From today's Wall Street Journal. Not exactly stuff I didn't know except for Some even claim 501(c)3 status to make donors’ contributions tax deductible.
The Kansas Jayhawks won the NCAA men’s basketball title in early April. A few weeks later, members of the team are on a barnstorming tour that will let them monetize their success in a way that was never possible until now.
Members of the title team stand to collectively make nearly $1 million during a six-week trek to seven gyms around the state. The Jayhawks will sign autographs for adoring fans, auction off game-worn sneakers and shoot around—but not play games or scrimmage—during the events.
Jayhawks star Ochai Agbaji will likely soon sign an NBA contract worth as much as $5 million as a first-round pick, but most of the touring players will return to the team next year. All of it is being organized by Kansas alumni who are explicitly banding together to line players’ pockets—and it’s all perfectly legal.
The “KU Basketball Barnstorming Tour” is being organized by a new and disruptive entity in college sports: “collectives” of supporters that operate outside the normal universe of the university and its athletic department. Collectives are companies, usually founded by well-connected and well-resourced alumni, whose sole aim is to pool the financial resources of a university’s fan base and direct funds to athletes who are now able to profit from their name, image and likeness under new rules that went into place last year.
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The rapid rise of collectives is among the forces that have turned college sports upside down in the past year and ripped control away from the National Collegiate Athletic Association since a Supreme Court ruling last year constrained the association’s ability to set national standards without running afoul of antitrust law.
Then last week, NCAA president Mark Emmert announced that he was stepping down by “mutual agreement” no later than June 2023, a sign the association is seeking a new vision as it rethinks its structure and role. Emmert’s contract had been extended just a year ago.
College athletes have spent the past 10 months in a dizzying frenzy to make money from their names. The rise of alumni-funded collectives is now creating an organized, deep-pocketed approach to athlete compensation.
Some collectives operate via a subscription model that solicits monthly dues from members, while others function as nonprofits. Some even claim 501(c)3 status to make donors’ contributions tax deductible.
“There is a wide spectrum of structure and legitimacy,” said Blake Lawrence, chief executive of Opendorse, a platform that connects brands with athletes. “The worst thing that could happen in the NIL collective space is that those with great intentions cause great harm to the student athletes and to the school by not knowing or following the rules.”
Interactions between boosters and recruits are verboten in college sports, but some collectives are skirting this by dangling lucrative endorsement deals to prospective athletes. Administrators are now rushing to stop this activity, which looks discomfitingly like “pay for play.” A task force reviewing NCAA rules in this space could issue new guidelines as soon as next week.
Collectives are becoming a key part of the arms race that once saw universities build lavish athletic facilities and inflate coaching salaries. There’s a growing fear that the best recruits will go wherever the money is highest—and that, without a collective, a university will miss out on that talent.
“What you’re seeing is short-term thinking by a lot of desperate universities that are trying to throw donor money in buying players,” said Phillip Stutts, a political marketing executive who is working as a senior adviser to High Tide Traditions, a collective associated with the University of Alabama.
The national landscape is disjointed. Data compiled by the Business of College Sports shows that 37 of the 65 schools in the five richest athletic conferences have at least one collective. Ten more have similar deal-facilitating entities. Twelve schools have duplicate collectives and five universities (Florida, Florida State, Penn State, Texas and Virginia Tech) own three apiece, which some analysts say is counterproductive.
“There’s a finite amount of money that can be brought in,” Stutts said. “When you have four collectives competing against each other for the same piece of the pie they will cannibalize themselves.”
Current NCAA rules prohibit name, image and likeness deals from functioning as overt inducements to attend a university. Coaches can’t promise specific deals. Yet nothing is stopping them from boasting to recruits about the school’s collective’s pot of money or citing six-figure deals star players have struck.
Policing this aspect of the NCAA guidelines is close to impossible. In April, Kansas State point guard Nijel Pack, the top available player in the transfer portal, announced he was enrolling at the University of Miami. Pack said he picked the Hurricanes for their “NBA-style offense” and coach Jim Larranaga’s history of ushering small-statured point guards into the NBA.
Kansas State point guard Nijel Pack, the top available player in the transfer portal, announced he was enrolling at the University of Miami.
PHOTO: JAY BIGGERSTAFF/USA TODAY SPORTS
Hours after Pack committed, LifeWallet, an app that collates medical records and is owned by billionaire Miami athletics booster John Ruiz, signed Pack to a two-year deal worth $800,000—and threw in a car for good measure. The deal wasn’t associated with Miami’s collective, Bring Back the U, but Ruiz might as well be a one-man version: thus far he’s sponsored more than 100 Hurricanes athletes.
Miami last month also landed two of the most marketable female athletes in the country, twins Haley and Hanna Cavinder, basketball players at Fresno State with more than 4 million followers on TikTok whose deal with Boost Mobile put their faces on a billboard in Times Square last summer. Their announcement came shortly after a meeting with Ruiz where the billionaire offered to sponsor them.
“They made a decision to move. I’m not saying it was entirely or even that NIL played a big part in that, but certainly it sits in the back of everyone’s mind,” said Darren Heitner, an adjunct professor at the University of Florida’s law school who handles legal matters for the Cavinders.
The NCAA says that endorsement deals cannot become a thinly veiled vehicle for pay for play, meaning there must be a quid pro quo involved between the athlete and whoever is paying them. But absent a mature and transparent market where the going rate for certain deals is defined, there is nothing stopping a collective from promising whoever earns the starting quarterback gig $10,000 for a single autograph-signing session.
Additionally, the NCAA has been loath to regulate this aspect of college athletes cashing in. The association has flagged a handful of deals, including one in which a nutrition bar company offered to endorse all walk-ons on Brigham Young’s football team. But the NCAA hasn’t doled out punishment for flouting the rules, which are so vague that it’s hard to prove anything is illegal.
Some collectives are offering lucrative deals to entire rosters. Last month, former Oklahoma football coach Barry Switzer unveiled “1Oklahoma,” a collective that aims to give every member of the Sooners football team “the opportunity to earn $40,000 to $50,000 each year” by endorsing charities of their choosing, according to a press release. At 110 players strong in 2021, that could mean raising as much as $5 million per year.
It’s unclear if that level of fundraising is sustainable. Division I athletic departments brought in $1.38 billion from donations in 2021, the lowest total since 2011, according to data from Syracuse University and the Knight Commission. Not all of that money will be redirected to college athletes, Lawrence cautioned, but the donor pool is deep.
Haley Cavinder, left, and Hanna Cavinder announced that they are transferring to Miami.
PHOTO: ERIC PAUL ZAMORA/ASSOCIATED PRESS
Ryan Baty—a former Kansas baseball player who, with his brother, founded the collective putting on the Jayhawks’ barnstorming tour—says that decades of prohibitions on paying college athletes has created pent-up demand among eager boosters. Their limited liability corporation, 6th Man Strategies, has set up half-dozen car deals, campaigns with local Wendy’s and Applebees and in December added a 501(c)3 charitable arm, Reaching Champions Joining Hearts Foundation, Inc., that has since raised more than $2 million. Baty expects to bring in about $900,000 from its barnstorming tour.
The majority of that revenue will go to the Jayhawks basketball players, who will reap 70% of ticket sales and all profits from a series of silent auctions. The tour’s first stop in Wichita on April 23 brought in about $125,000 in revenue, selling 250 VIP tickets at $75 each and more than 2,500 general admission tickets for $30, and another $30,000 from the auction.