Fan Data Is Next Ticket to Increased Revenues and Valuation Multiples

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Monumental Sports & Entertainment CEO Ted Leonsis has long argued that “platform” sports businesses are intrinsically undervalued and should be valued in line with SaaS businesses (8-12x top line). While these organizations do not sell software, they have the local, social and mobile components and the recurring revenue streams that define the world’s most valuable corporations. But there is one critical difference between SaaS businesses and sports organizations that helps to explain the variance in multiples they command. The latter “commonly has little knowledge of who [their] fans [or customers] are,” Tom Tercek (co-founder, Pumpjack Dataworks) said. The former MSG executive is convinced the situation could be improved: If sports businesses increase their understanding of their fan bases and make the data “tradable or portable” they could unlock new sales inventory, drive net revenues and lift their valuation multiples.

JWS’ Take: There are several reasons why domestic sports organizations tend to lag when it comes to monetizing data. The first “is that they are ahead in broadcast rights revenue,” Nick Goggans (co-founder, Pumpjack Dataworks) said. With so much revenue coming from media contracts, clubs across the big four leagues have lacked the incentive necessary to invest in building data warehouses and the infrastructure that would make fan information easily accessible—and actionable—to people throughout the organization. Sam Yardley (EVP North America, Two Circles) noted that many organizations still view data as being synonymous with “a big technology project,” one without clear KPIs.

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To be fair, teams have been good about collecting first party data (think: ticketing, social, stadium WiFi, POS). But until a couple of years ago, technological limitations prevented teams from bringing it all together to create a holistic fan profile. “It was technically a very hard [and costly] thing to do because you’re talking about [dozens] of different data source types that have to all be brought in, cleaned up and stitched together,” Tercek explained.

Pumpjack Dataworks was founded in 2018 to help solve that challenge. Its SaaS platform (the Pumpjack Fanbank) enables rights owners to easily connect a multitude of disparate data sources, to analyze the data it has collected and to turn that information into both a better experience for the fan and a commerce opportunity. Teams (see: Dallas Mavericks), venues (American Airlines Center), broadcasters (Eleven Sports), OTT services (ATP Media), leagues (Major League Rugby) and governing bodies (International Table Tennis Federation) all use the company’s software.

Sports’ collective decision to lean into social media may have also slowed efforts to own and control data. Meta has created an ad business worth more than a trillion dollars over the last 15 years, with much of its content focused on sports and entertainment. Yet, as Goggans said, “Mark Zuckerberg is [rarely] writing checks to pull all of that content into their distribution channels. Sports properties have in a way been “mortgaging out” their data opportunity to these other platforms” in exchange for the reach.

But to be competitive in “this new DTC world,” rights owners need to have a firm grasp on who their fans are. Without that knowledge, Tercek explained, the organization is unable to reach, communicate or monetize them, particularly younger fans with different viewing habits (think: consuming highlights rather than full games). He urged “teams to take back control of [their] first party data assets.”

Historically speaking, rights owners “have been getting multiples on valuation that are more akin to linear television values [than SaaS businesses].” Goggans said that makes sense when you consider “linear value is all about the [total] number of eyeballs” and the fact that clubs have traditionally been more focused on the size of the fan base (see: Barcelona’s claims to have more than 100 million fans) than exactly who is in it.

But Goggans does not believe all fan eyeballs are created equal. Super fans should be worth more, he said, and argues that sports organizations would be awarded greater valuation multiples if they were able to segment the community. Clubs with robust data systems can better match brands with passionate fans and command a premium for the higher precision inventory it delivers. “That is what Google AdWords has done. That is what Facebook Custom Audiences is,” he argued.

Pumpjack Dataworks’ client roster is evidence the data revolution is underway. “Level one was the stats,” Goggans said. “Leagues have laid down that foundation. [Stats] monetize through [official data partnerships] and gambling. The next level is about [rights owners controlling, understanding and packaging the data on] the fans themselves.”

Level two remains in the “early stages.” Goggans said that even the most data savvy of the organizations his company works with are still largely reliant on “manual process, done by a business intelligence team, and most of their [efforts] are focused on [ticket sales], not [on driving] the overall value of the club.” While it is a step in the right direction, he said, much of the revenue—and upside—in sports comes from other sources: sponsorships, broadcast rights “and entirely new inventory like digital rights and the data itself.”

Yardley, however, cautions against the idea of “tradeable” data. “Fan data is, alongside IP, the most valuable asset of any sports property. By trading that data, you are trading away a USP” (unique selling proposition).

For rights owners to ink new sponsorship deals—or even to retain existing partnerships—they need to supply data about their fan base to their partners. “It has [become] table stakes [for marketers],” Goggans said. “It is now part of the expectations [that come along with] their investment. They want insights or the ability to reach [the organization’s] fans.” The more precise the data, the more valuable the partnership is worth to marketers.

Historically, traditional media carried the load of reaching fans. “But those relationships have become disintermediated, and it’s now the job of the property to reach those people too,” Yardley said.

It is hard to say exactly how much a holistic picture of a fan is worth to a sports organization (never mind what the entirety of the fan base is worth). But Goggans cited Facebook’s average revenue per user (~$30) as a comp.

Yardley agreed that as a rule of thumb ~$30 was “in the right ballpark,” but “Facebook’s monetization engine is a lot more effective than most sports properties, so I’d probably head lower.”

He also suggested using customer lifetime value (CLTV), not average revenue, as the defining metric. “That [figure will] help guide conversations around how much to invest in technology, how high the threshold is for customer acquisition, etc… Without that as a North Star within the organization, a lot of investments [will be] made with little guidance.”

It is fair to wonder if privacy concerns and the possibility of future legislation will have a negative effect on the value of fan data (see: Meta’s stock price). But Monterosa CEO Tom McDonnell does not believe it will. “Privacy laws should not be seen as a barrier to organizations who go about acquiring first-party data from audiences in a fair and transparent way. When fans participate in a quiz challenge, vote or prediction game, or if they are then given the chance to enter a draw for a prize from a sponsor, their data is always requested alongside optional consent. When an exchange of value is taking place, the subsequent level of engagement and opt-in to marketing is remarkably high, as proven out from our recent implementations.”

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