the person quoted in a story benefits in some way by advancing that particular argument.

This industry isn't that big, and most of the major companies, big collectives and quoteable lawyers are all either in business with each other, or rivals with each other.

If a company makes money by assisting with fundraising and compliance from collectives, for example, maybe we should take it with a grain of salt if that company says everybody needs a collective. If an agent, who makes 15-20% from athlete NIL collective contracts, says the going rate is X, maybe we should be skeptical of that too.

In fact, we should be skeptical of almost all numbers.

I reached out to Texas A&M shortly after that, and while the school responded, they declined to discuss the particulars at the moment, which was understandable. But as I wrote then, it's almost impossible for third parties to really "do research" because there is almost no way to get verifiable, confirmed, NIL data.

I can file an Open Records Request and get imperfect, but still useable, athletic department financial data. We can see the fine print for a coach contracts, recruiting meals, stadium renovations and athletic apparel deals. Via FRS reports and a little bit of digging, you can get a pretty good idea of what media rights distributions look like too.

But NIL data? Based on my efforts, most schools won't return any information via FOIA, citing student privacy laws. But even the schools that do share compliance paperwork have only very incomplete data, since most athletes don't share what they're supposed to with compliance.

Opendorse and INFLCR share data, but even that's incomplete, since neither entity captures even a majority of NIL activity, especially stuff with collectives. Their reports can be useful, but have to be taken with grains of salt. The On3 NIL valuation database, for now, is even more speculative.

Without the ability to verify anything, the numbers that are thrown out there are typically coming from agents who may or may not be telling the truth, assistant coaches who are getting information secondhand (or from dishonest sources), message boards, or similarly speculative that agents, assistant coaches, boosters and other third parties will try to manipulate to push for different recruiting or financial outcomes.

Remember, the fine print matters

Let's take the most famous NIL deal so far, the "Eight Million QB Deal", allegedly, with Tennessee's NIL collective. This story comes from The Athletic.

I'm not sure everybody that talks about this story actually READ the story, because this is the very first damn paragraph:

On Friday, a five-star recruit in the Class of 2023 signed an agreement with a school’s NIL collective that could pay him more than $8 million by the end of his junior year of college,The Athletichas learned. He’ll be paid $350,000 almost immediately, followed by monthly payouts escalating to more than $2 million per year once he begins his college career, in exchange for making public appearances and taking part in social media promotions and other NIL activities “on behalf of (the collective) or a third party.”

Friends, a deal that "could pay more than $8 million" is NOT an $8 million deal!

That's a ~$2 million deal over four years. If this particular prospect is as good as his five-star recruiting projects him to be, and everything works out perfectly, he's not going to be there for four years, he'll leave for the NFL after three.

But historically, that doesn't always happen, even for elite five-star QBs. Five-star QBs get hurt, fail to win jobs, transfer, all the time. Four of the top five QB recruits in the 2019 class, after all, have transferred, and the fifth, Wisconsin QB Graham Mertz, hasn't exactly set the world on fire. Three of the top ten QBs in the 2020 class have already transferred as well.

If a QB transfers, gets hurt, gets benched, or any number of other reasons, most of these deals are not paying out that entire contract, even if they can't legally include performance clauses. The payouts are monthly.

It isn't really accurate to freak out about the total size of an NFL contract when it isn't fully guaranteed, after all. That same principle should apply here, where recruits are much riskier, the agents shadier, and the unknowns much more pronounced.

In fact, here's a dirty little secret about NIL collectives and football recruiting.

Honest to God, not every school is working hand-in-glove with a collective to throw big money at recruits.

I've written this before, but it's important to mention this again. NOT EVERY COLLECTIVE IS THE SAME.

Some collectives are very unsophisticated, essentially serving as a vehicle for message board dads to pass the hat and Venmo some current athletes. Some are barely concealed tax-avoidance schemes. Some are trying to support the entire athletic department, others, just one or two sports. Some are trying to run a profit and essentially become full-fledged marketing agencies. Some are just trying to turn previous bagman recruiting operations above board.

