Hail! Impact's Impact on the NIL Landscape
Is the Michigan collective the first contract for college football players?
Friday March 31 will be a monumental day in the history of Name, Image, and Likeness (NIL) in college football. A University of Michigan NIL collective called Hail! Impact pledged to provide each Michigan football player a $40,000 annual stipend for being on the team. The collective currently has an astonishing $5 million fundraising goal to meet the “salaries” of the players.
This is the first time a major collective like Michigan’s has pledged a contract-based stipend to college athletes. With the constant NIL battle being waged throughout the nation everywhere from blog post comments, to social media, to the Congress floor, this is obviously a major step. But, how does this impact that landscape?
NIL Primer
First, let’s understand what NIL even is. NIL covers the rights for student-athletes to profit off of their names, images and likeness. The issue was born out of the NCAA’s commitment to “amateurism,” which basically means student-athletes cannot be paid for their services. Seems simple, right? Not so much.
Think about everything you see from officially licensed NCAA merchandise. Jerseys each have a number, right? And those numbers always correlate to the star players, right? Those star players don’t see any money from those jersey sales. The jersey is their likeness, so should they profit? Take the hit EA Sports NCAA Football series, which was discontinued in 2013. The NCAA was hit with a class action lawsuit brought by former players whose likeness was in the game in 2014. Sure, Texas A&M’s QB #2 is a generic person with no name at all. But, his height, weight, uniform number, on-field apparel, play style, and character model are all Johnny Manziel. That case, O’Bannon v. NCAA, paved the way for NIL to be debated.
After O’Bannon, college football decided to ignore the idea that NIL could benefit athletes. That is, until the 2019 signing of California’s Fair Pay to Play Act allowed California-based student athletes to profit off of their NIL rights while in school. The California bill was followed by more states and the NCAA made their own ruling July 1, 2021 to allow student-athletes to sign marketing deals and earn money off of NIL.
Currently, schools cannot provide their athletes with NIL deals, but NIL “collectives” can orchestrate deals. Often, these collectives are run by donors and former athletes from a school. Gone are the days of shady dealings between boosters and players. Now, they’re encouraged to talk and build these NIL deals to keep student-athletes at their schools.
What is Hail! Impact?
Hail! Impact is one of the collectives we discussed earlier. They’re unaffiliated with Michigan, as they have to be. This collective is run by two prominent Michigan boosters, and has an ambassador on the team in wideout/defensive back Amorion Walker, and also has the backing of Jim Harbaugh.
This has the making of a highly successful collective, but they aren’t alone in their ambitions. In fact, based on my research Hail! Impact is the second collective to pledge providing contract-based stipends to the football team, though the UM group also has plans to cover all of their 27 NCAA athletics teams. In July of 2022, The Matador Club of Texas Tech has pledged $25,000 yearly contract stipends for the football team. They also have a $10,000 deal in place with the softball team.
These are massive figures, so where do they get the money? The answer is what is always has been: donors.
These are crowdfunded contracts for players. This is what people were worried about when NIL was tossed around previously. Would having donors cut game checks to athletes make the players feel like they have to perform specifically for that donor? What if the donor is involved in gambling, or some other nefarious activity that would require the player to feel pressure to alter the game? What if the donor doesn’t like the coach, and wants the players to perform poorly to get the coach removed?
Those issues haven’t arisen yet, but they will. The actions of Hail! Impact and The Matador Club, though, creates an interesting future path for NIL and collectives to continue to grow. That is, until the courts weigh in
Do the courts agree?
Counter question: Why do we care about the courts?
Well, that’s because any major change in NCAA history has come from a Supreme Court ruling.
So, the short answer to if the courts agree: we don’t know.
The landmark Alston v. NCAA case decided a year ago, contrary to popular belief, did not deal in NIL benefits. Instead, Alston focused on education benefits. Previously, the NCAA limited the amount of educational benefits a school could provide. The Alston ruling decimated that cap, and raised it to meet the $5,980 of on-field benefits a school can provide.
