Technology has driven many of the recent evolutions in the sports industry – how it’s played, how it’s consumed, and how it operates as a business – to the point that it is now a fundamental part of sport itself.
Broadcasting and digital distribution have transformed sport from an in-person event into a shared global experience, the smartphone has become the focal point for how most people interact with their preferred teams and leagues, and data analytics is transforming everything from fan engagement to crowd management at stadiums. Now a new wave of innovations, such as Web 3.0, the metaverse and artificial intelligence (AI), are rewriting the rules once again.
But sport’s growing dependence on technology comes at a time of macroeconomic challenges and market corrections. Inflation is impacting demand, big tech is cutting jobs after a prolonged period of expansion, and funding is harder to come by.
Which technologies are here to stay the course, what should we watch out for in 2023 and how will those involved in the sector fare in this changing investment climate? SportsPro asked a panel of experts for their views.
- Mohit Pareek, Principal, Drake Star Partners
- Benjamin Stoll, Director of Digital and Innovation, International Ski and Snowboard Federation (FIS)
- Thomas Alomes, Head of Market Insights, Sports Tech World Series
- David Nugent, Chief Executive, Next League
- Matilda Sung, General Partner, Ludis Capital
- Meredith McPherron, Chief Executive and Managing Partner, Drive by DraftKings
- Rohn Malhotra, Co-Founder, SportsTechX
- Charlie Greenwood, Founder, Sports Loft
Fan engagement will once again be near the top of the list of priorities (Image credit: Getty Images)
What trends will define sports technology in 2023?
Thomas Alomes: Market consolidation. After a few years of explosive pandemic-fuelled growth, the market will see a consolidation of power among industry leaders. These companies will likely focus on divesting non-core and [experimental] products to renew their focus on revenue-generating areas of their business, whilst also seeking growth through acquisitions of smaller companies
Mohit Pareek: We expect to see greater use of generative AI for greater fan engagement, including content creation at scale such as match previews and
highlights that bring fans even closer to players. With big tech moving into live sport, we expect to see new streaming experiences emerge in a bid to expand audience and focus on fan engagement.
Matilda Sung: Most rights holders now understand the power they have in the huge amounts of data they have about their fans. In the coming years we will see more experimentation and refinement of experiences from the technologically-progressive leagues and clubs. Fans will begin to feel the same delight that they did the first time Netflix recommended the perfect show for them to binge next.
Whereas the last two to three years were defined by visionary applications of these technologies, the next few years will be marked by clear and defined use cases that can connect directly to an action, reaction, or dollar value.
Sports betting in the US will be another area we stay keenly focused on. We continue to believe casual bettors represent a unique and large opportunity to service – what will be interesting to keep an eye on will be the experiences that can capture the casuals and ultimately graduate them to becoming the expert bettors.
Benjamin Stoll: Beyond jumping on the “Drive to Survive” bandwagon, sports properties will double down on gaming and virtual worlds to reach and engage with younger audiences in meaningful and sustainable ways. The ongoing success of TikTok will see rights holders further professionalise their short-form content production capabilities and expand on collaborating with content creators. A hidden champion might be audio technology, driven by the further adoption of advanced headphones like air pods and spatial sounds.
Matilda Sung, General Partner, Ludis Capital
Most rights holders now understand the power they have in the huge amounts of data they have about their fans. In the coming years we will see more experimentation and refinement of experiences from the technologically-progressive leagues and clubs.
Meredith McPherron: The personalisation of the fan experience will continue to see broad adoption as sports teams focus on how to better identify and monetise super fans. Reimagined ticketing platforms and applications will offer fans a more convenient and seamless experience, and for teams, the potential for global reach as tickets extend access from physical to virtual experiences.
The gamification of society will continue to be fuelled not only by the rise of legalised sports betting and real money gaming in the US, but also through the growing use of proprietary data driving personalised rewards.
Rohn Malhotra: We noted 2022 as the ‘Year of the Fan’ and I see no reason for this not to continue as sports looks for more ways to engage with and monetise fanbases. Tech will also find its way into fast-growing sports like pickleball and padel as well as innovations in older ones, such as TMRW Sports’ golf venture. Sports tech has emerged from the sidelines of being ‘niche’ to driving the conversation in sport.
