We believe a series of global macro tailwinds will help drive value creation across the TMT sector. Additionally, the sports industry offers its own secular trends that will further support significant value creation across the asset class. Below is a roundup of industry news highlighting some of these themes and related transactions.
- Traditional TV usage in the U.S. dropped below 50% of total TV consumption in July, marking a significant shift in media consumption patterns.
- Streaming services reached a record-high share of 38.7% of TV use, while other uses like video-on-demand and audio streaming made up 11.6%.
- Despite the growing shift to streaming, business models have struggled to keep up, evidenced by bankruptcies, struggling sports conferences, and the challenges faced by traditional media companies like Fox Corp. in adapting to the changing landscape. The industry is still exploring and adapting to the optimal business model for streaming.
- NASCAR is collaborating with production company Words + Pictures for a docuseries on Netflix, following the success of "Drive To Survive" in Formula 1. The show will focus on the 2023 Cup Series Playoffs and is aimed at attracting new and younger fans to the sport.
- Other sports like PGA Tour and ATP/WTA tennis tours have followed the trend set by "Drive To Survive" to engage audiences through docuseries. The success of such content among younger viewers on streaming platforms like Netflix is driving these initiatives.
- Former NASCAR driver Dale Earnhardt Jr. will serve as an executive producer for the new docuseries. The move to partner with Netflix is expected to expand NASCAR's documentary viewership due to the platform's wide reach and popularity among a younger demographic.
- The Vegas Golden Knights NHL team has teamed up with ViewLift, a streaming specialist, to support their local-broadcast direct-to-consumer (DTC) live game service. The partnership aims to provide fans in Nevada and surrounding areas with easier access to live games and team content.
- ViewLift will create Golden Knights-branded properties on various platforms, including web, mobile devices, streaming devices like Roku and Apple TV, and gaming consoles. The partnership will use ViewLift's end-to-end platform to streamline content streaming and enhance fan experiences with simplified production workflows.
- The service is set to launch on September 24th, coinciding with the Golden Knights' opening pre-season game. This partnership, established in collaboration with the NHL, follows the team's previous deal with Scripps Sports to broadcast locally on various devices, expanding accessibility for fans.
- Chiliz, the parent company of Socios, has formed a strategic partnership with Crypto Blockchain Industries (CBI) to launch a soccer-themed metaverse called 'Football at Alphaverse' (FAV) on the Chiliz Chain. The metaverse will allow fans to interact, play games, and purchase digital assets like NFTs in immersive environments based on major soccer events and clubs.
- Several European and South American teams, including Real Betis, Sao Paolo FC, and Cardiff City, have joined FAV's metaverse. Cardiff City plans to offer a digital recreation of their home stadium, training ground, and landmarks in the virtual environment. Partner clubs will offer fans real-life rewards like match tickets, merchandise, and exclusive events, powered by the '$FAV' token on the Chiliz Chain.
- Chiliz aims to establish the Chiliz Chain as a dedicated blockchain platform for the sports industry. Its flagship project, Socios, is a fan token platform that anchors the blockchain. The partnership with CBI and the introduction of FAV align with Chiliz's vision of bringing fans, communities, teams, and brands together using blockchain technology.
- IT services company Globant and Spanish soccer's LaLiga have partnered with Microsoft to develop a range of artificial intelligence (AI) services for the sports industry. This collaboration builds upon a joint venture established between La Liga and Globant last year, aiming to leverage innovations from La Liga Tech, the league's in-house division.
- The partnership will create AI-driven tools targeting coaching, fan engagement, and broadcasting. These tools will initially focus on soccer and later expand to other sports like basketball, rugby union, and tennis. Microsoft's Azure infrastructure and advanced AI models, such as OpenAI GPT-4, will facilitate the development and delivery of these services.
- Initial projects include multilanguage subtitles for live events to enhance accessibility for hearing-impaired fans, automatic sports content translations to reach a global audience, and real-time statistics integration into La Liga's existing Mediacoach application. The partnership aims to utilize AI to enhance fan engagement and transform the sports industry through technological innovation.
- Amazon's Prime Video plans to enhance its broadcasting of Thursday Night Football (TNF) for the upcoming NFL season. After successfully managing last year's TNF broadcasts, Amazon is leveraging its technical capabilities to elevate the production quality. Changes include improved chemistry among producers, a familiar commentator lineup, and new features like a secondary blue line on the field to indicate potential fourth-down plays.
