The Ultimate NIL Primer with College Sports Company’s Adam Breneman

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0:42Welcome back to The Deal. I'm Jason Kelly alongside Alex Rodriguez. And actually alongside Alex Rodriguez, it's Monday. We're here in Dallas. We just wrapped an unbelievable conversation with the legendary Jerry Jones. It takes a lot for us to show up somewhere together, but we had to for Jerry. Yeah, and like Magic Johnson, I mean, this is one that was very close to my heart. Ever since I dreamt of being an owner of sports, a professional sports team, Jerry has been my North Star. And he's been a longtime mentor. And yeah, he put on a master class. It's an unbelievable conversation. We can't wait for you guys to hear it.

1:19That'll be out in just a few weeks. A busy week for us. We're going our separate ways, at least for about 24 hours, 36 hours. You're heading off to Minnesota to see the Lynx play in the semifinals. What a season they're having. I mean, how excited are you? We're very, very excited. We're playing a very good Phoenix team, game two. We were fortunate to win game one. And we're supposed to go to New York together, and I had to split because of the schedule. But I'm very excited. You know, this is the road to number five, as the team has labeled this year, because we got very close against the Liberty last year and hopefully we can close it this year.

1:54Yeah, number five being you already have four championships, the most of any WNBA team. And so going for number five under the leadership of Nafisa Collier, what an incredible team. We are going to reconnect in New York, big Bloomberg event that we're putting on that you're going to be a part of. We're going to talk about building sports and entertainment infrastructure in Africa with Masai Ujiri and Adam Silver And meanwhile, we're looking at all the things happening in the world of sports. Nothing bigger right now than college football. You're Hurricanes, man. What in the world? They are on fire.

2:28I am like optimistic, but I'm cautious, right? Because we've been down this road before. We've had these start, fall, start, start, fall, start. But it seems like we have some momentum going. And we beat a very good Florida team last week at home. And then we play Florida State this upcoming week. And that's going to be like the moment because they are our arch rivals. Yeah. And we talk a lot on this show about college sports and college football specifically. No one better to talk to them than Adam Brenneman. He played at Penn State. He is now a college football analyst and also an entrepreneur.

3:00Fun to talk to him because, you know, he clearly is following a playbook that you helped invent. You know, candidly, he talks a lot about, you know, being ambitious in his his business dealings. Also just had some great insights, said some things about where college sports is going and where it should go that I found really, really interesting. So coming up next, Adam Brenneman.

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4:04Welcome back to The Deal. I'm Jason Kelly alongside Alex Rodriguez. We could not be more excited to have Adam Brenneman here with us. He's an analyst. He's an entrepreneur, former college football player. So much happening in this world, Adam. As the season gets underway, we are just thrilled to be talking to you. So welcome to the show. I appreciate you guys having me on. Love the show. Love what you guys are doing. Alex, I've been a big fan for a long time. The amount of times I've looked at the A-Rod Corp website as you've built out your company and showed it to my team and said, hey, I love what he's doing here.

4:34I'm trying to do it on a much smaller scale right now, but hopefully someday I can achieve the things you have. And again, love the show, love all the interviews you guys are doing. Thank you. So we're talking to you at a great time. You know, college football season is just in full swing. You know, the first couple weeks have seen some incredible games. What to you are the big storylines, especially given sort of the business angle that we know you really embrace as you think about college football right now? The biggest storyline in college football is just the money that's flowing into the sport.

5:07The money has shifted from it used to be just the media networks and the schools getting the money. Now the players are getting paid as well. And there's been so much negativity, as you guys know, around athletes, student athletes getting paid in college athletics. but as we've looked at the product on the field, college football has never been stronger. The viewership's never been better. The game has never been better. The product on the field, as far as the talent level, has been better. There's been an effect with the NIL and the money where guys are staying in school longer. You have players who could have gone to the NFL that stay in school because they're making$2 million as a starting quarterback.

5:44Think of a guy like Drew Aller at Penn State, which should have been a top five pick, but stayed for one more season at Penn State, now competing for a national championship. So for all the negativity and all the talk about NIL and should players get paid and, you know, people saying football will never be the same. College football, it's not the college football I remember growing up. Well, it's better than it ever was in college football and the fan bases, the pageantry. There's a reason that college football games have better TV ratings than any other sport. It's because of how diehard these fans are.

6:14And I think NIL has only made that stronger. Yeah, well, I mean, I got to just talk a little University of Miami because I'm going to geek out a little bit. We've suffered for a long time. And, you know, I was telling Jason, I sit on the board at the University of Miami for the last 20 years. And we were fortunate to get back the quarterback from Georgia, which I think he got around four million bucks. I've been really on a high because Notre Dame played Miami for the opener. I had to watch Catholic versus convicts. I'm all in it right now. Disappointment or we kind of do we have a real shot with the University of Miami?

