• Loading stock data...
Monday, December 9, 2024
Tune in on Dec. 11 at 1:05 p.m. ET for our last Future of Sports virtual summit of the year – Future of Sports: Marketing! Register Now

Investor Roundtable II: Too Fast, Too Furious

  • Our sports industry investor panel is back with more insights and predictions for 2022.
  • Topics from our last roundtable have already received substantial attention in the first two weeks of the year.
Investor-Sports-Industry
Design: Alex Brooks

It turns out, our readers love predictions.

If you go all the way back to 2021, you’ll remember that our final Sunday newsletter involved several sports industry investors providing their thoughts on the past year and their outlook on the not-so-distant future. We’ve decided to go one more round.

Professionals in the sports investing field find themselves at an interesting nexus of a variety of trends. Investing require an intimate understanding of technology, culture, media, healthcare, and even infrastructure.

In our previous edition, some of the most-cited themes and categories to pay attention to included women’s sports, NFTs, and the continued prevalence of private equity in sports. Just two weeks into the new year and we’ve already seen some of these themes come into play in a big way.

  • Forbes announced its highest-paid female athletes of 2021 with the top 10 accounting for $167 million, a 27% increase from 2020.
  • DappRadar published its NFT market report stating that NFT sales in 2021 reached $21 billion compared to only $100 million in 2020, an approximate 21,000% increase.
  • After an announcement in December that the NHL would allow private equity investment into teams, Arctos became the NHL’s first private equity investor in the Tampa Bay Lightning.

Now, let’s dive into our investors’ analysis.

What trend in the sports industry that was widely adopted in 2021 will you carry through 2022 and beyond?

Will Hershey – Co-Founder & CEO, Roundhill Investments

I’ll offer two. The first is the continued mainstream acceptance of sports betting. For the first time in history, sports betting commercials were allowed during NFL broadcasts. Roger Goodell changed his tune after years of dismissing the industry. Even Disney-owned ESPN is looking to get involved. I think every major sports media company is now embracing betting in one way shape or form. That’s likely to only accelerate as new states like New York come online in 2022 and beyond.

The second is the intersection of crypto/NFTs and the sports world. The success of Dapper Labs and what they built in NBA Top Shot has laid the foundation for new and creative monetization strategies for teams and leagues alike. DraftKings also launched its own NFT marketplace. Several European football clubs launched their own fan tokens. In my view, this is all about reaching the digitally-native crypto audience, and playing into the speculative nature of sports fans.

Lance Dietz – Partner, KB Partners

Dapper Labs (NBA TopShot), Sorare, Candy Digital, and others raised large amounts of capital at significant valuations over the past year; sports betting operators partnered with NFT marketplaces (DraftKings x Autograph); sports teams further engaged fans via various NFT drops (Blackhawks, MSE’s Wizards/Capitals); and athletes capitalized on their brands to get involved in the space (Heir Jordan).

The sports ecosystem seems to be a fantastic proving ground for the Web3 value chain, even though we are in early innings.

At KB, we’ve started to get more involved in the space with investments this year in two companies, StatusPRO and Stadium Live, which are building new digital sports experiences for fans and sports communities — and we plan to do more in 2022.

What trend are you most bullish on going into 2022?

Meredith McPherron – CEO, Drive by DraftKings

We are most bullish on the technology and applications that drive fan engagement and community, whether that’s NFTs, crypto, gamification, metaverse, sports betting, or AR/VR. These technologies are aligning to create a completely new universe — or metaverse — unlocking monetization opportunities yet to be fully discovered.

We have seen record venture funding flowing into the market, supporting both emerging and rapidly scaling disruptive new ventures. According to the recent SportsTechX VC report, a record-breaking $8.3 billion was invested in sports tech through September [2021] and $12.7 billion was projected by year’s end. This is more than the previous two years combined. Eleven unicorns have also emerged in 2021 from across the globe, driving an increasing appetite for venture funding to support a sector clearly becoming mainstream.

The market is moving quickly in sports tech and entertainment. Although some trends may be overhyped, there is tremendous innovation underway. The question around durability for many of the new ventures launched at this time is fair and will require the normal discipline and diligence of strong investors to sort out when placing their bets.

Edwin Draughan – Vice President, Park Lane

The renovation or development of sports venues and their surrounding areas. The life cycle of stadiums, arenas, and ballparks have shrunk over time. Owners understand that to fully realize their team’s value, the venue needs to better align with the market.

Additionally, layering in a mixed-use development surrounding the venue provides extra value for owners. While a few venue developments and/or renovations were announced in 2021, I expect to hear more in 2022.

Lance Dietz – Partner, KB Partners

Alongside the growing interest in the sports/Web3 intersection, we also remain big believers in the democratization of human performance tools, platforms, guidance, etc. and the opportunity for consumers to achieve holistic health/wellness goals more seamlessly and at lower costs.

