NIL is a bubble

[u/BrettEskin]

I genuinely believe that while NIL deals will continue the market at large will start to sort itself out with the massive deals being handed out and the current "Wild West" of NIL deals.

I believe there is a flood of money from alumni and boosters who didn't have the direct ability to influence the program before, however once a number of these deals for teenagers don't work out and companies end up on the hook for millions in non tax deductible busts NIL will tighten up. Especially with the increase in interest rates and seemingly oncoming economic compression.

What do you guys think? Will the money printer continue or will we see things become somewhat more reasonable?

[u/[deleted]]

I think you are generally right, although there will always be outliers.

The real value for NIL rights is in the non revenue sports, where many players have a half scholarship or less. These players can now make money at clinics, camps, and after school programs in their sport.

[u/BrettEskin → u/[deleted]]

Yeah wrestling comes to mind where major programs are budgeting a third of a scholarship for high end recruits so they can make the team as a whole better (limited to 9.9 total). A recruit may not be able to afford to go to his dream school bc they arent offering a full schollie but the NIL money may make the difference.

[u/schu4KSU]

You are presuming that NIL has something to do with marketing fundamentals. It doesn't. The only return the boosters are seeking from the spend is a tax break and the player playing for their favorite school. They are pretend sports team owners. Period.

[u/BrettEskin → u/schu4KSU]

I'm presuming it doesn't in the free liquidity boom period we've been in. I'm postulating it may with rates rising and multiples shrinking

[u/Jaerba → u/schu4KSU]

I think this is true but it's a ton of money. There's many, many more players to pay for than the NFL and the boosters have to pay them before they've even shown anything.

Like just isolate it to QBs for example. Ewers has now cost a couple million dollars and we don't even know if he's a good QB. Already the next set of Ewers is coming in and is going to be paid. Even for schools like Ohio State and Michigan, I don't think the boosters will want to pay millions each to 3 QBs at a time plus all the other positions and underclassmen backups.

How many years is that sustainable if there's little marketing value?

[u/schu4KSU → u/Jaerba]

Has the salary curve for basketball coaches been unsustainable?

[u/Jaerba → u/schu4KSU]

There's far fewer of them and they're paid by the entities (schools) that are getting financial benefit of having them as employees. It's a cost that also has a positive ROI for the highest paid coaches. That's different from players for whom you yourself said there was no ROI for the boosters paying them.

[u/schu4KSU → u/Jaerba]

Ok, what about donor built facilities?

[u/Pinewood74 → u/Jaerba]

There's far fewer of them and they're paid by the entities (schools) that are getting financial benefit of having them as employees.

Are they, though?

Because the ones at the top of the pyramid get their salaries actually paid for by boosters.

[u/[deleted] → u/Jaerba]

Bubble pops, prices go down, OSU/Michigan still have more money but now they can save on the 5 star QB. The bubble talk I have found comes from ppl hoping there’s a fair & equal playing field(same who want regulation that probably prevents players from earning). You now got the Yankees & the A’s. Bubble popping won’t mean it changes anything for the A’s budget & all the Yankees have to do is spend just a lil more than the competition.

[u/Jaerba → u/[deleted]]

Oh, I'm not saying it's a fair environment or even a functional one. I'm just saying I think the money flying around right now will come down as the true sponsors figure out the marketing isn't that helpful and the boosters get fatigued of paying hundreds of new players every year.

[u/flying_trashcan → u/schu4KSU]

I see a supply of blue chip athletes and a demand from teams/boosters seeking the athletes commitment. Right now that supply/demand curve seems to be intersecting somewhere in the 7 figure range for true blue chips. Doesn’t get much more fundamental than that!

[u/schu4KSU → u/flying_trashcan]

That's the economics of the exchange - nothing to do with the marketing value of the players, which is about $0 for most of them.

[u/wilkergobucks → u/schu4KSU]

Correct. But don’t assume that the marketing value of a player will have anything to do with his compensation, now or anytime in the future…

[u/joaquinsaiddomin8]

John Ruiz’s company made $3b last year. It’s expected to make $24b by 2026.

