Quick Hits from the 2022 Sloan Sports Conference
Part 1: Private equity cash, skyrocketing valuations, real world venues, and metaverse dreams.
Sloan was celebratory this year, with good reason. Covid is winding down (kinda), teams are valued exponentially higher than they were 10 years ago, and cash is everywhere. Cash to play with blockchain, NFTs, brick and mortar and virtual expansion, new hardware, wagering initiatives, and all kinds of other fun experiments. For Part 2 of Quick Hits go here.
First, Some Juicy Numbers:
- New York state handled about 25% of U.S. betting transactions for the Superbowl (there were over 80 million transactions nationwide).
- One-third of Fanduel activations come from people interested in wagering on NFL games.
- In a recent poll, 23% aged 25-and-under defined themselves as “passionate” sports fans, versus 42% of millennials.
- 90% of startups fail, including 65% that get VC funding.
- Over the last 10 years, about 60% of new team owners come from tech-related money.
- The sports collectible market is estimated to be around $6 billion dollars.
- 84% of sports fans are interested in women’s sports. 61% of women’s sports fans are male.
- Companies using advanced personalization in their digital channels say they get a $20 return for every $1 they spend.
- The NFL has given out 500K NFTs and saw great engagement: 75% email open rate and 60% click-through rate.
- In the U.S., men tend to drop out of sports around age 16, women drop out around 13.
Real Estate Is Real
One thing is clear, teams want to be in the property business, both brick-and-mortar and virtual. The “campus” concept is very attractive to teams who aren’t already building one, i.e. a compound of commercial, residential, hotel, and multi-use competition space all living within a tightly maintained, brand-heavy, high occupancy mini-city that strives for Disneyland/world. Spend the whole day, kids.
And why not? People have already made the decision to travel to your entertainment zone, let’s take it a step further and have it be a true resort destination. Hotels, theaters, arcades, restaurants, shopping, museums, nature parks … all under one family-friendly, metaphorical roof. Like Disney properties, or casinos, the longer folks stay on the grounds, the more money they will spend.
Sports venues also see distinct value propositions they can offer companies managing remote-hybrid workforces. Want to get together with your entire team three times a year in person? Come on down, get a business suite for company meetings, eat lunch, tour the park, get learning lessons from team execs, then go play and watch the game that night.
Sports complexes have already moved in this direction. The success of Deer District in Milwaukee, SoFi Stadium in L.A., and the area around Fenway Park in Boston has only inspired bigger thinking. Controlling every asset stream in a neighborhood, tracking all data points around purchasing and fan behavior, and getting considerable tax breaks and decision-making power to do so … it’s a logical step for entities flush with cash.
That cash flushing increasingly comes from private equity firms, which conveniently have connections to real estate, entertainment, and business improvement organizations and owners, all of whom make expansion feel so obvious.
Private Equity Is Everywhere
Private equity has flooded sports investment. In 2021 PE firms invested almost $2 billion in stakes in pro teams. Sixth Street Partners and Dell now own 30% of the San Antonio Spurs, and Arctos Sports Partners has 10% of the Minnesota Wild (and pieces of all kinds of other franchises).
Over the last 20 years, NBA teams have appreciated in value 1057%, on average. That’s 4 digits, no dots. Major League Baseball appreciation? 669% since 2002.
Baseball’s Tampa Bay Rays are currently valued at around $1 billion. The New York Yankees come in around $5 billion. Not too long ago a typical Major League Soccer team was valued at around $40 million dollars, today that average is around $500 million.
Sports teams are almost impossibly consistent financial winners. The established leagues are, for the most part, walled off from financial hardships thanks to a fiercely-protected ecosystem of broadcast rights deals, government involvement, tax breaks, hardball anti-competition practices, and a whole big pile of Scrooge McDuck cash to ward off the wannabes.
One panelist noted that when comparing investment opportunities, the Yankees organization has been around for more than 100 years and is worth more than ever. A SaaS platform company that’s doing great … global reach, great customer base, valued at $5 billion … could get wiped off the map in 5 years because of any number of market whims.
Across the Metaverse
Then there’s the metaverse. Oh, sweet metaverse, the idea every tech business is talking up but consumers seem a bit “meh” about. Dapper Labs’ Mickey Maher defined the metaverse as a sort of a “spiderweb” with a bunch of experiences connected under one collective umbrella, not necessarily a purely digital, VR goggle-driven enterprise. It would have some virtual, some digital, all flowing to and from a shared interest.
This is a great point, and it made me think that metaverse feels like a tech-fueled rebrand of our ideas around subcultures. It’s a marketing term, and product strategy, that washes away the inherent “underground” nature of how we defined subcultures in the ’80s and ’90s. I mean, metaverses have been around a while, right World of Warcraft?
The metaverse as a concept in 2022 feels like a pitch. A marketed, processed, branded thing we’re supposed to embrace because it brings us closer to the people and experiences we love, but in reality feels like a timeshare we’re supposed to buy because we got some gift codes and useless NFTs. Another way to sell premium access for premium $, right Ja Rule?
Truist Park In The Matrix
The Atlanta Braves built a full-on dining/entertainment/housing complex adjacent to Truist Park called The Battery (the PH’EAST food market is actually pretty good), as well as big plans to create a virtual version of the park in the metaverse. “Inside the digital park, fans will be able to create their own avatars and have access to exclusive content, performances, and meet-and-greets with the team.”
The metaverse is still being defined a million different ways, but it is essentially a digital community freed from the constraints of proximity and corporeal realities, right? Sort of? There’s a palpable sense that the term “virtual” should be stuck off all depictions of what the metaverse is. Sports marketing and revenue execs would prefer to label it as just plain ol’ “reality,” unless, of course, they switch over to humanist mode and talk about our primal need for in-person (ticketed) gatherings.
The numbers, however, are real: $500 million was spent on digital real estate in 2021, and analysts are estimating $1 billion in sales in 2022.
Hand Over The Loot
Another thing that drives the metaverse discussion is, literally, loot. 2.7 billion gamers spent $160 billion dollars in 2020. Gamers spend about $112 a month on in-game purchases, and an estimated $50 billion will be spent on loot boxes, skins, upgrades in gaming in 2022.
Pro sports teams look at those billions and think, “Sure, we’ll have some of that pie.” Their brands are sitting there waiting to extend further into a digital world full of engagement opportunities. They can double dip and create wholly new revenue streams in sponsorship, merchandise sales, and ticketing without having to come up with new IP.