Can the sports data gold rush last?

Joe Topping explores why prospectors should keep on digging

Data was said to be the new oil, and like oil and gold, the early days are usually marked by the rush to secure as much of the asset as possible. Industry analysts expect the next Bundesliga data rights deal to at least double. Industry rumours suggest the recent new deal agreed between Football Data Co (the body representing the rights of the EPL, EFL and SPFL) and Genuis Sports could well be a multiple of the current deal. However, the value of shares of the two quoted data rights agencies –who are leading the gold rush -have dropped by 70 per cent from their heights in 2021. Does this suggest the current gold rush in data rights might be ending soon or are there reasons for prospectors to keep on digging?

Sporting organisations partner with sports data collection service providers, who pay for the right to be the data partner (often exclusively) – collecting, formatting, and subsequently selling, data gathered during sporting events. The customers most interested in purchasing this data are sportsbook operators (gambling companies), who account for around 70 per cent of the estimated $1.8 billion sports data rights market.

Other customers include broadcasters aiming to enhance the service to sports viewers, clubs who often need industry data to benchmark their own players’ and team’s performance and tactics, and leagues and Federations who need to use the data to test for unusual patterns of play to maintain the integrity of their sport (ironically often challenged by punters trying to secure an unfair advantage through incentives to players or match officials).

Currently about 80 per cent of the sports data market is in the hands of three leading players; Stats Perform, Sportradar and Genuis Sports who battle it out for contracts to collect and exploit the data. Few direct deals are done between sports and the end users (mostly bookmakers)- the exception being horse racing, which given its unique historic dependence on betting revenues tends to do direct deals with betting operators or through specialist intermediaries.

The leading sports data agencies currently spend 40 to 50 per cent of their current revenues on acquiring data rights, the lion’s share going to top betting assets – the NFL, the EPL, ATP/WTA tennis etc. This has challenged their path to profitability and is the main reason for their fall in market value in the last couple of years. But the main determinant of whether the gold rush in data rights continues is not necessarily the health and positioning of the data agencies, but on the value of those rights to the end user – and in particular the betting operators. And here the trends suggest the gold rush could continue for some time yet.

First, current total spending on data rights by betting operators (excluding horse racing) at $1.25 billion looks perfectly sustainable given the total win margin on sports bets globally is approximately $20 billion. Spending c. 6 per cent of revenues on the data feeds that help set odds, fuel betting interest and facilitate in-play betting doesn’t appear excessive.

Second, largely due to deregulation of sports betting in most US states, global sports betting is likely to keep growing by more than 5 per cent a year, even as some European countries tighten up their regulation of online betting and gambling. Third, the growing move towards in-play betting, where timely verified data is particularly important, is likely to increase the value of securing the best data feeds.

And lastly, and perhaps most importantly, just as TV sports rights were used as the battering ram for pay TV globally from the 1990s onwards, so sports betting is the battering ram for the wider gambling and gaming market today. Win margins in most casino-type games are double those of sports betting, but it’s the sports betting that helps to acquire new punters and keep them on the platform. Margins on sports bets aren’t the only driver of sports data values, margins on the gaming activities from accounts gained and retained through sports betting, also help determine the value of the sports data. It’s not just the $20bn of sports betting win margin securing the data rights market, but also the c$50bn win margin on casino betting.

One could argue that competitive intensity among betting operators might slacken off as a consolidation phase hits the sector which is currently spending billions on marketing and free bets to encourage new account sign ups in their own gold rush for customers. But consolidation is also likely to take duplicated costs out of the sector and should still leave healthy rivalry from a number of survivors for the data they need. Consolidation in itself shouldn’t reduce the total value of the data rights to the end users.

So the gold rush for sports data is not likely to end any time soon.

The main issue for the sports data agencies won’t be growth in demand, but the challenge of more direct deals between leading bookmakers and leading sports bodies and how best to sell to fewer consolidated buyers to extract the most revenue. While data agencies tend to secure exclusive rights from the sports bodies, they tend to exploit them on a universal licensing model – any betting operator can have the data so long as they pay the rate card price. They may need to revisit this practice and instead offer a limited number of licences for a price premium – although if they push this too hard it could encourage more leading bookmakers to do direct deals to avoid being locked out of the data feed. And they may need to consider consolidation in their own sector to reduce cost duplication and enhance their own margins and valuations.

For sports bodies, the main issue will be whether to go direct to end users or through data agencies, and then how to design rights auctions and exploitation contracts to maximise the income from both. Many of these issues are similar to those they have faced in the exploitation of media rights for decades. They may just have to give more attention to their data rights auctions in the future as they increase in value and complexity.

O&O can advise on all these issues as it has helped several sports bodies value and optimise the value of all their media, data and commercial rights as well as helping investors assess sports agency businesses active in these areas.