The Future Of Monetization In Professional Sports

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Hey Friends,

Last month, the National Hockey League (NHL) announced that they would be rolling out jersey patch sponsorships for the 2022-23 season.

This wasn’t necessarily a surprise — the league lost out on nearly $3.6 billion due to COVID-19, and the NBA has already proven this sponsorship model works in North America, with the average team bringing in about $5 million annually from their jersey sponsor.

Naturally, fans were a bit concerned. They feel hockey jerseys are sacred and shouldn’t be covered with advertisements. Even worse, they are worried that the introduction of ads will eventually lead NHL jerseys to look like their European counterparts, which are littered with so many sponsors it’s sometimes tough to tell which team is which.

But I was more surprised by how people within the sports business industry took the news. For example, someone who has been in the industry for a long time, who I respect greatly, mentioned that jersey sponsorships were the “last available revenue stream for leagues to exploit.”

I don’t necessarily think he’s wrong. Most professional sports leagues have spent 50 to 100 years building additional revenue streams and diversifying their business. Sure, media rights, ticket sales, merchandise, and more will continue to grow, but those are established at this point — they aren’t new.

But on the other hand, I think we will see a divide start to occur between the professional sports leagues that embrace new technology and those that fight it.

Take the NBA, for example — they collect a rumored fee of ~2.5% on all transactions from their partnership with digital collectible platform NBA Top Shot, resulting in what could eventually be a billion-dollar business for the league and something Mark Cuban says might end up being their 3rd or 4th largest revenue stream.

That business *literally* didn’t exist two years ago, which tells me two things. First, the NBA was drastically undervaluing its intellectual property, and second, the idea that there are no more revenue streams to exploit is naive.

We’re entering a period where the top leagues — think NFL, NBA, Premier League, Formula 1, etc. — are all fighting for eyeballs, and in most cases, the same eyeballs.

Whether it’s a partnership like NBA Top Shot or something else, they must start to look at ancillary markets to add additional revenue streams. Why can’t NFL teams sell tickets via NFTs, cutting out secondary marketplaces and earning a commission each time the ticket changes hands?

That’s just one example, but there will be plenty more. These leagues operate in a monopolistic capacity with little to no competition, but that doesn’t mean they can rest on their laurels.

The most prominent organizations of tomorrow are building their future today — looking at new and emerging markets to capture asymmetric upside. The earliest adopters will benefit the most, with the return being marginalized for those that resist.

Ultimately, this will take a few years, if not a decade-plus, to play out. But it will be fascinating to see who takes risks, succeeds, fails, profits, and loses. Regardless, I hope each of you has a great weekend :) I’ll talk to everyone on Monday.

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Huddle Up is a daily newsletter that breaks down the business and money behind sports.

If you would like to join more than 47,000 other professional athletes, business executives, and casual sports fans that receive it directly in their inbox each morning, subscribe now.

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