How schools try to protect their IP, multimedia rights in the NIL era

As college athletics nears the two-year anniversary of the NCAA relenting on its previous prohibitions on athletes monetizing their name, image and likeness rights, administrators around the country are tasked with two parallel, yet potentially competing pursuits: Maximizing athletic department revenue and their athletes’ NIL opportunities – to the extent they’re allowed.

There’s the potential for the two goals to align, such as through group licensing agreements or when an NIL collective becomes an official sponsor of an institution through the institution’s multimedia rights holder.

On the other hand, attempting to maximize revenue for both athletes and athletic departments could also create potential conflict, such as when an institution limits the use of its intellectual property for NIL deals or when donors or businesses face multiple options of how to spend their discretionary income in support of an institution or its athletes.

The sports advertising and entertainment agency Van Wagner‘s recent multimedia rights (MMR) contracts with Western Michigan and Kent State, which the parties announced last December and in April, respectively, shed light on how an athletic department and its MMR partner might try to protect a university’s IP, official marks and related revenue opportunities in an era in which athletes can sign sponsorship agreements of their own.

An MMR contract can include a wide range of digital and physical properties, such as coaches’ television or radio shows, digital media rights and sponsorships that appear on scoreboards. MMR agreements are often long-term contracts with a mix of guaranteed, royalty-based and incentive-based compensation.

Western Michigan limits use of marks to sponsors

Through public records requests, On3 obtained a copy of the 56-page contract with Kent State and 50-page contract with Western Michigan that Van Wagner agreed to in the last six months.

In both contracts, NIL is mentioned on three pages, including the respective definitions schedules. The agreements define “Student NIL Arrangement” as “a personal sponsorship agreement or similar arrangement involving that student’s name, image, or likeness.”

While the two contracts were announced just four months apart and both involve a university in the Mid-American Conference, there are a few differences in the wording of their NIL-related clauses.

Western Michigan agreed that it shall not permit athletes who enter into an NIL deal to use any university marks or IP in connection with their agreement unless it’s with a Van Wagner sponsor that’s authorized to use those marks.

Regarding Kent State’s IP, the university agreed that it “shall use commercially reasonable efforts to ensure that its processes with regard to Student NIL protects the rights granted to Van Wagner under this Agreement.”

“They can’t use our branding or our intellectual property at all unless it goes through a different set of clearinghouses that our bosses – and then at the time, LEARFIELD – and now Van Wagner would kind of take a look at,” Kent State director of athletics communication Dan Griffin said.

According to the contract, Van Wagner agreed to pay Kent State $7.7 million in guaranteed royalties alone over the 10-year contract, including $700,000 in each of the first two contract years and up to $875,000 in the 10th year. Van Wagner also agreed to pay Kent State a one-time royalty payment of $500,000 by July 1, 2023 for the nonexclusive rights to university marks.

Kent State redacted the percent of net revenues that Van Wagner will retain in each year of the contract. If the first year of the contract doesn’t result in at least $1 million in gross revenue, there’s a clause regarding the parties agreeing to make good-faith adjustments to subsequent years.

In the 2022 fiscal year, which ended June 30, 2022, Kent State’s athletic department reported $28.6 million in total operating revenue, according to a copy of its financial report submitted to the NCAA. The athletic department reported almost $1.3 million in royalties, licensing, advertisement and sponsorships revenue, or nearly 4.5 percent of its total revenue for the year. That figure can also include in-kind products or services received as part of a sponsorship agreement.

The right to renegotiate an MMR agreement with Van Wagner

Under a heading in the contract between Kent State and Van Wagner that’s labeled “Right to Renegotiate Terms,” the parties agreed Kent State is required to renegotiate in good faith if a “change in applicable law” requires Kent State to allow its athletes to use university marks in connection with an NIL deal and if “such use or uses individually or collectively significantly and adversely affects Van Wagner’s ability to sell Sponsor Messages or other Multi Media Rights or results in a significant and adverse decline in the price at which Van Wagner is able to sell Sponsor Messages or other Multi Media Rights.”

At the time of publishing, a Van Wagner spokesperson hadn’t responded to requests for comment through voicemail and email.

“Now should the laws change to where student-athletes can just willy nilly use a university’s branding and intellectual property without going through that clearinghouse – just making sure that it’s NIL compliant – that’s where those clauses kind of come in,” Griffin said. “To where should something change at the state or national level, Van Wagner and Kent State reserve the right to go back to the table and be like, ‘OK, now that we have some clarity on where these laws are now sitting, how is that going to affect our partnership to maximize Kent State’s branding and MMR with Van Wagner? And is a student-athlete’s NIL (deal) going to impede on us maximizing that that partnership can be?’

“At a school like Kent State, maybe yes, maybe no. At Ohio State and Alabama, sure. Absolutely. That would have more kind of firepower than some of our athletes here but it’s still obviously a clause and a loophole you need to close should some NIL law change and it’s ever-changing so it’s a nice little provision to have in there to be a catch-all and a chance to kind of hit the reset button should any of those laws change.”

Western Michigan and Van Wagner agreed that the latter can require the former to renegotiate “if a Student Athlete is permitted to use Marks in connection with a Student NIL arrangement in violation of Section 2.11.3 of this Agreement and such arrangement significantly and adversely affects Van Wagner’s ability to sell Sponsor Messages or other Multi Media Rights.”

Section 2.11.3 is the clause that only allows athletes to use Western Michigan marks if an athlete’s deal is with a Van Wagner sponsor that is permitted to use university marks.

‘We hope we don’t have to use it but you never know’

Griffin equated the clauses regarding the right to renegotiate to many force majeure clauses, which have become particularly important in the last few years.

“Just like we saw all heck break loose in 2020 in regards to game contracts and figuring out, ‘Alright, are we going to negotiate a buyout? Are we going to try to reschedule it?'” Griffin said. “No one ever saw that happening. That’s why those clauses are in there. We don’t foresee anything happening but you never know with those ever-changing laws and basically NIL adapting as things go on.

“It’s an ever-changing kind of medium right now, for lack of a better word, now that it exists. So why not have that clause in there? Break glass in case of emergency should something come up within the scope of NIL as it kind of evolves (in the case) that this looks like it’s going to become something more of the regular that we need to address and it could become law. Alright, cool. This gives us the opportunity to come back and take a look at everything. We hope we don’t have to use it but you never know.”

Griffin said it remains to be seen how the NIL and MMR landscapes would be affected if a state or federal law required an institution to grant the use of its marks to athletes in NIL deals. Ideally, the hypothetical scenario would be mutually beneficial to all parties – an athlete would provide greater value through the university, which would receive more exposure – but it would place greater emphasis on educating athletes about partnering with the right brands.

“You hope that it would be beneficial to all parties and you could renegotiate and just go, ‘OK, well now you can almost look at the student-athletes as a secondary marketing arm to the university now that they can use our IP and things like that,'” Griffin said. “You hope that it can be beneficial that it would increase that brand footprint. It’s no longer just the athletic department or just the university. It is now an individual representing Kent State beyond just his or her scope of sport … It is a little bit of a slippery slope to where does a school like Kent State, where if this does come to fruition, what does that mean in terms of keeping an eye on everything? Now does a school like Kent State or Ohio State or whomever need to increase staff? Can they do that budgetarily? It creates a whole number of different issues should that come to fruition.”