OT: Kendrick Perkins co-founded 'predatory-ish' NIL cash upfront company

[TheNewEra]

If there's a cap at 2.5x earnings...I can't say I'm all that upset. I mean for an ESPN employee this is like charity work vs the trash they do on live TV.

Preying on young poor black kids. It’s really bad.

In a world where check advances are legal. Loans for pets are acceptable. This is pretty low hanging fruit. And frankly, sometimes you might actually NEED that money. These amounts are bad, but if you sign early would these guys not also potentially help you get better NIL money? If they do that, one could even argue it might not even be so bad.

Not justifying this btw. Just saying there are worse things. Like SAS being allowed on TV...

I want to hope the post you replied to was sarcasm. Young black men are capable of handling a loan.

[sikma42]

There are so many Fintech companies doing this and worse. Until we see the type of terms we really don’t know how predatory this is. It’s likely bad, but in the grand scheme of predatory businesses, this isn’t that bad.


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[Sealab2024]

250% back on a loan is usury. For those that don't know that's charging exorbitant interes rates on what should be a standard loan. 25% is generally considered usurious. Giving a kid a 50k loan that isn't squashed until you get 125K back is just wrong.

[UcanUwill]

There are so many Fintech companies doing this and worse. Until we see the type of terms we really don’t know how predatory this is. It’s likely bad, but in the grand scheme of predatory businesses, this isn’t that bad.


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This could be similar to farm teams investing in prospects, assuming most top talents could get money in other ways. Farm teams can invest in let say 10 young players, and at least 8 usully turn into nothing, but teams counting that 1 or 2 hit and cover all 10s worth of investment. Meaning, this "predatory" business could be very beneficial to most young players who choose to take part, but they probably count on idea that they snag few desperate kids who turn into NBA players, and they are in video games and stuff and they are screwed. But a lot of kids who sells their likeness to this essentially gets money for big bunch of nothing. Of course Perks business will not give money to anyone, but in a way they will.

[shrink]

The free market side of me wants to say, “This is just an additional opportunity. The consumer can say yes or no.”

But the truth is that many 16-year olds can’t say no. Getting a fraction of this money up-front is life changing for some of them and for their families. I appreciate the limitations put into these deals, including a maximum percentage, and a maximum total value, and I honestly don’t know if these deals are unfair. I can’t insert my opinion and say, “I’m going to step in and keep you desperate young athletes from the money you need, to protect you.” But this deal, or the many deals that will follow from other companies and private individuals, have the likelihood of being dangerous. When the power dynamic is so far off between desperate families and rich companies, there is ample opportunity for abuse, so I hope they are watched carefully.

[dhsilv2]

Preying on young poor black kids. It’s really bad.

In a world where check advances are legal. Loans for pets are acceptable. This is pretty low hanging fruit. And frankly, sometimes you might actually NEED that money. These amounts are bad, but if you sign early would these guys not also potentially help you get better NIL money? If they do that, one could even argue it might not even be so bad.

Not justifying this btw. Just saying there are worse things. Like SAS being allowed on TV...

I want to hope the post you replied to was sarcasm. Young black men are capable of handling a loan.

I'd argue most people aren't capable of handling loans or credit cards. But we let 17 year olds go to college...that's pretty abusive too.

That said this isn't a loan. It's definitely bigger than that.

[dhsilv2]

250% back on a loan is usury. For those that don't know that's charging exorbitant interes rates on what should be a standard loan. 25% is generally considered usurious. Giving a kid a 50k loan that isn't squashed until you get 125K back is just wrong.

It's not a loan and thus the person getting the money likely has no requirement to pay it back. The company has to be able to get the value out of them. So in theory it also gives these guys incentive to make these guys additional money through using their image. So it's not all terrible.

[hugepatsfan]

Yeah it's a mistake to call this a loan. And with the scale given in the OP of the contract they saw, this doesn't exactly seem like some hugely "predatory" deal. The kid gets $50K upfront. In exchange for that, he loses a maximum of $125K of his future earnings, so his max net loss is $75K. But the key thing here is that THOSE FUTURE EARNINGS ARE NOT GUARANTEED. Yeah it sucks to lose out on the extra $75K if he does well enough to make it, but that's not guaranteed. He could just as easily end up not even making the $50K he got upfront.

Now the OP mentions different contracts for each player. If you're Zion Williamson in high school where you'll obviously be a marketable college player, giving away a large percentage wouldn't make sense. If you're a walk on who's a long shot, locking in that guaranteed payment upfront might be worth it even knowing that if your career does take off you could lose out on some money. It's all about assessing your appetite for risk and being realistic with your career.

I'm sure there will be instances of this practice coming off as "predatory" because guys will end up losing on them. But there will also be lots of untold stories of guys who marginally win on deals like this. Honestly, contracts like this will probably HELP more kids than it hurts in terms of sheer volume. The kids it hurts will just have greater financial losses in absolute dollars. That's why they target the 250% rate of return on the example given in the OP. For every player they make that kind of money off of, there will be others they pay an upfront amount that they can't recover in full.

