In late 2021, the once-mighty Texas Longhorns had just finished a 5-7 football season, losing six straight games for the first time since 1956. “We need bigger humans,” said Steve Sarkisian, the team’s coach.
That off-season, Texas found a new — or at least, newly legal — way to recruit them: cash.
A new tax-exempt charity called Horns With Heart, set up by Texas football fans, startled the sports world by promising to pay every Longhorn offensive lineman a salary of $50,000 per year.
It worked.
“Me growing up, I really didn’t have money. So the $50,000, it was just amazing,” said Cameron Williams, a 6-foot-5, 369-pound lineman — the kind of behemoth that even other linemen call “huge.” He had already committed to play for Oregon that year, but switched to Texas a week after the charity made its offer. The money was one of the reasons, he said: “I was just thinking about me helping out my family.”
Texas had hoped for five offensive linemen. They got seven — kick-starting a rebuilding process that has now brought them, two years later, to the four-team College Football Playoff. The Longhorns play Washington on Monday night in the Sugar Bowl.
In those same two years, the tactic that helped Texas — using cash from fan “collectives” to woo and keep players — has gone from an anomaly to a necessity in big-time college sports.
These “name, image and likeness” payments through collectives — permissible under N.C.A.A. rules since July 2021 — along with the loosening of transfer restrictions, have shifted how powerhouse teams are built.
But they have also prompted red flags from the Internal Revenue Service, threatened to create a sense of imbalance within teams, and fostered a culture of secrecy and an uncomfortable push-pull between collectives and schools. They have also undermined the push for gender equity by immensely favoring male athletes.
One way to measure the change is to look at the collectives behind the four football playoff schools: Michigan, Texas, Washington and Alabama. All have reached this point by adapting to — and exploiting — this flood of cash from fans to players.
“Every team in college football has a different approach to N.I.L.,” said Trevor Keegan, an offensive lineman at Michigan, which plays Alabama in the Rose Bowl on Monday.
The collectives at the four semifinalists are among more than than 140 nationwide, competing with each other in a shadowy free-agent market for college talent.
Players say the groups’ payments have been a welcome, and long overdue, addition to their scholarships. “It’s the least they could do, is pay us a little bit for the hours we put in,” said Alabama wide receiver Isaiah Bond. “We’re walking around some days like we’re 85 — and we’re 19, 20 years old,” he said, describing the physical toll games can take on players.
Mr. Bond said that he had not realized how much money college football generates for the school: at last count, $131 million annually. “What they’re contributing back, it’s nothing compared to what they’re making,” he said. “But it helps.”
Texas Longhorns
Texas’ plan to pay linemen — called “The Pancake Factory” because linemen knock defenders flat, like pancakes — helped set precedents that dozens of collectives would follow.
The first was how they justified the payments. After all, the N.C.A.A. still prohibits fans from paying players to play.
The collective, called Texas One Fund, did it by exploiting the new system, which allowed endorsement-seeking companies to pay players for the rights to their name, image and likeness. Collectives flipped that. They bought the rights, so they could buy the player — ensuring they remained happy and playing for their school.
Britt Peterson, a vice president of the Texas collective, says he asks donors, “How much more fun is this than what it used to be?” He encourages them to feel personally responsible for this team’s success. “This is your team.”
Soon, collectives gobbled up the name, image and likeness system.
At Texas, the collective has paid $14 million to Longhorn athletes since 2021, according to statistics kept by the school. That’s 64 percent of the total payments to Texas college athletes from any source, and more than all the money from the shoe companies, sports drinks and other brands the system was built to serve.
The result: an influx of money to players, even those too obscure to have much value as endorsers. Mr. Williams, the offensive lineman, bought his mother her first cellphone. Adonai Mitchell, a wide receiver who caught touchdown passes in the last two championship games at Georgia, bought his 2-year-old daughter what she wanted for Christmas.