Huh? On-field benefits?
That’s right, schools can provide on-field benefits to students. Now, that’s not in the form of an extra $100 for a touchdown. These are payments in addition to the student-athlete’s grant-in-aid, that come for, you guessed it, athletic achievement. Often times, this comes from bowl games, individual appearances in NCAA-sanctioned championships, and NCAA tournament appearances. It’s not a lot for student-athletes, but it is a start.
Up to now, the Supreme Court has declined to rule on anything relating to athletic achievement benefits. Their hand could be forced soon, though, with a myriad of interesting cases approaching their docket. And, the stage has been set for a monumental ruling in favor of NIL payments increasing to more of a salary, based off of Justice Kavanaugh’s statement that “[n]owhere else in America can businesses get away with agreeing not to pay their workers a fair market rate on the theory that their product is defined by not paying their workers a fair market rate. . . . The NCAA is not above the law.”
“The NCAA is not above the law.” - Justice Brett Kavanaugh in concurring opinion for Alston v. NCAA, 2021
The US Court of Appeals heard arguments from Johnson v. NCAA in February, which focuses on the athletes’ claims that they should be classified as any other student worker and be paid minimum wage for their practice and game times. Johnson, a former Villanova football player, brought the claim under the Federal Labor Standards Act of 1938. This ruling will force a federal court to decide if student-athletes are student employees, and barring a dismissal, should be fast tracked to SCOTUS regardless of the decision.
Then, there is House v. NCAA, which aims to further relax the NCAA’s hold on permissible benefits and limits to marketing contracts athletes can sign. This one, of the three we’ll discuss, is the least monumental, but still could bring a big gut punch to the NCAA. The case is scheduled to be heard September 2024.
Finally, and most recently, is Hubbard v. NCAA, which was just filed April 4 by former Oklahoma State and current NFL running back Chuba Hubbard. The new suit’s goal is to force the NCAA to back-pay Alston payments to players that were previously deemed ineligible. While Hubbard’s name is listed as the primary plaintiff, he has 5,000 athletes at his back. Ross Dellenger of Sports Illustrated reports that number could grow to over 20,000, and damage demands could exceed $200 million.
So, what’s next?
Court cases take a long time to work their way through the system. Take House, for example, which was filed in 2020. It’s trial date is set for 2024, four years later. If you’re looking for NIL changes, the courts aren’t going to be the quickest. They will, however, be the most definitive changes.
Until the courts sort out the cases, we have to look at the innovations collectives make. Texas Tech’s The Matador Club set the precedent by pledging contracts for the first time. For a Power Five school to do this is massive. But, Texas Tech isn’t the school that most people would consider able to handle such a massive undertaking.
A 2018 Wall Street Journal study by Ryan Brewer looked at the profit margins of all college football teams to value each one. The Red Raiders clocked in at 33rd, with a $244 million valuation. It’s a lot, but how does that translate to budgets for donors? One way to look at that is the athletics budget, since most of it is financed by media deals and a donor base. Texas Tech, according to strategy consultant Troy Altimore, has one of the lowest overall budgets in the Power Five. That doesn’t bode well for donors being able to pay those contracts.
Michigan, on the other hand, is swimming in money. Altimore’s analysis puts the Wolverines at nearly $5 billion academically and $200 million athletically. They also boast the fourth most valuable program in the nation, with a $924 million valuation form the Wall Street Journal.
If this donor-led kickstarter contract thing can work out, Hail! Impact is at the forefront. Michigan is one of the few schools with the donor base, financial viability, and media deals to support an NIL payroll. If it can work anywhere, it has to work here.
Do I think it will work? I don’t know. There’s a lot of other factors going into it, but Michigan’s plan seems realistic. It doesn’t hurt that Jim Harbaugh penned a letter in support of Hail! Impact’s efforts. Michigan is riding high at the moment, and has no reason to not be able to generate the funds required to make this program work. But, as always, time will tell. At least, until the courts make their final rulings.