6:46Give me your thoughts. Miami has a real shot. You look at the ACC and Miami's the top team in the conference right now. I don't even think it's really that close. And you think about Carson Beck and how he's playing at quarterback. He's a guy who's played a lot of football. He has the experience. I also like a guy who's been through some crap in his career. It hasn't always been pretty. It hasn't always been good. But sometimes guys who have talent, but there's been issues for whatever reason, sometimes you just need a fresh start. Sometimes you just got to go somewhere and have someone new who believes in you.

7:18And that's what Miami's been for Carson Beck. I mean, he's a guy who played at Georgia, was a big recruit, so much excitement and talk every single year, never quite got to that pinnacle and now has this fresh start at Miami. And you can see the confidence he's brought to that team. He's brought a lot of confidence and swagger to this Miami program. The Notre Dame win, beating South Florida, who's a top 20 team, week three of college football season. So I really think Miami's got a good roster. Mario Cristobal's built that team the right way. He built it in the trenches through high school recruiting, not just through the transfer portal.

7:52I love Miami this season, and their path to making the playoff isn't all that hard. They may not play a ranked team other than Florida State the rest of the schedule. So I'm a big believer in Miami right now. Now Carson Beck has to keep playing well, keep taking care of the football, and avoid some of those mistakes that have plagued him last season and the last couple of years. But I'm happy for Carson Beck more than anything else because he needed a fresh start. And it's always cool to see the positive part of the transfer portal. You get a guy who gets to have that kind of second part of his career and thriving at his new school.

8:22Love it. So, Adam, let's keep with this because, to me, this is like the single most interesting business story in the world of sports is college sports right now. But when it comes to college football, Carson Beck, great story. We love to see it. You know, he doesn't go to the NFL. You know, you mentioned Drowler as well. What are the knock-on effects of this? You know, what are the effects that maybe we should be thinking about from a business perspective, from the businesses of the individual teams and the schools? You know this world so intimately. Like, what are the things we may not be seeing that you're seeing as we think about all this money coming in?

9:00The biggest shift that's happened in the last year or so in college sports, aside from just NIL as a whole, has been revenue sharing actually coming to college sports. So what's happening now is these college athletic programs can pay athletes directly out of the revenue they're getting from their media deals and through the athletic department. Every Division I program in college football, probably the same in basketball, has opted into revenue sharing where they have a salary cap, just like the NFL does, where they can pay their athletes in year one, it's$20.5 million a year. But the interesting part is you still have NIL that's outside of that$20.5 million.

9:41And that's the business story that gets really competitive here. And how do you get to a level playing field? And that's where the frustrations come in for a lot of coaches. You have all these schools. let's just stick with the Big Ten. Ohio State, Penn State, Michigan, Minnesota, Wisconsin, USC, all of them are saying, hey, we're going to pay our athletes $20.5 million a year. That's a revenue share agreement getting paid from the athletic department to the athlete. And they have to perform services for that just like a normal contract would be. Now, the athletic department has to split that between sports.

10:11So I would assume probably three-fourths goes to football. Say$16 million of the$20 million goes to football. Now, what happens is when everyone pays their players$20 million, well, everyone's pretty much back at zero because there's no competitive advantage for any program. So what's happening is Ohio State, and Ohio State says, well, we've got to pay our guys more than Penn State pays their guys. We're competing for championships. So now you have what's really true NIL outside of the revenue-sharing cap NIL, which is the businesses doing deals with the athletes. What the arms race is right now is what schools can create true commercial NIL programs that get their athletes paid more than just the revenue sharing money.

10:52So it's some of these schools are trying to put together a pool of donors or businesses to say, we want you to do deals that are real NIL deals with all of our top athletes that we want to come in here so that the quarterback can make maybe two and a half million instead of two million. And then you can compete in the transfer portal with all of them, which some coaches like, some coaches don't like. How do you make sure that doesn't become just pay for play, where then you kind of don't even have a salary cap anymore, and you're just funneling money through donors to athletes, like what was happening in the early days of NIL.

11:26so it's pretty chaotic and the money's going to keep flowing in and you guys know the amount of money that these teams are making on football and men's basketball and women's basketball a lot of places that it is worth it for them to try to fund all this money to the athletes because the product is so great the conferences are consolidating to get the better media rights which means more money will flow back to the schools so the the money continues to get more and more massive in college football and college sports. Adam, that's a thank you for that. That was a very, very good explanation. I mean, it's such, it's moving so fast and you said a lot.

12:01I just want to make sure that I get this part clear. So I'm clear on the 20.5 rev share, right? And that split among all sports. And you said three fourths will go to football. That sounds about right. Is there a cap outside of that? So in the situation of a quarterback, can you just spend unlimited amount of money? can it go up to like another 40 or 50 million dollars for the roster the short answer is yes but the nuance in this is that the school is not allowed to facilitate that payment so it's so similar to alex when you played major league baseball you had your contract with the major league baseball team but you also could do a brand deal with nike or adidas or pepsi or that's what's happening in college football but because the difference is there's recruiting in college football.

