The New Dealmakers: How Investments in Data, Content, and Merchandise are Shaping the Future of Sport
At the end of last year, some of the biggest names in sports filled into the W Hotel in New York City to discuss the unprecedented influx of big money into the sports industry. Hosted by SportsBusiness Journal, the inaugural Dealmakers in Sports conference brought together not only team owners and league commissioners, but also media executives, venture capitalists, tech company founders, and more.
Who are the New Dealmakers?
“Most teams are family-owned, legacy, historical…they need to be better updated. The deals to be made in sports going forward will be in the supporting tech and media businesses.”
— Wyc Grousbeck, Managing Partner and Governor, Boston Celtics
With exorbitant costs and a high risk of financial loss, Wyc Grousbeck, Managing Partner and Governor of the Boston Celtics, acknowledged that the pool of potential investors in a major sports team is extremely small. But the surrounding $150 billion sports business is brimming with opportunity, and many of the panelists at the conference pointed to advances in technology and shifts in fan behavior as the driving forces behind the evolution of some of the sports industry’s most core components, like media deals and merchandise.
To understand the future of the sports business, it is critical to understand who these New Dealmakers are. Here’s what we see:
New Dealmaker #1: The Data Stewards
Companies that help teams and leagues use data effectively both on and off the field.
Stuart Sternberg, Principal Owner of the Tampa Bay Rays, said that harnessing data has led to innovation on both the “field-side” and “business-side” of his team. The Rays have dozens of people on their data team, and have made headlines with their use of analytics. Data is the new currency of the 21st century economy, and the sports economy is not immune to this fact.
On the court-side…
Wyc Grousbeck attributes his first Boston Celtics championship win to data analysis. After taking control of the Celtics in 2002, Grousbeck enlisted a team of data scientists from Harvard and MIT to analyze the winners of the previous twenty-five NBA championship games. They found that twenty-four of those wins came from teams with three All-Star players on their rosters. This key insight was hidden in the data because no one was talking about “Big Threes” at the time. Grousbeck set the course to building a Big Three team, and six years later took the Celtics to a 2008 NBA Finals victory, the team’s first Championship win in over two decades.
Nearly ten years later, advances in machine learning have allowed almost anyone to conduct this type of predictive analysis without a team of Ivy League data scientists. Startups are leading this charge. R/GA Ventures portfolio company Swish Analytics, for example, uses a machine learning algorithm to accurately predict game outcomes, player performance, and other statistics for sports betting and fantasy.
The takeaway: As these technologies democratize access to data-informed forecasting, teams will need to invest in smarter algorithms in order to stay ahead of the competition.
On the business-side…
Major League Soccer Commissioner Don Garber believes that his league is “punching way above our weight with our data intelligence group,” tracking everything from how people watch games to what products they buy. He added that MLS is especially interested in how the league can use AI and machine learning to make sense of the vast amounts of data they’re collecting.
Lytics, an alum of the 2017 R/GA Marketing Tech Venture Studio with IPG and Snap, offers a solution for organizations like MLS: using machine learning to build a next-generation customer data platform (CDP). Lytics pulls sales data, CRM data, social data, and more into a single place, making it easier for companies to orchestrate truly integrated omnichannel marketing. With built-in machine learning algorithms that track this vast array of data-points, the platform helps marketers predict audience behaviors and affinities.
The takeaway: Machine learning connects the dots at a level that humans simply cannot. As leagues and teams continue to acquire mountains of fan data, solutions like Lytics are rapidly becoming a necessary tool to make sense of it all.
New Dealmaker #2: The Next-Generation Content Kings
Companies that use technology to innovate in areas like content creation and distribution.
The changing media landscape is the biggest story in sports.
— Michael Rubin, Co-Owner, Philadelphia 76ers and New Jersey Devils; Founder & Executive Chairman, Fanatics
The combination of recent tech developments and expiring media rights deals has set the stage for an emerging class of players in the content creation and distribution space. NHL Commissioner Gary Bettman said that when his league begins media rights renewal negotiations in 2020, he “expects Silicon Valley companies to be at the table.” He added that currently existing media rights deals are the only barrier preventing platforms like Facebook and Twitter from dominating the live sports landscape today. Bettman lauded technology’s effect on hockey, saying that the NHL has traditionally been underserved on national TV by deficiencies in playoff game coverage and a minuscule share of highlights on shows like SportsCenter. Now, hockey fans can go online and get as much hockey content as they can watch.
Other leagues have already started experimenting with tech-enabled media creation and distribution.
Don Garber, Commissioner, Major League Soccer
“We’re testing a wide variety of OTT opportunities. We did a deal with Facebook to livestream games on Univision’s Facebook page. [We are in] a disruptive, transformational time period.”
Commissioner Garber mentioned that MLS is already working with startups to help create personalized, on-demand content for its fans. In a partnership with R/GA Ventures portfolio company WSC Sports, Major League Soccer now creates personalized highlight clips for fans based on their favorite teams and players. Fans have come to expect personalized content recommendations from their experiences on platforms like Netflix, YouTube, and Spotify, so the teams and leagues that fail to meet these expectations are going to be left behind.
