The Foundation and Framework of Name, Image, and Likeness Rights in Sports

NIL_Blog_V13

Social media isn’t just a platform for the NCAA NIL debate… It’s a clear opportunity to create a compliant framework for the future.

Name, Image, and Likeness monetization takes many forms for athletes, marketers, and fans. Below, I’ll break down how each layer impacts:

Professional Athletes
Marketers
Consumers

The beginning of the modern-day conversation concerning the monetization of the name, image, and likeness (NIL) of college athletes can be pinpointed to a single night in the early 1990s. That’s when, on Feb. 2, 1992, Michigan basketball coach Steve Fisher started five freshmen in a game against Notre Dame.

This group, which quickly became known as the Fab Five, was not only celebrated for its on-court performance — those five freshmen scored all of Michigan’s points that night — but was equally as heralded off the court as a pop culture phenomenon. A new wave of fashion entered the public lexicon as kids and adults of all ages began wearing the below-the-knee, baggy shorts and black socks and shoes that team popularized in their run to college basketball’s national championship later that year.

But it wasn’t just the ideas, swagger and fashion that was siphoned from the Fab Five. Michigan profited greatly from their NIL. Most notably, Chris Webber, the star of those Fab Five teams, was outspoken regarding his No. 4 jersey being sold in campus bookstores. Though his name was not on the back of those jerseys, the No. 4 was monetized explicitly as a result of his individual popularity.

Nearly three decades removed from that night the Fab Five first started a game together, conversations surrounding the monetization of NIL for college athletes has snowballed. Universities have doubled down on the increasing popularity, particularly, of college football and college basketball by creating billboards, fundraising dinners, social sponsorship and more in an effort to drive revenue — not to mention the income generated from broadcasts, ticketing, and concessions.

And there isn’t necessarily as much dissension against universities profiting from NIL. More so, the populist message over the last 20 years is that many think athletes should receive equal benefit. It is, of course, their NIL. The advent of social media has not only given a stronger voice to the idea but also another platform that has amplified the value of an athlete’s NIL.

All of which spawned a seminal moment in September when California Governor Gavin Newsom signed the “Fair Pay to Play Act,” which will allow student-athletes in the state of California to begin monetizing their NIL on Jan. 21, 2023.

Though the law won’t take effect for three years, the rest of the country is scrambling to react. If California schools like Cal, UCLA, USC or Stanford are able to let student-athletes monetize their NIL by law, it would give them an insurmountable advantage when it comes to recruiting. As such, the NCAA, which restricts student-athletes from monetizing their NIL, must adjust its bylaws.

Of course, that’s spawned a helluva lot of questions ranging from Title IX compliance to tax implications to limitations. The larger question: How the heck is it all going to work?

To answer that larger question, it’s important that the public understands the basics of NIL and how compensation and opportunities have evolved over time in sports. While it is a complex, crowded conversation, at Opendorse, we have made every effort to simplify that conversation in creating a framework that we believe works in today’s climate of college athletics.

And to understand the evolution, there’s only one logical place to start: with those who have been monetizing NIL for close to a century.

Professional Athletes

Many credit Michael Jordan as the forefather of modern-day athlete endorsements. During the late 80s and 90s, it seemed as if basketball’s all-time great was always on television — whether a nationally televised game or a commercial for any number of big brands including Gatorade, Nike or Hanes.

Sure, “His Airness” is certainly among those who should be credited with elevating athlete marketing into a multi-billion-dollar-per-year industry. But the history of athlete marketing doesn’t begin with Jordan’s rockstar persona.

That would ignore more than 70 years of history.

Truly it all began circa 1919 — sorry Boston — when the Red Sox traded Babe Ruth to the New York Yankees. At a time when television had yet to be invented, New York was the epicenter of, well, everything.

Because Ruth was playing in the world’s largest city, both he and baseball’s first agent of record Walter “Christy” Walsh recognized that playing in New York afforded Ruth tremendous reach. Spoiler Alert: Reach is still the critical metric in athlete marketing today. We just measure it by social media followers, likes and engagements and have advanced analytics that tell us the value of a player’s reach.

Or, in the parlance of the conversation at hand, these numbers determine the value of an athlete’s name, image, and likeness (NIL).