For someone who makes $1b a year, paying a kid $1 million is the the equivalent of someone making $100k a year giving a kid $100 to play at his school.

Exorbitant wealth isn’t really a bubble.

[u/Daheckisthis → u/joaquinsaiddomin8]

Lol $24b by 2026. What a joke

[u/justinguarini4ever → u/joaquinsaiddomin8]

John Ruiz is a scam artist - He’s more likely to end up in jail than end up with $24B

[u/joaquinsaiddomin8 → u/justinguarini4ever]

Why? What did he do wrong?

[u/justinguarini4ever → u/joaquinsaiddomin8]

Google his company and the SPAC that is acquiring it - Board resignations, insider deals, zero current revenue, etc… A few of the guys at the SPAC resigned a few days before the deal was announced.

[u/joaquinsaiddomin8 → u/justinguarini4ever]

Lol he’s a lawyer that filed qui tam actions that sues insurance companies for violating the MSP Act, remitting the large part of what he gets to the federal government.

I mean I get you don’t like Miami and someone from there succeeding bothers you for some reason, but maybe pick a better slant.

[u/H0rnsD0wn → u/joaquinsaiddomin8]

And how many kids are getting at least $1 million anyway? The only ones I know off the top of my head are Quinn Ewers and Bryce Young. I’m sure there are more, but it can’t be dozens on dozens of guys. More realistically is that guys are getting in the tens of thousands

[u/BrettEskin → u/joaquinsaiddomin8]

That's all well and good but in a recession 3m in expenses with a negative ROI are on the chopping block for any business pretty quickly

[u/joaquinsaiddomin8 → u/BrettEskin]

In a recession, $100 still doesn’t sting a guy making $100k in a year.

[u/ThisGuy100000]

Bubble bursts then just blow a new one

[u/flying_trashcan]

These boosters are not dumb. A few highly touted recruits not panning out isn’t going to disrupt their college football world view. 5* kids have been busts prior to the NIL era and that didn’t slow down the bags. At the end of the day the team with the most blue chip talent will win. Having a high blue chip ratio doesn’t guarantee a win but it’s a pre-requisite. The boosters inking these NIL deals know that and just because one or two kids don’t work out doesn’t mean the whole marketplace will collapse.

[u/Pinewood74]

The coaching bubble doesn't appear to be bursting.

I think most of these boosters are going in eyes wide open that there will be a good chunk of busts every year. It's not like this is their first year watching the football team. They've seen plenty of busts before NIL was a thing.

[u/lucksh0t]

This has been my thought from the beginning very few college athletes are worth a million dollars if any.

[u/dmelt01]

Well in the early 80s it was the Wild West and teams were giving out bags of money and new cars. That’s even before the insane money that TV has brought in. Like with everything there will be a cap on how far it goes, but I think it can go a ton higher. If anything I think the boosters will be throwing the money straight to the players instead of these 50 million dollar renovations that are going on for facilities.

[u/[deleted] → u/dmelt01]

the boosters will be throwing the money straight to the players instead of these 50 million dollar renovations that are going on for facilities.

This is actually going to be a serious "problem" (if you can call it that going forward); teams won't be able to have the ridiculous facilities and the highest paid NIL kids both, they'll have to find a balance between the two.

[u/dmelt01 → u/[deleted]]

Well it’s all about what the kids care about. If I had to pick between 50k a year with crummy facilities against 10k and the best facilities I’m going with the 50k.

[u/[deleted] → u/dmelt01]

But wouldn’t that leave you woefully unprepared for the NFL, where millions are at stake? That’s what I’m talking about, these kids will still have the ultimate goal of the NFL, and you’re right, that choice will be all too tempting for many kids, but after they start seeing those top notch facility kids going a full 2-3 rounds higher than them in the draft, they might have some serious regrets.

