When NIL Turns Into Payroll
It's a rainy Sunday afternoon so I started playing around with some numbers on what a future NIL-based payroll would look like in college football, and specifically how much money would it take to establish the same level of dominance that programs like Alabama and Ohio have today.
This is of course all speculation, but I've made some basic assumptions.
For starters, I've assumed that affiliates of the universities will raise permanent NIL funds to establish the equivalent of salaries in college football. For example, an affiliated entity of Michigan might raise $300M in order to pay out $21M per year in "NIL" payments to football players (so clearly paying out 7% a year which could be replaced by investment earnings or new fund raising, etc...)
I've also assumed that players will sign contracts with those affiliates out of high school, and the value of the contracts will roughly equate with recruiting rankings. For the sake of argument, I've assumed the following annual "NIL" salary by recruiting level:
5*: Avg. $1,400,000 with range of $800,000 - $2,000,000
High 4*: Avg. $700,000 with range of $600,000 - $800,000
Mid 4*: Avg. $500,000 with range of $400,000 - $600,000
Low 4*: Avg. $300,000 with range of $200,000 - $400,000
High 3*: Avg. $150,000 with range of $100,000 - $200,000
Low 3*: Avg. $75,000 with range of $50,000 - $100,000
Finally, I've assumed that schools will pay "NIL" salaries to 70 players, which is obviously less than the 85 scholarship players today.
Based on the above, for Michigan to retain a roster of 70 players with the same average recruiting level as its 2021 class, which ranked #14 in the country according to ESPN, the annual salary would be $19.3M which would require a permanent NIL fund of $276M. It seems totally realistic to me that 14 or more programs can raise a permanent fund of $276M or more. (For comparison sake, Stephen Ross has donated $400M to Michigan to date, and that's one donor).
The most expensive class in 2021 according to the above would be Ohio's class, which if spread across 70 players would require an annual salary of $41.3M, and a permanent NIL fund of $590M.
I suppose the key question as we head into this new world of NIL is whether anyone will be able to raise 2x what Michigan will be able to raise in order to maintain the sort of recruiting dominance that Ohio, Alabama and Georgia has over Michigan today. It's going to be wild, but my intuition is that Michigan won't end up with a payroll that is 50% of whoever the "top" schools end up being. But it does mean more in the $EC, and there are families out there with Wal-Mart money, and the universities may end up interacting with the NIL affiliate funds in different ways, so we'll see....
January 12th, 2022 at 5:27 PM ^
But who generates the money, the players or the schools? I'd argue the vast, vast majority is generated by the schools irrespective of the players. Imagine if you imported Michigan's entire roster to a new minor league team. Would that team generate anything more than a tiny fraction of the money generated at Michigan? My guess is no. You could create the minor league by importing entire conferences--B1G, SEC, etc.--and I'd imagine that this minor league would struggle to survive, while the new look college teams repopulated with walk-ons would go on barely missing a beat.
So if the schools are the ones generating the real interest and revenue, there doesn't seem to be any issue with the schools keeping most of the money.
January 10th, 2022 at 6:36 PM ^
Am I the only person who thinks it crazy that a high 3 star recruit who might never start a game is worth more then an NFL practice squad player? Based on this chart most college players are going to be taking a pay cut when they go to the NFL.
January 10th, 2022 at 8:01 PM ^
The rookie minimum contract in the NFL is $700K so I took roughly 20% of that for the high 3*. I figure low 3* guys will get something, but it will be more like a decent living than anything you could scale with the NFL.
January 11th, 2022 at 2:27 PM ^
Using rivals (on3) the 3 star guys from our 2017 class are JaRaymond Hall, Ben Mason, Kurt Taylor, and Brad Roddins. Only 2 of the 4 will ever even make an NFL practice. Right now Ben Mason is on the Bears Practice Squad and is going to make 165,000 this year. If he had stayed in college based on your numbers he would be making about the same money. I am not saying you are wrong people have Irrational passion for their college football teams (see Mel Tuckers one sided contract) but I feel like we are overvaluing players and also not deducting the cost of the free education students are getting from what their NIL value would be.
January 11th, 2022 at 7:48 PM ^
OK but there are soccer players in MLS who make $100K a year who couldn't make a roster in Europe (or minor league baseball players who couldn't make a roster in MLB), but they still make $100K every year in the minor league. The only difference in what I've laid out is that the college football player will lose eligibility after four years. But otherwise, it's just a lesser league with guys getting paid less.
January 12th, 2022 at 11:15 PM ^
Okay, I'll play Mr. Raincloud here...NIL could very well be the death of college football as we have known it. I understand players deserve some of the $$ that the sport generates as they are the ones generating it, but without a commissioner or a czar to set the rules and limits on how this happens, this wild west that has been created will quickly implode or just become a minor league of the NFL and not really be part of the universities going forward.
Without limits, the haves will have more and the have-nots will just go away. I can't see Michigan willing to play this game due to its own arrogance and holier than thou attitude toward football. I think that is what JH is fighting for or planning on leaving because of. He knows if UM doesn't go all in right now, the program will never be competitive with the elite and leaving is his only option.
College football is at the precipice of hell and if they don't come up with limits, rules and controls to reign in the Texas AMs and any school that is willing to buy titles and set limits on the transfer portal this sport we all love is going completely destroy itself over money.
Remember Roger Goddell is paid $40M a year just to tell billionaire owners no when they want to control the NFL. College football needs a commissioner now.
January 15th, 2022 at 8:58 AM ^
Thanks for this well structured hypothetical NIL model. I agree with the thoughts that NIL is probably the best shot for making the FBS competition for CFP more than an annual $EC playoff.
January 17th, 2022 at 3:47 PM ^
Most endowments use a 4-5% payout rate to ensure that the endowment can be resilient through economic cycles and can grow at a pace matching or exceeding expenses.
It'll be interesting to see what begins to happen when there's effectively bidding on talent. Will that 5* assumption of $1.4M go instead to $2.5M? $5M?
I'm all for NIL, but I also feel bad for all of the lower-D1 programs that are about to be financially wrecked and/or will cut their football programs in the next 10 years.
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