Overtime Elite grabs another…

[rollskies]

I know what happened with Tatis. That's the "evidence" that OTE is using the same model?

I saw an article a long time ago that talked about it, but I haven’t really followed much of it since then. I just looked again to see if I could find anything and the only thing i’m seeing is that no one knows who they are going to play or how they will make money.

So at this point I actually have no idea. They have a huge social media following which will bring in revenue and they have gotten some major donors, but that’s about all I can find right now.

 

[Jbirdp5]

Yes i think that’s exactly what the model is

I’m curious to see how it shakes out IF they ever hit big on one of these prospects. I just can’t picture guys being happy giving up X% of their NBA money to overtime. And yes, I understand that’s what they signed up for, but if someone offered me 650K as a high schooler it would have been impossible to turn down.

This just feels like something that has been attempted and failed so many times in the basketball world

If they are taking a percentage well into the kids futures this goes from a feel good story about kids being compensated for their worth to them being exploited.

 

[rollskies]

If they are taking a percentage well into the kids futures this goes from a feel good story about kids being compensated for their worth to them being exploited.

I read that a while ago, and now I can’t find the article anymore, so I am thinking it might have been false. I agree that it would be a horrible model

 

[WhereistheDove?]

I saw an article a long time ago that talked about it, but I haven’t really followed much of it since then. I just looked again to see if I could find anything and the only thing i’m seeing is that no one knows who they are going to play or how they will make money.

So at this point I actually have no idea. They have a huge social media following which will bring in revenue and they have gotten some major donors, but that’s about all I can find right now.

I saw that as message board chatter at the beginning of all of this but haven’t actually seen it from a reputable source. And given the NIL windfalls the top guys will get now (plus food/housing/etc. already being paid for), I’m not sure the incentive for the players to take on that much risk is there. In the minors example, it’s different because these players are generally living on pennies with no costs covered.

From what I understand, the revenue will theoretically come from sponsorships and media (I assume streaming) rights mainly. I’m very curious to see if the market is really there for what will be a third tier basketball product behind the NBA and high major D1 (with no allegiances of fans to guarantee an audience).

 

[Chief00]

Honestly, one-and-done prospects rarely make up the excitement of the college basketball landscape.
Obviously, Suggs was a stud, Cunningham was the best player on OSU and Mobley was a stud too. Barnes was a very good player on Florida State, but maybe their #3 option. Aside from that, did any of these players do much for the college basketball landscape?

Other than that Mrs Lincoln, how did you enjoy the play? Those guys were a big part of the season and tournament.

 

[Chief00]

The funding is covered in the Infrastructure Bill

They get a percentage of future earnings, I believe. So for Drummond, let’s say 10% of his NBA earnings is $13m - not a bad return on maybe a $400,000 investment - a year or two of pay, coaches, lodging, car, etc.

 

[BigErnMcCracken]

If they are taking a percentage well into the kids futures this goes from a feel good story about kids being compensated for their worth to them being exploited.

Fair point. The last thing we would want to see is the exploitation of young athletes by big business.

 

[Lynyrd]

They get a percentage of future earnings, I believe. So for Drummond, let’s say 10% of his NBA earnings is $13m - not a bad return on maybe a $400,000 investment - a year or two of pay, coaches, lodging, car, etc.

Oh boy

 

[freescooter]

If they are taking a percentage well into the kids futures this goes from a feel good story about kids being compensated for their worth to them being exploited.

Why are they being exploited now? They get money upfront. The investor, so to speak, gets his return from future earnings. And remember there is risk. A player might not develop, could get injured, could never be an NBA player, could decide the grind is too much and decide to quit to become a dentist.

 

[BGesus4]

Why are they being exploited now? They get money upfront. The investor, so to speak, gets his return from future earnings. And remember there is risk. A player might not develop, could get injured, could never be an NBA player, could decide the grind is too much and decide to quit to become a dentist.