12:46So you're not just drafting players and then trading them and then doing free agency. You're recruiting. So that's where pay for play comes in. You're now trying to recruit the players. So the more money you pay them, the easier it is to recruit. So these schools that have the$20.5 million cap, they're trying to get that incremental money above. And that's the gray area where this isn't happening. But for example, if Penn State has a massive donor, Terry Pagula, the owner of the Bills, like I'm sure they'd love for him to be more involved than NIL, but say he wanted to be involved and he said, I could buy whatever roster we want here.

13:18So he could go just pay all these athletes through NIL deals, get them to go to their school. Who's to judge what the fair market value is of that deal? Because that's the nuance. To directly answer your question, Alex, the deal that's outside the cap has to be fair market value and go through a clearinghouse from the NCAA. There's a group called the College Sports Commission, which was put in place after the house settlement in college sports and after revenue sharing came in that said anything that's outside of the revenue sharing cap has to be fair market value has to be true commercial nil to avoid the schools just saying hey this donor just pay this guy all this money to come to our school but who's going to tell phil knight at nike what fair market value is he's going to say i'll pay the guy whatever i want like it's fair it's worth it to nike and to me so that's the nuance of it all there's no cap on true nil because who's to tell an athlete you're not worth three million dollars a year to this company but the making sure that it stays fair is the biggest challenge right now facing college sports and that's the arms race i interviewed athletic director at ohio state and he straight up said the biggest arms race right now used it used to be facilities who has the nicest facility in college sports now it's who can build out the best true true commercial nil outside of their athletic department and who can do it the fastest so that they have a recruiting advantage well i mean this happened so Alex's older daughter is a student at Michigan.

14:39I mean, Michigan played this brilliantly, right? I mean, they had a donor who came in and essentially was able to pay their quarterback and woo him away from LSU, right? He was committed to LSU, and now he's at Michigan. He's the starting quarterback at Michigan. Do I have that right? Correct, yeah. Bryce Underwood, he's a great player, going to be one of the best quarterbacks in college football, and Michigan got a bunch of donors together and just sold them away, basically, when he was in high school as a recruit. So the legality of all that, and that was pre-revenue share. So that was when it was just straight NIL collectives.

15:12These schools weren't allowed to be part of it. It was what the donors were. The donors could be part of it. The donors could pull their money together through collectives and pay the athletes. So that's what happened with Bryce Underwood. And Michigan got their quarterback of the future. Yeah. I mean, it's why, Alex, isn't it wild to think about? I mean, this is like so radically different. I mean, you must see it, Alex, you must see it. even in being on the board of Miami. It totally changes the governance of a school. It couldn't be more different than it was. Yeah, and Adam, it's interesting what you said about players get more motivated because of the money.

15:47When I was 17, coming out of Miami, I was the number one pick in the country, and I signed for$1.3 million. And I agree with you because I also had a coach that had an iron fist, and his name was Lou Piniella. and he never made you feel like you were the special kid on the block. It was in the contrary. And because of him, because of his coaching style, which it resembles like a Nick Saban, right? Like just a great coach, but very tough, all about fundamentals. Made sure you were accountable at every inch of every single day of the game. And he has a big, big time print on my career. So the money was not a negative.

16:28It was actually a neutral or positive, like some of these athletes. I would hear all the time from coaches, old school guys say, well, you pay the players a hundred, a million, four million a year. These coaches or guys who have kind of been around the system a while have said and said to me, if I got a million dollars, I'd stop working. How's this going to motivate the players? They're just going to show up and get their check and go home. And I've found the exact opposite. The money has motivated these players even more. There's no better motivator to show up every day on time to practice, to put in the extra work to want to perform well to ensure that you're getting paid your million dollar a year contract you have with the school and to also get that next contract get the year two revenue share deal if a player is making 200 grand one year he's going to want to make 400 the next year so i i think it's actually enhanced the product in college football it's made it all better it's made it more well-rounded where you also have more balance in the system now i mean college football college athletics has been such a big business for everyone but the athletes for so long.

17:31And now finally, the athletes can be part of that business. They can partake in the upside. They can get the reward for the hard work they're putting in. I think it's been a big positive and it's really actually made the athletes work harder because there's a financial incentive at stake.

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18:28All right. So, Adam, let's talk about the business you're building or one of the businesses you're building, the College Sports Company. You found this a few years ago. Clearly, you know, seeing part of what was happening, it's only accelerated since then, given how, using your word, chaotic it is. how do you build a sustainable business in this and how much has it changed what you were trying to do as you're constantly I'm imagining sort of evolving what what you're aiming for yeah the college sports company came or started based on really two pillars one was that content is king and everyone wants to do content well I was just finding as I was creating content myself and building a platform online telling stories about football breaking down the game people were coming to me, athletes and college athletes and schools and said, Hey, we want content.

