In The Market

“Fair Pay to Play Act” Raises Questions

The collegiate sports licensing industry could be in for a shake-up.

NBA stars LeBron James and Draymond Green support the measure, but 2007 Heisman Trophy winner and current ESPN analyst Tim Tebow hates it. Ditto the National Collegiate Athletic Association, which earlier this summer warned of “dire consequences” with the passage of a California state bill that is currently awaiting the signature of Gov. Gavin Newsom after passing in the state senate by a vote of 39-0 and state assembly, 73-0.

California’s “Fair Pay to Play Act,” if passed into law, will allow four-year college and university students in the Golden State to own the rights to their names, images and likenesses starting on Jan. 1, 2023, and ban intercollegiate sports organizations from penalizing students or the institutions they attend if they strike deals or hire an agent or lawyer to help them negotiate a licensing pact. Similar legislation being considered in South Carolina would allow colleges to pay $5,000 annual stipends to athletes in profitable sports such as football and basketball and allow all collegiate athletes opportunities to earn money from sponsorships and autograph sales.

What does it all mean? Sweeping changes on how collegiate athletes are compensated and marketed may be on the horizon over the next decade. From a sports licensing perspective, such changes would eventually establish new opportunities on both a national and local scale from T-shirts to signed trading cards.

While no one is yet sure how the potential California law would be enforced, the NCAA is well aware of the rising interest in its players’ names and image rights. The governing body recently established a working group to study the matter. It’s also unclear at this point how major athletic, sports memorabilia and video game companies would embrace major changes to the business model that governs collegiate sports and licensing.

Ed Schauder, who heads the sports law practice for Phillips Nizer LLP in New York, favors the passage of legislation that gives collegiate players ownership of their name, likeness and images but admits there is much to be ironed out about how collegians would be compensated and still retain their amateur status. One possibility—putting any and all proceeds from deals into trust accounts until after graduation. Also, he believes compensation from deals could be structured so more collegiate players reap financial benefits.

“When a school wins an NCAA championship and wins $15 million or whatever it may be, these players that are really driving the dollars and driving the sale of TV spots, the commercials et cetera aren’t getting anything,” stressed Schauder. “A guy like Zion Williamson, who is an outstanding player, doesn’t really benefit.”

“It’s all grounded in rights of publicity, by the state laws that basically say you can’t commercially exploit someone’s image without their permission or authorization for any kind of economic benefit. And it’s all based on rights to privacy laws,” added Schauder. “And I’m all for broadening it for student-athletes to share part of the wealth, so to speak.”

The attorney also pointed out that any pending state legislation, similar to “The Fair Pay to Play Act” in California isn’t intended to only cover players’ collegiate careers and name, but also “moments” they captured such as Rudy Ruettiger’s 32-second football-playing career at Notre Dame.

“Even though he was wasn’t a great player, why shouldn’t have he been able to commercially exploit his image given he had a great story to tell?” wondered Schauder about the now 71-year old motivational speaker who was the inspiration behind the 1993 movie.

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