April 29, 2022

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Front Office Sports Pro

Happy Friday!   

This is the Pro monthly update. Here we provide a summary of what’s happening on the platform. We provide April’s top 10 deals, key earnings releases, and One Big Thing about the looming IPL media rights deal. As always, if you have any questions, comments, or suggestions, please reach out to me directly at liam@fos.company.

Pro April 2022 Update

Design: Alex Brooks

Reports This Month

  • Scouting Report: Creator Enablement and New Commerce
  • Scouting Report: Consumer Spotlight: Payments Powering E-Commerce
  • Heat Check: Stadium Innovation: The Benefits of Modular Construction

One Big Thing

April felt like a moment for streaming companies, with the biggest news being Netflix’s declining subscriber numbers and Warner Media’s failed CNN+ experiment. 

Overall, the sentiment from the street has been somewhat negative as analysts start to see market saturation meaningfully impacting subscriber numbers.  

Earlier in April, a Nielsen report found that nearly half of consumers who participated in the report felt overwhelmed by the number of streaming services available. Additionally, a survey of streaming services in the U.K. by industry analysts from Kantar found that in the last three months, 1.5 million households had canceled a streaming service subscription, and 38% of those cancellations were made in an attempt to cut costs. 

In essence, the abundance of streaming services is no longer a boon to consumers but a burden. 

True product differentiation has yet to materialize but there does seem to be a logical path to customer acquisition. Live sports make a difference, and one market clearly providing value to consumers is the IPL

Since November of 2021, PL media rights have been a hot commodity. 

As it currently stands, Disney-owned Star India owns rights to the league. The five-year, $2.6 billion deal expires this summer, and the cost is estimated to potentially triple as bids continue to increase since last year.

One reason: valuations for IPL teams have been exploding. IPL clubs have seen an annualized growth rate of 24% in just over a decade, according to Forbes. That’s more than both the NBA and NFL, which have seen 16% and 10% growth rates, respectively. 

Of the 10 teams in the IPL, seven currently tout a $1 billion-plus valuation, with the Mumbai Indians leading the pack at $1.3 billion. 

One of the main reasons for the rapid growth in valuations has been the ever-increasing viewership numbers in India. Up to match 35 last year (delayed due to COVID), the IPL brought in its highest viewership in three years — 380 million viewers (roughly 10 million per match). For context, an NFL game draws an average 17.1 million viewers. 

Disney is one of the six main competitors looking to acquire the rights. While it’s difficult to extrapolate, the company’s most recent financials indicate that 35% of Disney+ subscribers come from India. Of these users, a large portion are likely subscribing for access to the IPL.

Other bidders include Amazon, Dream 11, Reliance Industries, Sony, and Zee Entertainment — Sony purchased a 53% stake in Zee last year. Other bidders may still decide to join, and those listed may not end up bidding at all.

Live sports have the highest impact on subscriptions and engagement out of any form of content. According to George Cheeks, head of the CBS Entertainment Group, Paramount+ relies heavily on its live sports rights (mostly European soccer) when it comes to growth.

“[Sports] is television’s most valuable property by far, attracting massive audiences, and major advertisers, and it will be fundamental to the growth of Paramount+…  It drives more subscriptions than any other program and significant engagement, too.” 

George Cheeks, CBS Entertainment

While Netflix has stated that it will not be going after live sports rights, it’s hard to imagine that the company will be able to stave off the sports strategy for the long term.

Deal Tracker

Deal Tracker

Here are 10 of the most notable deals from the month of April.