19:18How do we do content? We need to do content. At the same time, every school now, and every NIL collective has a revenue issue. They're trying to figure out how do we drive more revenue? Because think about it, every school has a new$20.5 million bill they got to pay every year they didn't have last year. So all these schools are like, man, we need more money. How do we drive more revenue? And that's where kind of the epiphany came in that the best way for schools to thrive in this era of college sports is to think and act like a media company. It's to create content with all the athletes they have currently at their schools.

19:50It's to create content with the former athletes that want to be part of the program. Think about how many former athletes want to be in media. Well, let's use them and let's build these school-specific media networks that we can then monetize to drive revenue for the school, for NIL, for paying the players themselves. So that's how we started. It's evolved since then. As you guys know, this landscape of college sports is crazy. And you have new legislation, new rules. But we work with schools all over the country and work with their athletes to build school-specific networks, media networks, have shows at each of those networks.

20:25And then we monetize it through sponsorship, advertising, events, experiences, e-commerce, everything that a normal media company would do. And then we share that revenue with the school or with the NIL collective. And that's the solution for them. So the schools are getting brand building, their athletes get to be part of content, and they also are getting revenue on the back end. It's been fun. I mean, the world of college sports and sports itself has become really an asset class. And people want to invest in sports. People are excited about sports and college sports. I think the shift in what college sports looks like, it's only becoming more professionalized.

21:00You know, Adam, it reminds me of how private companies are staying private longer, right? Because they can raise more capital. You don't have the quarterly earnings. CEOs can really think about long-term enterprise value versus like what's going to be great on the next quarterly call. I think about a player like Anthony Edwards who plays with us and he was the number one pick out of Georgia. He would have made probably, who knows, maybe tens of millions of dollars over the course of four years. And the whole course of the Timberwolves may have been completely different. I guess my question is, I'm sitting here in our facilities with the Minnesota Timberwolves and the Lynx.

21:34and as I think about how should we, I'm asking for your advice here because you're right in the middle of college sports. How should we be assessing players? Because if a player's making three and a half million dollars, is he going to have the same motivation to be great in the NBA or the WNBA? Because this is, I think I can relate with players, but it's like Jason said, radically different than when I played. How would you think about recruiting players? Yeah, I think athletes that are getting paid a ton of money in college are just as motivated as anyone else who is trying to make it with their career.

22:10I'm thinking of a football player specifically, I won't mention his name, that I talked to who made a comment to me. He made like$800 ,000 the one year he was in school. And all he was talking about was how hard he wanted to work because he wanted his next deal to be$2 million. And I just kept thinking, I kept coming back to that because the average person, you would say, hey, this guy's 18 years old making 800 grand. I mean, the things I would have done with 800 grand when I was 18 in college, like I see this perspective and it's like, man, like you taste it a little bit, right? Like you get that taste in your mouth and then you're around people who are making even more and more.

22:44And I think that's just human nature. Like now that I'm post playing in my business career, the more I'm around people who make more and more money, the more motivated I get. I'm like, oh, well, that guy figured out how to make that much money. Why can't I figure that out? I really think that you have these guys who make all this money in college, they know what the top echelon looks like. And I still think that they're going to want to get there, whether it's money motivation. I also think that if there is an athlete who was good enough in college to work their butt off, avoid distractions, and get to that pinnacle of college sports, they're going to have that same attitude in professional sports.

23:21That's in their DNA at that point. They're not going to say, hey, I made$4 million. I think I'm going to just ease out. In their DNA is that there's greatness within them. So I think it's finding those guys, the guys who can have consistent excellence in college, despite how much money they made, are ones that are going to be great professionals. I do think that there is a new shift in sports where, like when I was playing football, if I would have told my coaches that I wanted to start a podcast or have a business on the side, they would have laughed me out of the room, right? It would have been like, no, like Bill O 'Brien was my head coach at Penn State.

23:55he would have been like, dude, you just messed up that play on third down. You're not starting a podcast. Learn your playbook. Where nowadays, it's way more accepted, and I think it should be. Where athletes, it's cool to invest as an athlete. And Alex, you've been a big part of that, I think. The shift in that athletes are entrepreneurs, athletes are businesses, athletes create content, athletes can be venture capitalists and can start businesses and can invest in their hometown and can buy real estate. All that is cool now, and it has shifted completely, And I think that's an amazing thing for the athlete, because for a long time, it was almost no matter what your sport was, it was kind of like, hey, if you talk about that, it's kind of like you're not focused on your sport and you better just shut up and play well on Saturday or play well on Sunday.