I can tell you, based on my conversations with industry leaders, ADs, athletes, etc...not every AD and coach is thrilled with their local collective, and a lot of folks who run collectives read stories about guys like John Ruiz or Michael Caspino and get MAD, because they want to run their operations in different ways.

This, from an individual involved in NIL efforts at Michigan, mirrors that I've heard from MANY folks involved in NIL efforts at big time programs:

Throwing big money at recruits who haven't played a single snap of college football may be emotionally rewarding to boosters, but it sets off alarm bells for many coaches. A four-star who may never end up cracking the two-deep making four times as much money as an established starter is a situation that could hurt locker room unity, undermines coach control, and creates future roster management headaches. It's also very risky business for any collective that actual cares about business outcomes or fundraising stability.

There are unquestionably collectives out there that are trying to throw big money at football recruits. But I'll say this, I do not believe that the approaches you may read that are tied to collectives supporting say, Tennessee, or Texas, or A&M, or Miami...are the standard at every high level football program. Maybe that changes in a few years. Maybe not. But Wangler's last paragraph there is a sentiment I hear from many, many people in this world.

Finally, remember that NIL still means a lot of different things.

NIL includes the money that athletes make from giving coaching clinics, hawking energy drinks and autographs, doing Instagram promotional deals, and tweeting nice things about Extra Points. That market absolutely exists, and many athletes across all levels are enjoying meaningful benefits from it.

I am skeptical that this market will continue to grow like some industry boosters or investors think it will, especially given economic headwinds our country is facing, but it is very much a real thing.

NIL also includes 'talent fees' for recruits, payouts that have absolutely nothing to do with business outcomes or marketability.

What market is bigger? How big are the total markets? How liquid are these collectives, actually? How will this marketplace change after one post-collective football season? Are athlete-led and managed collectives a new trend, or a fad?

I don't think anybody really knows!

This is a tough beat. NIL isn't just a recruiting story. It's a business story, a legal story, a finance story, and one that requires different skills, sources and structure to really wrap your head around. This is half of my entire beat, and I still struggle with it.

The important thing here, for all of us, is to ask ourselves who benefits when a particular eye-popping number or fact is shared on social media or in a publication. We should ask ourselves if the likely source for that story really knows the numbers and fine print of a deal, or if they're hearing about it second or third-hand. We should ask ourselves if the parties involved are actually trustworthy.

Chances are, when you see a shocking trend story, or some crazy-high deal terms...there is some important context missing.

This newsletter was brought to you, in part, by Refind.

How to read an NIL story in 2022:

Get smarter every day. Every day we pick 7 links that make you smarter, tailored to your interests, curated from 10k+ sources, love by 50K curious minds.

(Extra Points earns a small commission for every signup)

This newsletter is brought to you in part by The Average Joe

How to read an NIL story in 2022:

It doesn't matter whether you're a growth, value or contrarian investor, you'll find value in reading The Average Joe, a 3x-weekly newsletter covering stock market trends, news and analysis.

Over 19k investors rely on them to discover trends like:

  • Cloud companies are taking over as the next FAANG stocks, and here are the companies with the potential to drive returns…

  • Canadian tech companies are seeing explosive growth and here’s how you can diversify your portfolio beyond US stocks…

  • Biden’s infrastructure bill could electrify the commercial EV sector, and this electric bus maker stands to benefit...

Subscribe to the free newsletter and become a better investor by reading their 5-minute, jargon-free stock market updates.

(each free subscription results in a commission for Extra Points)

To sponsor a future Extra Points newsletter, please email [email protected]. For article ideas, newsletter feedback, FOIA tips, athlete NIL sponsorships and more, I'm at [email protected], or @MattBrownEP on Twitter, and @ExtraPointsMB on Instagram.

Join the conversation

or to participate.