Friends or Foes?
For the last two years, we’ve been researching and reporting from the front lines of the sports tech boom. We’ve sat down with inventors at scores of startups. We’ve seen hundreds of demos and pitch decks. We’ve scrutinized the teams these startups assemble. We’ve tracked the best of them to market. The race is palpable as they burn the midnight oil. Meanwhile, we’ve watched the flow and pooling of global capital, along the way predicting several of the mergers, acquisitions and megadeals that have transformed the landscape in a single stroke.
For decades, professional sports franchises have relied on the big four revenue streams: gate receipts, media rights, sponsorships and merchandising. The explosion of new technologies, however, has given rise to many side businesses and ancillary markets that piggyback on the popularity of professional sports. These industries wouldn’t even exist if pro sports weren’t there, yet many of them have contributed little or nothing to the bottom lines of pro leagues and franchises.
The radical reshaping of the ticket resale business was a harbinger of this trend. For decades, resales were mainly the domain of small-time scalpers, lurking outside stadiums and parking lots. But as the transactions moved online, ticket resales exploded into an $8 billion market, becoming many fans’ habitual first option to find tickets. Franchises have realized they need to fight back to get their share and regain control. They’re especially worried that these new intermediaries now have the data on fans and can market directly to them, severing the franchises’ 1-to-1 customer relationships. “What I really want is more Clippers fans in our arena, rooting for our team,” Steve Ballmer remarked at a recent conference. “And less of these California transplants buying the tickets to see their hometown Celtics or Bulls. That’s why I want to control ticketing.”
We can see this dynamic at work in sports social media, sports tourism, video games, unlicensed merchandising, sports news, fantasy sports and sportsbook betting. Billions in revenue—tens of billions in some cases—are now being generated, as technology has allowed new businesses access to millions of fans. There is now legitimate concern that sports ancillaries have become a partial replacement for attending games and watching on television. Until now, these ancillary businesses have gotten by on the argument that they benefit franchises indirectly by engaging fans and promoting their brands. But franchises have started wondering if they are truly friends or foes. Even as the leagues partner with some technologies, they’re banning others, such as live streams from fans’ smartphones. A turf war has begun and it is taking place across the globe. Teams and leagues are beginning to flex their muscles as rights owners. They want their rightful cut, and they want to control their communication and connection with their fans.
This is a wild time. The wins and losses on the field are no longer the only compelling drama. The competition off the field is equally riveting.
Josh McHugh, Editor in Chief
Po Bronson, Contributing Editor
Ethan Watters, Contributing Editor
David Reardon (reporting and research), Aaron Frank (machine learning advisor), Justine Gubar, Andy Dolich, Dylan Casey, Steve Baker, Todd Merry, Gary Bettman, Garrett Law, Cam Neely, Peter White, Tracy Hughes, Merrick Madsen, Garrison Murphy, Mark Charles, Long Ellis III, Katie Gorman, San Francisco Writers’ Grotto, Sean Wagstaff, Shannon Roy, Sam Nordemann, Andries Maritz, Paul Saffo and Attention Span Media.