I was listening to a sports radio show and the conversation rolled around to this month’s top 10 NIL contracts valued in the hundreds of thousands and millions of dollars.
For those of you not familiar with NIL (Name, Image, and Likeness) contracts, I’m referring to agreements in which an individual (such as an athlete or student) grants a third party (such as a company or university) the right to use their name, image, and likeness for commercial purposes and in exchange for payment. NIL contracts became legal in the United States in 2021, when the NCAA (National Collegiate Athletic Association) voted to allow college athletes to profit from their name, image, and likeness.
Because of the big numbers involved, the topic caught my attention and I spent a few minutes researching on ChatGPT and Google to gain more knowledge about NIL contracts. One website that particularly caught my attention was https://www.on3.com/nil/ as it claims to provide detailed information about the NIL status of high school and college players.
I invite you to take a look at the deals and numbers. Pretty impressive!
I am in favor of athletes being able to monetize their name, image, and likeness, however, there are benefits and drawbacks to this new business opportunity that everyone should be aware of.
For me, the pros of NIL agreements for companies and universities include increased revenue from the use of the individual’s name, image, and likeness, as well as increased visibility and brand recognition. For athletes, NIL agreements can provide substantial income streams and branding opportunities never before available. Again, I like the idea of athletes being able to enter into these agreements.
The cons of NIL agreements for companies and universities include potential legal and branding issues (a young person uses bad judgment and makes a mistake) related to the use of an individual’s name, image, and likeness. Additionally, big schools with wealthy boosters and commercial supporters may be able to offer better and more lucrative NIL contracts than smaller schools and conferences, which could affect parity and fair competition. For athletes, NIL agreements can take up a lot of time and energy, while also risking their reputation and privacy. Poor negotiation skills and contracts can bind uninformed athletes into bad long-term agreements.
Again, I believe when handled properly at arms length, the upside of NIL agreements substantially outweigh the downside issues.
As a lawyer who’s negotiated hundreds of different types of agreements over the last three decades, I gave thought to things I’d take into consideration if I was an athlete, or represented an athlete, negotiating a NIL contract. While my final checklist is much longer than the following, here are some of the highlights:
When negotiating a NIL contract, athletes and their representatives should consider:
#1: Creating a legal entity and doing NIL business via their legal entity.
#2: Understanding the legal and financial implications of the contract.
#3: Assessing the compensation being offered and negotiating for the best deal possible.
#4: Evaluating any restrictions or exclusivity clauses in the agreement.
#5: Considering the potential impact on their reputation and privacy.
#6: Assessing the effect on their ability to participate in their sport with the contract term.
#7: Evaluating other offers and opportunities for future income streams.
#8: Considering the impact on relationships with teams, leagues or governing bodies.
#9: Understanding the potential impact on their relationship with sponsors and endorsers.
#10: Taking into account their relationship with fans and the public.
#11: Securing guarantees and insurance to protect themselves in the contract.
#12: Consulting with professionals like lawyers, CPAs and financial advisors for proper negotiation, financial and tax planning.
So what do you think about NIL contracts?
Are they good or bad?
Did you take a look at the numbers at the website link I provided?
Let me know what you think. Take a look at what ChatGPT shared with me below.
Between now and the next time we chat, enjoy the journey and never stop making each day your masterpiece.
Just for fun, I asked ChatGPT to draft a template NIL agreement based upon the above parameters. This is what it created in about 30 seconds.
The agreement is missing a few key terms and conditions but for the most part, is an impressive first draft of an NIL agreement. Anyone who thinks that AI isn’t going to completely disrupt the legal system, and world for that matter, is still living under a rock.
In any case, please note that no legal, financial or investment advice is being shared in this post. The following short version NIL contract template is for educational and informative purposes only, it’s not a substitute for legal advice, and it’s recommended that individuals consult with a qualified attorney before entering into any NIL contract.
NIL Agreement (Template and Incomplete)
This NIL contract template (“Agreement”) is intended to serve as a guide for individuals seeking to enter into agreements for the commercial use of their name, image, and likeness. It is important to note that this template is not a substitute for legal advice, and it is recommended that individuals consult with a qualified attorney before entering into any NIL contract.
Definition of terms:
a. “Name, Image, and Likeness” or “NIL” shall mean the individual’s name, signature, photograph, image, likeness, voice, and any other indicia of identity.
b. “Party” shall mean the individual entering into this Agreement.
c. “Company” shall mean the entity that is granted rights to use the Party’s NIL under this Agreement.
d. “Term” shall mean the duration of this Agreement as specified in Section 5.
Grant of Rights:
a. The Party grants to the Company the exclusive and irrevocable right to use the Party’s NIL for commercial purposes, as specified in this Agreement.
b. The rights granted in this Section 2 shall include, but not be limited to, the right to use the Party’s NIL in advertising, marketing, and promotions, on the Company’s website and social media channels, and in any other commercial or promotional materials.
a. The Company shall pay the Party a sum of money as specified in this Agreement for the rights granted in Section 2.
b. The compensation shall be paid in accordance with the payment schedule outlined in this Agreement.
a. The Party shall not enter into any agreements for the use of their NIL that would conflict with the rights granted to the Company under this Agreement.
b. The Company shall not use the Party’s NIL in any manner that is disparaging, libelous, or defamatory.
c. The Party shall have the right to review and approve all commercial materials that use the Party’s NIL before they are released to the public.
a. This Agreement shall be in effect for a period of [insert number] years, commencing on the date of execution.
b. Either party may terminate this Agreement upon [insert number] days written notice in the event of a material breach of this Agreement by the other party.
Guarantees and Insurance:
a. The Company shall provide guarantees and insurance to the Party to protect their rights and interests in this Agreement.
b. The Party may require the Company to provide proof of such guarantees and insurance before executing this Agreement.
Relationship of the Parties:
a. This Agreement shall not be deemed to create a partnership, joint venture, or agency relationship between the parties.
b. The Party shall act as an independent contractor in performing the services under this Agreement.
a. This Agreement shall be governed by and construed in accordance with the laws of the [insert state/country].
b. Any disputes arising out of or related to this Agreement shall be resolved in accordance with the [insert dispute resolution method].
Representations and Warranties:
a. The Party represents and warrants that they have the full right, power, and authority to enter into this Agreement and to grant the rights granted to the Company under this Agreement.
b. The Company represents and warrants that it shall use the Party’s NIL in compliance with all applicable laws and regulations.
a. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings, whether oral or written.
b. This Agreement may not be amended or modified except in writing signed by both parties.
c. Any provision of this Agreement that is held to be invalid or unenforceable by a court of competent jurisdiction shall be severed from this Agreement, and the remaining provisions shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.