ESPN raises concerns over new NIL company fronted by ESPN NBA analyst Kendrick Perkins

An ESPN article is raising concerns about a new NIL company called Nilly. Co-founded by ESPN NBA analyst and former player Kendrick Perkins, it’s offering athletes money in exchange for portions of their NIL earnings.

Nilly is fronted by Kendrick Perkins and Wall Street veteran Chris Ricciardi. Nilly is offering athletes cash upfront in exchange for a portion of their name, image and likeness deals. Those upfront payments range from $25,000 to into the hundreds of thousands of dollars and it’s a tactic that some consumer protection experts warn could be preying on young athletes.

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According to ESPN, several agents, athletic department employees, and others working in college athletics have not seen a company that operates in this manner before.

For his part, Kendrick Perkins emphasized that he wants to lessen the financial burden on college athletes. The belief is that Nilly could help do that.

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“You have so many athletes and their parents who are struggling day-to-day,” Perkins said. “Because we’re actually taking a bit of a gamble on what the student-athlete is going to make in the NIL space, the benefit is the kid — the student-athlete — is able to get financial security so they don’t have to rush.”

This comes at a time of change in college athletics, with players being able to earn money from their NIL, or name, image and likeness. These are typically deals for marketing, selling autographs, or things like that. However, there is a lot of confusion in the space and many are concerned about a lack of guardrails.

Nilly already has contracts in place with 20 high school and college athletes, all of whom either play football or men’s basketball. ESPN also obtained a contract that has a $50,000 payment to a high school senior in exchange for the exclusive rights to sell his name, image and likeness for seven years. That length of time would, of course, go into a potential professional career. Nilly and its investors will receive a 25% cut of the player’s NIL earnings for the length of the contract or until they make a total of $125,000.

According to Ricciardi, the percentage of NIL earnings Nilly could take is as high as 50%. Meanwhile, a spokesperson shared that on the low end, it would be about 10% of their NIL earnings.

There are also several “minimum commitments” for athletes who have a deal with Nilly. That includes a certain amount of social media activity, autograph sessions, and being available to make at least one public appearance a year. The company, meanwhile, is not obligated to provide assistance in finding or fulfilling endorsement deals.

A group of consumer finance experts who reviewed the contract say that parts of the deal resemble a high-interest loan. Others are concerned that the price being paid by athletes for this money upfront is too expensive.

“To me it feels like you are preying on people who need the capital now and using that to cloud their focus on the future,” Michael Haddix Jr. said, whose company Scout provides financial education seminars to college athletic departments. “It feels predatory, and it’s capitalizing on young people who need money and haven’t thought through the long-term implications.”

Utah law professor Chris Peterson, who has worked as an advisor for the federal government’s Consumer Financial Protection Bureau, said these deals are functionally loans.

“These are trashy products designed to take advantage of young kids,” Peterson said.

Despite those concerns, Ricciardi and Nilly have insisted that these deals aren’t loans but licensing agreements. That is to say, there is no responsibility to pay back the money initially given to them if Nilly doesn’t recoup its investment.

“There’s no interest rate. There’s no requirement to pay back,” Ricciardi said. “It’s purely a licensing deal. I would be surprised if those people thought that music advances were high-interest loans.”

For his part, Kendrick Perkins has pushed back on criticism as well, openly wondering if those critics have been in a financially unstable situation. Because many athletes may be in that situation, Perkins maintained that he believes Nilly is helping, not hurting the athletes.

Perkins and Ricciardi say they have a proprietary formula to predict how much an athlete will earn through NIL deals. They then use that to help determine what the contracts they offer look like in appearance. Ricciardi added that it is “statistically unlikely” a player will earn enough for Nilly to maximize its investment. He also added that Nilly speaks to NIL collectives about potential deals for athletes when determining how much they would offer.

“It’s critical to understand that anticipated NIL earnings are highly uncertain and volatile,” Ricciardi said. “It may be tempting for one to assume that we’re simply calculating money coming in and deciding how much we want to make on it, but that’s not the case at all. Investors are taking risk because earnings are far from certain and are in no way guaranteed.”

Courtney Altemus, co-founder of the Advance NIL consulting firm, explained that Kendrick Perkins’ involvment makes Nilly more legitimate in the eyes of athletes due to his status as an NBA champion and ESPN analyst. However, she also normally recommends against multi-year contracts.

“They don’t understand until they see the numbers,” Altemus said. “They’re going to have to make their own choices, but we’d really want to make sure they understand how much they’re really paying to get access to that money earlier.”

The investors for Nilly are a mix of institutional funds and high net worth individuals. It’s unclear how much money has been raised to this point.