Today’s guest columnist is Matt Davey, CEO of Tekkorp Digital Acquisition Corp., a SPAC focused on the U.S. digital, entertainment and gaming sectors.
The dilemma facing U.S. sports right now is analogous to what has been happening in TV and music. How do you best monetize your IP and content, and enthuse and convert a new audience?
When new players like Spotify and Netflix entered the markets, streaming companies became bigger than legacy names because they played to changing consumer behavior. Instead of individuals buying an exclusive product, consumers spent money grazing on content because they preferred the format, delivery mechanism and price point.
The old way in most major entertainment sectors was for rightsholders to sell to an exclusive partner for the biggest amount of money on offer. But when the market changed, this exclusive approach no longer worked—a good example being the disaster that was the streaming service Tidal. Giving people the option to pay to listen to what they want, when and how they want it, was essential.
Linear sports’ TV deals still largely work the old way. People have been looking to sell data for domestic betting in the same way they sold TV rights, but data for sports betting opens up a whole new frontier. Why take the analog approach to a digital future?
Leagues need to get smarter on packaging data and developing quality products for the sports betting industry. Before the repeal of PASPA, no one cared about data rights. Until now these have typically been managed by one of the twin goliaths of the industry: Genius Sports and Sportradar. But now that there’s an emerging U.S. domestic market for sports betting data, it surely has to change how leagues package their rights. Betting will be the economic driver transforming how sports monetize their content.
When I was at NextGen Gaming, we licensed from Marvel and DC for games, but their rights were sliced and diced in so many ways. There wasn’t just a single fee to pay. You had to consider territory issues—like being licensed for the U.K. but not France—plus other issues around copyright and variations of use. Following this model, which gives opportunities to varied players in the market, could be economically transformational for sports content owners.
The sports industry is yet to be persuaded. The NFL’s deal with Genius Sports looks like a step into the future, as it contains data and a digital component, but a closer examination suggests it might be short-term gain but long-term pain for the NFL, its relationship with betting operators, and with fans.
Far from taking a new approach, it’s just the NFL selling hugely valuable IP for a lump sum to a middleman. And the Genius approach since has rocked the industry. Costs for data and IP usage have increased for operators by a multiple of four, and even the NFL’s own sponsors could be priced out of using the assets they thought they’d locked in. While big names like DraftKings and FanDuel can afford it, tier 2 operators are unsure and largely uncommitted. So what looks like a huge deal might backfire. It’s a step away from democratization, not a step forward.
Genius and Sportradar need to create innovative products that deliver new and incremental streams for betting operators so they can justify their price increases. They cannot simply be passive pass-through vehicles, or they will be disrupted and disintermediated.
Linear sports-viewing, especially by millennials and Gen Z, is hitting the floor, but fans are consuming sports content in myriad ways—like watch-along parties, YouTube, podcasts and influencers. People work around the official rules. They don’t pay rightsholders to consume; instead, they watch other people watch, or they read or listen to betting expertise. If this model grows, sports rightsholders could find themselves out of step with the market. By following the slice-and-dice Marvel example, or providing data free to consumers like Spotify did, they may end up making more money from their audience using betting data than from the old big deals for passive consumption.
It surely won’t continue to make financial sense to silo rights, so sports fans can look forward to a richer service. Latency is a huge issue (i.e how fast does data travel from source to destination), with repercussions for betting. For example, in some broadcast structures, U.K. viewers could watch U.S. sports a second or so before U.S. viewers, as American broadcasters chopped up the video feed and sent it around the states.
That plumbing doesn’t make sense now. It needs untangling and re-deploying in a world in which streaming and betting entertainment are becoming the main ways people consume sports content. New businesses that provide low latency video with interesting comment and betting analysis can disrupt the current Genius Sports and Sportradar duopoly, and be an enormous economic driver for the sports industry. Sports leagues need to offer flexibility to start-ups; high upfront fixed costs stifle the kind of innovation in data-driven tech and content that is much needed.
Data providers like Genius Sports and Sportradar have time to reposition, but the opportunity for new players to enter this market over the next year, and do interesting things, is huge. It’s going to be messy until leagues and rightsholders get their positions straight. But there’s a big new world up for grabs.
Davey, who set up Tekkorp in 2020, has been active for over 25 years in digital media, sports, entertainment, leisure and gaming, overseeing more than 10 mergers and acquisitions and $1.2 billion in debt and equity capital raised.
(This column is corrected in the seventh paragraph to remove an incorrect amount cited in the Genius data deal with the NFL.)