How Sports Is Being Revolutionized From Top Down
How Sports Is Being Revolutionized From Top Down
Profitability, legitimacy, and fame.
That’s what global investment groups are trying to accomplish through sports.
Sports are at an interesting place right now because:
restructuring is taking place at the top
innovation is bubbling at the bottom
Let’s Dive In 👇
Sports Is Attracting New Money
The sports industry is an asset class gaining increased love from investment firms.
This is seen in 5 major trends:
Sovereign wealth funds, venture capital giants, investment banks, and family groups have made the industry more sophisticated.
Capital flows are looking beyond just traditional team assets — real estate, broadcasting rights, sponsorship, betting, and international joint ventures.
The diversity of investment is greater today than ever before, with emerging leagues popping up everywhere.
Big capital is beginning to show interest in women’s sports, which are growing in popularity.
Sports are moving downstream thanks to NIL legislation, and major leagues are placing investment dollars both horizontally and vertically into the ecosystem.
Macro Bad, Micro Good
The hike in interest rates to combat inflation has made financing more expensive while lowering the valuation of many assets.
However, the impact of the central banks’ decisions hasn’t been felt in the sports industry:
2021: $10B in deals
2022: $17B in deals
2023: expected to be even higher
The great beneficiaries of this new economic boom are athletes (salaries and sponsorships are skyrocketing).
Highest-paid athletes in the world:
Cristiano Ronaldo, $136 million.
Lionel Messi, $130 million.
Lebron James, $120 million.
So why is this?
Athletes Make You Look Better
Companies and countries are looking to gain legitimacy, counter negative news, and create an emotional appeal through the use of athletes.
Countries
Prince Mohamed Bin Salman says that his goal is to bring the 300 best players in the world to Saudi Arabia’s soccer league.
The Public Investment Fund manages a portfolio worth $600 billion and has acquired 75% of four national soccer clubs (Al-Ittihad, Al-Ahli, Al-Nassr, and Al-Hilal).
Saudi Arabia knows that sport is an accelerator for its economic transformation projects (and for international tourism).
It’s both an internal and external operation:
Internal: 70% of Saudis are under 35 years old and it is necessary to provide them with entertainment and access to Western modernity.
External: sports tourism moves over $600 billion annually and the PIF’s agenda for “Vision 2030” lays out that the tourism sector should contribute 10% of GDP (it now stands at 3%).
Investing in sports has become a way to gain prestige — and has a powerful geopolitical dimension.
Companies
Entire sectors — even volatile ones like crypto — are seeking to make themselves better known by attaching themselves to athletes and sports.
Artificial Intelligence companies are certainly next in line…
These industries want to pull in new believers.
It’s why FTX paid $130M to put its name on the Miami Heat’s basketball court until 2040 (oops).
Money Likes Sports More and More
Today, there are sports teams such as Manchester United and Juventus that are listed on the stock market (they tend to experience a drop when titles are lost).
I am certain this will move downstream as fractionalization and decentralization become more prevalent.
Teams, leagues, and companies will open up crowdfunding rounds long before they go public.
The cost of broadcasting rights is growing as new investors enter the bidding war. Streaming platforms — such as Apple, Amazon, and Netflix — are trying to snap up as many rights as possible.
In a market like sports, it feels as if you only need money to be profitable.
How Big Is Sports?
It’s difficult to know how much money moves through the world of sports.
There are hundreds of different niches that directly or indirectly impact the market
tickets
betting
subsidies
high salaries
sponsorships
merchandising
nutrition products
agent commissions
broadcasting rights
According to the Sports Global Market Report, by the end of 2023, there will be around $500 billion in the sector.
Personally…I believe it is much higher than that (and it’s not even accounting for things you can’t place a value on).
Spotify is paying $70 million per season to link its name to FC Barcelona’s stadium.
And these deals last long after…
Despite the Steelers changing their name to Acrisure Stadium — many people in Pittsburgh (including myself) still call it Heinz Field.
Merging of Technology
I won’t go too deep on this today…
But sports is now a breeding ground for technology and innovation.
Look at all the different apps that could be used within the sequence of a basketball game:
buy tickets
where to park
purchase merchandise
order food to your seats
place bets on a free throw attempt
see the game more closely from a second screen
Technology has changed the way we see (and do) sports.
And the experience now goes far beyond the field, court, and rink.
Looking Ahead
We like stories and characters that provoke conversations — it’s complex to be human.
Sports is the perfect intermediary for these stories to be told through athletes and authentic drama.
If you can pay Ronaldo or Lebron James…
Then you can make a profit from their image, broadcasting rights, sale of shirts, and even promote countries, companies, or leagues.
Sports is the labeled investment. Eyeballs are the true asset.
Podcast 🎙
Today’s guest is Meredith McPherron, the CEO and Managing Partner of Drive By DraftKings.
DDK is a multi-stage venture capital firm investing in sports tech, entertainment, and gaming.
You’ll enjoy this episode as we discuss:
Web1, Web2, Web3
State of VC in sports
Growth of women’s athletics
Check out the podcast episode here.
Thanks for reading today!
Have an awesome weekend.
Peace,
AP
Sources:
https://profluence.com/saudi-arabia-revolutionizing-the-sports-industry/
https://www.espn.com/soccer/story/_/id/37975000/lionel-messi-mls-apple-adidas-inter-miami
https://english.elpais.com/sports/2023-06-20/the-great-sharks-of-finance-are-revolutionizing-sports-and-boosting-athletes-income.html
https://www.controlrisks.com/our-thinking/insights/sports-sponsorship-deals