“I got her a kitchen. That’s her favorite thing,” he said. “I’ll call her and she’s like, ‘I’m making carrots!’”
Texas’ collective set another pattern that more than 70 other collectives followed: It organized itself as a tax-exempt charity, meaning its donors get a tax deduction. The groups have justified their charitable status by paying athletes to visit sports camps and hospitals, or to post about nonprofits on social media.
But now, these charitable collectives have a problem: the I.R.S.
After initially approving dozens of collectives for tax-exempt status, the I.R.S. seemed to reverse itself in May. It issued a memo saying that collectives might not qualify as tax-exempt after all because their real purpose was to pay players — not to serve the public good.
“You can’t just take a collective or a booster club, turn it into 501(c)(3) and then just pay everybody just whatever the heck you want to pay them,” said Andrew D. Morton, a nonprofit-law attorney at the firm Handler Thayer, citing the tax code section that describes tax-exempt charities.
Mr. Morton said the I.R.S. could shut the collectives down or impose penalty taxes if they do not change course.
Texas’ collective says it is considering changes that would overhaul its spending and give a larger portion of its money directly to other charities.
For now, Mr. Peterson said the group is looking for charity work valuable enough to justify what it pays football players. But the collective paid football players $1.8 million this fall alone. What kind of part-time charity work would justify that?
“If you carve football out of this, all of this probably works,” Mr. Peterson said. But he said the collective cannot carve out football: It accounts for 81 percent of all the money it spends.
Alabama Crimson Tide
Alabama, one of college football’s most successful teams, initially resisted this change. Coach Nick Saban even blasted rival Texas A&M for using collectives to recruit players. “A&M bought every player on their team,” he said in May 2022. “We didn’t buy one player.”
Then Alabama played Texas A&M that year, and almost lost for the second consecutive year. The next season, Alabama had two new collectives, which illustrate another key facet of this emerging industry: its secrecy.
Many collectives say next to nothing about themselves, guarding a competitive advantage by preventing rivals — and athletes — from figuring out what players are actually paid.
One for-profit company called Yea Alabama releases few details about what it raises or spends. The company even declines to describe itself as a collective, calling itself merely an “entity.”
Alabama’s other collective is a tax-exempt charity called Walk of Champions. One of its board members, Elliot Maisel, told The Times earlier this month that the university had told his collective how much to pay each team. Mr. Maisel estimated that the amount for the football team worked out to $2,500 per month, per player.
“The coach and the athletic department determine all that. We don’t have that discretion. We don’t want it,” Mr. Maisel said.
N.C.A.A. rules bar university staff from “securing or negotiating deals” on behalf of student athletes. The organization, however, has shown little appetite for a crackdown on collectives that are too close to their schools. In fact, its most recent proposal would allow schools to take over the collectives’ work and begin paying athletes directly.
On Saturday, the president of Mr. Maisel’s collective, a former Alabama quarterback named John Parker Wilson, disputed Mr. Maisel’s account, saying that the collective was not “controlled, directed or managed” by the university. He said the group had only ever paid two athletes.
At the same time, Mr. Maisel changed his own account. He said that despite being a member of the collective’s board since its beginning in February, he did not know how its money was given out.
Washington Huskies
Collectives don’t just attract players: They help retain them, providing a counterweight to the pull of the N.F.L.
A year ago, Washington’s football fortunes had been resurrected with stunning speed. A new coach, Kalen DeBoer, and a new quarterback, Michael Penix Jr., who stepped into a program that had been a mess on and off the field, led the Huskies to their second-best record in 22 years.
But Mr. Penix and several core members of the revival seemed likely to pass up their remaining eligibility and enter the N.F.L. draft, meaning Washington’s giant leap forward might be followed by a step back.
Then another rally kicked into gear.
Washington’s collective, Montlake Futures, had struggled to find its footing in what amounted to a chaotic start-up industry. So a little more than a year ago, Andrew Minear, who had built a career as a nonprofit fund-raiser in Seattle — including nearly a decade raising millions in Washington’s development office — was brought in to lead the program.