Ginny Gilder, Managing Member, Force 10 Enterprises/Seattle Storm
“Social media makes it much easier to reach the population that’s most interested in us. Seattle Storm player Jewel Loyd pitched the idea of a Twitter partnership to the WNBA president, and now we’re in a three year deal to broadcast twenty games on Twitter. You would never know about these fans if you were just thinking about ESPN. The drive for content that these social media platforms are pushing is great for the WNBA.”
Robert Kraft, Founder, Chairman & CEO, The Kraft Group
“We’ve done something around streaming that will be announced soon.”
The takeaway: The way that audiences consume media today — on-demand, binge-watched, and personalized— is catching up to sports media. The tech companies that help teams and leagues best meet these new consumer behaviors are poised to become the next major players in the sports media ecosystem.
New Dealmaker #3: The Merchandisers
Sports merchandise, from the standard jersey to the truly bizarre, has existed for decades. So why are sports merchandisers one of the New Dealmakers?Because emerging business models and unprecedented rights deals are changing the way that teams and leagues approach branded products.
Merchandise is almost becoming the new content. These auctions [for merchandising rights] have started to resemble media rights auctions. The rate of growth is very interesting to us.
- Josh Empson, Managing Director, Providence Equity Partners
Michael Rubin, Founder and Executive Chairman of Fanatics (a sports merchandise company with $2 billion in revenue in 2017), has created a dynamic business that rapidly responds to culture and sports moments. In the “old days” of sports merchandise, fans were often disappointed by sold-out products, geographic limitations, and a lack of variety, Rubin explained. Today, tech has helped to address many of these pain-points.
Rubin stressed the concept of micro-moments: spontaneous, unplanned events that used to result in sold-out merchandise. Merchandisers can plan for something like the Super Bowl, but events like a player trade, a shattered record, or a breakout player performance are harder to predict. Fanatics has a team of fifty people whose sole task is identifying these moments, and making sure that supply can meet the imminent swell in demand.
By making micro-moments a key part of their business, Fanatics has redefined the way that a sports merchandise company operates. It’s possible to imagine a future in which predictive analytics and AI handle micro-moments entirely, from dynamically identifying these moments to automatically ramping up production of relevant merchandise — which is why startups like Relative Insight, a comparative language analytics platform (and alum of our Marketing Tech Venture Studio with IPG and Snap) have the potential to play a huge role in helping companies like Fanatics identify moments that matter most to their audience, and market their products accordingly.
Rubin added that the convergence of tech and retail has enabled merchandise companies like Fanatics to deliver products to customers in more dynamic ways, including:
- Buying online and picking up in stadium
- Purchasing on your phone in stadium and having it delivered to your seat
- Seeing an item in stadium that you like but not in your size, and having it delivered to your house from a warehouse
- Rapid delivery through Uber after big sports moments (Fanatics had forty Uber drivers delivering t-shirts after last year’s Super Bowl)
The takeaway: While the main objective of sports merchandisers — to sell products — hasn’t changed, nearly everything else in this category has. From data-informed production decisions to tech-enabled delivery, these companies have some of the most to gain in an increasingly digital world.
Honorable Mentions: eSports Teams and Sports Betting Companies
eSports and sports betting dealmakers are gaining steam, but a nascent U.S. fanbase and legal ambiguity, respectively, keep players in these spaces as honorable mentions on our list — for now. Still, Jonathan Kraft, President of The Kraft Group and son of the legendary Robert Kraft, said that he is “very excited about eSports” — a claim backed up by The Kraft Group’s reportedly $20 million investment in Overwatch League. For those who want to get an early start in the eSports market, the time is now; but the general attitude at the conference was that it’s simply too early for investors to make informed decisions about the eSports industry in the United States.
Panelists were a little more divided on sports betting. MLS Commissioner Garber said he believes that gambling is one of the “biggest stories” in sports right now, while NHL Commissioner Bettman commented, “The nature of our game doesn’t lend itself to betting.” Bettman also alluded to the moral position that some owners and investors have on the subject: “What should athletes represent to young people? Physical fitness, competition, drive — or winning bets?” Until the U.S. Supreme Court makes its decision on the legality of sports gambling, these conversations are mostly conjecture.
The ultimate takeaway: From curated highlight reels to niche merchandise delivered right to your seat, the future of sport hinges on the personalization of the fan experience.
Everyone wants to be in a direct-to-consumer business, and these tech companies help you get closer to that.
— Michael Rubin, Co-Owner, Philadelphia 76ers and New Jersey Devils; Founder & Executive Chairman, Fanatics
Rubin pointed to “web browse data, social data, and transaction data” as the assets that are going to shape the future of the professional sports economy. The teams and leagues that are most successful at putting these pieces of the fan experience puzzle together today are going to be the leaders of the sports world of tomorrow. With so many different startups in data analytics, machine learning, automatic content creation, and content delivery innovation, there are more opportunities than ever to become one of the New Dealmakers in sports.
In 2015, R/GA Ventures and the LA Dodgers launched the first Dodgers Accelerator, pioneering a new model for innovation in sport. Last month, they announced the Global Sports Venture Studio, a platform designed to help industry leaders embrace disruption. Follow us here on Medium and on Twitter @globalsportsVS for the latest updates.