Charlie Greenwood: The ability for streaming to show that it is a viable business model. Companies like Disney, Comcast and CBS have all invested hugely in streaming services and are trying to balance driving revenue from their legacy businesses and the costs of their new OTT platforms. At the same time, leagues and teams are realising that having a direct-to-consumer (DTC) streaming service isn’t necessarily an easy business as it requires skillsets, such as customer service and marketing
The other trend will be consolidation. I think we are going to see several “roll-ups” in the market that combine multiple startups, while larger players will acquire smaller players – especially if funding is seen to be challenging and an acquisition provides a good exit path for founders and investors.
The mobile phone is now the centre of the sporting experience
Which sector within sports tech will see the greatest growth over the next 12 months?
Mohit Pareek: In 2022, fan engagement was the largest [sports technology] segment in terms of private placement activity and the second largest in terms of M&A deal value. We believe it will also be the highest growing sector this year as the industry looks to better engage fans and offer new experiences using new technologies.
Meredith McPherron: It is hard to overstate the potential of AI on the sports tech and media landscape. Teams, fans and athletes alike will benefit from AI advancements in our space – from driving more efficient digital content creation and personalised fan experiences to powering more accurate models for predictive injury prevention.
Benjamin Stoll: Hopefully it will be women’s sport and data and AI-driven technologies that help athletes train and perform better. Examples of this include managing menstrual cycles, sleep, fitness and nutrition as well as services that aid injury prevention and mental health. I also expect stadium and in-venue technologies to further blossom.
Thomas Alomes: Consumer-facing AI. ChatGPT is the most well-publicised [application] but within sport there are some ground-breaking uses of AI which have the potential to democratise access to advanced technology. Examples of this include hyper-personalised content generation; automated camera systems for broadcast of competitions at all levels; computer vision assisted virtual coaching; and AI-powered biometric analysis giving consumers actionable outcomes to take control of their health and wellness journey.
David Nugent: Customer intelligence which relies on large volumes of data and developing technologies such as AI and machine learning (ML). Sports organisations are now using technology to [track] every possible source of customer engagement, from social media and face-to-face interactions to the way they place sports bets and interact with live events.
Matilda Sung: Ticketing, venue management, and innovative fan engagement will see the most growth this year. Sports is mostly non-cyclical and so we will likely see rights holders and partners invest deeply into simplifying and improving the ticketing experience, the in-game experience, and the various touchpoints with their loyal fans. With the backdrop of inflation, widespread layoffs, and eventual decrease in disposable income, it will be even more vital to deliver delightful, efficient, and safe sports experiences.
Rohn Malhotra: I expect some very cool things to happen in broadcasting tech as big tech fights for a piece of the live sports pie. Aside from that, in the last year or so we’ve seen big investments in automated video production. The likes of Pixellot, WSC Sports and Veo now have deep pockets in their battle for the lower tier, collegiate and amateur sports market. It is a pretty good time to be a sports rights holder, across the value chain.
What do you think the sports technology investment landscape will be like in 2023? Will it be harder for startups to find funding?
David Nugent: Depending on who you talk to we are either entering into a recession, or in the middle of one. What is certain is that many traditional startup funding sources have already dried up for the short-to-medium term. When there is capital on the sidelines, acquisitions typically increase and startups who have funding issues may sell earlier than they’d like to or enter into less than favourable convertible loan scenarios.
Matilda Sung: Capital will certainly be tighter as we move forward. While a number of sports tech mandated funds were raised in the last several years, investment teams will take their time to write their cheques. Startups who have been diligent in cash flow management, hiring protocols, and recurring revenue focus will be in a better position. We will likely see startups leave the ecosystem, either through acquihires or even shuttering of business.
Mohit Pareek: While global macroeconomic factors have made investors more cautious and watchful about their investments, there is still a large amount of capital available for deployment in 2023. We continue to see new funds being raised and existing investment funds doubling down in the sports tech market.