Mr. Minear wanted to keep money from being the reason Mr. Penix and others would leave for the N.F.L., which offered a minimum salary of $750,000 this season. “It wasn’t a sticky note with a dollar amount,” he said. Nor was there an attempt to match their draft projection with a dollar value.
Instead, he said, the collective laid out a plan for the players to maximize their endorsement value by working with nonprofits, which would burnish their brands when they turn pro and their legacy in the community.
Mr. Minear said the collective’s revenues, which cover athletes for all sports, have improved to about four times its federal filings for 2022, which were $2.02 million. (Washington’s athletic department projected an $8 million deficit for the 2024 fiscal year, according to The Seattle Times.)
“If you stack us up with Oregon, Alabama, L.S.U. and other schools and what they do, we’re not at the top of the list,” Mr. Minear said. “But with what we do, we’re probably efficient.”
And if Montlake Futures’ cash reserves weren’t flush, Mr. Minear had something few college programs could sell — the opportunities that come with being anchored in a sports-thirsty, major league city like Seattle. Tuscaloosa it isn’t.
“How they did it and kind of having us work with not just random companies, but nonprofits, it was pretty cool,” said Troy Fautanu, the anchor of the offensive line, who added that money was a factor in his return, but “not everything.”
The plan has kept players at Washington. Mr. Penix announced his return last December and recently finished as the Heisman Trophy runner-up. Ultimately, he was joined by the headlining receiver, Rome Odunze, and the game-changing pass rusher, Bralen Trice, who, along with Mr. Penix, are considered first-round draft picks.
“All those guys could have left last year,” said Dillon Johnson, the Huskies running back. “But they came back, you know, got some money and they helped their draft stock. So, I mean, in my opinion, I mean, it helped them.”
And everyone else on the unbeaten Huskies.
Michigan Wolverines
In this new era of college athletics, it can pay to have a presence. When Michigan safety Rod Moore told reporters after his game-clinching interception against Ohio State that he had “called game” with his catch, it was a matter of days before Mr. Moore and the school’s marketing arm had trademarked the phrase and began selling T-shirts stamped with the phrase.
Mr. Moore is a textbook example of how name, image and likeness rights were intended to work. But not every Wolverine gets a moment on center stage — or has the desire to take a star turn.
Mr. Keegan, the offensive lineman, is one of the team’s captains, but a brand ambassador he is not. “I’m not really a social media guy,” he said.
But he is still making out nicely, telling Sports Illustrated at the start of the season that he expected to bring in between $225,000 and $500,000 for his final college football season through Michigan’s collectives, Champions Circle and Hail Impact.
The setup at Michigan, which, like Washington, struggled to find its N.I.L. bearings, may signal what the rapidly evolving future of college football looks like if revenue sharing — something that Wolverines Coach Jim Harbaugh has publicly backed — becomes a reality. Money will likely be spread somewhat evenly around a locker room with star players earning more through separate endorsements.
Hail Impact was formed as a nonprofit, whose objective is to establish baseline payments to every Michigan football player.
Champions Circle is a for-profit operation, and last year created the One More Year Fund, which raised money to help convince players who might be on the fence about leaving for the N.F.L. to return. Whereas many collectives have leaned on donors for funding — a model that some view as unsustainable — Champions Circle has also sought to raise money by selling high-priced experiences to well-heeled Michigan fans.
For example, it advertised a package that included joining the Wolverines for their team dinner before the Ohio State game, and running with the players out of the stadium tunnel and leaping to touch the “Go Blue” banner, a Michigan football tradition since 1962. The price tag: $65,000.
“That’s a once-in-a-lifetime experience for some of those guys,” said Junior Colson, a linebacker. “That’s something they love to do, something they cherish because they love being at Michigan. They love being part of the Michigan team. We love having them around.”
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