How Are NIL Valuations Calculated?

The Significance of NIL Valuation

As stated earlier, NIL valuation is a process that estimates the worth of a college athlete’s Name, Image, and Likeness at a given point in time. This valuation carries immense importance for both athletes and businesses:

• For Athletes – NIL valuation helps athletes understand their worth in the NIL marketplace. It provides them with a basis to negotiate brand deals, endorsements, and sponsorships, enabling them to maximize their earning potential. For some, this is a tremendous opportunity for real world experience if they decide not to or are unable to go pro. 
• For Businesses – For brands and companies, NIL valuations serve as useful metrics in their search for the right college sports influencer. This allows them to make informed decisions about potential partnerships and collaborations. I mean, you gotta do some due diligence before handing 18-year-olds fat paychecks.

The industry has seen a significant surge with the advent of the NIL era, and with it, a newfound need for understanding valuation. This can be on both sides of the playing field. For businesses, NIL campaigns that didn’t have significant Return on Investment. On the other side, maybe partnering with a brand that is the best from a publicist stand point, is actually hurting the athletes earning potential in the long run. So many various factors come into play, especially for not the top tier cash cow athletes who are raking in cash. 

The ground-breaking 2021 ruling that lifted restrictions on college athletes profiting from their NIL has made NIL valuation real, rather than us fans speculating how much money a player makes their school like we did when Reggie Bush was at USC. It has opened the floodgates and I think this concept is only scratching the surface of what is to come. 

Decoding NIL Value: Key Concepts and Metrics

The valuation of a college athlete’s NIL isn’t a simple task. It varies significantly depending on a myriad of factors. Some of the primary considerations include:

• Athletic Performance and Position – An athlete’s performance in their sport and their position in the team can significantly affect their NIL valuation. Exceptional athletic achievements often correspond to higher valuations.
• Social Media Presence – The size and engagement level of an athlete’s social media following play a crucial role in determining their NIL value. A larger online following can boost an athlete’s NIL valuation, irrespective of their athletic performance.
• Media Perception – Media sentiments surrounding an athlete can influence their NIL valuation. Positive attention from major media publications can lead to a higher valuation.
• University Ranking – The prestige of a college can also impact an athlete’s NIL value. Athletes from top-ranked colleges often command higher NIL deals.
• Family Legacy – Athletes with famous sports family members can see a boost in their NIL value. A notable example is Bronny James, son of Lebron James, who boasts one of the highest NIL valuations, and was in a car commercial before he even stepped foot on USC’s campus. Shedeur Sanders, the son of Deion Sanders, is second among the highest NIL Valuations.
• Notable Achievements – Winning prestigious awards, such as the Heisman Trophy, can lead to an increase in an athlete’s NIL valuation. You can see why USC’s Caleb Williams is in the Top 5.
• Previous NIL Opportunities – An athlete’s past NIL deals can influence their future valuations. For example, a history of landing lucrative contracts and executing them properly can increase an athlete’s NIL value.

The Calculation of NIL Valuations

NIL valuations are calculated using proprietary algorithms that consider the factors mentioned above. One of the leading algorithms in the industry is On3 NIL Valuation Index.

This index calculates an athlete’s brand and roster value using dynamic data points targeting three primary categories: Performance, Influence, and Exposure. It then combines these values to generate the athlete’s total NIL valuation.

Performance is determined by the athlete’s achievements in their sport, influence is gauged by their social media authority, and exposure is evaluated based on factors like the athlete’s school and position.

NIL Valuation in Sports Marketing

NIL valuation has found wide applications in sports marketing. Here are some of the common ways athletes can monetize their NIL:

• Brand Endorsement Deals – High-profile athletes can enter into lucrative brand endorsement deals, helping brands promote their products and services.
• Public Appearances – Athletes can earn money by making public appearances at events, thereby increasing their publicity and coverage.
• Sale of Autographs and Apparel – Athletes can earn additional income by signing autographs or selling merchandise featuring their personal branding.
• Coaching – Thanks to the new NIL rules, college athletes can now earn money by coaching others in their sport or promoting sports camps.
• Business Ventures – Entrepreneurial athletes can start their own businesses and leverage their NIL to market them.