Athletes Are on Hollywood Stars’ NIL Path for Future Pay
Today’s guest author is Josh Harlan, founder and managing partner of Harlan Capital Partners.
The world of sports is witnessing a transformative shift in athlete compensation that echoes the revolution that redefined how actors and directors were compensated in Hollywood in the late 20th century. Just as the entertainment industry moved away from fixed salaries to a more complex system of royalties and profit-sharing, professional and college athletes are now seeing a greater share of the revenue pie through endorsements via name, image and likeness (NIL) payments.
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This evolution recognizes the individual marketability of athletes and aligns financial rewards with their contributions to the industry’s success. It’s also opening new opportunities for investors to consider a nascent market that is bound for considerable expansion over the next decade.
In the “golden era” of Hollywood from the mid-1930s to the early 1960s, studios held a firm grip on stars and bound them to long-term contracts with fixed salaries irrespective of a film’s success. The eventual decline of this system, spurred by legal changes and the rise of television, opened the door for actors and directors to negotiate more lucrative deals that acknowledged the star power certain actors and directors wielded and their likelihood to significantly boost a project’s profitability. Most importantly, the introduction of royalties and back-end participation deals allowed these individuals to share in the financial success of their projects.
A similar evolution has taken place in professional sports. Traditionally, athletes were compensated through fixed salaries with limited opportunities to earn beyond their contracts. However, the growing commercial appeal of sports, amplified by global media and social media platforms, has highlighted the immense value of individual athletes. The negotiation of collective bargaining agreements (CBAs) in major leagues has secured players a substantial share of league revenues that recognize their central role in generating income through ticket sales, broadcasting rights and merchandise.
Moreover, the rise of athlete endorsements mirrors today’s modern Hollywood model, where stars leverage their public personas for financial gain. Athletes like LeBron James and Serena Williams have turned their global recognition into lucrative endorsement deals, sometimes surpassing their earnings from sports contracts. This trend underscores the shift towards a model where athletes are seen not just as players but as brands in their own right.
Perhaps the most significant recent development in this landscape is the introduction of NIL rights for college athletes. Historically, these athletes were barred from profiting from their name, image and likeness altogether despite being major draws for their schools and the NCAA. The recent policy changes allowing NIL payments and the NCAA’s proposed settlement of ongoing antitrust litigation mark a watershed moment, granting college athletes the ability to monetize their personal brand. This change aligns college sports more closely with professional leagues and the entertainment industry, where individuals can capitalize on the marketability of their individual brands.
As NIL rights and athlete compensation evolve, new markets are likely to emerge, driven by the need to support this growing industry. Investment firms may soon look to finance colleges, collectives, leagues and individual athletes against their future income from sources such as media rights, endorsements and NIL royalties. This represents a significant opportunity for financial institutions and investors to enter a market poised for expansion. Furthermore, college athletes bring a unique appeal: their hyper-local, hyper-relevant and hyper-authentic presence resonates strongly in markets where college sports are the primary or sole athletic entertainment. In regions without professional sports teams, these athletes embody the spirit and pride of their communities, offering a layer of authenticity that is exclusive to college sports and likely to attract local and regional brands seeking to connect with their audience in a meaningful way.
Critics argue the shift towards a more market-driven compensation model could lead to disparities within teams, with only the most marketable athletes benefiting significantly. In the context of college sports, there are concerns that focusing on endorsements and NIL deals might distract athletes from their academic and athletic commitments. Additionally, there are fears that young athletes may lack the necessary guidance to manage their newfound wealth responsibly.
However, these concerns often miss the broader point of fairness and the right of individuals to profit from their own labor and marketability. The evolution in compensation models acknowledges the reality that certain athletes bring exceptional value to their teams and leagues. Just as Hollywood stars command higher fees due to their ability to attract viewership, it is only fair that top athletes receive compensation commensurate with their impact. With proper support and education, athletes can navigate these new financial opportunities responsibly to ensure long-term financial stability.
Overall, the transformation in how athletes are compensated mirrors the earlier revolution in the entertainment industry. The move towards more equitable compensation structures, including endorsements and NIL payments, recognizes the significant value that individual talents bring to their respective fields. While there are valid concerns about potential disparities, the benefits of allowing athletes to profit from their own marketability and contributions are clear. As the sports industry continues to evolve, it will be key to embrace fair and incentive-based compensation models that will be crucial for promoting equity and recognizing the true value of individual talent.
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