And in player-agent duo recognizing that Ruth’s star power combined with his geography provided his NIL with tremendous value, it spawned opportunities with cigarette and cigar companies, breakfast cereals and more. On March 8, 1927, The Wall Street Journal published an article regarding Ruth’s “by-product income,” or money he earned for off-the-field activities. That piece revealed that the Great Bambino earned $73,247 in by-product money, amounting to $3,247 more than his Yankees salary that season.

To this day, the biggest name athletes earn more off the field of competition than on it, hawking products and events of all kinds across terrestrial, streaming and social media. But it was Ruth and Walsh that set forth the framework through which athletes, marketers, and consumers interact — identifying two different methods of utilizing athletes’ NIL.

ACTIVE

In Ruth’s era, it was common that the monetization of his NIL actually required his presence, thus identifying the “physical” form of athlete participation in off-the-field marketing opportunities. Examples include speaking on a radio station, signing autographs at a department store or appearing on behalf of a brand.

This was most common in Ruth’s era but still extends to today’s framework of athlete NIL. And the active form still exists today because of a singular, undeniable benefit: it promotes the highest level of consumer connection because the athlete is actually present.

That connection between the athlete and consumer also extends to the brand that is being represented. For example, oftentimes athletes will appear at a sports collectibles show. Those seeking autographs are required to purchase merchandise for the particular player to sign. That connection — the thirst for the autograph — provides them the means through which to justify that purchase.

Of course, this form has negative implications as well, namely that it isn’t scalable. The limitations on use of the athlete’s NIL are confined to those actually able to get to the location of the particular athlete — likely those within reasonable driving distance. Choose to quash that issue by initiating a campaign that features appearances around the country on behalf of a brand and the expenses — flight and hotels — become so astronomical that the return on investment diminishes.

In Ruth’s era, this was the most prevalent form of utilization of athlete NIL, which makes it easy to understand why the geography enhanced his overall marketability and value.

The most well-known and oldest form of NIL use is dependent on the athlete’s active participation. While appearances, photoshoots, and autograph signings provide high-value opportunities for fans and brands, the stress on an athlete’s schedule greatly limits the scale of monetizing NIL through an athlete’s active involvement.
The most well-known and oldest form of NIL use is dependent on the athlete’s active participation. While appearances, photoshoots, and autograph signings provide high-value opportunities for fans and brands, the stress on an athlete’s schedule greatly limits the scale of monetizing NIL through an athlete’s active involvement.

 

PASSIVE

Though inappropriate to call Jordan the pioneer of athlete marketing, there is a particular element of which he ushered into the lexicon. The passive form of athlete NIL either does not require athlete participation at all or takes a form that calls for the athlete to initially participate in creating a piece of content but can be duplicated without participation.

Sorry, is that a mouthful? Stay with me.

For the former, think a Jordan No. 23 Chicago Bulls jersey hanging on the rack at a sports apparel shop or at the Jordan Brand logo — a silhouette of his famed dunk from the free-throw line in the 1988 Slam Dunk Content — attached to shoes, shirts, and pants.

Nike and jersey makers are capitalizing on Jordan’s NIL by selling clothing associated with his personal brand. But the creation of this clothing and the Jordan Brand logo don’t require a second of his participation. Examples of the latter — that mouthful — are commercials and print ads. Initially, the athlete needs to participate in a photoshoot (which actually begins to percolate later into Ruth and Wash’s foray into athlete NIL) or filming of the commercial. But once those assets are created, they can be duplicated and distributed at scale without the athlete’s participation.

That scalability is the standout benefit of this form of athlete NIL because it’s easily distributed. The cost is also low. In the case of apparel, the NIL is simply licensed. In the case of a commercial or print ad, the financial commitment still remains low given its potential for wider distribution, ability to reach multiple geographic locations and overall ROI.

In Babe Ruth’s era, the first foray into passive NIL monetization took the form of trading cards. A one-day photoshoot would produce enough assets for trading card companies to distribute sets of collectible items for fans across the country. For fans, one pack could include the NIL of more than ten different players, creating a connection with stars outside of their local market. For players, trading cards became a marketing tool for increasing NIL value (and created a new revenue stream).

As trading cards companies looked to please the fan’s demand for variety in each pack, they had to negotiate the NIL rights for dozens of players at the same time. This created a wide range of contract structures, licensing agreements and royalty payment structures. The growing complexity of keeping NIL rights in order for licensees and athletes alike would later usher in the era of players associations and group licensing agreements.

