It would probably be easier to list the titles he doesn’t have and the hats he doesn’t wear.
Two-time All-American wrestler. International gold medalist. Starting strong safety on the UB football team of 1986. Vice President of the Student Body. UB Alumni class of 1987. UB Athletic Hall of Fame Inductee 2009. Coach of Providence Day School back-to-back NCISAA state title team (’21,’22). Entrepreneur. NIL pioneer. Husband to Diann, dad to Matt, Kevin and Kate, and Uncle Dave to me.
Earlier this week I was fortunate enough to sit down with Western New York native, David Hickson, to discuss the current landscape of NIL collectives and how he found himself working as the head of NIL and Executive VP of Infinite Reality. The story is an interesting one: a story especially worth sharing to young aspiring attorneys looking to break into one of the most exciting practice areas the law can offer.
Dave’s first job was with AT&T, where he received invaluable corporate training. Much of what he learned during his time with them qualified as a mini-MBA. Using these building blocks, he started his own business so that he could be the one in charge. But “business” quickly turned into “businesses.” All were successful at some level, and each time he would turn a profit, he would be led to another bigger and better opportunity. It was being the co-founder of chek.com, now Synacor, that served as his first foray into enthusiast audiences.
Next in line was Stoneacre Acquisition in 2004. Though exclusively for NASCAR at its inception, Stoneacre was created to build affinity programs for sports and entertainment entities. Following a short consulting assignment to help NASCAR create a valuation for their website (which was licensed to Turner Sports), Stoneacre was granted the rights to build “affinity” programs for NASCAR.
But what exactly are affinity rights? In 2004, this was not clear, so he began to research direct to consumer programs where he discovered the Dave Matthews Band Warehouse Club. At the time, the Warehouse Club (which was literally set up in a warehouse in the-middle-of-nowhere Virginia) was one of the first true “Insider” membership programs for fanatics of the band. Members could pay $50 a year and get benefits that were not available to the general public: exclusive rights to purchase tickets before the general public, get better seats, a chance to win a meet and greet, previews of new music, and leftover tour merchandise at a deep discount. This type of paid membership access became the future of the fanatical subscription model: VIP experiences, exclusive content, and a private marketplace of merchandise. This is the model that Stoneacre built for NASCAR fans and later for other fanatical brands like Turner Classic movies, This Old House, The Enthusiast Network, The Culinary Institute of America, Skin Walker Ranch and many others. See where we’re headed?
Eventually they were able to build a data base of more than 6 million NASCAR fans while enrolling over 600,000 fans into a credit card on file Insider Membership. Remember, this is back in the early 2000s when subscriptions were not universally adopted.
In 2014, Dave founded FullCube, Inc. to build a turnkey technology platform to support “Insider” membership programs for enterprise clients. Their technology and intellectual capital provided a valuable technology-enabled services business that enabled their brand partners to launch and operate “Insider” memberships. These would go on to consistently deliver those seven- or eight-digit recurring revenue streams. But while the technology advanced, so did consumer demands.
All of this leads to ReKTGlobal’s acquisition of FullCube. Kismet, if you will. ReKTGlobal is a holding company in e-sports consisting of about six different e-sport franchises. Fueled by Gen-Z’s insatiable desire for more, and more, content, ReKTGlobal originally focused on implementing the module so fans could access their favorite professional gamers while using an app. This too was wildly successful. But then something happened in the world of college sports in 2021…
In what is likely the last 9-0 decision we will see in our lifetimes, the Supreme Court handed down the famed Alston decision. And it seemed like it was right here that all the stars aligned for Dave’s entrepreneurial pursuits and passion for sport. We know the chaos that ensued following Alston. ReKTGlobal saw a clear opportunity to enter into a new arena as a potential leader: the world of NIL. The collectives that were forming were no different from their enterprise clients. College sports fans might be the biggest “fanatics” around and ReKTGlobal had the technology to support these collectives by building “Insider” membership programs giving fans what they wanted: access to more, more, and more, while generating revenue for talented, young athletes to get paid, paid, paid.
