If you follow college sports, you've heard the term "collective" being thrown around in connection with name, image, and likeness ("NIL") deals. While there are different ways to structure collectives, they all have one thing in common: a collective is an organization that pools funds to pay student athletes for NIL.
The ultimate goal of a collective is to attract talented student-athletes to a university in order to boost the chances of having successful sports teams. Donors give money to the collective, which then pays players to perform certain tasks. These tasks often include speaking at charitable events and posting on social media. Some collectives even facilitate private events and meet-and-greets with student athletes.
The typical structure of a collective varies in two predominant ways: (1) entity type and (2) the source of funds.
Entity Type
Some collectives have obtained 501(c)(3) nonprofit status. This raises the question of whether a collective can legitimately claim this tax-exempt status, which, among other things, allows supporters to make tax-deductible contributions to the collective. We plan to discuss this issue in more detail in a future blog post.
Another common choice is forming a limited liability company. This allows the owners of the collective to make money while also trying to promote a university's athletics by enhancing the opportunities available to student athletes.
Source of Funds
Collectives are oftentimes funded by alumni of the university that the collective supports. Supporters might also be businesses local to the university or owned by alumni of the university. For many collectives, generous fans are the main source of funds. Sometimes these crowdfunded collectives partner with a company. This can give the collective a more stable source of funds (whether paid to the collective or paid directly to student athletes), and, in return, the collective can help facilitate deals between the company and student athletes. This partnership approach might also add legitimacy to an otherwise unknown collective, which is important in attracting talented athletes.
Another approach is to charge fans for meet-and-greet type events with student athletes. This is less common, but the idea is that players and the collective will split the fees paid by fans. If this sounds entirely different from the crowdfunded collective approach described above, that's because it is. The entire concept of what constitutes a "collective" is evolving rapidly, and I have little doubt we will see many more variations of the concept of a collective in the near future.