  • Kinexon, developer of specialized IoT technologies designed to connect and automate operations for industries, sports, and entertainment entities, raised $130 million of Series A venture funding in a round led by Thomas H. Lee Partners.
  • Onefootball, a soccer media platform providing live streaming and news updates about professional football from around the world, raised $300 million in a round led by blockchain fund Liberty City Ventures to expand its presence into Web3. 
  • The Sandbox, developer of a gaming platform offering a metaverse where virtual worlds and games will be created collaboratively without a central authority, is looking to raise $400 million of venture funding from both new and existing investors.
  • Levels, developer of a wellness device designed to take control of metabolic fitness, raised $38 million of Series A venture funding from Andreessen Horowitz, AirAngels, and Mario Gabriele.
  • Epic Games, developer of gaming software and applications designed for gamers and game developers to publish and play immersive games, raised $2 billion of venture funding from Sony and KIRKB.
  • Viral Nation, provider of digital marketing services intended to create social media influencer campaigns for brands, received $198 million of development capital from Maverix Private Equity and Eldridge Industries.
  • ReKTGlobal, provider of esports infrastructure services, reached a definitive agreement to be acquired by Infinite Reality for $470 million.
  • Fanatics, operator of a multichannel sports merchandise retailer aiming to create connections for all fans, raised $1.5 billion in development capital from Blackrock, MSD Capital, Fidelity, and the NFL. The company is now valued at $27 billion.
  • Axie Infinity, developer of a gaming platform designed to let players earn in-game resources and trade them for real money, raised $150 million in development capital from Binance, Animoca Brands, and Andreesen Horowitz.
  • Oura, developer of a wellness wearable ring designed to track and improve the quality of sleep and performance, raised an undisclosed amount of venture funding at a valuation of $2.55 billion from undisclosed investors.

View the full Deal Tracker here.

April Earnings

April Earnings

Selected earnings calls and results from the past month:

Netflix: Netflix exec talks F1, games but taps brakes on live sports

Alphabet: Alphabet reports weak earnings and revenue on big YouTube miss

Meta: Meta Platforms beats EPS estimates but misses on revenue

Garmin: Garmin’s record quarter boosted by sports watches

Spotify: Spotify beats on top and bottom lines while adding 182 million paid subs

Activision Blizzard: Activision Blizzard misses Q1 target as ‘Call of Duty’ underwhelms

Apple: Apple warns of a possible $8 billion hit from supply constraints

Amazon: Amazon shares fall on bleak forecast and slowest growth since dot-com bust

Microsoft: Xbox sales surge as Microsoft posts $41.7B quarter

Coca-Cola: Coca-Cola pours it on with sports drinks in Q1

Univision: Sports boost TelevisaUnivision in $1B quarter

SeatGeek: SeatGeek posts record $82.5M in Q4 revenue

Closing

Closing

Elon Musk Buys Twitter. Yes, as you may have heard, the billionaire founder of Tesla, SpaceX, The Boring Company, and NeuraLink is now the proud owner of one of the world’s most important social media applications. 

The deal was first brought to the public attention on April 14, when Musk announced that he would offer to buy Twitter outright for $43 billion at $54.20 a share. Leading up to the offer, Musk purchased a 9.2% stake in the public equity of the social media app — leading the company to offer Musk a board seat. 

The subsequent two weeks were filled with discourse about what an outright purchase of Twitter would mean for the tech ecosystem. The conversations centered largely on the implications for free speech, as Twitter has become the de facto “town square” for many. Musk himself has referenced the social platform as “the digital town square where matters vital to the future of humanity are debated.”

Regardless of your views on speech, when it comes to the big tech companies, Twitter is a small player. The company has a little over 200 million daily users and brings in $5 billion in annual revenue. For comparison’s sake, Facebook (of Meta) currently boasts 3 billion users and $117 billion in annual revenues. 

In a report for Axios Login, chief technology correspondent Ina Fried laid out the plans Musk has for the platform:

  • Edit button: Musk announced the feature at the TED2022 conference in April (which has apparently been in the works for several months already).
  • Long-form tweets: Musk has been an advocate of “essay level” tweets. In 2017, the company increased the character limit from 140 characters to 280.
  • Spam bots and authentication: Removing spam bots from the platform has been one of Musk’s “passion points” on the platform for a long time. 
  • Open-source algorithms: There are current concerns about the inherent bias in Twitter’s algorithm to serve up content. Musk has been a proponent of opening up the Twitter API going back to the platform’s early days. 
  • Content moderation: Musk believes that Twitter should not regulate content beyond what is required by the laws of the countries it operates in. We can expect less stringent content moderation going forward with wide ranging implications for national security.

While the deal has been agreed to in principle, it has a $1 billion break up or “termination” fee for the transaction — which has a drop-dead completion date of October 24, 2022. There is plenty of time for something to go south or terms to change, but the willingness of the banks (in this case Morgan Stanley) to play ball, providing $25.5 billion in debt for the transaction, is a positive indication. 

Time will tell whether or not the acquisition and subsequent go-private will result in the value accretion that many are hoping for. My bet? Since Twitter’s growth has basically flatlined since IPO, I am a proponent of well…anything new and different. 

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Written by Liam Killingstad

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