Thomas Alomes: There are still smart investors looking to deploy capital into quality sports tech companies. Courtside Ventures just announced a US$100 million fund, KB Partners closed their second US$127 million fund in November 2022, and several new funds are in the process of coming online over the next 12 months. The caveat to this ongoing access to capital is that investments won’t be on terms or at valuations startups would have enjoyed 12 to 18 months ago. Arguably, introducing more restraint to valuations is not a bad thing for the industry’s ongoing sustainable growth.
Charlie Greenwood: We have to be careful not to get carried away with either the hype of large fundraising rounds or the negative macroeconomic stories in the media – it’s easy for the pendulum to swing too violently from one extreme to the other. When valuations get over-inflated there will always be a correction and these things are cyclical. However, I think what we are seeing at the moment is a greater focus on company quality and that fundraising rounds are being done at a more realistic multiple.
That’s probably only a good thing as there are certainly instances where founders have been too ambitious on their valuations and have priced themselves out of the market. It also means that investors are doing their due diligence properly. Again, this is a good thing.
From an investor’s point of view, a correction also provides an opportunity to get some more appealing valuations and provides a more believable route to making a return. The ‘growth at all costs’ approach will be replaced with a greater discipline that leads towards profitability.
What’s the most overhyped sports tech trend or product heading into 2023?
Thomas Alomes: Consumer-facing AI, especially generative AI! Much like the conversations being had around NFTs and Web 3.0 this time last year, generative consumer-facing AI isn’t the panacea for the sports industry’s problems or challenges. It will have a profound and long-term positive impact, however in the short term that impact may not reach the hype.
David Nugent: Web 3.0 technology. As we reported in July 2022, ‘Web 3.0 has emerged as both a force and a farce’. The potential of blockchain-based technologies is undeniable, and there are already great companies being built around blockchain, some specifically in the sports space. That said, the lack of maturity for enterprises, and the speculative areas of Web 3.0 (NFT marketplaces, cryptocurrency), have dampened some of the excitement.
Mohit Pareek: We believe that esports will struggle with monetisation and engagement in 2023 and we will see some of the esports organisations/teams joining forces to survive while some will be bought out.
Meredith McPherron: With markets more grounded coming into 2023, and the hype around overpriced NFTs and digital gaming assets refocused on utility over quick flip transactions, we believe continued experimentation will drive exponential growth and value creation in sports tech and entertainment.
Rohn Malhotra: We’ll continue to hear a lot about the ‘metaverse’ but are still some way from seeing an adoption inflection point.
The Australian Open’s NFTs have attracted praise for their community and utility elements (Image credit: Tennis Australia)
What will happen to the crypto market in 2023 and how will this affect the sports industry?
Mohit Pareek: In 2022, the entire crypto market lost around US$1.4 trillion in value with the liquidity issues and bankruptcies. While we believe that it’s unlikely that the market will reach its historic peak, it may have bottomed out and 2023 is going to be a year of caution.
Thomas Alomes: Rights holders are (finally) starting to realise that fans are more interested in the benefits that these technologies can provide, rather than the technology itself. So expect to see less crypto buzzword bingo in marketing efforts. A successful example is the recent Australian Open Artball initiative. Now in its second year it has evolved from primarily an NFT digital collectable into a practical, virtual membership programme integrating real-world benefits from tournament sponsors for token holders.
Benjamin Stoll: Hopefully sports organisations will not only focus on the [potential] revenues of crypto technology, but will try and build a sustainable product with community value as part of a long-term plan.
Thomas Alomes, Head of Market Insights, Sports Tech World Series
Rights holders are finally starting to realise that fans are more interested in the benefits that these technologies can provide, rather than the technology itself. So expect to see less crypto buzzword bingo in marketing efforts.
Matilda Sung: We are in a crypto ‘bear’ market, which will only mean a time to reset, reframe, and even rebuild for the projects that have staying power. This period should be spent on deepening existing community relationships with education and re-education. As it relates to sports and crypto, time and money will be spent less on speculation and more on communities with long lasting and deep-rooted beliefs, such as those around collectibles and memorabilia.
Rohn Malhotra: The sponsorships cash cow has been sent to pasture. It might take a while but post all the hype, there is value to be unlocked in the space.
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