The importance of mental health was brought to national attention by Naomi Osaka and Simone Biles this past year; brands with a ‘recovery’ focus have raised substantial capital over the pasted 12-18 months (Hyperice, Whoop, Oura, Therabody, etc.); and the everyday consumer continues to look for ways to reset, decompress, and be more physically, mentally, and emotionally fit.

We’re investors in Alkeme Health and Kensho Health, both of which have a focus in these areas, and we’re incredibly excited about the future of this space in the coming year(s).

Will Hershey – Co-Founder & CEO, Roundhill Investments

M&A activity in the iGaming sector. We have already seen a large number of deals since the repeal of PASPA (Professional and Amateur Sports Protection Act) and I think that will accelerate into next year. In the U.S. market, I expect the top sportsbooks to account for the large majority of handle and wouldn’t be surprised to see them pursue strategic acquisitions of smaller competitors in 2022.

Scale is a critical component in this game, and acquiring market share and/or databases can be beneficial to both parties. I also think sports media-related assets continue to get scooped up. As we saw with the Penn/Barstool deal, acquiring a top-of-funnel can be a differentiated way to drive traffic to a sportsbook or online casino offering.

On top of all of that, the largest players all have cash on their balance sheets and in many cases, have the stock currency to be able to structure deals in an accretive fashion.

What trend are you most bearish on for 2022?

Daniel Magliocco – Partner, Patricof Co

For us, as a primary consumer investor, it’s not so much a trend that we are bearish on but rather a business model. Brands that are exclusively direct-to-consumer don’t necessarily excite us at the moment. When companies rely on a single channel for distribution, the cost to acquire customers tends to go up.

During the pandemic, we saw that the more goods and services were competing for the same number of “eyeballs” and those eyeballs subsequently became more valuable. The way unit economics shakes out businesses — regardless of industry — that opt for a pure play DTC model will be difficult to sustain.

Jeffrey Roth – Partner, Bruin Capital

VR. Until the form factor becomes less intrusive and easier to use for the average person, I think it’s a tough sell for the typical sports fan, outside of early tech adopters. AR, however, will continue to become more pervasive.

Will Hershey – Co-Founder & CEO, Roundhill Investments

While I’m certainly bullish on the overall sports betting opportunity, I’m generally skeptical of newer business-to-consumer entrants coming to the U.S. market.

Unless you are extremely well capitalized (i.e. Fanatics) or a household brand (i.e. ESPN) I think it’s going to be very difficult to compete in a top-heavy market that is currently dominated by large public companies with massive marketing budgets. Every major sportsbook operator is currently running at a loss in the U.S. market due to outsized ad spend targeted at new users.

Even if you have a highly differentiated product, that’s an uphill battle. I think there will be a time in the future where product matters more (i.e. better pricing, specialized offerings, etc.) but I think we are at the point in the “S-curve” that’s all about initial adoption.

What is a specific company, trend, or market dynamic that you believe is not receiving enough attention?

Edwin Draughan – Vice President, Park Lane

The expansion of multi-sport team portfolios. 2021 saw multiple owners add to an already impressive sports team portfolio, focusing regionally, domestically or internationally. A few examples are:

  • Regionally: Todd Boehly and Mark Walter (Los Angeles Dodgers) invested into the NBA’s Los Angeles Lakers; Mark Davis (Las Vegas Raiders) acquired the WNBA’s Las Vegas Aces.
  • Domestically: Fenway Sports Group (Boston Red Sox) acquired the NHL’s Pittsburgh Penguins; David Blitzer (Philadelphia 76ers) acquired MLS’ Real Salt Lake.
  • Internationally: Jed York (San Francisco 49ers) increased his investment in the Premier League’s Leeds United FC.

While the rationale and tactical approaches differ among these owners, it’s clear they believe this strategy unlocks added value. I believe this trend may even accelerate in 2022 given that the macro (increased wealth among the top 1%) and micro (private equity in sports, team cash flow uncertainty due to COVID) economic factors suggest that it will continue to be a team buyer’s market.

Daniel Magliocco – Partner, Patricof Co

Investing at the nexus of health and wellness and food and beverage. We have invested in the likes of Orgain, a plant based protein powder, and Kodiak Cakes which we believe represents that intersection. For us, it pairs a secular trend in health and wellness with an everlasting human need in food and beverage.

Additionally, having an investor base of athletes provides us with a unique advantage. Who better to diligence these opportunities? Who is more dialed into what goes into their bodies than professional athletes? Being in the top 0.01% of your field is a competitive advantage, and with our athlete investors we leverage that advantage to make decisions around their core competencies.

Jeffrey Roth – Partner, Bruin Capital

Globalization around sports. Fans are everywhere, especially given remote working due to COVID. Sports leagues were already going global to adopt new fans/audiences. Media companies will continue to seek rights of international leagues to reach global fans.