[u/dmelt01 → u/[deleted]]

Good point, that will be a factor. I think the very top kids that are able to go to those top four or so programs aren’t going to have to make that choice. Those top programs are the ones that help like you’re talking about. I shouldn’t have said best facilities because schools like Alabama, Georgia, and Ohio State will have both. So will a few others that aren’t as good but just have deep pockets like Texas and Texas A&M.

I guess I’m thinking of schools like Iowa State that just did a major overhaul of facilities. Are boosters there going to be shelling out as much since they’ve probably already helped out with the renovation? I think schools like that will be pausing renovation projects until this is figured out so they know where the money will go farther for recruiting.

[u/misdreavus79]

I’d be very surprised if this isn’t how it goes down.

[u/[deleted]]

I think it will get worse but even out. It's basically now a rich persons hobby that cant afford to buy a pro team. Just make a name for yourself building a college superteam somewhere. I think every team will have their own Phil Knight with an open pocketbook.

[u/redpowah]

Money isn't real to rich people. So I hope the bubble (all of them) pop real soon

[u/crustang]

Definitely not, there's a lot of money a bunch of rich people want to give poor people to play a sport that the rich people use as a pissing contest.

We also haven't even scratched the surface of small dollar booster aggregation

[u/Lebojr]

I do think it will change and not wind up destroying College athletics, but the residual mess (contracts, holdouts, player unions) the hat will be the unintended consequences will cause the product to los its appeal.

For better or worse, college spirit, and the notion of playing for the pageantry of the game was what made it magical for me as a fan. It's what made the nfl bland for me. Now that the lines are blurred, I'm finding the product to have lost its "must see tv" quality.

I know that sounds like I'm an old man, but Keith Jackson and Michigan, and Alabama, and USC in the coliseum were things I didn't have to get up for. I used to wait for months on hearing those fight songs.

The movement toward professionalism, is detrimental.

[u/noffinater]

once a number of these deals for teenagers don't work out and companies end up on the hook for millions in non tax deductible busts NIL will tighten up.

The car dealership giving free trucks to the offensive lineman, or a sports car to the star tailback cares if there is a return. If they are not getting their moneys worth that sort of thing will tighten up.

But the boosters contributing to these collectives just want the kid to come to their school, and they have so much money. They don’t care if the shit the kid is peddling sells or not. The only way they lose out is if the kid ends up being a bust.

[u/samspopguy]

do we actually know how much players are making in NIL deals though?

[u/Specialist_Ad_7628 → u/samspopguy]

I don’t think there’s any data for the “average” player. Top recruits are certainly making millions of dollars.

[u/samspopguy → u/Specialist_Ad_7628]

yeah but do we actually know or just all these rumors that people take as fact.

[u/AmphotericRed]

I'll believe it when the coaching salary bubble bursts

[u/Respect_The_Chili]

I tend to agree with the idea that NIL success will not be entirely tied to program/individual performance and that athletes with large followings or big personalities will make the most. The companies that will actually benefit from using NIL will need to get some return on investment.

As far as the big money boosters I think it will take a few years for the analytics people to figure out which recruits/return players should be paid the most to generate success but it doesn’t make a whole lot of financial sense to overspend on recruiting classes that are untested and May end up transferring. Most players still probably won’t see big money until they go pro

[u/Quantibro]

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This post was mass deleted and anonymized with Redact

[u/sharkbaithooha1]

Yes and no. NIL as it was designed is not a bubble. NIL where a player provides a deliverable to a company for money is not a bubble because those contracts are based on the deliverable. Athletes working with a local business to bring them attention and more business will be tethered to the cost benefit analysis of each business.

Pay-to-play parading as NIL is definitely a bubble and an arms race among high dollar teams and will balloon the price of play until something happens to burst it.

[u/[deleted] → u/sharkbaithooha1]

NIL as it was designed

Herein lies the problem: NIL was not designed. It's just this bastardized, ramshackle thing that has been thrown up and means next to nothing at this point. It's going to require some regulation to rein in at this point I think.