Football Fridays: The Changing High School NIL Landscape

Welcome to The Modern Day Renaissance Man newsletter. I, Trey Layton, write about the things that interest me, often covering topics such as startups, sports, and entertainment. If you'd like to receive these newsletters directly in your email a few times a week, go ahead and subscribe to never miss an email!

Happy Friday, folks.

The first pitch in this year's World Series is tonight as the Phillies and Astros face off in game 1 at Minute Maid Park in Houston. Vegas likes the Texas team, giving them -185 odds to win 4 outta 7. This means that a successful $100 bet on the 'Stros pays out $154.05.

Quick lesson on those numbers: they're listed in "American odds." A negative sign implies a favorite, and the actual number tells you how much money you'd have to risk to win $100. In this case, that means $185. The positive number for the Phillies shows you the profit you'd make with a successful $100 bet on the underdogs, here a $250 total payout on a $100 bet.

One bettor actually proved that oracles walk amongst us when they bet $50 that Houston would beat Philadelphia in the World Series before the season at 2500/1 odds. Fractional odds like this tell you the payout on each dollar of your bet, here $2500 for each dollar. For the Humanities majors, that means that if the Astros win 4 games, that $50 bet would pay a $125,000 profit.

Some big news came out of Indy a couple of days ago when the NCAA served a steaming dish of updated NIL guidelines for institutions. University presidents, boosters, and collectives have been clamoring for clearer outlines for what is and isn't allowed in the arms race that is the NIL landscape, and they finally got exactly what they were looking for. In fact, they were likely surprised with more flexibility for schools than they had even hoped for.

Collectives have become all the rage over the past year, possibly surpassing purchasing social media platforms and #MakeInstagramCasualAgain hashtags in popularity. These groups often consist of rich university alumni who band together in the valiant effort of purchasing the best college football team that money can buy.

There has been criticism, however, over exactly how these groups operate. Instead of helping to provide harmless brand endorsements for their alma mater's athletes, there are (all but confirmed) rumors of these groups offering high school recruits and transferring players millions of dollars to come to the schools which they are "unaffiliated" with. While this unofficial connection might be true in theory, it's hard to believe that coaches have no say in some of the deals that are being thrown around out there.

Now, the relationship between schools and collectives has been given some post-"What are we?" clarity. The biggest takeaways:

• Schools CANNOT provide financial support to collectives

• University athletics employees CANNOT be employed by collectives or incentivize collective donations

• Schools CANNOT seek or negotiate contracts for individual athletes or review contracts (unless this service is offered to all students of said university)

• Athletic departments CAN help fundraise for collectives

• Athletic departments CAN facilitate meetings between collectives and donors

• Schools CAN encourage boosters to donate to collectives (as long as they're not sport-specific)

What does this mean? To start, most of what has been happening is now officially allowed. If anything, it will only be juiced like Zac Efron for Baywatch as schools can now ask donors to fund collectives, the recruiting instrument at the center of the NIL roster-building era.

The guidelines are very lenient for schools and collectives, alike. Even worse, most are willing to call the NCAA's bluff when it comes to enforcement of the guidelines it has laid out, so be prepared for NIL to take over college athletics even more than it already has.

If you've ever watched any movie set in high school, you've seen the halls portrayed as a bloodbath with jocks and bullies prowling the corridors in search of defenseless nerds, ready to shake them down for their $5 of lunch money. First, I'm convinced that every one of these writers was homeschooled. Has anyone ever actually seen this happen???

Second, the few athletes who do partake in the timeless art of bullying and risk suspension are likely going to be even more unlikely to engage in such shenanigans given that they might soon be driving Bentleys to school and wearing Louis from head to toe. There's been a lot of talk about the money being wired to college athletes' bank accounts thanks to NIL, but were you aware that many high school athletes are getting similar deals while still balancing woodwork and study hall?

As of now, high school athletes in 19 states are allowed to monetize their name, image, likeness. That includes talent-rich states like California and Louisiana where we have seen some of these deals surface.

