A new company is offering college athletes upfront cash in exchange for a portion of their name, image and likeness deals, an arrangement some consumer protection experts and financial advisers say could prey on young athletes.
It’s definitely not a 1:1 business model, but it’s the same concept. It’s a little less problematic for the end user than payday loans/loan sharks for the reasons you mentioned.
But that doesn’t change the fact that it’s gross because it’s attempting to capitalize off of impoverished families and their financial desperation.
Also, this is assuming that all the reporting about the equity and everything is correct. Without seeing the contracts, we don’t know for sure if there’s some fallback for repayment over a longer timeline if the NIL portion doesn’t pay out. And if there’s the case, it’s absolutely predatory because it’s not only taking advantage of the financial desperation but also playing on the hopes and dreams of “making it out” via sports. And probably puts a ton of pressure on the kid.
Obviously without seeing the contracts we don’t know for sure, but anytime you have venture capital involved, they usually try to minimize their risk and exposure when they can. And given the inherent differences in power dynamic between the contracting parties, it would not at all surprise me if there’s some fine print for clawback if/when the athlete doesn’t realize their full expected NIL.
From what’s been posted of the contract, it seems like a terrible deal for the firm. I don’t see how they would stay afloat unless they’re extremely discerning when picking athletes.
The maximum they can make back is a 14% return rate for 7 years. The firm is literally better off putting the money in an index fund instead of investing in these kids.
Nilly’s investors are a mix of institutional funds and high net worth individuals, Ricciardi said, but he declined to share specifics about how much they have raised. The company last month announced that investment firm Harlan Capital Partners would commit up to $200 million to Nilly contracts.
To pay the players their upfront money, Nilly raises funds by offering investors the opportunity to buy a share of a pool of contracts. The concept — which alleviates the risk that a single athlete might not be successful — is similar to mortgage-backed securities or collateralized debt obligations; Ricciardi was deemed the “grandfather of CDOs” by the Wall Street Journal for his role in popularizing the investment while working at Merrill Lynch in the 2000s.
These are not the type of people who typically make losing bets. So the fact that your first thought is “this seems too good to be true” is why I said in one of the other replies that alarm bells are going off in my head.
Venture capital types don’t typically just roll over and take it on the chin if they can help it. Especially in a situation like this where there’s such a vast gulf in power dynamics between contracting parties.
I would not at all be surprised if there’s fine print language defining any professional sports contracts (like with the NBA/NFL) as NIL, or hell arguably even any employment contract with any company (basically wage garnishments).
Theres also that part at the end where they have a “boilerplate clause” for conduct that allows them to nullify the contract and seek repayment. Imagine this group had signed the entirety of the Georgia football team to their NIL pay-advance deals. We all know the legal troubles that have been surrounding that team from more minor stuff like speeding to more serious stuff like assault and battery. You think this group wouldn’t be looking at that and saying “okay, the guys who are performing and getting paid we leave on their deal - cash is coming in. The ones who are buried on the depth chart? Conduct clause them and get our investment back.”
How many college athletes have incidents that could be considered conduct clauses? Hell, even if they didn’t, again with the power dynamic, many might feel like they couldn’t fight that in court.
There’s just so many ways that this goes south and gets gross really quickly. It all just feels so slimy and exploitative.
Especially since there was that quote about how Perkins has mostly been relying on word of mouth advertisement so far. This is on ESPN’s website - his employer btw - which is arguably the biggest possible platform they could get.
The article does talk about the terms of a deal they got access to, they straight up lose the 50k if the player doesn’t make anything from NIL. You’re making up contract provisions that could be bad and being mad about it even though its not part of the deal.
I said up front that even at its most charitable I still think it’s gross and exploitative. I then followed it up to say that it could get worse. I never said it was.
I get it, you’re more on the trusting side and I’m more on the cynical side. But for me, exploitative business practices on their face ring giant alarm bells to be on the look out for fine print and further exploitation.
Is it really that far outside of the realm of possibility that the single contract mentioned in the fluff media piece designed to promote this to the young athletes reading it might not be fully representative of every single contract they will ever sign kids to?
It’s definitely not a 1:1 business model, but it’s the same concept. It’s a little less problematic for the end user than payday loans/loan sharks for the reasons you mentioned.
But that doesn’t change the fact that it’s gross because it’s attempting to capitalize off of impoverished families and their financial desperation.
Also, this is assuming that all the reporting about the equity and everything is correct. Without seeing the contracts, we don’t know for sure if there’s some fallback for repayment over a longer timeline if the NIL portion doesn’t pay out. And if there’s the case, it’s absolutely predatory because it’s not only taking advantage of the financial desperation but also playing on the hopes and dreams of “making it out” via sports. And probably puts a ton of pressure on the kid.
Obviously without seeing the contracts we don’t know for sure, but anytime you have venture capital involved, they usually try to minimize their risk and exposure when they can. And given the inherent differences in power dynamic between the contracting parties, it would not at all surprise me if there’s some fine print for clawback if/when the athlete doesn’t realize their full expected NIL.
From what’s been posted of the contract, it seems like a terrible deal for the firm. I don’t see how they would stay afloat unless they’re extremely discerning when picking athletes.
The maximum they can make back is a 14% return rate for 7 years. The firm is literally better off putting the money in an index fund instead of investing in these kids.
From the article:
These are not the type of people who typically make losing bets. So the fact that your first thought is “this seems too good to be true” is why I said in one of the other replies that alarm bells are going off in my head.
Venture capital types don’t typically just roll over and take it on the chin if they can help it. Especially in a situation like this where there’s such a vast gulf in power dynamics between contracting parties.
I would not at all be surprised if there’s fine print language defining any professional sports contracts (like with the NBA/NFL) as NIL, or hell arguably even any employment contract with any company (basically wage garnishments).
Theres also that part at the end where they have a “boilerplate clause” for conduct that allows them to nullify the contract and seek repayment. Imagine this group had signed the entirety of the Georgia football team to their NIL pay-advance deals. We all know the legal troubles that have been surrounding that team from more minor stuff like speeding to more serious stuff like assault and battery. You think this group wouldn’t be looking at that and saying “okay, the guys who are performing and getting paid we leave on their deal - cash is coming in. The ones who are buried on the depth chart? Conduct clause them and get our investment back.”
How many college athletes have incidents that could be considered conduct clauses? Hell, even if they didn’t, again with the power dynamic, many might feel like they couldn’t fight that in court.
There’s just so many ways that this goes south and gets gross really quickly. It all just feels so slimy and exploitative.
Especially since there was that quote about how Perkins has mostly been relying on word of mouth advertisement so far. This is on ESPN’s website - his employer btw - which is arguably the biggest possible platform they could get.
The article does talk about the terms of a deal they got access to, they straight up lose the 50k if the player doesn’t make anything from NIL. You’re making up contract provisions that could be bad and being mad about it even though its not part of the deal.
I said up front that even at its most charitable I still think it’s gross and exploitative. I then followed it up to say that it could get worse. I never said it was.
I get it, you’re more on the trusting side and I’m more on the cynical side. But for me, exploitative business practices on their face ring giant alarm bells to be on the look out for fine print and further exploitation.
Is it really that far outside of the realm of possibility that the single contract mentioned in the fluff media piece designed to promote this to the young athletes reading it might not be fully representative of every single contract they will ever sign kids to?