How will agents be compensated, and how will fees be paid and tracked?
Currently, agents are usually compensated in one of two ways – they either received a commission on the percentage of dollars or revenue they generate on behalf of a client’s employment or marketing agreement, or they are paid a predetermined hourly rate for their work. The vast majority of professional athletes pay their agents through commissions, which on employment contracts are capped by each respective players’ union at: 3% (NFL), 4% (NBA/NHL), and 5% (MLB). While there is no set cap on marketing commissions, because those opportunities are usually the direct result of an agent’s sweat-equity and relationships, the commission rate is significantly higher, and usually ranges from 15-20%.
Since there is no employment contract for agents representing student-athletes to negotiate (at least not yet), all of their earnings will come from the off-the-court and field opportunities they generate for student-athletes. And because the vast majority of student-athletes will likely make less than five-figures from those marketing activities, it’s not difficult to see that the value proposition of representing student-athletes doesn’t sound too promising. Of course, if an agent’s intention is to use NIL as an opportunity to build a relationship with a student athlete in hopes that that their value will increase and they will eventually provide a return on investment, it may be worth the effort.
Moreover, it is likely that many agents and agencies may attempt to sign a large swath of student athletes in the hopes of doing deals in bulk. That being said, with the advent of marketplaces like Opendorse, many student athletes will likely choose to seek deals themselves without being forced to pay a substantial percentage of their compensation as commission.
Whether through a sports-agent, marketplace, or any other mechanism, any fees a student-athlete must pay to third-parties will have to be tracked. With likely millions of these transactions occurring yearly, the NCAA’s most daunting task will be building a system that can handle the monitoring and administration of deals. That will be the next topic of focus for Student Athlete NIL.