Sports Are About Money (and lots of advertisements)
Some announcements + a look at the trillion-dollar industry sports have become thanks to advertisements.
Sports are a massive business.
Here are some of the headlines over the past few months:
• $230M contract for Kyler Murray
• $8M NIL deal for a college athlete
• $100B+ for 11 years of NFL rights
• $4.65B sale of the Denver Broncos
• $8B Big Ten media deal
• ~ $2M for Aaron Judge’s homerun ball
Sports is one of the largest industries in the world — it also doesn’t get enough credit for the innovation it brings to the world.
I talked about this with a general partner at an investment fund with over $1B in assets (mostly investing in sports, media, and entertainment).
Our thesis was that up until now, sports were only viewed as an entertainment setting (and not as an innovation hub).
Tech used to be built for other industries and then applied to sports.
Today, a lot of tech is built for sports and then scaled to other industries.
The much less talked about function of sports is advertisements.
The sports industry is built upon advertising money (yet many of us want to ignore that fact).
Ads and Sports
There's nothing new about ads or sponsorships in sports.
What's new is how prolific sports organizations have become at selling them, and how quickly the pace has started to pick up recently.
More and more teams are owned by businesspeople who view the organization as business versus a hobby — when you do that, you see a lot of blank spaces that can be sold.
Which is clearly evident with the Golden State Warriors (Business of the Golden State Warriors).
It used to be cool to own a sports team.
Now it’s cool (and a good investment).
Let's use baseball to illustrate all of the ways your attention is being monetized...
Less than 30 years ago, stadiums had generic names and almost no advertisements.
Today, stadium naming rights go for millions, the fields are covered in ads, and the jerseys are even starting to include ad placements.
Advertisements in Sports
Here are some of the ways baseball monetized using advertisements and sponsorships:
1. In the venue
The only place in the outfield that can't have ads is directly behind the pitcher (to prevent distracting the batter). Everywhere else is fair game — even foul poles and rain delay tarps.
Naming rights deals have exploded in recent decades.
8 MLB ballparks are currently unsponsored.
Sponsors have their names on entire areas of the ballpark.
From entrances (Chicago's Budweiser Gate) to clubs (Audi Yankees Club) and hospitality zones (San Diego's Toyota Beach).
2. On the field
It first started with Nike swooshes on the jerseys (and now we have actual ad patches).
The MLB will introduce jersey and helmet patches next season, and the Padres and Red Sox already have multi-million dollar deals.
Even umpires have advertising uniforms — FTX, a crypto exchange platform.
The MLB first allowed on-field advertisements (painted on the grass in foul territory) during the shortened 2020 season.
Expect to see more going forward.
3. On the broadcast
The most frequent camera angle for baseball games is directly behind the pitcher. Anything in that frame is extremely valuable — and technology has unlocked new revenue opportunities.
Most of the ads you see behind the batter's box are digital, so they change throughout the game and advertisers buy rotations (20 seconds, full inning, etc).
Some networks are selling virtual ads that are overlayed on the broadcast.
Hockey has perfected this along the boards.
Broadcasts are full of sponsored segments like “live odds brought to you by FanDuel”.
Ads. Ads. Ads.
We’re getting to the point where we no longer ask “what can be monetized”, but instead “what can’t be monetized”.
How far can it go?
I’m not sure…but I expect all of this to flow downstream into college.
With large media deals and tons of eyeballs, brands will pay a lot of money to have their logo on Ohio State’s football jerseys or Duke’s basketball warmup shirts.
It’s coming — just give it a few years.
As always, I appreciate you taking the time to read this today.
Have an awesome weekend. We’ll chat on Sunday when I break down the weekly roundup.