From an athlete’s perspective, active and passive NIL monetization feel the same – they put in a day’s worth of work in exchange for compensation. Active monetization leads to one-time, up-front payments. Passive monetization comes with the potential to earn royalty payments in perpetuity.

From a marketer’s perspective, active and passive use of athlete name, image and likeness are drastically different.

We’ll dive into that next.

From trading cards to authentic jerseys, athletes have found ways to passively monetize their NIL for decades. They trade the up-front payments actively using their NIL alongside brands for deferred payments from the passive use of their NIL by brands. Fans and brands will see the exchange the strength of connection that comes from active NIL use for the scale of passive NIL use.
From trading cards to authentic jerseys, athletes have found ways to passively monetize their NIL for decades. They trade the up-front payments actively using their NIL alongside brands for deferred payments from the passive use of their NIL by brands. Fans and brands will see the strength of connection that comes from active NIL use for the scale of passive use.

Marketers

The earliest advertising agency executives self-identified with the moniker “Mad Men” because those shops sat on New York’s Madison Avenue. But over seven seasons on AMC, the eponymous television show unveiled the double entendre that moniker represents.

Marketers do have to be “mad” or crazy scientists of sorts who develop ideas from scratch that otherwise seem wacky. The opening scene of “Mad Men” features the main character, Don Draper (played by John Hamm), scribbling on a napkin, trying to determine an ad campaign for Lucky Strike cigarettes. Whether it be a napkin, whiteboard or tablet, the idea remains the same: marketers follow no recipes; everything is born from raw ideation. It is a fact-finding mission of sorts or a game of trial and error.

Draper perks his head up from his scribbling to talk with a server at the bar where he’s enjoying a Manhattan. Their conversation reveals three critical elements:

  1. The server read an article in Reader’s Digest that says cigarettes are bad for you.
  2. His wife hates them.
  3. He loves them.

The central figure in “Mad Men” knew that he didn’t need to appeal to those who hated cigarettes but the epiphany came when he recognized he needed to grab those who loved them. Practically speaking, the more one likes cigarettes the more they’ll smoke.

So Draper designed an ad for Lucky Strike that read: “I Love Cigarettes.”

Given what we now know about cigarettes, some might call Draper’s Lucky Strike campaign one of regression. The reality: it represents evolution, based on trends the “Mad Man” recognized were occurring around him. Marketers are constantly having to evolve, remaining ahead of mainstream trends and conventional thinking.

With little significant technological innovation in the advertising world, the “Mad Men” of the 1960s were focused on creating engaging content. But as computers became in vogue, the Internet was developed and email became a primary form of communication, marketers not only needed to innovate in the content they created but also the systems through which that content was delivered.

And yes, in many ways, social media pioneers like Mark Zuckerberg (Facebook), Jack Dorsey (Twitter) and Kevin Systrom (Instagram) are as much adtech innovators as they are technologists. They rely on the advertising and marketing industries for much of their revenue. And the existence of these platforms has increased the need for content — the same types of content that the earliest “Mad Men” were creating for billboards, commercials and print ads. There’s simply a bigger need for more marketing material.

With athletes being relied upon more heavily by brands — social media, in particular, allowing even lesser-known athletes to be advertising stalwarts — it is technological innovation that has helped to grow the athlete marketing space as much as the increase in popularity of the sports themselves.

Because of this evolution, which has transformed from only one type of marketing content to two, the value of an athlete’s name, image, and likeness (NIL) has grown exponentially.

PHYSICAL

Think about the things consumers can interact with in person: Athlete appearances on behalf of brands, autograph sessions, jerseys, and billboards. And remember that by needing to be present to interact with these items, they are difficult to scale.

A billboard, for example, is only seen by those who pass by it in their cars. And marketers can be sure how many of those passersby would be interested in the advertised brand. Prior to the e-commerce era, which has helped amplify the benefits of physical NIL content, a jersey, for example, needed to be carried by a store within driving distance of a fan’s home.

It was much more difficult for a fan of the Lakers who lived in Indianapolis to acquire the jersey of any player on that team. Of course, that’s now possible with retailers like Amazon and the online NBA store. Likewise, print ads were limited to the readership of a publication and, even then, there was no guarantee a particular reader would interact with that advertisement.

