Part 1: The Decision to Go Pro
The Go/Stay decision was already complex and multi-faceted; NIL completely upends it
As I hinted last week, I am going to break this analysis into two pieces. In today’s article, I will examine the key factors that players weigh when considering leaving school early for the NFL Draft. I will also orient you to the following numbers and structures:
Rookie Contract
College Scholarship
Bachelor’s and Master’s Degrees
Injury Insurance
Agent
In addition, I will include a section on qualitative considerations, such as: Injury Risk, Legacy, Family, Brotherhood, Brand, and Love for the University and College Life.
Finally, I will explain where NIL (Name, Image, and Likeness - i.e., the legal structure for players making money outside of the university based on their sporting achievements at the university) fits in all this.
Quantitative Factors
As already noted, there are five key quantitative factors, each entailing its own costs and benefits. I will address each in detail in order to provide sufficient contextual understanding for the Go/Stay formula.
Rookie Contract
Contract value varies significantly in the early rounds, but there is little difference between where in a round players are taken on the third day of the draft (i.e., the first pick of the sixth round does not make much more money than the last pick of the sixth round).
The entire value of the contract is guaranteed for first round draft picks and, as the graph shows, it really pays to be a first round pick. Second rounders also do quite well, but after that, the money declines sharply. All contracts are for four years, but only the best players make it, uninterrupted, to the end of their rookie contract.
A significant number of late round picks will be cut before the end of training camp. For players chosen in rounds 2-6, only the signing bonus is guaranteed, and it can either be paid out all at once or in a series of payments over time. Once again, all the big money is in the first round.
Another key point on signing bonuses is that they are taxed at the marginal rate. For an unmarried, late round draft pick who gets cut during camp in August and does not catch on anywhere else, that rate would most likely be 35%. Throw in another 5% for the vast majority who pay state income taxes, plus Social Security and Medicaid contributions, and one can safely assume about half of the signing bonus would go to Uncle Sam, in some form or fashion.
College Scholarship
A full Virginia Tech athletic scholarship is valued at approximately $35,750 for in-state players and $57,250 for out-of-state players who live on campus. That amount is lower for the many players who live off-campus ($33,440 and $54,940, respectively). Cost of Attendance payments, allowed only in recent years by the NCAA, help defray the indirect costs of education and gaps in meal plans.
Bachelor’s and Master’s Degrees
With so much in the way of academic assistance (tutors, guidance counselors, etc.) and players often entering school in January of what should be their senior year of high school and then staying on campus year round, it has become fairly common for major college athletes to complete their Bachelor’s degree in under four years. So, in many cases, players considering leaving school with remaining eligibility are doing so with one degree already in hand. As such, it is appropriate to consider the value of both undergraduate and graduate degrees.
Nothing precludes a player who leaves early for the NFL from returning to school and completing his degree, and even attending graduate school (see: Dr. Shaquille O’Neal, Ed.D.). However, guys who leave early and get chosen on the third day, who then flame out quickly, are unlikely to have the financial means to return to school.
Injury Insurance
Many athletes with professional potential who choose to return to school once they are eligible to go pro opt to purchase injury insurance. These days, that usually means adding a Critical Injury (CI) provision to a Permanent Disability (PDB) policy. As described in a recent Sportico article, these policies work as such:
Although often mischaracterized as standalone policies, CI and LOV [Loss of Value] are, in fact, riders that can be added to underlying Permanent Total Disability (PTD) policies. To obtain the extra CI or LOV coverage, an athlete first has to qualify for PTD; for collegiate consumers, that means the athlete must be viewed by an insurance company as a legitimate risk for the professional leagues.
Typical critical injury provisions define two categories of bodily harm on which the policy holder can cash in. Category 1 injuries—which, for college athletes, typically pays out $250,000—include high-grade ligament tears, torn rotator cuffs and heart attacks. For “Cat 1” tears, reconstructive surgery within a certain period of time is required for the policy holder to receive the benefit. Category 2 injuries, which usually come with a $100,000 benefit, are mostly muscular injuries, such as torn triceps or pecs. One current underwriter has a third category, paying up to $50,000 benefits, for injuries such as herniated discs.