Yeah, the quality of the deal for the kids is related to the profit the investors get, but to the extent they are using future earnings of the kids that do make it to finance paying good salaries to all that enter their league, it’s more of an insurance policy on making it to the NBA for these kids. There are very few spots in the NBA and as we all know rankings are far from an exact predictor of success (not to mention all the other things that can get in the way - injuries etc). So, having a massive NBA contract will be the exception, not the rule, for these kids regardless of the route they take.

 

[Jbirdp5]

Why are they being exploited now? They get money upfront. The investor, so to speak, gets his return from future earnings. And remember there is risk. A player might not develop, could get injured, could never be an NBA player, could decide the grind is too much and decide to quit to become a dentist.

The guy who made the deal with Fernando Tatis is heavily criticized and looked at in a negative light for his business model. My guess is that perception will be the same here in the mass media.
Personally I think it will come down to the terms. If a player is to give them x percentage of dollars in every contract for the life of their career is where I would think it gets into the unfair range.

 

[auror]

Regular college students are increasingly being offered a similar option. College loans that gets repaid out of future earnings only.

I disagree that it is exploitative, because it is a scenario where both parties have their goals aligned. The player makes more money if they make more money, and the investor makes more money if the player makes more money.

Obviously, there is a percentage that starts becoming actually exploitative, and there should be clauses to protect both parties like all contracts. Those players with the highest of pedigrees should likely be able to negotiate a cap on the return. But I truly see nothing wrong with the business model. Nobody is forced to take the deal, although in baseball due to the meager salaries in minor leagues, it's certainly more necessary (college basketball players get treated like royalty in comparison). It's similar in fact to the loans and advances for training that agents give to prospects before the draft in hopes they sign them... whereupon they get a % of the future contract.

In the case of Tatis, the article literally mentions that he was able to functionally improve his training and life while working his way to the majors. He may not have become the player he is without that money. And he made significantly more money than expected, much more than the 10% cost him, so he's ahead in the end.

 

[Dogdeacon]

Regular college students are increasingly being offered a similar option. College loans that gets repaid out of future earnings only.

I disagree that it is exploitative, because it is a scenario where both parties have their goals aligned. The player makes more money if they make more money, and the investor makes more money if the player makes more money.

Obviously, there is a percentage that starts becoming actually exploitative, and there should be clauses to protect both parties like all contracts. Those players with the highest of pedigrees should likely be able to negotiate a cap on the return. But I truly see nothing wrong with the business model. Nobody is forced to take the deal, although in baseball due to the meager salaries in minor leagues, it's certainly more necessary (college basketball players get treated like royalty in comparison). It's similar in fact to the loans and advances for training that agents give to prospects before the draft in hopes they sign them... whereupon they get a % of the future contract.

In the case of Tatis, the article literally mentions that he was able to functionally improve his training and life while working his way to the majors. He may not have become the player he is without that money. And he made significantly more money than expected, much more than the 10% cost him, so he's ahead in the end.

That has parts of a decent argument, although kind of blending three different things: 1) a 'broker' type role of helping one get the best deal, 2) true speculative investment capital and 3) a loan which has defined interest, repayment etc.. Ironically if they were loaning these kids 100K and asking for 15% interest + less than 2yr payback (and they are actually getting wayyyyy more than that) THEN we'd definitely consider it borderline loansharking, usurious and exploitive.

The 'obviously' parargraph is where as you say some percentage suffers from unfair trade practices, b/c the 17yr olds aren't exactly going to be business or contract savy and they are negotiating with their purported new adviser. So they'd need to hire a lawyer or some 2nd/3rd advisor to help with the contract. Not sure where that money comes from and opens up yet another person getting a piece of an actual person's earnings. It is exploitive if you negotiate a contract with someone who has no knowledge of what they are signing especially when you are bringing far greater resources to the lawyering & negotiating table to get that contract signed. To restate the player is significantly less sophisticated and the bargaining power is inequitable because OT Elite is the only 'team' paying high school kids 6 figure salaries.