But that conundrum is one example of why marketers were forced to evolve and create another large scale method of distributing content.

Marketers team up with athletes to create physical products bearing their NIL or leverage an athlete’s NIL to promote their product through physical media (i.e. newspapers, magazines, billboards) or physical mediums (i.e. appearances, autograph signings). Physical media and mediums have natural limitations to scale and control, limiting marketers to pushing product in smaller markets.
Marketers team up with athletes to create physical products bearing their NIL or leverage an athlete’s NIL to promote their product through physical media (i.e. newspapers, magazines, billboards) or physical mediums (i.e. appearances, autograph signings). Physical media and mediums have natural limitations to scale and control, limiting marketers to pushing product in smaller markets.

 

DIGITAL

Most people think digital media equates to social media. But its evolution actually began long before the advent of these channels — even before the Internet. Video games, as one example, were early forms of digital media where designers like EA Sports utilized the NIL of athletes — down to their facial features — in games like Madden, NBA Jam and Ken Griffey Jr. Baseball. 

The Internet then expanded the category as players launched personal websites and digital ads, which allowed marketers to target specific consumers and provide direct access to products via in-ad links. Likewise, social media and the rise of big data provided even more scalability and accuracy for marketers, all of which spawned today’s era of athlete marketing and the multi-billion dollar — and growing — usage of NIL.

The evolution from physical media and mediums to the digital world has changed the way consumers connect with their favorite athletes. The athlete-fan relationship is the centerpiece in sports — without it, the industry wouldn’t exist. 

Looking at the evolution of NIL rights in sports from the consumer’s perspective gives us the full picture — and allows us to complete the NIL framework.

Since the dawn of video games, athlete NIL rights have been used to create a wide range of digital products that have virtually no limits to scale. This widens the range of consumers that marketers are able to reach, and creates tremendous upside for athletes. The newest evolution in digital NIL use is focused on distribution -- wherein marketers leverage athlete NIL in the development AND distribution of digital media. Athlete’s social handles are becoming channels for marketing messages all on their own.
Since the dawn of video games, athlete NIL rights have been used to create a wide range of digital products that have virtually no limits to scale. This widens the range of consumers that marketers are able to reach, and creates tremendous upside for athletes. The newest evolution in digital NIL use is focused on distribution — wherein marketers leverage athlete NIL in the development AND distribution of digital media. Athlete’s social handles are becoming channels for marketing messages all on their own.

Consumers

So far, we’ve established that Babe Ruth and his agent, Walter “Christy” Walsh, identified that athletes could monetize their NIL through appearances and endorsements. Additionally, marketers have not only partnered with athletes but evolved technologically such that it’s increased the opportunity and value of NIL by billions of dollars per year — forming a profitable union.

But what’s it all for?

The idea is for marketers and athletes to join forces in an effort to sell products. And how do they sell products? By reaching consumers with the content they’ve mutually created.

And given that both athletes and marketers have evolved, it’s only natural that the end consumer product has done so as well. That evolution has come in conjunction with the ways in which athletes interact with marketers and the latter’s ability to evolve by creating new content formats.

ACTIVE-PHYSICAL

The earliest form of athlete marketing, which is still prevalent today, were athlete appearances. Even before photoshoots, billboards and radio ads, superstars like Babe Ruth would sign autographs after games and make public appearances on behalf of brands.

Both the athletes and the consumers have a physical involvement in the piece of content. With an athlete appearance — be it for an autograph signing or on behalf of a brand — the interaction with the athlete is the piece of marketing unto itself. For athletes in the early 1920s, evidence of their popularity came in the form of the crowds that attended the games and those who waited to speak with them after.

So, naturally, given the financial incentive, athletes wanted to increase their access to fans.

What marketers and athletes both later realized was that while in-person access breeds the most meaningful connection to consumers, there was still a thirst from fans to interact with athletes at a distance.

Active use of NIL rights in the physical medium provides the strongest connection for fans and brands, but comes at a high cost and lacks scale.
Active use of NIL rights in the physical medium provides the strongest connection for fans and brands, but comes at a high cost and lacks scale.

PASSIVE-PHYSICAL

Later in the 1920s, Ruth and Walsh recognized that not only did informal conversation have value with fans but also the ability to engage at a less tangible level. As Ruth’s popularity grew nationally, many wanted to emulate the Yankees slugger.