Final Thoughts

Looking to the future can sometimes be an exercise in testing the bounds of the imagination. There will be a point where the absurdities of today — like digital apes selling for millions of dollars — will seem mundane and antiquated. It’s the natural evolution of technology. But as it stands, the future is certainly bright, and it appears the best is still ahead of us.

Linkedin
Whatsapp
Copy Link
Link Copied
Link Copied

What to Read

Nov 2, 2024; Ann Arbor, Michigan, USA; Michigan Wolverines cheerleader runs with a flag before the game against the Oregon Ducks at Michigan Stadium.
opinion

College Football’s Billionaire Backer Era Begins

Is this the new normal in CFB recruiting?
LA Galaxy forward Dejan Joveljic (9) celebrates with midfielder Riqui Puig (10) after scoring a goal against Seattle Sounders FC in the second half in the 2024 MLS Cup Western Conference Final match at Dignity Health Sports Park

With or Without Messi, Major League Soccer Is Barreling Into the Future

After the Cup final, the league looks to accelerate its growth.

U.S. Firm Makes $310M Bet on Soccer by Forming Superagency

The U.S.-based investment company makes a significant play in international soccer.
Dec 18, 2022; Lusail, Qatar; FIFA president Gianni Infantino claps during the awards ceremony after the 2022 World Cup final between Argentina and France at Lusail Stadium.

FIFA Wants More Matches. Resistance Is Growing Inside the Global Soccer World

Resentment and frustration over expanded schedules is nearing a breaking point.

Featured Today

U.S. Investors Are Gunning for England’s Small Soccer Clubs

Is another Hollywood-like success story possible among the U.K.’s smallest clubs?
Nov 1, 2024; Boise, Idaho, USA; Boise State Broncos running back Ashton Jeanty (2) leads the team onto the field prior to the first quarter against the San Diego State Aztecs at Albertsons Stadium.
November 29, 2024

Schools Are Scrambling to Prepare for the NCAA Revenue-Sharing Era

In the post–House v. NCAA world, “everyone’s kind of on their own.”
Nov 4, 2024; Kansas City, Missouri, USA; Recording artist Taylor Swift arrives prior to a game between the Tampa Bay Buccaneers and the Kansas City Chiefs at GEHA Field at Arrowhead Stadium.
November 29, 2024

The PWHL Could Be Inviting a Date With Taylor Swift’s Legal Team

The Toronto Sceptres may have opened a Pandora’s box of trademark issues.
November 23, 2024

Can an Elite Women’s Soccer School Survive the New College Sports Moneyball?

Santa Clara faces an uphill battle in the new college sports landscape.
Dec 1, 2024; Landover, Maryland, USA; Washington Commanders general manager Adam Peters (L) talks with Commanders owner Josh Harris (R) on the field prior to the game against the Tennessee Titans at Northwest Stadium.

CEO Leaves $13 Billion Soup Company to Run Commanders

The new president will lead the planning and development of the team’s stadium.
November 15, 2024

Adam Silver Defends NBA Product Amid Sluggish Ratings

Silver said the NBA compares itself to “the biggest brands in the world.”
LPGA Commissioner Mollie Marcoux Samaan after the final round of golf during the CME Group Tour Championship at the Tiburon Golf Club in Naples, Fla., Sunday, November 19, 2023.
December 2, 2024

LPGA Commissioner Leaving After Brief Up-and-Down Tenure

Mollie Marcoux Samaan was hired in 2021.
Sponsored

How UBS Crafts Impactful Partnerships Across Sports, Arts, and Culture

As UBS continues to expand its impressive array of sports and entertainment partnerships, the company solidifies its position as a leader in wealth management.
November 11, 2024

Endeavor to Sell OpenBet, IMG Arena to Its CEO Ari Emanuel

The move is “a necessary step” as Endeavor seeks to go private.
May 22, 2024; Minneapolis, Minnesota, USA; Minnesota Timberwolves minority owners Marc Lore and Alex Rodriguez look on in the second half against the Dallas Mavericks during game one of the western conference finals for the 2024 NBA playoffs at Target Center.
October 23, 2024

A-Rod, Lore Deposit $940M As Wolves Ownership Hearing Nears

Rodriguez and Lore made a large escrow deposit in advance of a key upcoming arbitration hearing.
October 22, 2024

Dude Perfect CEO’s Task: Make the Dudes a Media Company

Dude Perfect’s new CEO wants fans to be able to experience the brand in person.
Feb 13, 2023; Beverly Hills, CA, USA; Disney CEO Bob Iger arrives at the 95th Oscars nominees luncheon at the Beverly Hilton in Beverly Hills, Calif. on Monday, Feb. 13, 2023.
October 21, 2024

Bob Iger’s Successor Won’t Be Named Until 2026

Iger’s current contract expires at the end of 2026.