- Amazon aims to deepen fan engagement with alternate broadcasts featuring collaborations with partners like Dude Perfect and LeBron James' Uninterrupted. They will also introduce innovative features through Prime Vision, such as using machine learning to predict key plays and suggesting going for a first down on fourth down. These enhancements are based on advanced AI models trained on player-tracking sensor data from thousands of plays.
- The new TNF season will feature high-profile matchups in major markets to attract a wider audience. Amazon is committed to increasing its viewership in the second year of an 11-year broadcasting deal. With a free-to-all Black Friday game and strategic marketing efforts, Amazon aims to make a significant impact in the football broadcasting landscape while focusing on improving customer experiences and anticipating future advancements.
- British women bettors have accounted for 21% of bets placed during this summer's Women's World Cup, with increased interest attributed to England's historic run to the final.
- A UK bookmaker has observed higher betting activity compared to previous Women's World Cups, reflecting growing sports betting engagement among women.
- Women's sports, including the Women's World Cup, have seen rising viewership and betting interest, with the tournament ranking as the third-most bet-on league/sport for DraftKings, following MLB and UFC.
- Arthur Blank's AMB Sports and Entertainment (AMBSE), the owner of the NFL's Atlanta Falcons, has acquired a team in TMRW Sports' tech focused TGL golf venture. This new addition to AMBSE's portfolio joins the Atlanta Falcons and MLS's Atlanta United.
- TGL is a golf venture launched by TMRW Sports, a joint effort involving Tiger Woods, Rory McIlroy, and former NBC Sports executive Mike McCarley. The league aims to innovate and attract a broader audience with its technology-integrated, shorter-format approach to golf. The league features 12 top golfers, including Woods and McIlroy, committing to participate.
- Arthur Blank highlighted the investment's aim to promote the growth of golf, introduce innovation to dedicated fans, engage younger audiences, and contribute to Atlanta's championship efforts. More team ownership groups are expected to be announced for the remaining three franchises in TGL, with the competition set to debut in 2024.
- The Professional Fighters League (PFL), a US-based mixed martial arts (MMA) promotion, is exploring investments from sovereign wealth funds to support its global expansion efforts. Founded in 2017, the PFL has expanded into Europe and plans to enter the African market. The company's founder and chairman, Donn Davis, expressed interest in bringing in international partners to support the organization's growth beyond the US.
- The PFL aims to establish itself as a global MMA league, competing with established organizations like the Ultimate Fighting Championship (UFC) and ONE Championship. In May 2022, the PFL secured $30 million in a Series E funding round, valuing the promotion at $500 million. The company has been actively broadening its fan base by signing fighters like former UFC heavyweight champion Francis Ngannou to support its African expansion.
- Engaging sovereign wealth funds could provide the PFL with additional financial resources to realize its international expansion plans. While specific sovereign wealth funds were not mentioned, Saudi Arabia's Public Investment Fund (PIF) has shown interest in combat sports investment and has previously hosted high-profile boxing events.
- MSP Sports Capital, based in New York, has pulled out of discussions to acquire a minority stake in Premier League club Everton. The exclusivity agreement, which would have seen MSP invest up to ￡150 million in convertible debt for a 25% stake, including ￡100 million earmarked for the club's new stadium project, has collapsed due to opposition from an existing lender, Rights and Media Funding Limited.
- The deal fell apart due to concerns from Everton's existing lender, Rights and Media Funding Limited. The lender's reluctance to relinquish its protection against possible default and concerns over the financial terms of the proposed MSP deal made the agreement unfeasible. The lender's loan facility with Everton was extended to ￡200 million this year, secured against club assets.
- While the original plans with MSP have fallen through, the group is proceeding with a ￡100 million loan to Everton Stadium Development Company for the new stadium. However, this will now be a conventional loan rather than convertible debt. Everton's financial challenges include losses, a need for cash injection, and uncertainty about funding the remainder of the new stadium project, originally planned to be sourced through construction loans.
- A newly established investment group, Mercury 13, plans to acquire women's soccer clubs globally, focusing initially on teams outside the United States. The company has secured $100 million in funding from European family offices and former professional soccer players.
