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Booster-Funded NIL Expected to Decline Even as Overall Market Grows

John H. Ruiz is the founder and CEO of MSP Recovery (NASDAQ: MSPR), and a University of Miami alum. He is also one of the highest profile name, image and likeness backers in the country. LifeWallet, a consumer healthcare-focused app and data platform powered by MSP Recovery, has signed more than 115 players, the bulk of them Hurricanes, to NIL deals worth more than $7 million over the last 15 months. That includes a two-year deal worth $400,000/year for basketball player Nijel Pack.

Ruiz’s efforts have drawn national headlines and generated awareness for UM, LifeWallet and himself. “More people know me for NIL than they do as a lawyer—and I’ve been a lawyer for 30 years,” he said.

But with the media no longer treating six- and seven-figure deals for college athletes as news, will wealthy supporters like Ruiz continue to invest in NIL opportunities at the same level?

Conversations with the MSP CEO and several other college sports insiders suggest many will not. “There’s going to be a big pullback,” one sponsorship executive said.

“I’ve predicted that before,” Ruiz added. “The overall prices of the athletes are going to drop … It’s not going to be the Wild, Wild West like the first year.”

However, as regional and national brands begin entering the market, the overall amount of money awarded to college athletes could still rise. “As things have settled and people start to understand the landscape, you’re seeing more brands and businesses getting involved in the traditional sense of NIL,” Andrew Donovan (EVP, collegiate partnerships, Altius Sports Partners) said.

JWS’ Take: Many NIL backers, particularly those donating to collectives, have done so to date in support of their favorite university. The presumption is that their money will help the program win games.

Inevitably, many of those efforts will fail—after all, every game produces one loser. In that case, will program supporters continue to pump money into players and teams that underperform expectations? “If you know anything about economics, and that’s really what we’re talking about, people aren’t going to get the bang for their buck, and many will realize they can get a better return and not spend as much money elsewhere,” the sponsorship executive said.

Sure, some will continue to give towards NIL programs because, as Donovan said, “they are seeing across the country and hearing from their peers [that giving] is a necessity in this new era.”

That message is going to be amplified with recent NCAA guidance empowering schools to essentially fundraise on a collective’s behalf. “They’re going to have development staff proactively talking to donors about NIL being one of the prongs of institutional fundraising,” Donovan said.

But many more are likely to determine that at least a portion of their dollars are better spent elsewhere. “From a sustainability standpoint, that has to be a real concern,” Donovan said.

A small percentage may even decide to “proactively not give because they no longer believe in the coach, want to hamper his or her success and believe withholding funds will ultimately lead to the desired outcome,” Donovan said.

Collectives should be thinking about how to create sustainable structures to ensure their futures. Donovan said that starts with having the operational manpower needed to support day-to-day operations and establishing relationships with for-profit and non-profit businesses that can continually provide commercial opportunities for athletes.

Ruiz actually better fits the description of the kind of business collectives should pursue than he does his image as a fan. As the CEO of a publicly traded company, he is responsible for maximizing shareholder returns. “I’m not throwing money away without getting results,” he said.

And he does not mean on the field or court. The MSP executive looks to several metrics to ensure he is receiving a satisfactory ROI.

“One is branding exposure,” Ruiz said. “LifeWallet has been branded nationally” as a result of the NIL program. More than one million unique healthcare member profiles were uploaded to LifeWallet within a month of its launch in Jan. 2022, and 33 million more have joined the platform through Aug. 2022. NIL deals have been the company’s primary form of marketing.

App downloads and engagement with the LifeWallet member interface and corresponding website are also used to gauge NIL spend efficacy. “We’ve gotten millions and millions of users [into] our ecosystem as a result of it,” Ruiz said. “We’re very pleased with the results we’ve had thus far.”

But NIL-related media opportunities are drying up as the public becomes desensitized to college players getting paid. So, the value proposition for program supporters seeking notoriety will be depressed moving forward.

That will almost certainly matter to some, but it doesn’t to Ruiz. He intends to spend more money on NIL in 2022-23 than he did during the previous 12 months—if only because LifeWallet’s platform is now more expansive. He continues to see value in young people touting the product to their circle of influence.

On the field this year, the Hurricanes have struggled; the team is 4-4 and 2-2 in the ACC. But Ruiz insists that, unlike other backers, he is not investing in NIL to bring wins to Coral Gables, Fla. In fact, he points out that the worse the U performs on the field, the more value he derives from his spend.

“It actually creates more following because people say, This guy Ruiz doesn’t know what he’s doing, he’s putting money into NIL and the team’s losing. There’s sort of a connotation of ‘he got duped, he paid too much’ … My dad always taught me, good or bad, if they’re talking about you, they know who you are.”

While booster- and fan-related NIL money is expected to dip in the years ahead, the emergence of some new regional and national brands in the market could make up some of the lost ground. “You may see a drop-off in those bigger, outlier deals that made everyone’s eyes pop when they saw it in the media,” Donovan said. “But there could be a steady uptick in the volume of deals by other brands who have yet to get into the space. It could all even out over time to where you see continuity in those figures or even a steady incline.”

Schools are also expected to open more doors to co-branding opportunities for athletes and new avenues for existing corporate partners to get more involved with NIL in the years ahead. “Schools are going to realize the pie can grow for all parties,” Donovan said.

The absence of dependable data will make it challenging to definitively state if, or how much, investments in NIL rise or fall. “The majority of deals are not being reported,” Donovan said. “And the reporting mechanism from school to school, let alone platform to platform, is inconsistent.”

As reporting mechanisms improve, or if athletes begin disclosing their deals more consistently, it could look as if NIL dollars are on the rise when it’s just a matter of better information sharing.

In any case, future NIL success won’t likely come from super-rich alumni looking to buy their alma mater a championship, but from smart business deals that benefit all parties.

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