NIL Royalties 101

Investing in Sports NIL Royalties

In the landmark 2021 Supreme Court decision Alston vs. NCAA, the court found that college athletes could maintain their amateur status but still receive compensation for their name, image and likeness (“NIL”). Since that time, a vibrant and fast-growing market has developed to support college athletes’ ability to monetize their NIL royalties.

Who pays NIL royalties?

Brands can and do pay college athletes NIL royalties for promoting their products or services. This represents approximately 20% of the current NIL money earned by athletes.

The balance (~80%) of the NIL money paid to athletes comes from “Collectives”  -- groups of alumni boosters who raise money from alumni, fans and brands and distribute it to athletes. In return, athletes typically have to perform certain activities, such as making a social media post or attending an autograph signing session. Each collective is affiliated with a particular college. For example, “Happy Valley United” is the collective that pays NIL money to Penn State athletes.

Until recently, the colleges could not pay NIL money to athletes directly, which gave rise to the aforementioned Collectives. However, several states have recently enacted legislation that allows schools in those states to pay athletes directly, and other states may do the same. Such a change would, potentially, create a bigger pool of NIL money that could be paid to athletes.

It is also worth noting that, presently, athletes cannot earn NIL royalties on media rights, which are instead paid to the NCAA, conferences and schools. There are several proposals that would change this also, which would create additional potential royalty streams for athletes.

About $1 billion of NIL royalties were paid last year to college athletes. That amount would grow materially if colleges and media companies could pay directly.

What does NILLY do?

NILLY provides upfront advances to athletes in exchange for exclusive rights to their NIL royalties for a period of time (4 to 7 years). In order to entice the athletes to continue to generate NIL royalties, NILLY makes additional payments to them over time (typically 75% of the amounts earned). The royalty agreement typically terminates once NILLY has received 2.5 times its initial advance.

NILLY also seeks to maximize the amount of money earned from the NIL royalties through the many NIL platforms that exist.

How does an investment in Sports NIL royalties work?

NILLY values any NIL royalty opportunity with the objective of achieving a target return specified by investors.
The other factors NILLY considers are:


The amount of NIL payments offered to the athletes by the collective in the next year.


Historical growth of NIL payments from collectives each year.


Historical “loss” factor that accounts for the historical incidence of injury and dropout.

The amount of the NIL royalty investment is simply the present value of these cashflows at any given target return required by investors.

Note that NILLY does not currently assume ANY earnings through its efforts on NIL platforms, from media payments, or through direct school payments. In other words, actual investor returns can exceed the target return – perhaps by significant amounts.