As formally announced on May 23, 2024, the NCAA, Big Ten, SEC, Pac-12, Big 12, and ACC announced a landmark settlement of House v. NCAA, Hubbard v. NCAA, and Carter v. NCAA, three pending antitrust lawsuits aimed at the NCAA’s limits on name, image, and likeness (NIL)-related compensation and benefits. Although the presiding US District Court Judge must still approve the settlement, its impact is top of mind for many athletic departments and college athletics stakeholders. While many questions remain, a few key takeaways have emerged:
Key Takeaways
- Under the settlement, more than $2.75B in damages will be paid to college athletes over a 10-year period.
- The settlement unlocks the ability for schools to pay Division I athletes directly. In year one, NCAA schools are permitted to share 22% of the average Power 5 school’s revenues (approx. $20M per school, per year). The amount will increase year over year as revenue grows.
- Direct school payments to college athletes are in addition to scholarships, third-party NIL payments, health care, and other benefits.
- Scholarship caps no longer apply.
Future impact of NIL settlement
While the House settlement does not resolve other ongoing cases and inquiries—for example, Fontenot v. NCAA, which challenges rules prohibiting pay for play, and ongoing Fair Labor Standards Act and National Labor Relations Act litigation and unionization efforts—it could dramatically shape the future relationship between educational institutions and athletes. With schools now permitted to direct $20M plus per year to athletes (across all sports), schools must now determine how to allocate funds, and navigate whether Title IX applies to these payments.
Some educational institutions are already preparing for budget cuts in other areas to ensure they can provide NIL-related payments, bringing the question of who funds these payments to the forefront. Funding may come from existing budgets, donors, corporate partners, or new private investors, which could create challenges for lower-revenue sports and schools.
Future NIL collectives may differ from today’s. Donor funds and collective activities could move in-house, with collectives serving as a vehicle to provide additional compensation for schools that hit the direct payment cap. Relatedly, the settlement might give the NCAA the power to enforce its pay-for-play restrictions against schools directly.
With regard to the proposal outlined in December 2023 by NCAA President Charlie Baker to create a Division I “subdivision” for institutions with the largest athletic budgets to provide students with an “enhanced educational trust fund,” the House settlement may alter the NCAA’s “subdivision” goals in the near future.
Separately, the NCAA also recently announced changes to transfer rules, allowing immediate eligibility for qualifying athletes, and opening the door to unlimited transfers.
Navigating NIL challenges and opportunities
The House settlement upends how educational institutions, student-athletes, donors, and their private equity investors have traditionally approached compensation and benefits.
Nixon Peabody’s Sports & Stadiums, Higher Education, Labor & Employment, and Corporate attorneys keep a pulse on NIL issues and will continue to provide guidance on how these unfolding developments will impact businesses, institutions, and individuals in the NIL sphere.
Our Perspectives
Title IX
“While the House settlement, if approved, may temporarily put the NCAA’s antitrust issues to rest and allow it to survive in its current form, at least for now, it leaves NCAA member institutions without answers and looking for legal guidance as to whether Title IX may apply to require equal distribution of either the settlement funds themselves or future funds resulting from revenue-sharing allowed under the settlement among athletes playing men’s and women’s NCAA sports. Early reports on the terms of the confidential settlement suggest payments from the settlement funds themselves may be structured in a way that would not implicate Title IX, and conferences and member institutions may hope to follow the same distribution model with the revenue-sharing funds. However, with the degrees of uncertainty and risk for NCAA member institutions, the Title IX issue is likely to land back in federal court, with the House settlement in some way exchanging present antitrust issues for future Title IX issues.”
- S. Amy Spencer, counsel, Higher Education
Private Equity
“While the House settlement presents exciting opportunities for schools to compensate student athletes directly as much as approximately $22 million from television and box office revenue sharing and provide an additional $5 to $10 million in scholarships beyond what is currently allowed, even NCAA member school athletic departments with 8-figure budgets may struggle to keep pace, especially when competing demands such as facility improvements and endowment funds come into play. To avoid significant drop-off in quality, or the devastation and stigma of dropping sports altogether to try to compete in football and basketball, it’s almost inevitable that schools, or athletic departments, will turn to private equity funds to infuse capital into their programs.”
- Shaziah Singh, counsel, Corporate & Finance
- Corey Habib, associate, Corporate & Finance
- S. Amy Spencer, counsel, Higher Education
NIL Collectives
“In the collective space, we have already seen a number of different forms of collective emerge. Some function purely to direct donor funds to athletes, and for most schools, I think the House settlement provides an opportunity to bring that back under the athletic department’s purview. Other collectives function more as a group licensing entity or brand marketing agency, creating genuine and unique sports marketing opportunities, which I think will continue with appropriate oversight (and provide opportunities for athletes at schools that spend the $20M+ cap to earn even more outside of direct payments). Ultimately, we may be one step closer to a more normal functioning athlete endorsement market, but still have a ways to go.”
- Nicoleas Mayne, counsel, Entertainment & Media and Sports & Stadiums