- Led by Victoire Cogevina Reynal, an advocate for gender equity in soccer and a VP at OneFootball, Mercury 13 aims to gain controlling stakes in non-U.S. teams due to concerns about rapidly increasing franchise prices in the U.S. Similar to investment models in men's soccer, the group intends to achieve cost savings and revenue synergies across multiple clubs.
- Named after a group of female pilots denied entry into NASA's astronaut program, Mercury 13 follows the trend of investment in women's sports such as WNBA and NWSL. However, the ownership model has raised concerns about potential competition limitations both on and off the field, despite its potential benefits.
- Sports betting startup Novig has secured $6.4 million in seed funding with the goal of introducing exchange-style wagering to the general public. The funding round was led by Lux Capital and included participation from Joe Montana and Y Combinator. The New York-based company plans to launch its app in Colorado in October.
- Novig differentiates itself by offering bets without a vig (vigorous or juice, which is the bookmaker's commission). Instead of using the traditional sportsbook model, Novig's platform operates on an exchange model similar to stock markets, where bets are matched between opposing sides. The company aims to make money by charging institutional traders and monetizing the data it gathers from the bets.
- Novig, founded by CEO Jacob Fortinsky and CTO Kelechi Ukah, aims to attract both price-sensitive, profit-focused bettors and casual bettors seeking a trading-like experience. The company's vision is to compete with major sportsbooks by offering a better user experience and appealing to a wide range of bettors, regardless of their betting preferences.
- California-based equipment manufacturer Sacks Parente Golf experienced a strong initial public offering (IPO) with shares initially soaring from $4 to $28.97, marking a 624% gain. However, shares plummeted two days later to $3.15, a 90% drop from the high. The company specializes in putters used by professional golfers and had a promising start before significant losses.
- The IPO performance of Sacks Parente is not an isolated case. Sports-related IPOs in 2023 have struggled, with a total return of -43% from offering prices. This poor performance contrasts with the positive performance of the broader Sportico Sports Stock Index, which includes sports-dependent businesses and has gained 13% this year.
- Many sports IPOs priced under $5 have faced challenges in attracting institutional investor interest due to limited revenue. Weak financials and lack of institutional support have resulted in a pattern where IPO prices initially bounce, followed by steep losses. Institutional investors tend to avoid stocks with minimal revenue, and the success of such low-priced IPOs remains uncertain.
- Diamond Sports Group (DSG) has accused JPMorgan Chase of benefiting from receiving $922 million in cash transfers from DSG, its parent company Sinclair Broadcast Group, while knowing these moves would likely lead to Diamond's bankruptcy. DSG claims that JPMorgan earned an additional $245 million in fees from Diamond despite being aware of its financial struggles.
- Diamond Sports, owned by Sinclair, filed a legal complaint in July asserting that JPMorgan was enriched at DSG's expense. Diamond, facing bankruptcy, is seeking repayment of at least $922 million with interest. The lawsuit reveals that JPMorgan had a history of involvement with Diamond, including preferred equity units and dividends.
- JPMorgan is expected to deny the accusations and may argue that fraudulent intent is challenging to prove in business transactions. The bank's response is due in the coming weeks. Given the complexities of the case and bankruptcy proceedings, the civil lawsuit is likely to extend well into 2024 or beyond.
- Microsoft has made adjustments to its $68.7 billion takeover of Activision Blizzard to address concerns raised by regulators, particularly the UK's Competition and Markets Authority (CMA). The altered deal now includes provisions for cloud gaming and specifies that Microsoft will not release existing or new Activision games on a cloud streaming service. Instead, French publisher Ubisoft will sell the rights in the UK, lasting for 15 years.
- The original deal faced opposition from regulators, with concerns that it could limit consumer choice and negatively impact the cloud gaming market's innovation. While the European Union and other jurisdictions approved the deal, the CMA had raised concerns. The altered deal aims to address these concerns and pave the way for UK approval.
- The outcome of this deal will significantly impact the gaming and esports industries, as Microsoft would gain control over popular esports titles. This could influence the esports ecosystem, from fan engagement to regulatory aspects. The gaming industry, being the largest entertainment category by revenue, has wide-reaching effects on various sectors, including sports and esports.