Just a couple of weeks ago, Nike signed five athletes, one of which was LeBron James Jr. (son of LeBron James), better known as Bronny. Of the five, three of the athletes (Bronny, DJ Wagner, and JuJu Watkins) are high schoolers. While the terms of the deal weren't released, there are rumors that James' was worth $10 million.

I've discussed the attempts of companies such as On3 to estimate the "value" of a player is it relates to NIL deals, but if the $10 million number is correct, it is even larger than the valuation which the On3 model estimates at jUsT $7.4 million. Plus, the Nike deal was quickly followed by a similarly lucrative deal with Beats By Dre, the audio company's first endorsement for a high school athlete.

While world-famous high school athletes are few and far between, and the 8-figure deals that they're signing aren't the norm even in the exorbitant market that is sports, high school athletes across the country are still cashing on on this newfound freedom. In the past week alone, there were NIL deals signed by high school junior QB Myles Jackson with Champs Sports, LSU commit Trey Holly with an injury law firm, and two Oregon basketball commits, Jackson Shelstad and Sofia Bell, inked endorsements with Portland Gear.

The potential effects of these regulations runs even deeper.

Texas quarterback Quinn Ewers was initially ranked as the top player in the entire country for the class of 2022. Ewers played at South Lake Carroll High School, a Dallas-area powerhouse. He was committed to play for the in-state Horns following his junior season before shocking the college football world and flipping his commitment to Ohio State and announcing that he would also be graduating a year early, skipping his senior season, to enroll in Columbus to cash in on a few million dollar NIL deals which were already being offered to him, deals which he would have been unable to take because of state legislation while in high school in Texas.

Though he eventually ended up back in Austin (after a whopping two snaps for the Buckeyes...), his situation isn't unique. In fact, state NIL rules are leading to high school players transferring to schools in NIL-friendly states for pre-college deals and oftentimes staying in that new state when they commit to their college of choice. This is deeply shifting the competitive landscape of college football in favor of states in which it is legal, such as California and Louisiana.

If you've ever met a Texan, chances are that you know how seriously they take their football. Do you really expect them to allow their state to fall behind in the sport, much less to California?

Legalization in other states is putting loads of pressure on prohibiting states to pass their own legislation to allow high school players to tap into the NIL world. The next domino to fall might be the Lone Star State which will vote on the issue in January 2023, and momentum is gaining for a pro-allowance vote.

Last year, in its first of existence, the NIL market was worth nearly $1 billion. It will undoubtedly top that number this year as more companies attempt to capitalize on the potential which the space has. If (though more likely when) football-crazed states like Texas, Florida, and Georgia open it up to a crop of millions of other eligible athletes, there is going to be an entire generation of millionaires who made their bank accounts by signing with local banks and fried chicken chains.

Perhaps nobody will be rooting for this harder than Little Jimmy Wurner. He'll finally get to enjoy that cafeteria pizza stick and cookie, after all.

There were some decent games last week. Not many upsets, but a couple of moves in the top 25:

• #15 Ole Miss (prev. 7) dropped its first of the season to a red-hot #18 LSU

• #16 Syracuse (prev. 14) might have actually added to its resume by taking Clemson to the wire

• On the note of LSU, the Tigers and in-state #23 Tulane are both ranked for the first time since 1998. Celebratory beignets, anyone?

A few for tomorrow:

• #2 Ohio State @ #13 Penn State

• #9 Okie State @ #22 Kansas State

• Florida @ #1 Georgia...

A few other meh matchups, but at least we have the "World's Largest Outdoor Cocktail Party" between the Gators and Dawgs. In case you weren't aware, organizers have tried to distance the game from its reputation as an alcohol-fueled binge fest by changing the unofficial name of the rivalry to the "World's Largest Outdoor Lemonade Stand"... Soft.

Make sure to catch up on this week's other editions:

• Movie Mondays: Netflix Signs with BARB

• Startup Spotlight: Umee Crosschain

As always, I appreciate each and every one of you for taking the time to read my unedited thoughts on the topics that I'm passionate about. Thank you all, and have a great weekend.

Cheers to another day,

Trey