 

[Mhuskmayne]

Ollie is a poon

 

[freescooter]

That has parts of a decent argument, although kind of blending three different things: 1) a 'broker' type role of helping one get the best deal, 2) true speculative investment capital and 3) a loan which has defined interest, repayment etc.. Ironically if they were loaning these kids 100K and asking for 15% interest + less than 2yr payback (and they are actually getting wayyyyy more than that) THEN we'd definitely consider it borderline loansharking, usurious and exploitive.

The 'obviously' parargraph is where as you say some percentage suffers from unfair trade practices, b/c the 17yr olds aren't exactly going to be business or contract savy and they are negotiating with their purported new adviser. So they'd need to hire a lawyer or some 2nd/3rd advisor to help with the contract. Not sure where that money comes from and opens up yet another person getting a piece of an actual person's earnings. It is exploitive if you negotiate a contract with someone who has no knowledge of what they are signing especially when you are bringing far greater resources to the lawyering & negotiating table to get that contract signed. To restate the player is significantly less sophisticated and the bargaining power is inequitable because OT Elite is the only 'team' paying high school kids 6 figure salaries.

Well maybe but doesn’t it cut both ways in that nobody else is willing to take the risk of paying a high school kid a six figure salary. Therefore they can set terms. Plus in most places you can’t sign a contract if you are under 18 so at a minimum you need a parent/guardian involved. And yeah, you should hire a lawyer to assist you. Maybe an accountant as well. But unless someone is taking a huge chunk of future earnings I’m not sure it is such a bad deal. If you end up a star and get Steph Curry money, and OTE gets 4 million/year they did great. If you are the end of the bench guy earning the league minimum and OTE only gets $10000 it’s a loser deal. And frankly nobody knows for sure if any kid they sign will end up as Curry or Justin Anderson ($125000) when a kid is 16. Frankly, based on his college career where he played at a decidedly non-power school in Davidson, I doubt Curry would have been a OTE candidate. The much travelled Anderson on the other hand played at Virginia. He might have been.

 

[Jbirdp5]

Well maybe but doesn’t it cut both ways in that nobody else is willing to take the risk of paying a high school kid a six figure salary. Therefore they can set terms. Plus in most places you can’t sign a contract if you are under 18 so at a minimum you need a parent/guardian involved. And yeah, you should hire a lawyer to assist you. Maybe an accountant as well. But unless someone is taking a huge chunk of future earnings I’m not sure it is such a bad deal. If you end up a star and get Steph Curry money, and OTE gets 4 million/year they did great. If you are the end of the bench guy earning the league minimum and OTE only gets $10000 it’s a loser deal. And frankly nobody knows for sure if any kid they sign will end up as Curry or Justin Anderson ($125000) when a kid is 16. Frankly, based on his college career where he played at a decidedly non-power school in Davidson, I doubt Curry would have been a OTE candidate. The much travelled Anderson on the other hand played at Virginia. He might have been.

Until someone actually sees the terms of these deals it’s impossible for us to tell if it is fair or
Unfair based terms.
they also seem to be promising these kids top notch academics, coaching, media prep, and exposure. It’s way to early to tell any of this.

 

[freescooter]

Until someone actually sees the terms of these deals it’s impossible for us to tell if it is fair or
Unfair based terms.
they also seem to be promising these kids top notch academics, coaching, media prep, and exposure. It’s way to early to tell any of this.

Yeah, top notch academics. LOL. Probably not even up to the worst basketball factories and those are basically reviewing SAT prep books for 6 hours a day. They won’t even have the incentive to do that since going to college isn’t in the plans.

 

[Jbirdp5]

Yeah, top notch academics. LOL. Probably not even up to the worst basketball factories and those are basically reviewing SAT prep books for 6 hours a day. They won’t even have the incentive to do that since going to college isn’t in the plans.

