NIL
NCAA explains multi-year player contracts with incentives and buyouts
Though overdue and underutilized, it appears athletic departments will finally include stability and consequences into name, image and likeness contracts with their players. A lengthy Q&A crafted and distributed by the NCAA covers several aspects of the post-House settlement world, and one section relevant to this conversation addresses multi-year contracts with players, buyouts and incentives. For starters, the […]

Though overdue and underutilized, it appears athletic departments will finally include stability and consequences into name, image and likeness contracts with their players.
A lengthy Q&A crafted and distributed by the NCAA covers several aspects of the post-House settlement world, and one section relevant to this conversation addresses multi-year contracts with players, buyouts and incentives.
For starters, the NCAA said that contracts covering “additional payments” do count against the “benefits cap,” which is the $20.5 million limit schools are now permitted to split up among those participating in NCAA sports on campus. If a school pays a player a share of revenue and/or NIL, which is also permissible now, the amount specified for a year in the contract is counted toward the cap that year. The amount specified for any subsequent year counts toward that year.
In short, the school has to report the benefit in the year the benefit is provided. That’s important to note if and when takes its NIL operation in-house. If NIL agreements are with WVU, the payments count toward the cap. If NIL agreements are made outside of WVU, those wouldn’t count toward WVU’s cap.
The example the NCAA provides details a two-year agreement and includes a “signing incentive.” A player is promised $50,000 “upon enrollment” as well as $100,000 on Jan. 1 of the first year and then $100,00 on Jan. 1 of the second year. The school would have to count $150,000 for the first year, because the player received the signing incentive and the annual payment. The school would count the second $100,000 annual payment for the second year.
However, the NCAA also acknowledges the obvious, which is that players will inevitably breach the contract and transfer to another school. The NCAA presented a scenario with a $100,000 payment split into $50,000 paid at the beginning of the academic year and the remaining $50,000 paid at the end of the academic year and, most importantly, a $100,000 buyout if the player transfers.
Supposing the player transfers before the end of the academic year, the school has made just one of the $50,000 payments and counts that toward the cap. The second payment never happened, so it doesn’t count. The new school that the player transfers to then pays the original school a $100,000 buyout, and that’s one benefit of bringing NIL in-house.
If a WVU player transfers to a new school and breaches the NIL contract with WVU’s in-house setup, the player’s new school would pay WVU the buyout. However, if that transferring player breaches an NIL contract with a third party NIL and not with WVU, the new school wouldn’t owe WVU anything and would only pay the third party the buyout if that was in the NIL contract.
In the NCAA’s scenario, the new school has to count the $100,000 buyout, as well as any other payment promised and made to the player that year, toward the cap. The new school “may not increase its benefits cap allowance by $100,000 as a result of this buyout payment.”
The NCAA is also allowing contract incentives and explained a scenario for a two-year contract with a payable bonus if a player has a 3.0 GPA after the fall semester. The player is to be paid $50,000 on Jan. 1 of the first year and Jan. 2 of the second year, and both payments would count toward the cap for the respective year. If the player earns the incentive, the $5,000 counts, and if the player falls short of the GPA “the payment will be removed from the benefits cap allowance for that year.”