Last week, a federal judge made a landmark decision that transformed the world of college athletics. Schools were granted the authority to compensate athletes directly.

The court decision also regulated rules concerning name, image and likeness (NIL) payments, a ruling that came as Michigan’s NIL collective, Champions Circle, continues to thrive.

Before the ruling, many payments mirrored a “pay-for-play” model, where boosters and non-profit collectives would pay athletes significant amounts of money for minor services with the intention of bringing them to a certain school. Now, all NIL deals must pass through a clearinghouse to ensure athletes are receiving compensation for no more than their “fair market value.” Deals that don’t meet this criteria will be denied by the NCAA.

Like collectives around the country, Champions Circle is looking to adapt to the new NIL world. The Michigan Daily’s Jordan Klein sat down with Champions Circle co-founder Jared Wangler to discuss the collective’s strategy in the revenue-sharing era.

Responses have been edited for clarity.

Jordan Klein (JK): Players now have to be compensated for their “fair market value,” as approved by a Deloitte clearinghouse. How does that change the deals and other things Champions Circle does to get athletes to the University of Michigan?

Jared Wangler (JW): It’s a great question. I think everything you’re looking for is tailored around athlete compensation in this new revenue-sharing world, with increased oversight from the clearinghouse, and a little bit more regulation around athlete compensation outside of what the university can offer. With the new House settlement, universities are now permitted to share up to $20.5 million worth of benefits in Year 1 one. That will increase by 4% year over year, all the way to Year 3. Then, it will reset based on the equation that they came to, which is 22% of the average annualized revenues of the Power Four schools. That’s what the schools are now permitted to share.

What’s difficult is that the market for athlete compensation currently outweighs what the universities are able to bear. If you look across college football, men’s basketball, women’s basketball, softball, wrestling … If you want to be competitive at a national-title level or a conference-title level, you need to have adequate funding for what the talent costs.

I could walk you back four years when schools couldn’t provide anything, and the only money that could be provided was from brands and collectives. Most of the major markets created these collectives as a way to aggregate capital to pay the student athletes. The cap at that point was zero dollars, and there wasn’t regulation around how much money you could pay the student athlete, and what the exchange of services for. It was very laissez-faire. Now, the cap is $20.5 million, and any dollars above the cap that are being used for talent acquisition and talent retention. Those are going to be more regulated by the Deloitte clearinghouse, as you reference. 

The Deloitte clearinghouse will be reviewing any deals that come from associated entities at the universities. Associated entities can mean a lot of things, but primarily they’re going to start with collectives and the multimedia rights holders. The multimedia rights holders, those are the Learfields of the world, the Playflys of the world. Think of it as the corporate sponsorship arm of these athletic departments. 

In this current state, I’m bringing it back to where talent costs have gotten. You might have seen Texas Tech pay over $55 million worth of contracts to its student athletes. That’s football, that’s men’s basketball, it’s women’s basketball, baseball, softball … that’s their pool. That’s $20.5 million of revenue share from the university, and about $35 million coming from affiliated entities. It might be their collective, it might be Learfield, Playfly, whatever their MMR holder is, or a combination of the two. In this world, where there’s a clearinghouse to decide whether the deals are fair market value or not, it is the job of these collectives and associated entities, to have enough deal flow for the athletes that will pass through the ‘sniff test.’ That can be used in conjunction with the revenue sharing to come to a total compensation package that is agreeable to.

It’s probably not a secret like right now that most college football budgets, if you’re trying to compete at the top level, are between $20 and $30 to $35 million. That’s just football. And then basketball. Men’s basketball is anywhere between $10 million, and in some markets, up to $20 million. When you’re adding all these budgets together across multiple sports, you need more than just $20.5 million if you’re at a place like Michigan, Ohio State, Auburn, Alabama, Southern California, Texas. 

That’s where you’re seeing these collectives and multimedia rights holders work together to get as much capital as they can, to then use and underwrite contracts for the athletes that will be above the cap. They have to be done in a way that can pass the clearinghouse standards for fair market value. 

In practice, let’s say it’s a women’s basketball player, starting point guard, making $1 million. Let’s say $500,000 of it was going to come from revenue sharing, and $500,000 of it was going to come from the collective. The payment can’t just be a lump sum payment of $500,000 — show up to an event and then be on your merry way. There has to be actual work done and actual services rendered for the $500,000. That might be spread out over 12 months. It might look like 20 different commercial activations. They might do signing events, they might have merchandising promotions, they might work with brands that are affiliated with the collective or the multimedia rights holder, there might be media appearances. 

There’s a whole host of services that groups like us have the athletes do to justify their NIL payments. That becomes even more critical if you want to be one of the schools ‘above the cap’ space, because that’s really the new name of the game. How much capital can you put together, and how many deals can you get to the student athletes that can make their way through the clearinghouse and be used in a way that helps underwrite competitive teams? That’s where a lot of this is moving.

JK: Deloitte estimated that roughly 70% of deals would not have passed through their clearinghouse standards. Where would that number sit for Champions Circle deals? How is the Champions Circle changing its approach so 100% of your deals meet the clearinghouse standards but also keep athletes at the compensation levels they were looking to get before these new rules?

