The Next Frontier in Sports Investing

A lot is happening in sports and we wanted to take a look at the trends driving the sector in emerging and frontier markets. We’ve spoken with dozens of entrepreneurs, funds and domain experts that straddle developed and developing worlds about the challenges and opportunities in the sector. We’ve attempted to distill from these conversations and our research themes that we believe will drive sports investing in frontier markets in the future. We’ve identified six: 1. Unbundling “Big Sport,” 2. “Mobile”-zation of content, 3. Building around niche sports, 4. Player-centric models, 5. Gamification of platforms, 6. Demography as destiny.

Our core belief is that “Big Sport” wants to expand its audience around the globe, but fundamentally lacks the expertise to reach mobile-first lower income consumers, which creates an opportunity to back startups and non-traditional sports, leagues, platforms, and business models that can.

1. Unbundling “Big Sport" - We see the unbundling happening mostly in content atomization, which is the process of breaking down a brand's narrative into many small pieces of content, each of which convey a small part of the whole. Going to a ‘sponsored’ bar to watch sporting events collectively, whatsapping a branded highlight reel, making a mobile bet using phone minutes offer more cost conscious consumables as entry points for frontier consumers.
2. “Mobile”-zation of content - To succeed in frontier markets, mobile has to be central to any business model. Ninety-five percent of internet users live outside the US and 80% of them access it via their phone. A preview of what sports distribution might look like in the future given this reality was shown in the recent Fury-Ngannou MMA fight in Riyadh (as our friend Marie Lora-Mungai recently reviewed in her newsletter). Ngannou’s agency worked with African telcos to offer discounted viewing fees of $.80 as compared with the ESPN fee of $79.99. It’s unclear what revenue was generated, but even if 1% of Africa’s 950m mobile subscribers purchased a pass, those fees would have covered Ngannou’s $10 million purse. In contrast, Ngannou made about $600,000 when he beat Ciryl Gane to retain the UFC heavyweight title, his last fight under the UFC banner.
3. Building around niche sports - Cheap mobile internet gives niche sports huge exposure online and effectively zeros out the cost curve of distribution, so the remaining cost is capex - effectively how expensive it is to play and whether that is done collectively or on individually. And while there are roughly 200 sports that have international recognition through an international governing body, that pales in comparison to the 8000 “sports” played world-wide. We think there is an opportunity to build micro-platforms for the long-tail of “under-formalized” smaller sports that have dedicated fan bases, but limited common technological platforms and no centralized governing bodies.?
4. Player-centric models - Sporting “legends” used to be created by teams and leagues. Now, the league's popularity is as much a function of the players that choose to play in them. That has always been the case with mixed martial arts, where having the right fighter was key to profitability. We think player centric business models will drive unique revenue growth in frontier markets, not just in the creation of new leagues and the adoption of new sports but, specifically, in how content is made and distributed, and how the value created is shared. Our portco Eksab Gaming is leveraging players' distribution, theyre not buying ads. It's both a technology and business model change. Given what we have seen with the Messi deal in Miami, players are recognizing that just getting salaried contracts – no matter how astronomical–do not accurately reflect the value that they create.
5. Gamification of platforms - Arguably the most interesting theme in frontier markets is gamification and skills-based betting. In 2019, our PR firm, InsiderPR , started working with Carry1st - now one of the most successful African startups. Our work with them showed us how challenging, but also compelling the gaming segment is in frontier markets. Brazil, India and Turkey have traditionally been major players in the gaming industry, but Africa and other frontier markets are starting to come online as GSM transitions to LTE. Gamers in sub-Saharan Africa increased to over 200 million in 2023, from 50 million in 2015.
6. Demography as destiny - It’s no secret that demographics are shifting towards emerging markets. By 2035, Africa and India together will constitute the majority of the world’s working age population and two thirds of the population under 35. Viewed in the context of sports investing, it’s especially stark. Avid sports fans tend to be younger, and viewership drops off considerably at around 40. Eighteen to 45 year olds are more than 70% of global demand for sports and the vast majority of future fans in five to 10 years will reside in emerging markets. As the western world rapidly gets older, and emerging markets constitute a larger portion of both the supply (of talent into global sports) and demand (of viewership), sports will inevitably shift to these markets.