Unlike LOV, critical injury does not stipulate that the athlete’s future career be harmed in order to receive a payout. In fact, while many of the listed injuries are serious, athletes can reasonably be recovered and ready to play before the start of the next season.
While there are variations to the cost of the coverage based on an athlete’s sport and pro potential, annual premiums for total disability policies with critical injury provisions will usually run a college athlete between $18,000 to $25,000. The bulk of that expense is from the riders, with the underlying PTD costing between $5,000 and $9,000 annually for $1 million of coverage.
It is important to note that CI riders are pretty cut and dry - you get hurt, you get paid, so athletes do not have to worry about the possibility of the insurance company refusing to pay based on a technicality.
Agent
The NFL limits agent commissions to 3% of a player’s salary, and good agents can provide rookie players a lot of value. One estimate puts that value at $15k to $25k per rookie. And, unlike injury insurance, the player is guaranteed to reap the benefit of having an agent. Still, an agent is one more cost to factor in, as all but a few players will require professional representation.
Qualitative Factors
Like usual, the qualitative factors are difficult to assess and subjective in nature. In general, one can think of them as such:
Injury Risk
This one is undoubtedly the primary qualitative factor that drives early entry to the draft. Even with injury insurance, players are unlikely to recoup the full value of what they could have made in the NFL, sans injury. For certain positions, like running back, that have especially high wear and tear rates, the injury risk does not end with that final college season, but extends into the pro career due to the “extra miles” on that player’s body.
Legacy
Players who are on the verge of breaking major records and/or are contenders for the Heisman Trophy may give such individual legacy achievements weight in the Go/Stay decision. Likewise, if the player’s team looks like a conference or national title contender, that possibility may also factor into the decision.
Family
Most players not named John Elway or Eli Manning have little sway over which team takes them in the draft and, therefore, which city they end up in. One can imagine an in-state player with a sick loved one who would prefer the certain proximity in college to the geographic uncertainty of the NFL.
Brotherhood
Some teams have groups of recruits who came in together in a key signing class. These guys all know each other well, having competed against one another ever since their earliest Pop Warner days. This brotherhood bond can sometimes keep the best players at the university past when individual calculations suggest they should go pro.
Brand
How many times have we seen elite college players make poor life decisions, especially early on in their college careers? The Oakland Raiders, under Al Davis, were famous for taking guys with great measurables while looking the other way on off-the-field incidents. It was almost part of their brand. But that is just one team out of 31, and Al Davis passed away years ago. For many players, an extra year of personal branding, including the development of leadership characteristics valued in the NFL, is a major consideration. A comeback story is almost always preferable to the dreaded “questionable character” label that follows too many guys to the NFL.
Love for the University and College Life
Finally, some guys just love being in college, or being at their specific college. A case in point would be former USC quarterback and current Fox Sports Analyst Matt Leinart. He returned for his fifth season at USC for many reasons, but one of them was that he liked living in L.A., dating famous people, taking Ballroom Dancing (because he already had earned his Bachelor’s degree and had little interest in a Master’s), and being a responsibility-free college student. It was a one-time opportunity and Leinart took it. More power to him!
The X-Factor: NIL
NIL gets a lot of attention because it involves putting money in players’ pockets. There are whispers about massive deals, and some of them are even true. However, NIL is about more than direct payments. In the qualitative realm, NIL can also play a major role in personal branding, which can increase a player’s current and future earning potential, both in the game and away from the field.
Through The Hokie Way, which facilitates charitable activities, Virginia Tech players have opportunities to cement their legacy in the community and build their personal brand. Engaging in such efforts also positions players for future professional and non-professional opportunities with the university.
The common thread in NIL is networking. By meeting people and engaging in business or charitable ventures, players develop a personal network that they can leverage down the road, regardless of what they do in the NFL.
Next Week
In Part 2 of this series, I will present a formula for how players, either implicitly or explicitly, approach the Go/Stay decision. Using former Hokie players as case studies and current players as hypotheticals, I will attempt to shed some light on the role NIL plays in convincing some guys to forego early entry into the draft. Finally, I will try to give readers a sense of the NIL earning potential necessary to keep each type of player (Day 1, Day 2, and Day 3) in school for the duration of their eligibility.