JW: It’s hard to know for sure how much of our total deal volume would have gotten through the clearinghouse. I’d say with high confidence that we would bat at a significantly better percentage than only 30% of our deals getting through. That’s because our business was set up as a sports marketing agency before we built the collective. Valiant Management Group, which is the holding company to Champions Circle, was built as a group licensing agency, a talent rep agency and a merchandising company. It all spun up in 2021 around real commercial activity. It wasn’t until 2022 that we set up Champions Circle as a fund that dollars would come in, and then we would use that to help underwrite payments for the student athletes. All of our agreements with our athletes read as real commercial services agreements. 

For the amount of money we’re paying the student athletes, are we getting that much in return for the work that they’re doing? If you took a peek behind the curtain of our event calendar, our brand activations and our merchandising, we’ve generated significant revenue of commercial dollars based on the services of the athletes. We’ve had over $7 million worth of NIL merchandise sold over the last four years. Over $3 million generated around fan events. So think golf outings, think signing events, think private meet and greets. We’ve brought in over $4 million worth of brand deals. When you look at these different parts of our business, we’re one of the few collectives, marketing agencies, that you could point to to be like, ‘Oh, they were actually using the athletes’ NIL to generate real commercial revenue.’ 

(Other groups) tried to capture as much money as possible and get it out the door before there’d be more regulation. Those groups are now either folding or trying to restructure as a marketing agency.

That’s really where most of this moves — putting more infrastructure and bones behind the athlete marketing agency component of what you do. There is real commercial value that the athletes’ marketing services bring, if done correctly. Not everyone is Bryce Underwood and can demand a large sum of money for an appearance or a post around the brand, but the athletes collectively can drive revenue, if done in a way that is capturing everybody’s rights together to promote a good or a service. 

An example would be the starting point guard for the women’s basketball team.  On her own, she couldn’t demand a $1 million budget for a brand activation. But that starting point guard in conjunction with seven of her teammates, and then becoming a Michigan women’s basketball partnership, the sum of the parts are greater than than the whole. It’s more of a collective mentality around utilizing all of their NIL together to promote a good or service, using all of their social media handles to distribute that content, using their voice to elevate whatever product or service we’re working with. It’s a different type of marketing. It’s more viewed around the property itself and aggregating all the talent together. 

The really strong groups are going to separate themselves if they understand how to do this specific type of marketing. That is where you will be able to make a justifiable case to move significant sums of money through a clearinghouse, because you are a legitimate exchange of services.

JK: It seems like in the last year or so, Michigan’s NIL really took off. With the new regulation, is Michigan more uniquely positioned to succeed in the NIL space?

JW: I believe that Michigan’s always been primed to succeed in a world where it can level the playing field and start compensating its athletes. I long felt like we were fighting with one arm tied behind our back, because that’s an area where we were never active compared to some of the teams we were competing against. I do feel like we have had a leg up for quite some time. 

The bad rap we got early on wasn’t because we were not doing NIL, we just weren’t using it in recruiting the way most other schools were. Almost all of our NIL money was predominantly used for the current student athletes, and not used in recruiting for prospective student athletes. That’s changed as rules and regulations have adjusted over time. Now, we do communicate NIL opportunities, and we do have those compensation conversations on the front end in recruiting, whereas we wouldn’t before. But the resources have been there. There’s been greater alignment with the athletic department over the last two years that’s really elevated the fundraising efforts. 

Michigan has always been a place that demands brand attraction, and fan and donor engagement. We’ve had a competitive advantage over the last four years now that we can pay student athletes, and I believe that will only continue to grow that competitive advantage over time, because we are at a place like Michigan. It has the largest living alumni base. We have more brands that want to partner with the ‘block M’ and partner with the athletes in conjunction with the ‘block M’ more than any other school in the country. We sit in a robust business market in metro Detroit, but have national ties into different markets because we have alumni in New York and alumni in California. 

We’re able to make a compelling pitch to brands when they want to do real NIL activations with our student athletes. Our friends down the street, in Michigan State and Columbus, don’t quite have that same competitive advantage because they’re so much more of a regional, localized brand than Michigan, which is more national. I do think that Michigan only stands to benefit from that. 

You can’t discount the educational piece of it, and the relationship value of it. When the sum of money for these student athletes has gotten so significant, then you really have to start peeling back. What the advantage is now, if you have money, then how can you multiply that? Some of the best multipliers of compensation are relationships and education. How are you going to take those earnings in that window while you’re in college, and multiply that year over year. That’s our goal with what we’re trying to do, and I know that’s the goal with Michigan athletics — create great infrastructure, develop relationships. 

As they’re earning that money, it’s not about how much you make. It’s about how much you can keep and how you can multiply that over time. There’s no better market in college sports than Michigan for that. You might be able to look at Stanford or Notre Dame. I’d say those are up to par, but Michigan is just so much bigger, and the engagement is so much more significant than those two other schools. I really do believe we check all the boxes, if you’re a prospective student athlete. … There’s a whole host of reasons, and we’re at the level now where we can compete from a compensation standpoint. It’s not like it was five years ago, six years ago and all the years before that, where some schools might have something under the table, and we had nothing. Now there’s an equalizer there. Michigan is very well positioned for the future of college athletics.