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NIL - Unintended Consequences

Posted by Paul Saluja | Jun 02, 2024

Recently a Professor noted that the Name, Image, and Likeness (NIL) collective system in the United States is the single biggest threat to youth basketball in Europe. Every decision has hidden costs and unforeseen variables, and the far-reaching ramifications of policy often are not easily forecasted. The effects are not just felt within college athletics: NCAA policy has impacted youth and professional sports in America and beyond – youth basketball in Europe is the latest to be implicated.

When NIL was introduced to collegiate sports in 2021, most people saw the change in restrictive NCAA policy as a way for athletes to monetize their publicity rights through merchandise sales and sponsorships, placing them on an equal playing field with their professional peers. Very few, at the outset, saw the potential of creating backdoor “pay-for-play” contracts through NIL collectives. The concept has become universally adopted and the main form of player recruiting, where elite collegiate athletes can command six-figure salaries for their athletic talents.

Now, in 2024, due to NIL and concurrent changes to NCAA transfer restrictions, after every season, all collegiate basketball players with remaining eligibility have the option to enter a system of proxy free agency. Any collegiate program can solicit athletes for the upcoming season with one-year “pay-for-play" NIL contracts masqueraded as endorsement deals; through free market forces, this new system further escalates the compensation athletes can command. Increased sophistication of NIL collective payment practices has recently opened the door for foreign athletes to cash in on NIL Collective payments - previously understood to be a violation of U.S. immigration policy and often avoided.

Highly touted prospects with NBA potential are a vital commodity for European basketball clubs. When players under contract with European teams enter the NBA draft process, they carry buy-out clauses that can yield favorable returns for European clubs. The NBA CBA allows franchises to cover the buyout cost of up to $825,000 for the 2023-24 season without impacting the salary cap; any more owed to the European club is up to the player to cover. Since NBA rookie contracts are scaled, most buy-out clauses for European players are strategically structured around the maximum an NBA franchise can compensate.

The NBA continues to globalize, and European talent is heavily ingrained into the fabric of the league. Many of the league's current brightest stars have been developed within European basketball systems: Luka Doncic (Real Madrid), Giannis Antetokounmpo (EFAO Zografou), Nikola Jokic (KK Mega Basket), Victor Wembanyama (Metropolitans 92), Domantas Sabonis (Unicaja Málaga), and several more. For the upcoming 2024 NBA Draft, four of the top ten projected draft picks are currently under contract with European clubs.

It is evident that the European system has been successful in talent development. Unlike the American youth development systems funded by the families of young athletes who participate for the opportunity to play in college and generate revenue regardless of athlete success, the European system treats youth development as an investment: youth athletes who develop into strong prospects can be purchased by higher-tier clubs and generate revenue for the organization. The players that this highly organized system has been able to produce speak volumes about the effectiveness of the European model.

Often starting around the age of twelve, clubs foster talent not only to develop the next generation of basketball stars but also, in part, to keep the lights on. In the wake of hefty NIL payments to college athletes, the tradition of European youth basketball development will, at a minimum, be fundamentally altered.

It is not only the players who are interested in abandoning EuroLeague, “[players] are driven not only by their own ambitions but also by those of their agents, who, motivated by the possibility of monetizing their athletes at an absolutely unimaginable age/price range not long ago, push them [to America] and constrain the development system in Europe.”

It is apparent that European training academies will undoubtedly have to rethink their functionality, objectives, and orientation as development centers because most of the material they work with will leave as an unfinished product. Structural change has already been implemented by many across Spain, some first/second level clubs will have to bet on becoming training clubs, daring to offer young players the opportunities and visibility elite clubs do not offer, thus filling a role that until now was nonexistent because it was not necessary.

So, what is the overall impact of this new reality? The paradigm changes completely... especially for clubs at the top EuroLeague level, it is really difficult for a player to move from the U18 to have an important role on the first team. Placing young talent at the center of Europe's highest stage is not part of the development process that has worked for so long. Due to the lure of NIL, players who may not be ready for the next level could be prematurely thrust into higher leagues to ensure buyouts and provide more competitive compensation.

In the near future, we will likely see the removal of many youth programs across Europe. Economic forces caused by NIL collective “pay for pay” contracts have rendered the European system of youth basketball development economically unfeasible. While these changes have delivered positive leverage to up-and-coming basketball talents, the lack of youth development opportunities poses an immediate concern about how elite prospects can even be cultivated in the first place.

It is not crazy to think that NIL poses a significant long-term threat to the NBA. With a less robust European talent development pipeline, the volume of European basketball players will undoubtedly fall. So much of NBA history has been made off of the blood, sweat, and tears of European players: Arvydas Sabonis, Detlef Schrempf, Dirk Nowitzki, Pau Gasol, Tony Parker, and so many more. Weakening the European connection to the game hurts the NBA product and the market penetration of the NBA in Europe.

About the Author

Paul Saluja

Paul Saluja is a distinguished legal professional with over two decades of experience serving clients across a spectrum of legal domains. Graduating from West Virginia State University in 1988 with a bachelor's degree in chemistry, he continued his academic journey at Ohio Northern University, gr...

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