The NCAA's new revenue-sharing settlement has come into effect, allowing colleges to pay millions of dollars to their athletes outright.

Indianapolis

Colleges and universities in the United States are now able to directly compensate student athletes, following the implementation of a new NCAA revenue-sharing settlement. Under this arrangement, schools can pay up to $20.5 million annually to their athletes, with the allocation of funds at each institution's discretion. Most of the funding is expected to go to major sports like football and basketball, potentially giving an advantage to schools with strong programs in these areas.

The settlement also introduces a clearing house, managed by Deloitte and the College Sports Commission, to oversee Name, Image, and Likeness (NIL) deals and ensure compliance with the spending cap. While direct brand endorsement deals are likely to continue, the new system aims to move away from donor-driven NIL collectives and create a more level playing field among major schools. Smaller schools may still rely on external funding to remain competitive.

Colleges can now pay athletes: what it means for sports at-large

Welcome back to Power Lunch. A new era is beginning for college sports. Effective today, colleges and universities are now permitted to directly compensate their student athletes, just outright pay them with a paycheck. Let's bring in Alex Sherman to discuss just how much money is actually on the table, as well as what the competitive implications are, not just for each team, but for amateur slash pro sports and pro sports outright. Right, it's hard to know what's amateur and what's pro these days, right? There's not anything anymore. That's part of it. Everyone gets paid. So what we know now is that, really what's gonna happen is the big time college sports, you know, whether that's, it's been mainly football and basketball, and obviously there's a slew of Power 5 schools that will pay up to $20.5 million per year for their athletes. It is at their discretion how they divvy up that money, but broadly speaking, most of it will go to football. There are certain schools, obviously, that are big time college basketball programs that don't have football programs. So those schools will be at an advantage to compete in basketball because that's where they'll skew their funds. But you can spend up to 20.5 million. You don't have to spend all of the money, but obviously to compete at the highest levels, you will spend all of it because otherwise you will be at a disadvantage competitively. How complicated do you think this makes the calculation? Not just for the schools running the programs themselves, for boosters and everybody else in the ecosystem, because now that you have, in essence, what is a salary cap, right? If you wanted to spend the, if you were Alabama football and you wanna spend a lot of this $20.5 million on football, you also have a very decent D1 college basketball program. So are you doing, this is a resource allocation decision at this point. Yeah, look, I mean, theoretically this should, I don't know if simplify is the right word, but it should at least flatten the playing field among the major schools so that you're moving out of this system of NIL collectives where it was really the wild west. It was just however much money you could raise, great. All of that money can be then thrown to these athletes and there will be these major bidding wars. Now that there's a cap in essence, you're saying, okay, of all of the schools that are gonna pay up to that, at least they can all kind of compete fairly against each other because they can only spend up to a certain amount of money. That said, you're right. It will be up to the schools to figure out, is it worth it for us to throw a few million dollars at a certain sport because we feel like there's some sort of added benefit to doing that. The economics tend to skew toward the big ones. So my guess is that the bulk of the money will just go to the football programs at all of these schools and the smaller sports will be left at a relative disadvantage. Because the other major news item, the big change here is that all of the NIL stuff now has to go through a clearing house. Is that right? Right. So the clearing house could potentially, and we don't know what's gonna happen. If the clearing house ends up denying nine out of 10 deals or something like that, or saying in order for you to receive this compensation, there has to be an endorsement product that really goes with it and really kind of stepping down on that. Okay, fine. Then the 20 million is the whole pot. But if that's not what happens and they're just basically rubber stamping stuff, then the 20 million to Dom's point is just a floor. And then those NIL numbers continue to be with there. Do we have any sense yet just how stringent and strict the clearing house is going to be? So the idea behind the clearing house, the numbers that, so Deloitte sort of is the enforcement agency of the clearing house. And then there's also another commission called the College Sports Commission, which is an enforcement of this sort of college spending. So there's kind of two ways of looking at NIL. There's the 20.5 million. That's the money that the colleges will pay the players. Then the outside NIL money will then run through this clearing house that Deloitte will basically say, is this a fair deal? And the purpose of the clearing house is so that you can't, in essence, go over the 20.5 million dollar cap and come up with some ridiculous number and say like, oh yeah, we're just paying for NIL rights for some video game and here's $8 million. And that would give certain schools an advantage and not others. Then there's sort of another category of NIL, which is this direct endorsement branding deals. That's where the system wants things to go. They want to move away from the NIL collective and that's why they're bringing in Deloitte to be sort of the arm force, the agency here and say, look, do a deal directly with a brand. Because we know a public company, we know those deals are probably fine. And that's what Deloitte has said, that 90% of the public company deals will probably become unchanged. It's these private company deals. It was always weird to me that by allowing the athletes to receive a compensation, that somehow it was coming from alumni instead of from the companies themselves. Right. Like, shouldn't the whole point be if a company wants to pay to endorse something? Well, some companies do. I mean, Roback, just as an athleisure wear company, was a pioneer in this. They had signed their student athletes and some high profile ones over the course of the last few years. I don't exactly know what the payment profile or parameters were, but these athletes were wearing their gear. And if you use like a certain code or you buy it through them, I don't know how they get paid, but they got paid by a company. Yeah, that's right. So Kelly's point, the donors, that money will move toward the colleges. So you will donate to the college. The college will then push that money toward the players. The NIL collectives, many of them will shut down. Smaller schools will probably keep them open because they won't pay up to that $20.5 million. So they'll need every penny they can get from outside donors if they can get it. And then there will be these third category of deals, which will be between the company and the athlete directly. And those deals will probably be more or less unchanged.

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