They started calling collectives and offering their intellectual capital and software to help keep these budding ventures from falling into murky waters. Dave and ReKTGlobal had been wildly successful using this model for 20 years. Those who started collectives created them in 20 days. Dave helped deliver specific tool sets for collectives already in formation and those about to be formed. Their partnerships allow for them to work together on multiple sustainable revenue streams and to manage workflows and related audit trails to ensure that these collectives don’t violate one of the two key potential rules: using NIL as a recruiting inducement and pay-for-play.
They are personally responsible for starting, supporting and managing the collectives of Auburn, Penn State, Illinois, West Virginia, Iowa, Ole Miss, and Illinois State.
We then went on to discuss some interesting insider developments in the world of NIL. One of the toughest issues collectives face, aside from sustainability, is valuation. The market is far from mature. And because there is no market range for determining the proper valuation of a player’s NIL, they are currently using both internal and external data to build Moneyball models (yes, like the movie): valuing players by area of the country they are from, the position they play, the specific roster needs of the program, their star-rating as recruits, etc. That’s probably why we see a lot of eyebrow raising figures in the headlines. This has essentially lead to the collective emulating a professional sports franchise. He believes programs and collectives will eventually need “GM’s” to manage their budgets, rosters, transfer portal acquisitions and recruiting. Yes, positions. Collectives are now becoming involved in who the coach can and cannot recruit because of who they have NIL deals with. What’s important now for good players has changed. NIL is now the final criteria for recruits and for players making decisions to stay at their current university: boosters and athletes are acting accordingly.
The recent NCAA guidance has rolled back its previous guidelines on collectives (the booster definition caveat) and is now arguably collective-friendly. Even some states are repealing prematurely passed NIL legislation as they have found it be a competitive disadvantage in the marketplace. All of which has made Dave’s job much easier.
Legally speaking, the question remains about the reach of the NCAA when it comes to enforcement of their rules. Technically speaking, these are private LLCs and 501-C(3)s. If violations occur, who is liable? It’s not clear if the NCAA knows who to sanction or how to do it, or if it’s even legally possible.
As for the contracts these student-athletes enter into, what is the recourse when there’s a breach? Specifically, what happens if a student with an NIL deal in Michigan transfers to Nebraska? Dave believes, like a scholarship, many are finding ways around this by making the agreements renewable around the end of the applicable athletic season, although the contract itself cannot be tied to being enrolled in a specific school or even participating in a sport. Another way lawyers seem to be skirting around this is contracting athletes to deploy their NIL rights locally. If a player transfers out of that specified geographic area and cannot continue to fulfill those obligations, then the player is in breach. However, we have yet to really see this be challenged in any substantial way on either side.
Regardless, the current model is not sustainable. Boosters and donors have finite funding, even if it doesn’t look that way right now. The subscription-based module is an obvious solution, but they need new content distribution channels and even metaverse offerings to fans where sponsors and advertisers can spend their marketing budgets.
And it so happens that metaverse pioneer Infinite Reality acquired ReKTGlobal for $470 million in stock back in July 2022. The deal valued the combined entity at $2.5 billion. Infinite Reality announced plans to go public through a merger with a SPAC this week, making available $128 million in working capital at a valuation of $1.85 billion. The company has plans to work with some of the world’s biggest brands, like Warner Bros. Discovery Sports to create immersive experiences including live content, web-enabled showrooms and live entertainment. It probably won’t be long before the metaverse and collectives do a little deal of their own.
I would be remiss if I did not ask my source how I and other young lawyers looking to get into this world should do so. It is abundantly clear that the opportunities are endless. We’re even talking metaverse now. There are not many areas of law that NIL doesn’t incorporate, but it can seem overwhelming at times. He first advised the importance of being an expert on the subject matter: read! We need to identify the legal challenges before the business people do. Second, find people who can network you in: stakeholders, administrators, coaches, players, agents, collectives, and even brands! He urges ambitious young lawyers to go out and draw up contracts the right way and offer up their services because there is a huge demand for people to do the work.
Lastly, I’d like to finish by extending my gratitude to my uncle for taking the time to speak with me and share his experiences with UB Sports Law. It’s not often you get to sit down with a titan of industry, your role model, and your Spikeball partner all in one. And yes, we clean up in the family tournament.
Leave a Reply