Just reiterating their pitch

 

[Dogdeacon]

Until someone actually sees the terms of these deals it’s impossible for us to tell if it is fair or
Unfair based terms.
they also seem to be promising these kids top notch academics, coaching, media prep, and exposure. It’s way to early to tell any of this.

Yeah very true. And reflecting on my post, the ongoing NCAA setup simply disperses the exploitation to thousands of advertisers and bureaucrats (led by despicable Emmert) and I/we accept this because its ingrained in our culture. But it is also to a degree exploitive writ large. We dangle the chance of NBA in front of 4,000+ players and reap the entertainment and $ from their talents and hard work, then less than 2% of them reach their goal of NBA to make any real money off their efforts. Yes they get an education and some understand its only a college gig, but even there it still exploits the dream a little bit and historically the education is cheapened by 'gut' classes etc.. I guess I just like my grift a little more out in the open.

 

[Watchdog]

If they are taking a percentage well into the kids futures this goes from a feel good story about kids being compensated for their worth to them being exploited.

Tatis apparently disagrees. He sees it as a cost of getting the resources he needed to maximize his talent and potential and the payout he owes is not important. Maximum of 10%, but no one outside him and the company know the %.

 

[Jbirdp5]

Tatis apparently disagrees. He sees it as a cost of getting the resources he needed to maximize his talent and potential and the payout he owes is not important. Maximum of 10%, but no one outside him and the company know the %.

Does his opinion really make the whole thing either good or bad? The real sports doc painted the Tatis guy in a very bad light. Without the numbers it’s tough to make an informed decision and it is also open to interpretation at what point it goes from the cost of business to taking advantage of someone

 

[8893]

Does his opinion really make the whole thing either good or bad? The real sports doc painted the Tatis guy in a very bad light. Without the numbers it’s tough to make an informed decision and it is also open to interpretation at what point it goes from the cost of business to taking advantage of someone

It’s basically the Kevin “Mr. Wonderful” O’Leary approach to most deals on Shark Tank. There is a reason most people turn it down, but there is a reason some people take it.

 

[Watchdog]

Does his opinion really make the whole thing either good or bad? The real sports doc painted the Tatis guy in a very bad light. Without the numbers it’s tough to make an informed decision and it is also open to interpretation at what point it goes from the cost of business to taking advantage of someone

I don't know anything about the "real sports doc" but Tatis seemed totally focused on how the deal might speed his development and if it got him to a big contract sooner than the traditional route the percentage to the "company" was a small price to pay.

Nice to see someone so young who understands compounding of money and isn't greedy. No one knows if the deal helped his rapid development but he seems at peace with his decision.

 

[WhereistheDove?]

I don't know anything about the "real sports doc" but Tatis seemed totally focused on how the deal might speed his development and if it got him to a big contract sooner than the traditional route the percentage to the "company" was a small price to pay.

Nice to see someone so young who understands compounding of money and isn't greedy. No one knows if the deal helped his rapid development but he seems at peace with his decision.

Your points on whether it helped his development aside.... how on earth does his decision show you that he understands the compounding of money? You could discount his future cash outflows back at an absurd rate and I guarantee you it's going to be nowhere near what he received up front.

 

[Watchdog]

This "league" looks like a scheme to lock kids with the greatest earnings potential into long term contracts with an agent (the "league") without running afoul of rules and laws as happened with the Adidas payments to coaches and kids.

Major challenges:
-operating costs
-signing enough good players to have competitive games -unpredictability of the kids' talent levels at such a young age
-NIL money and college lifestyle may be more appealing to kids

So, the investors risk the money to pay coaches, staff, the players and all the other costs of operations and get a maximum of 10% of the earnings for some period of time. If they do a good job with development and get lucky with the players they sign and keep them as clients for their entire careers it could be a big win. If not, not so much.