What that meant was not only to fantasize about wearing pinstripes but also aspiring to live the life Ruth led off the field. He was iconic for his hard-partying in an era — the roaring 20s — where modern nightlife became in vogue. Just as many in the era emulated Ruth’s social habits, they also wanted to adopt the slugger’s brands of choice.

Recognizing that fans not only wanted to interact with Ruth but aspired to be a superstar athlete, led to the growth of his brand and increased usage of NIL. That came in the form of print ads for cigarettes and chocolates.

And such was the birthplace of the modern athlete endorsement.

What Ruth and Walsh conveyed was that an athlete’s NIL could be replicated through different formats of content distribution. Print ads were still a physical marketing product but required less participation from the athlete.

Even today, athletes are on billboards in Times Square, representing different brands, interacting with fans while doing something entirely unrelated. Maybe practicing. Playing in a game. Or hanging out on a beach.

The category would later be expanded with jersey sales, memorabilia, trading cards, and other items.

But what Ruth and Walsh exposed was that an athlete’s NIL could be duplicated and distributed en masse, all of which became the basis for athlete marketing today.

Passive use of NIL rights in physical media or medium provides more scale to athletes and marketers, but there is a sacrifice of connection with consumers.
Passive use of NIL rights in physical media or medium provides more scale to athletes and marketers, but there is a sacrifice of connection with consumers.

PASSIVE-DIGITAL

The digital era did not eliminate the need for the aforementioned physical interactions with athletes and marketing materials. Instead it created a new category and more of a demand for NIL-driven content.

While video games came first, the Internet provided limitless reach that was not dependent on either geography, readership or circumstance. Instead it provided marketers the ability to utilize and quantify NIL using a more targeted methodology.

The earliest days of the Internet saw athletes create personalized websites as a destination for fans. Those traffic numbers allow marketers to actually quantify — by estimation — the level of fandom an athlete received. This helped further NIL by introducing elements related to athlete celebrity not previously understood within the marketing community.

During the early days of athlete marketing, NIL valuation was solely tide to performance inside the athletic arena. The Internet exposed that athletes who transcend pop culture, but are not necessarily superstars in the athletic arena, have marketing value.

In fact, someone like the Cleveland Cavaliers Tristan Thompson — a pop culture icon because of his relationship with Khloe Kardashian — has a NIL with a higher value than some of the NBA’s superstars.

With this information, marketers were able to create more poignant content and further leverage the idea of passive athlete involvement at scale. A marketing company could create an advertisement and post it on an athlete’s personal website without utilizing any of the athlete’s time.

Leveraging NIL rights in digital media or mediums provides athletes and marketers a valuable way to scale distribution while being able to connect with consumers on a more individualized basis. 
Leveraging NIL rights in digital media or mediums provides athletes and marketers a valuable way to scale distribution while being able to connect with consumers on a more individualized basis.

ACTIVE-DIGITAL

The most robust form of athlete marketing today, the active-digital format revolves largely around social media channels — namely Facebook, Twitter and Instagram.

Athletes are now able to interact with fans from behind their smartphones, tablets and computers. This allows marketers to capitalize on the rich connections made in the active-physical form at scale. Brands can advertise on Instagram and athletes can share their opinions, in real time, with fans who are simultaneously commenting. This also offered athletes the opportunity to significantly increase the value of their NIL by creating engaging, insightful content that helped increase their individual fandom.

For the first time athletes had the ability to expose fans to their lives outside the arenas of competitions, giving an envoy into their family life, homes and personal philosophies and initiatives.

Perhaps most significant, however, were the analytics provided to marketers. Athlete NIL is now quantifiable in more accurate ways. We know exactly how much marketers can profit off an individual athlete.

All of which sparked the recent movement laws allowing college athletes to monetize their NIL.

When athletes are active in the creation and distribution of digital media, consumers engage much like they do when an athlete is physically present. This new era provides the magnificent scale of digital media, the power of the direct connection between athlete and fan and the targeted distribution that today’s marketers expect.
When athletes are active in the creation and distribution of digital media, consumers engage much like they do when an athlete is physically present. This new era provides the magnificent scale of digital media, the power of the direct connection between athlete and fan and the targeted distribution that today’s marketers expect.

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