Shawn ZobelComment

The Agent Industry Is Broken

Shawn ZobelComment
The Agent Industry Is Broken
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In today's industry, the largest agencies are “buying” players on the NFL’s top scouting lists using financial guarantees, up-front signing bonuses, and luxurious training accommodations that smaller agencies, with more limited resources, have a hard time providing.

2/8/18 - Shawn Zobel - Founder

Whether it be the league’s laughable concussion policy or the mishandling of the ongoing circus of off-field disasters, it has been a trying few years for the league office. 

Yet one of the league’s biggest problems — one that lies beneath the surface of the game and impacts the foundation with which the stadiums are built on — is player compensation and their respective representation.

While a majority of players won't gripe publicly over their pay, as the NBA’s average salaries have skyrocketed over the past 24 months courtesy of mega-television deals, many still can’t come to grips with why they can’t have fully-guaranteed contracts. To this day, the NFL is the only of the major four sports leagues that doesn't fully guarantee salaries.

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Beginning with the new Collective Bargaining Agreement in 2011, over the past half-decade, the NFL’s pay-scale and ability to properly compensate its players has slowly become corrupt.

In 2016, the NFL Players Association (NFLPA) dropped the standard fee on Standard Representation Agreements (SRA’s) from 3% to a default fee of 1.5%. In other words, the maximum amount an agent can take home remains 3% of a player’s contract. But under the new rules, the default fee has forced agents to “prove” why they deserve the extra 1.5%.

What the NFLPA did not realize at the time was curtailing agent commissions would set off a domino effect in the agency world, as the largest agencies began to monopolize in an attempt to woo a limited group of players using an ever-expanding list of resources to convince them. 

With any major deal, there are always strings attached – and the following is an example of what it would take to sign one first-round prospect in today’s industry:

1) Training Expenses – When college football players finish their collegiate careers they immediately are herded to giant training complexes in Arizona, California, Florida, Texas, etc. At each of these locations the NFLPA certified agent that signs the player is expected to cover their expenses to train at the workout facility. At every facility there are a menu of options of things that will help a player prepare for the combine: workout with the best personal trainers in the country, position-specific drills with former NFL players, eat and develop a diet with a nutritionist, practice media interviews, break down film with former NFL coaches, etc; each has its own respective cost.

2) Housing – While a player picks up their lives and moves half-way across the country, it is fully expected that the agent who represents the player financially cover the housing (typically a two-month condo/apartment/townhouse), rental car, flights, and any other expenses associated with moving their life for two months of Combine prep. Players that aren’t top prospects typically train for the draft with their college strength coaches and live at college, taking the financial burden off the agent.

3) Marketing Guarantee – Typically, agents offer marketing guarantees in excess of $250,000 for a player to sign. These marketing guarantees simply “promise” that the player will be guaranteed a minimum amount for appearances, autograph signings, etc. These deals are typically set up with a third-party company that specializes in athlete marketing representation. In some instances, the marketing company will give the agency the financial guarantee for the player, which will be used as a package in the agency’s recruiting of the player. Thus, an agent can “promise” the player $250,000 before he’s even drafted.

4) Stipends (Optional) – For first round players, today’s going rate for illegal cash stipends are $6,000/week or roughly $25,000 pre-draft. While the unofficial player-agent agreements require that the cash is to be paid back by the player once he signs his first contract, this is an illegal solicitation of players that is spread rampant throughout the industry, and the get-in-the-door price for top prospects continues to rise.

So what does this all lead to? Massive agencies are now signing players to bad deals that provide 0% or 1% return for the agency on their first contract, with an expectation that the contract commission will jump to 3% for the next contract. On top of that are the massive expenses in marketing guarantees and stipends.

For large agencies that represent 50-100+ players, it is financially feasible to take on a “bad” deal with little incentive and certain financial loss in the first contract with the hopes that the player reaches his second contract, which most certainly will multiply, at times in excess of 10x annually, from what the player was making on his rookie deal. If you sign five players and two of them are a success in the NFL, the class will still be financially profitable.

 Lonzo Ball and "Big Baller Brand"

Lonzo Ball and "Big Baller Brand"

The problem that has arisen are the aforementioned monopolies. The largest agencies in the industry are “buying” players on the NFL’s top scouting lists using financial guarantees, up-front signing bonuses, and luxurious training accommodations that smaller agencies, with more limited resources, have a harder time providing.

Asking an agent to cover $100,000 in expenses for an athlete in the four months before he is even drafted has become career suicide for middle class and young, aspiring agents. As one source put it, “the NFL agents are attempting to use the NBA shoe deal model where players sign massive shoe marketing deals via their agency as they turn pro. The problem in the NFL is we have no shoe deals.” 

With no shoe deals, agencies have gotten creative and offered one-time financial packages up front to players with the expectation that they will be financially compensated in return when the player is drafted with a $10-20+ million signing bonus.

For smaller agencies that represent, for example, 20-30 players, their survival is dependent on bringing in new talent and building a sustaining revenue stream. That survival becomes suffocated when the player pool shrinks on an annual basis due to bigger agencies “going shopping,” as one agent put it.

Over the last year, multiple agencies have closed or down-sized as a result of the recent trend and it isn't slowing down. In what some have described as a "whittling down" of the ranks, these moves were put in place to effectively thin out a group of agents that represents one or fewer players.

The end result is a shrinking industry that is suffocating from decreasing fees and higher expectations by players. Barring a change in the NFLPA Standard Representation Agreements, this won't be the last article discussing NFL agents going out of business.

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