Last week, Overtime (a digital sports media company built for the next generation) announced plans to start a new basketball league. Starting this fall, Overtime Elite will serve as an alternative to the traditional high school basketball route for up to 30 of the top 16- to 18-year-old NBA hopefuls. Players will receive six-figure salaries, education/training designed to prepare them for a career in the NBA both on and off the floor (think: financial literacy, media skills) and equity shares in the company.
It’s hard to argue that playing for free and attending chemistry class would be a better way for pro prospects to spend their teenage years—particularly with Overtime willing to pay $100,000 toward a college education should the player decide not to pursue a professional basketball career. So, one can understand why Overtime believes the league will be able to draw some of the best teenage players in the world. What is less clear is how the league plans to turn a profit—it’s not as if the G League, the NBA’s developmental league, operates in the black (it’s heavily subsidized). But Zack Weiner (co-founder, Overtime) believes that comparison “falls short of the mark. Starting with the difference in who plays in each league, the number of players, and flowing to the different business models. [They are] very different businesses.”
Our Take: For everything working in the G League’s favor (see: NBA ties), it is important to understand the league is not meant to be a profit center. It is designed to assist in the development of future NBA players. By contrast, venture-backed Overtime is starting Overtime Elite with the expectation the league will be profitable—not on day one, but presumably sooner rather than later.
Recent history has shown how challenging it is to start a new pro sports league (see: AAF, XFL 2.0). But Overtime investor Eric A. Stern believes Overtime Elite is “just a different animal altogether,” as it enjoys several native advantages over nearly every other upstart sports property. (Triller Fight Club would be among the exceptions.) “It’s the distribution. It’s the storytelling. And it’s this critical mass [of athletes with large social followings] that is only increasing,” Weiner explained.
Back in May 2019, Overtime held a one-day showcase in Brooklyn, featuring some of the country’s top high school prospects. Known as the Overtime Takeover, the event drew more than 130 million video views, reflecting the strength of the company’s social distribution capabilities (which have only grown over the last two years). “It’s just totally different when you start with the platform [and audience] and build it out from there,” Stern said. With almost 50 million followers across social platforms and 1.7 billion video views per month, Overtime will launch Elite to a captive fan base.
One challenge upstart leagues face in growing their audience is the lack of emotional connection between the fans and the players or teams. But Weiner insists the company’s expertise in both on-court and off-court storytelling will “make people [beyond the core Overtime audience] care about the athletes.” Of course, the platforms on which the content ultimately resides will also have an impact on how many “new” fans watch.
Weiner views “this trend of high school athletes being influential and famous [at younger ages]” as another tailwind working in Overtime Elite’s favor. He said Zion Williamson “reached 1 million followers by the time he was a senior in high school. [Overtime now] has multiple athletes that are sophomores in high school that [already] have millions of followers.” Naturally, the better known a player is, the more likely casual fans will tune in to watch him.
Because of the strength of the Overtime brand and its proven distribution channels, the company can monetize Overtime Elite’s media rights within its own ecosystem. So, the league isn’t facing the same pressures most new leagues do, “in terms of trying to secure [a broadcast deal] in year one and having [it] fund the entire [business],” Weiner explained. While Overtime may still end up selling the league’s media rights, the fact that the company has the option to broadcast on its own platforms means it can make decisions in Overtime Elite’s long-term best interests. “We haven’t made a commitment whether we’re going to do a media rights deal, try pay-per-view or maybe in year one let as many people as possible see [the league] for the benefit of our sponsors, the athletes’ brands and the brand of Overtime Elite.”
It’s certainly fair to wonder if a legacy broadcast outlet would pay big money for Overtime Elite games. The NBA’s G League Ignite has two of the projected top five selections in the 2021 draft, and few are watching the team play. And as big as the Overtime audience is, there’s certainly no guarantee the demographic will migrate over to a different platform. Chris Bevilacqua (co-founder, Bevilacqua Helfant Ventures) said he doesn’t see a significant media rights deal with a linear broadcast happening anytime soon. “No brand new, untested property is going to get ‘significant money’ for rights fees in this environment,” he said. “They will need to establish a brand, a track record and long-term stability before that ever happens.”
The bulk of Overtime Elite’s revenues, at least initially, are likely to fall into one of two buckets: sponsorship and merchandise/licensing. Overtime Elite should have little trouble finding corporate partners interested in aligning with the brand. The league provides a viable opportunity to reach tens of millions within the valuable 18-34 demographic (the Overtime audience is largely in their 20s and 30s). For perspective, the average age of the NBA Finals viewer is 46.1 years old. “If you think about the sports sponsorship space now, there are not a lot of properties that are catered towards Gen Z and Millennials. This is really the first league built for the next generation,” Weiner said. For informational purposes, Google, KFC and Converse are among the company’s current sponsors.
As for licensing, Weiner mentioned some of the “obvious categories like jersey sales and apparel [and video games].” He also said, “There are also some really interesting newer categories like NFTs (non-fungible tokens) and trading cards [that look to be viable revenue streams].” In the collectibles market, rookie cards are often among the most desired. “What if you could have a card of the athlete at 16? [Well], now you can actually do it because there are no [amateurism] restrictions,” Weiner reminded.