Licensed products industry not convinced NIL law is a slam-dunk opportunity
The NCAA’s recent decision to allow its athletes to explore selling their names, images and likenesses by 2021 launched a tidal wave of speculation about how much revenue will be rushing into the pockets of those collegians.
We can see the opportunities from a local car dealer, quick-service restaurant chain or Mattress Mack-type volume furniture retailer. However, from the point of view of the licensed consumer products industry, it’s kind of a shrug.
“The perception that there’s billions to be made in licensing from this is just wildly overblown,” said a source at one of the largest NCAA licensees, who, like many others interviewed, did not want to be identified because of the nascent and controversial nature of the subject at hand.
There’s a question of how many college athletes have enough renown to sell product nationally. In a normal year, that’s less than a handful. At top colleges, royalty rates are now close to pro sports levels: 18%-20%. So how much money will there be left to pay collegiate athletes, even when they can be compensated? Is there value there? Surely, but take a look at the kind of money top NBA draft pick Zion Williamson could have made in his lone season at Duke versus the paycheck that second overall NBA pick Ja Morant could have cashed during his time at Murray State and you get some idea of the disparity. Add to that morass the generally short career of a premier college athlete, and you’ve got some licensees scratching their heads.
“The life cycle of those athletes is short, so you’re not talking about something the size of a Derek Jeter or Brett Favre program,” said John Killen, CEO of licensed hard-goods giant WinCraft. “It’s going to be largely a local or regional opportunity, but we’d still like to have it.”
Clearly, there’s an opportunity for companies that require large group licenses. In video games, the new rules should eventually allow EA to relaunch the college football title it abandoned six years ago, after litigation from former players seeking a piece of the profits. Still, we’re told that even the most meaningful football schools would realize just a few hundred thousand dollars from that.
Since trading card value centers on whatever is deemed a star’s true “rookie card,” would the first college card of a generational player attain stratospheric secondary-market value? As for the viability of the college set, keep in mind trading cards work eight to 12 months out.
“There’s some opportunity there,” said Jason Howarth, vice president of marketing at Panini America, which has exclusive NBA trading-card rights, “but things are so unclear as yet, we haven’t really even talked about it seriously yet.”
Among other things, the NCAA has promised to make those forthcoming rules “transparent, focused and enforceable and facilitate fair and balanced competition; make clear the distinction between collegiate and professional opportunities; and make clear that compensation for athletics performance or participation is impermissible.”
Hmm … try codifying those intentions. The lack of specific rules makes forecasting about as easy as picking a winner in your March Madness bracket — if you only knew half of the teams playing.
SME Branding Chairman Ed O’Hara noted that among the unknowns are whether the school and athletes’ rights will be bundled by either side; whether any categories will be forbidden, like gambling, alcohol, drugs, and tobacco; if and when NCAA regulations and developing state laws will be in accordance; and what rights schools will have to use their own athletes in their own marketing.
“We have more questions than answers at this point,’’ said O’Hara, whose Learfield/IMG-owned agency has worked on numerous college branding assignments.
Foremost among the still unknown rules is whether athletes will be able to endorse brands which are rivals to their schools’ commercial partners. Where there’s a Coca-Cola school, there’s value in a top athlete touting Pepsi. However, if Zion Williamson signed with Adidas while he was at Duke, how much would that reduce the value of Nike’s longtime deal with the school?
“Will there be an uptick in business? Yes,” said an athletic apparel marketer with decades of experience. “Is it a giant opportunity? No. There are so many athletes whose biggest opportunity will be their ability to charge for lessons as a member of a local college team. These are extraordinarily complex issues on the business side and even more so on the compliance side. And you are talking about an organization [the NCAA] which generally doesn’t move quickly. … Agents will be moving fast; I’m wondering if the schools and the NCAA will be able to keep up with them.’’
■ PLUS CA CHANGE: Former NFLer Jim Schwebel is back to selling football some 16 years after leaving the league. His Apel Inc. agency has won the assignment to sell USA Football’s new Football Development Model. That’s the NGB’s framework to build grassroots participation at a time of declining participation in tackle football by introducing the game at appropriate levels of growth and development, from youth through high school with fundamental instructions; using football as a training vehicle; and introducing kids to different forms of football — from flag to tackle. “There’s a lot of community involvement built in, and we’ve seen that’s what a lot of sponsors are looking for now, along with health, wellness, and grassroots ties,’’ Schwebel said, adding that he sees opportunities for apparel and footwear, along with tech and insurance, for any brand already sponsoring other levels of football.
Terry Lefton can be reached at firstname.lastname@example.org.