Adidas NIL deal a long time coming, but devil is in the details

Adidas took a significant step for a major brand in the NIL space, announcing a sweeping deal Wednesday to create a NIL network to enable more than 50,000 athletes at 109 Adidas-sponsored schools to become paid brand ambassadors. 

The announcement was universally celebrated and represents an important moment in the long, complicated relationship between apparel companies and college sports teams. But broader implications hinge on the terms of the deal, many of which remain unknown. For that reason, it is premature to say that fellow sports apparel titans Nike and Under Armour now are on the clock to create similar deals for athletes at their schools.

“I think they’re going to do something similar, or at least look into it,” Peter Schoenthal, CEO of Athliance, told On3. (Athliance is a company designed to educate and protect schools and student-athletes from the challenges that surround NIL.) “I don’t know how much they’re on the clock. As it pertains to recruits, as it pertains to athletes in college, I’m not sure how much this will actually move the needle. One of the things we’ve all seen in the NIL space is a lot of big announcements without having actual clarity for when that opportunity is going to start or what the actual terms are.”

Adidas said its program will begin in phases. It is scheduled to roll out with HBCU and Power 5 schools this fall, and athletes at other schools are expected to be able to take part by April 2023. Athletes will have the opportunity to earn a percentage of sales they drive at adidas.com or the Adidas app. They also will be paid per relevant social media post. But Adidas did not disclose how much compensation athletes may receive. 

The devil is in the NIL details. One of the things Schoenthal said student-athletes and especially schools are getting frustrated with, generally speaking, are big-splash NIL announcements where there is a “big bark but not a lot of big bite behind it.”

“Before we decide to put Nike and Armour on the clock, we all need to understand what the terms of the deal are,” Schoenthal said, “whether the student-athletes are getting paid in cash, whether they are getting paid in swag, whether they are getting paid in Adidas dollars to spend at Adidas.

“All of those things matter in order to decide how much effort the student-athletes are going to put into this, which will then show how big an impact this announcement will make.”

So, how much is this going to cost Adidas?

Schoenthal, who applauded the announcement, said it would get expensive even for a company like Adidas to give athletes actual cash every time an Adidas college athlete posted a relevant post. Even awarding some 50,000 athletes – if they all take part – $1,000 per year translates into a $50 million bill for Adidas. Schoenthal isn’t sure Adidas would get the return on investment with that strategy, but said it might make sense for the company to give them so-called Adidas dollars to spend on the website in a special portal for sponsored athletes. Or similarly, for each social media post, an athlete could receive a $50 or $100 Adidas gift card.

“That [model] is brilliant,” he said, “and I think you’re going to see Nike and all of them get involved, too.”

Dale Hutcherson, a Memphis-area attorney who specializes in sports and trademark law, views this as a great move by Adidas but also takes a wait-and-see approach because of several unanswered questions. For starters, he said, will Adidas offer a deal to players that is commensurate to a given player’s status and NIL potential – in other words, make different levels of offers to athletes based on social media advertising potential? 

If the NIL deals do not vary by player based on an individual player’s given status and NIL potential, he said, we may see top athletes opting out of so-called big-brand NIL deals to avoid issues with exclusivity within the contracts. That would allow the player to be on the open market, he said, for other clothing and apparel companies to pursue these athletes and give better NIL-related offers.

“If players are not offered the big-brand NIL deals commensurate with their individualized NIL value,” Hutcherson said, “it would appear that big brands are opting for, and see value in, micro-marketing through athletes based on their affiliation with a school rather than large-scale deals with individual athletes.”

However compensation is awarded, the deal includes such a wide swath of athletes that dollar amounts may not be overly substantial for most, relatively speaking. Chris Aumueller, CEO and founder of FanWord, an athlete branding and storytelling company, called the announcement a “brilliant move by Adidas” because, at its core, NIL is about empowerment.

“This deal gives 50,000-plus student-athletes the ability to tap into one of the most powerful brands to monetize their NIL,” Aumueller told On3 Wednesday. “Will this create pressure for Nike or Under Armour? I think so, yes. They are obviously not sleeping on NIL, but a deal at this scale is hard to ignore. I don’t think they’re going to rush into anything because of the announcement, but I do think they are going to be very mindful about positioning themselves in a similar capacity.”

Prominent Florida-based sports attorney Darren Heitner tweeted, “Adidas just opened the door to big brand NIL wars. … This will put pressure on Nike, Coca-Cola, Pepsi and other major brands to offer nationwide deals.”

For the sneaker/apparel companies in particular, it ushers in yet another compelling chapter in the endless sneaker wars that have waged since industry czar Sonny Vaccaro sported velour jumpsuits and courted top talent to attend his annual shoe company-sponsored camps.

These companies are in a unique yet tricky spot in the NIL space. Navigating the new NIL terrain has been viewed by several industry sources as a slippery slope for sneaker companies because they maintain partnerships with so many schools. If Nike, for instance, chose to offer Paolo Banchero, a star on the Nike-sponsored Duke basketball team, an especially lucrative deal, Jalen Duren, a future NBA player on the Nike-sponsored Memphis team, may say, “Hey, what about me?”

Blake Lawrence, CEO and co-founder of Opendorse, addressed this fine line for apparel companies when he told On3 in the fall, “They can’t just do it for one school. If Adidas starts to support and pay ambassadors at Nebraska, they’re going to get a phone call from every athletic director in the country. I’m telling you, man, they are not lining up to do that because they have been getting the same love and exposure by providing products [elsewhere].”

Finally, apparel money to the athletes

While the details in the Adidas announcement remain opaque, this is a financial victory for the athletes, the ones who actually wear sneakers and other apparel in games.

To understand the significance is to understand the entrenched relationship between sneaker companies and college teams, one largely viewed as hypocritical. Coaches have been receiving six-figure contracts (or more) from sneaker companies for more than four decades to outfit their players in its apparel; all the while, players weren’t allowed to receive a dollar. 

Even in the early 1980s, then-Georgetown coach John Thompson showed why he was way ahead of his time and didn’t shy away from explaining that hypocrisy-rich system to his players. In his autobiography ”I Came as a Shadow,” he said he once told his team, “You guys have to understand that you are extremely marketable. People are going to give you things to wear because you can influence sales of that product.”

Thompson then pulled out his contract with Nike, which gave him more than $100,000 a year on top of his Georgetown salary to make him the sneaker company’s highest-paid coach. He then explained to players how the so-called “amateur” system worked.

“Nike paid me, the coach, to have them, the players, wear the company’s sneakers,” Thompson wrote. “I wore dress shoes to games, not Nikes, but I got the money. I was getting paid for their labor.”

After letting players marvel at the dollar figure, he said, “OK, now help me understand why none of y’all [expletives] have asked me for any of this money.”

Now sneaker companies are compensating athletes. It is a new day, indeed.