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The four phases of NIL: Predictions based on trends

The evolution of NIL over time and how it is expected to change in the future can be broken down into four distinct phases -- NIL 1.0, 2.0, 3.0 and 4.0.

NIL 1.0 The Age of Marketplaces (July 2021 to March 2022)

The early days of NIL can be characterized by deals between businesses and student athletes, which prompted the emergence of marketplaces as a solution. Initially celebrated for democratizing opportunities for all college athletes regardless of gender and if they play non-revenue or lower division sports, marketplaces quickly faced challenges.

The influx of athletes led to oversaturation, diminishing deal values and creating hurdles for the athletes that weren’t in the top 1%. The average deal value fell below anticipated figures, typically ranging between $50 and $200.

Athletes on multiple marketplaces found it tedious for brands to engage with them effectively, prompting a realization that success in NIL ventures required more than passive platforms.

Recognizing the need for athletes to receive greater financial rewards than businesses and marketplaces could offer, alumni and fan donor groups called collectives emerged and began to pay athletes higher value opportunities.

NIL 2.0 The Age of Collectives (April 2022 to November 2023)

Collectives, like one of the first, University of Florida’s “Gator Collective,” provided student athletes with a support system, streamlined their deal negotiations, offered financial education and consolidated NIL deals for student athletes amid their academic and athletic commitments.

Collectives succeeded in engaging athletes with tens of millions of dollars in deal volume and thousands of hours in community service engagements. Basepath, along with marketplaces including Opendorse and INFLCR, discovered that over 80% of NIL payments to student athletes are coming from collectives over individual businesses or marketplaces, prompting NIL software companies to recalibrate their direction.

As collectives broadened their community connections, memberships became avenues for fans to participate in athletes’ success, strengthening bonds between athletes and supporters. However, the increasing influence of collectives raised questions about universities’ direct compensation of athletes, particularly as state NIL laws and NCAA regulations added complexity to the landscape.

As student athletes become increasingly similar to professionals, they begin to make career decisions based on both athletic and financial aspirations. This narrative shift is exemplified by the emergence of a pseudo-free agency within the current model, where players weigh their value and opportunities against those elsewhere. Concurrently, conferences grapple with shifts in team compositions and financial landscapes, as illustrated by the exodus of nine Pac-12 teams dissatisfied with their TV rights deal.

NIL 3.0 The Age of School Involvement and Athlete Unions (December 2023 to December 2024)

NCAA President Charlie Baker’s December 2023 proposal to allow D-I schools to pay student athletes through an “enhanced educational trust fund” and NIL licensing agreements directly challenged traditional NCAA models and stimulated discussions about the future of relationships between universities, athletes and collectives. The proposal catalyzed the third phase of NIL, introducing a new subdivision where schools can establish their own rules regarding recruiting, transfers, and roster size.

University booster foundations in states with flexible NIL laws have begun collaborating with collectives to drive NIL deal flow. Institutions and collectives are likely to form symbiotic relationships, with collectives serving as student-athlete marketing and management agencies for universities, who will be taking on more fundraising responsibilities.

The National Labor Relations Board (NLRB) decided in February to uphold the Dartmouth men’s basketball team’s petition for unionization. Their declaration as employees suggests that more widespread unionization lies ahead for college athletes and their employment status. The basketball team proceeded to vote in March to join the labor union at Dartmouth, forcing the NCAA to reevaluate their rules toward athlete compensation to potentially adapt a private employee model.

Meanwhile in February, during the ongoing Tennessee and Virginia antitrust case, a judge placed an injunction on the NCAA and temporarily halted their power to enforce NIL regulations. In March, Baker confirmed there will be no penalties for activity aligned with the injunction. Consequently, collectives can freely negotiate and sign NIL deals with college recruits and transfers before enrollment for the duration of the case, making collectives the most influential recruiting entities in college athletics. The decision is causing universities to consider moving recruiting employees to their collectives.

The upcoming D-I Council meeting in April is expected to discuss formalizing schools’ direct involvement in NIL activities as soon as August, promising a more mutually beneficial dynamic between collectives and universities.

NIL 4.0 Rev Sharing & The Age of Broadcast NIL (January 2025 to December 2025)

In the fourth phase of NIL, some envision that the university compensation model and athlete unionization efforts will pave the way for the emergence of a TV revenue-sharing model for student athletes, also called Broadcast NIL (BNIL), where conferences, the NCAA and media outlets will negotiate and come to new progressive agreements.

The sentiment among coaches and athletic directors is gradually shifting towards revenue sharing. For example, Chargers coach Jim Harbaugh advocates for treating student athletes with respect, highlighting the disparity between the revenue generated by athletes and their compensation. Bills in several states propose sharing television revenue with athletes, emphasizing the need for exploration in new directions.

However, redistributing revenue may create disparities across schools, particularly affecting smaller institutions and non-Power Five conferences. Concerns about individual athletes and potential dilution of earnings also arise, raising questions about Title IX compliance and gender equity in collegiate sports. These issues may lead to the bifurcation of sports like football from the existing college athletics model.

Big Picture

The four phases of NIL exemplify that balancing the interests of athletes, universities and the broader sports community is crucial for shaping a sustainable and equitable future for college athletics. In the next few years, lawmakers must carefully consider student athlete compensation models with the intention of ensuring fairness and compliance with regulations, ultimately fostering a supportive environment for all players and stakeholders involved.

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