The Billion Dollar Play: NIL and Revenue Sharing Reshaping College Athletics

In less than three years since its introduction to college athletics, the NIL (Name, Image, and Likeness) industry is projected to be worth 1.17 billion dollars and this is only the beginning. In April 2024, Virginia Governor signed House Bill 1505 into law, making Virginia the first state to allow universities to directly pay their student-athletes and prohibit retaliatory penalties from any athletic association, including the NCAA. While Virginia universities proceed cautiously, the billion-dollar industry of college athletics may have just grown enormously. If Virginia schools begin to implement this progressive legislation, other schools may succumb to the pressure of staying competitive with these universities sooner rather than later.

Athletes have advocated for equitable revenue distribution for years and it is only a matter of time before they collect on their efforts. The NCAA President issued a memorandum in December 2023 supporting direct compensation between Division I schools and their athletes. However, this sentiment was not reflected in the most recent NCAA policy which now allows universities to facilitate NIL deals for their athletes with third parties, but did not extend permission for direct compensation. As a private, non-profit organization, the NCAA expects schools to comply with their rules to maintain membership, but recently they have seemed virtually powerless in enforcing their regulations. Without federal legislation and an antitrust exemption, the NCAA will continue to face lawsuits for violating antitrust law by restricting fair and competitive markets. For example, House v. NCAA is closing in on a 2.8-billion-dollar landmark settlement to back pay student-athletes who were unable to earn money from their NIL. This settlement also seeks an agreement on a revenue sharing framework which would allow schools to set aside up to 22 percent of revenue, or roughly $22 million, for compensation of their athletes. 

“Pay-for-play” has already sparked controversy surrounding athletes’ employment status, Title IX implications, and the role of university collectives. Revenue sharing seems to indicate that athletes are professionals who are entitled to employment status and its benefits. However, employment would not come without complications such as social security, tax consequences, and worker’s compensation. Although the National Labor Relations Board recently recognized 15 men’s basketball players at Dartmouth as employees, the trend seems to be shying away from this classification. Not only is the Dartmouth decision being appealed but H.R. 8534, known as the Protecting Student Athletes’ Economic Freedom Act, will go in front of the House of Representatives shortly. This bill would prevent athletes from being declared employees, but allow for collective bargaining rights. Whether or not athletes are labeled as “employees,” direct compensation for performance appears inevitable.

If, and when, athletes receive shares of revenue, universities will need to make difficult decisions on how to structure the pay, which athletes receive what amounts, and how they will continue to support non-revenue sports. At a majority of schools, football and men’s basketball are the only sports which bring in revenue, the other programs report losses of millions of dollars annually. If compensation is subject to Title IX, many programs, particularly men’s non-revenue sports, risk dissolution or significant restrictions. Title IX prohibits any institution which receives federal financial assistance from discriminating on the basis of sex. Whether or not Title IX would require equal monetary amounts of revenue sharing between men’s and women’s sports is an issue to be resolved by the Department of Education or the courts. Regardless, universities will need to find creative solutions to make up the new deficit, most likely by incorporating more sponsorship opportunities. The future may include putting sponsorship logos on football fields, renaming conferences, and significantly reducing their operating expenses. Another component for absorbing these new costs will be conferences forming more lucrative television contracts. 

The aforementioned caps on revenue sharing with athletes are meant to standardize NIL and eliminate the need for the 362 existing collectives. As independent organizations, collectives could easily provide ways around compensation caps and continue to initiate large deals between athletes and businesses. Universities in Power 5 conferences will most likely pay out the entire revenue sharing amount allowed, and collective offers could be a determinative factor in recruiting. As we await guidance from the decision in House v. NCAA or federal legislation, states continue to push the boundaries and enter “pay-for-play” territory. Universities must prepare for a future where innovative financial strategies and partnerships will be essential to cope with the enormous economic shift in revenue sharing.

Alyssa Baumann is a second-year law student at Wake Forest School of Law and will begin concurrently working toward her MBA this fall. She graduated from the University of Florida with a B.S. in Sport Management and a Master’s in Management. She was a gymnast on the U.S. National Team and competed for the University of Florida gymnastics team for 5 years.

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