Sports are the last frontier of live media.
Last year, 96/100 of the most-watched events were sports, and most of 2024’s largest sports transactions are related to media.
Making it essential to take a quick look at the overall ecosystem (and the verticals transforming it).
Let’s Dive In ????
Sports M&A Stay Hot
The strongest-ever first half of a year in sports mergers and acquisitions…
Over $27B in disclosed value through 225 M&A deals:
- Canal+’s $1.9B offer for MultiChoice
- DraftKings’ $750M acquisition of Jackpocket
- Liberty Media’s $4.6B acquisition of Dorna Sports
- Merger of Disney India and Reliance Media assets
- Silver Lake’s $13B acquisition of the remainder of Endeavor
Numerous high-profile deals of H1 2024 signal a greater appetite in the sports tech market (and more liquidity for late-stage companies).
As you can see, most of these deals revolved around media.
Media Goes in Cycles
Over the past decade, private and public capital has been used to fund numerous bets in the creator (and media) economies.
We saw this across:
- OTT
- esports
- streamers
- podcasters
- creator tools
- digital publishers
- livestream and social commerce
The rationale was twofold:
- Digital consumption and ad spending were growing, and traditional media and commerce models were losing market share.
- New digital-native business models would enable more revenue per customer and lower user acquisition and delivery costs than traditional models.
There was some good innovation…
But over the past few years, investors and executors were overly exuberant and got sloppy.
This led to:
- leaders trying to do too much vs doing one thing well
- upside down unit economics, and high staffing and fixed costs
- reliance on outsized commercial deals that were unlikely to persist
- numerous market entrants with undifferentiated value propositions
Profitability is paramount in media-native business models. The media and creator markets are undergoing a correction (especially as AI ramps up).
A few themes stand out:
Growing Social Channel M&A
More buyers and sellers are emerging for social channels, particularly YouTube.
There are a few reasons why…
???? From the seller’s POV:
Many channel owners, particularly those who are also on-camera personalities, have been burnt out from the past decade’s creator economy boom.
They’re now looking to exit the game/join a larger ecosystem.
???? From the buyer’s POV:
Gaining access to audience and distribution are now the biggest challenges to any business, so operators are willing to pay a premium to meet their consumers where they are and accelerate their go-to-markets.
This is happening across many industries, like fintech and sports betting, to name a few.
Creator Tools Quickly Consolidating
Many upstarts launched to support the growing needs of creators and raised funding back in 2021:
- link-in-bio
- merchandise
- subscriptions
- creator education
- payment advances
- personalized tokens
A good case study is the $40M Series A raise by Passes, founded by entrepreneur wunderkind Lucy Guo.
They recently signed college gymnastics NIL star Livvy Dunne.
However, many offerings were undifferentiated, and the creator’s willingness to pay was lower than expected (the long tail of creators make under the poverty line).
Many of these upstarts couldn’t scale users and generate meaningful revenues — leading to consolidation and shutdowns.
There will be edge cases for platforms with rockstar founders who boast strong KPIs in user growth, engagement, revenue generated for creators, ARR, and operating margin trends.
AI Hype Headed To Sports/Media
There’s a whole new cohort of AI-enabled services & tools being built.
For creators and publishers, these include:
- chatbots
- analytics
- AI-generated creators
- text-to-image/speech/video
- production/editing/dubbing
- copy for metadata and titling
Investors are starting to lean in…
But as creators and industry professionals have put these new AI offerings into practice, the feedback I’m increasingly hearing is that the tools leave a lot to be desired.
Unit economic challenges plagued creator tools businesses, and I expect the same things to happen in creator AI (a natural part of the industry’s growth cycle).
Live and Social Commerce Rightsizing
Livestream shopping is an exciting and growing market in the US.
This explains why many new livestream upstarts received 9-10 figures of VC funding between 2020 and 2022.
However, the U.S. live and social commerce market is only 1/10th of China’s (and American consumer online shopping behaviors differ materially from their Chinese counterparts).
The takeaway is that the live and social commerce market is attractive but still nascent — with strong incumbent competition from TikTok, Amazon, WhatNot, Shein, and Temu.
Podcasting Is Consolidating
Podcasting is going through a cycle many other early media markets have faced.
Too much capital prematurely flooded the market…
What drove this was the hope that:
- Spotify/iHeart/SiriusXM would keep buying at over 7x revenue multiples
- IP licensing/co-production deals would continue in both high volume & prices
But content distributors were bludgeoned by growing streamer competition, writer and actor strikes, and the collapse of pay TV cash cows.
In turn, podcast buyers and capital pulled back.
Growth Ahead for Podcasts
However, podcasting continues to show signs it’s a new media mega market.
The stats back it up:
Collectively, I see the short-term correction plus long-term tailwinds as an exciting moment to bet on podcasting.
Remember that podcast ad revenues are <25% of the radio market but growing at 10x the rate.
Looking Ahead
Media, particularly in sports, is going through a shift…
Podcasting continues to grow, creator tools are shifting, social channels are being acquired, and live commerce is emerging.
Most importantly though…
New AI tech enables high-growth startup building with less and less capital due to services like Github’s Copilot, which can 10x the output of a single engineer.
Distribution will be even more important in the sports industry…as if it wasn’t already.
I think there’s a big opportunity for managed services businesses to help athletes and creators effectively use the new AI toolkits.
