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Why Investment Dollars Are Pouring Into Sports

09/11/2013 11:04 pm ET | Updated Nov 11, 2013

With the NFL season now underway, the nation's highest revenue generating sport has resumed center stage. With over $9 billion in revenue, the NFL is a behemoth, but it's not just professional football that depicts financial upside in sports. The entire sports sector is awash with opportunity, and it is gaining attention from both private and corporate investors.

Why has this been happening and what can we expect in the future?

I posed this question to venture capitalist, Carmichael Roberts, and he said, "The amount of dollars going into sports versus opportunity is out of whack. Even though you see it increasing (investment), the opportunity way outstrips the amount of capital going that direction." Roberts is a partner at North Bridge Venture Partners where serves as the chairman of a sports-related company called, MC10; he also coaches youth lacrosse.

Now startups are looking to reshape entire sports verticals, like golf. Several years ago, GolfNow burst onto the scene by enabling golfers to find and book tee times from their computers; it was acquired by Comcast for $40 million. Today, mobile technology has opened the door for a wave of startups like Game Golf, Swing By Swing, and DiabloGolf, which are changing a golfer's experience before, after, and even during rounds.

Larger companies, not just startups, have also taken notice and are trying to capitalize on latent opportunity within the general sports market. For example, FOX Sports recently launched FOX Sports 1 (FS1), a 24-hour sports network to compete with sports juggernaut ESPN. Similarly, Nike sponsored an accelerator with TechStars to find and fund companies who will better assimilate its Nike+ tech products into the marketplace, involving an array of directors from leading tech firms like Facebook, Twitter, and Path.

Market
Driving interest to this investment sector is the health, size, and potential of the general sports market. Investment dollars are drawn to it's increasing popularity, how consumers desire access to sports content in new ways, and how consumers want to interact with that content daily if not even throughout the day.

"75 of the top 100 TV programs were sporting events in 2012," claimed Randy Freer, COO of FOX Sports. Such market demand is reflected in record-setting team valuations and TV-rights deals, like the $2 billion paid for the Los Angeles Dodgers which was then followed by a $6 billion TV rights deal with Time Warner Cable.

Sports consumers are broad, diverse, and loyal. As Stephen Espinoza, EVP and General Manager of Showtime Sports, put it, "Fathers don't raise their sons to be 'Breaking Bad' fans," as sports fans often connect with teams or athletes at an early age. And while Espinoza was referring to mainstream sports, this them also applies to action sports, where skateboarding phenomenon, Nyjah Huston learned the trade from - you guessed it - his estranged father. Huston is now a headliner in Street League Skateboarding, which is backed by Nike.

Opportunity
Traditionally, TV generates vast sums of sports revenue, where broadcasting networks pay for the rights to sporting events and then sell commercial space for a profit. But the television model is being disrupted by digital, as consumers desire more content available on more devices in real-time.

"Over the next 5 years, mobility presents the biggest opportunity to change the current model (TV), as consumers want multi-platform access to content," said Terry Denson, Verizon Communications' VP of Content Strategy and Acquisition, at the Variety Sports Entertainment Summit.

While half a decade is an eternity in the technology world, there is no question that the direction is accurate. Investment dollars will quickly help establish new distribution channels and create entirely new content. MLB Advanced Media is one company that has been well ahead in this respect, where it was a pioneer in streaming MLB baseball games to computers and then to mobile devices. Its success has led to licensing deals with ESPN and a reported multi-billion dollar valuation.

Another shining example has been fantasy sports, where Yahoo, ESPN, CBS, FOX and even the professional leagues themselves have flocked to capture market share. But the digital sports market is still in a nascent state.

"We're pre-revenue (digital sports market), still trying to figure it out," but there is a big opportunity "using the unlimited shelf space of the Web." said Pete Vlastelica, SVP of FOX Sports Digital, whose group recently acquired the startup Fanhood and is building out a robust digital team in San Francisco. Such gestures indicate that investment dollars will stay in pursuit of further sports opportunities.