The really important thing is going to be for players to really accurately assess their own financial positions/needs and a realistic career path for them. Then they need to sign a contract with figures that appropriately weigh those things. Do it right and this is a great financial risk mechanism for the kids themselves. Do it wrong and they can be screwed over easily.

[Devilanche]

It will be interesting what type of players will be targeted . Those bubble second rounds or undrafted talent or 3-4stars high school recruit that may get NIL money but unlikely to get drafted.

If you are on track for first round draft pick at high school level , you probably would keep the NIL money and negotiate for an upfront deal when you go to college instead.

[magee]

Akin to credit card companies offering high interest options, or banks offering personal loans with interest. Nothing surprising about this.

[zimpy27]

Yeah it's a mistake to call this a loan. And with the scale given in the OP of the contract they saw, this doesn't exactly seem like some hugely "predatory" deal. The kid gets $50K upfront. In exchange for that, he loses a maximum of $125K of his future earnings, so his max net loss is $75K. But the key thing here is that THOSE FUTURE EARNINGS ARE NOT GUARANTEED. Yeah it sucks to lose out on the extra $75K if he does well enough to make it, but that's not guaranteed. He could just as easily end up not even making the $50K he got upfront.

Now the OP mentions different contracts for each player. If you're Zion Williamson in high school where you'll obviously be a marketable college player, giving away a large percentage wouldn't make sense. If you're a walk on who's a long shot, locking in that guaranteed payment upfront might be worth it even knowing that if your career does take off you could lose out on some money. It's all about assessing your appetite for risk and being realistic with your career.

I'm sure there will be instances of this practice coming off as "predatory" because guys will end up losing on them. But there will also be lots of untold stories of guys who marginally win on deals like this. Honestly, contracts like this will probably HELP more kids than it hurts in terms of sheer volume. The kids it hurts will just have greater financial losses in absolute dollars. That's why they target the 250% rate of return on the example given in the OP. For every player they make that kind of money off of, there will be others they pay an upfront amount that they can't recover in full.

The really important thing is going to be for players to really accurately assess their own financial positions/needs and a realistic career path for them. Then they need to sign a contract with figures that appropriately weigh those things. Do it right and this is a great financial risk mechanism for the kids themselves. Do it wrong and they can be screwed over easily.

Also missed is that Nilly only repay themselves at 10-50% of NIL, so they will function to try get the player NIL money like an agent to repay themselves while getting NIL money to the player than they may otherwise get.

[zimpy27]

I honestly think Nilly will fail.


NIL market is finite. Increasing pool of people that can just claim NIL money will only serve to drop the prices the players make.

[tsherkin]

Man I didn't think he could become more unlikable, but he managed it.

This is it, right here.

[Saints14]

Far from a Perk fan but I don’t necessarily see the issue here. The kids who know they’ll outearn that deal won’t take it, the ones that do are I assume high risk. For every kid that pays Nilly back twice what they got up front there are 3 that barely get any NIL at all. I’m sure a lot of these kids are happy to get $100k up front which can be life changing

[mastermixer]

250% back on a loan is usury. For those that don't know that's charging exorbitant interes rates on what should be a standard loan. 25% is generally considered usurious. Giving a kid a 50k loan that isn't squashed until you get 125K back is just wrong.

This isn’t a loan though.

If the kid gets hurt and doesn’t make a penny, Kendrick is out the 50k.


So there’s a risk on the investment

[durden_tyler]

This is the only wait to get him off our screens. Hope he goes to jail.

[PushDaRock]

Far from a Perk fan but I don’t necessarily see the issue here. The kids who know they’ll outearn that deal won’t take it, the ones that do are I assume high risk. For every kid that pays Nilly back twice what they got up front there are 3 that barely get any NIL at all. I’m sure a lot of these kids are happy to get $100k up front which can be life changing

Yeah, I think this just looks like a bad business model more than anything else. The top athletes obviously don't need a service like this so the target seems to be the less accomplished and lesser known athletes which comes with significantly higher risk in terms of getting back a return on investment and then the upside is capped at only 250% on top.

[Perishable517]

Has an age been mentioned? A limit to how young the person is?

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[brutalitops]

250% on a loan? **** Should be in jail.

[dans1230]

If there's a cap at 2.5x earnings...I can't say I'm all that upset. I mean for an ESPN employee this is like charity work vs the trash they do on live TV.

Preying on young poor black kids. It’s really bad.

When i first saw this story i was kind of thinking the same thing minus making it a racial thing. My initial thought was young athletes with a promising future getting taken advantage of, but with the caps in place i really dont. Its not impossible to consider a scenerio where someone could really benefit from a loan like this. If you are coming at it from a view point where you think Perkins should be donating money to kids and shouldnt be going into business trying to make a profit then you may get a bit butt hurt. Its a risk on his part as well, it isnt much different from a bank offering a mortgage on a home, you end up paying back alot more than you borrowed, and sometimes the house gets forclosed on and the bank potentially takes a loss.