For College Football Elite, Quest for National Championship is Expensive
Oh, how college sports have changed.
Just five years ago, many student-athletes were compensated in the form of a scholarship. This might include either a full or partial waiver of the cost of tuition, fees, books, housing and perhaps even their meals. The NCAA strictly prohibited college athletes from monetizing their position as a college athlete. They couldn’t receive money through corporate sponsorships or endorsements. They couldn’t even sell their autographs or accept fees for personal appearances.
But in June 2021, all those restrictions came to a grinding halt. In the case of NCAA v. Alston, the U.S. Supreme Court ruled the NCAA’s restrictions on education-related compensation violated antitrust laws under the Sherman Act. Days later, on July 1, the NCAA’s newly created Name, Image and Likeness (NIL) policy went into effect. Student-athletes were now free to monetize their name, image and likeness to sign endorsement and sponsorship deals and to earn income from the commercial use of their personal brand identity.
The Supreme Court’s decision immediately opened the floodgates of money that poured into college sports. Much of that money is funneled into what’s called university collectives. A collective is an independent entity that partners with a university to raise money to fund NIL deals for their student-athletes. The money is typically raised from alumni, boosters, fans and businesses. For example, Ohio State’s collective is called Buckeye Sports Group while the University of Texas’ is called The One Fund. Locally, fans of the Iowa Hawkeyes can donate money to The Swarm Collective while the University of Illinois’ preferred collective is called ICON.
The NIL money raised by a university’s collective can be staggering, especially for perennial blue-blood programs like Ohio State, Notre Dame, Texas, Georgia and Alabama. It’s of little surprise that many industry experts estimate that between 70%-80% of the NIL money raised by these collectives is allocated to the university’s football program. According to data compiled by website NIL-NCAA.com, Ohio State’s collective spent $20.2 million in NIL funds for its national championship football team last year.
The money raised by a university’s collective is used to retain and reward current players on a team’s roster. According to sports media company On3, Ohio State had roughly 10 players on last year’s championship football team that received $1 million or more in NIL money. The money is also used to entice elite high school recruits. Many of the nation’s top high school football players can negotiate NIL agreements with a university at $1-$3 million per year even before they set foot on campus.
A major criticism is that to achieve success, especially for programs like football, has become an arms race to raise money for the university’s collective. From that collective, the NIL money gets doled out to retain and attract the best talent available. The greater the team’s talent, the greater the odds of success.
Last year, Ohio State finished the college football season ranked No. 1, according to the final Associated Press poll. They also ranked No. 3 in NIL collective money raised with $20.3 million. Notre Dame finished the football season at No. 2 and also ranked second in NIL money raised with $20.5 million.
Rounding out the Top 6 finishers, along with the amount and ranking of NIL money raised, are No. 3 Oregon ($10.6 million – No. 9), No. 4 Texas ($22.3 million – No. 1), No. 5 Penn State ($13.8 million – No. 5) and No. 6 Georgia ($18.3 million – No. 4). Of the final Top 6 rankings for the 2024 college football season, five of the six also ranked in the Top 5 for NIL money raised. NIL data was compiled from NIL-NCAA.com and Sportico.
This year, many of the top college football programs are upping the ante on their NIL collective spending. According to Sports Illustrated, Texas is expected to have the biggest wallet, spending upwards of $40 million on its football players this upcoming season. And for the rest of the blue-blood football programs, a $20 million NIL budget is now deemed a “minimum” just to stay competitive.
Even before the June 2021 Supreme Court decision, mid-tiered football programs – like Iowa and Illinois – still struggled to attract the elite high school talent the larger programs often took for granted. However, there were times when they could pull off a surprise and land a highly touted recruit. Maybe that recruit developed a strong relationship with one of the coaches. Or maybe the recruit was a legacy player, where his father or grandfather had also played for the team.
But now those elite players are often going to a program that can offer them the most NIL money. And if you’re Iowa or Illinois, your NIL checkbook is a lot smaller than that of Texas, Ohio State, Notre Dame and the other blue-blood programs.
Mark M. Grywacheski, Investment Advisor
Quad Cities Investment Group is a Registered Investment Adviser.
This material is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Quad Cities Investment Group and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Quad Cities Investment Group unless a client service agreement is in place.