Over the last 18 months, cryptocurrency has become the “largest” sector of sports based on annual spending. GlobalData numbers show blockchain-based companies committed more than $3 billion to team and league partnership pacts during that period.
But the latest crypto season has brought spending in the category to a halt and jeopardized at least part of the deals signed over the past year and a half. FTX’s bankruptcy filing alone is believed to put more than $375 million in sponsor commitments at risk.
New sports betting sponsorship pacts become less frequent, too. SponsorUnited reported that after the deal volume in the five big leagues increased by 95% in 2020 and 93% in 2021, only 8% in 2022.
A resurgence in traditional categories, such as airlines, car services and financials, is expected to help offset some of the losses in crypto and sports betting. But Adam Grossman (VP business insights & analytics, Excel Sports Management) says rights owners who want to keep their partners’ profits growing would be wise to pay attention to generatives. artificial intelligence sector. The nascent industry has gotten “a lot of VC and PE attention” and could be “the next big sponsor vertical,” Grossman said, especially as AI plays an increasingly important role in the business of teams and leagues.
Bob Lynch (founder and CEO, SponsorUnited) said he expects rights owners to use their investment in AI technology—and the natural synergy with the sector—to sign new sponsorship pacts. Team and league partnerships can be important in creating brand awareness and have an impact as a B2B platform to reach other potential clients. They can also be the basis for an interesting content strategy that reflects how technology is used internally.
JWS’ Take: Generative AI refers to the merging of existing data sets with user creativity, machine learning and artificial intelligence algorithms to create original content. Grossman called it the next iteration of augmentative AI that sports betting affiliates and cost-cutting media companies have been using to generate automated game previews and recaps.
OpenAI is the most prominent company in the emerging industry. The DALL-E 2 product can turn text messages into pictures or stories. “A user can type ‘a cat flying in a bird in Las Vegas,’ and the machine will create an image for you,” said Grossman. The company declined to comment for our story.
Teams and leagues need to follow the money to find sports’ next big sponsorship category. “Generative AI is on the rise [investment] attention, especially from the venture community and private equity,” said Grossman. According to Crunchbase data, OpenAI has raised $1 billion to date. Rival Jasper recently closed a $125 million round at a valuation of $1.5 billion.
Excel executives recommend looking into venture and PE activities, as institutional capital has a history of trickling down into other categories—such as sports sponsorship spending. “We see the effect that crypto and sports betting companies are having, which have raised hundreds of millions of dollars in sports,” he said.
Sponsorship is the most obvious way for rights owners to get direct revenue from PE or VC-backed generative AI companies. “Generative AI is still in the early stages of adoption, and people need to know what it is before [a company] can continue the journey of customer adoption and monetization,” said Grossman. “So using sports as a path to create the highest awareness of the product” makes sense.
The category is now wide open. “Of the approximately 19,000 unique companies that were prospected on SponsorUnited last week, OpenAI’s profile was not reviewed,” Lynch said.
Teams and leagues will also explore licensing opportunities with generative AI companies. “If this machine will be a direct-to-consumer product, people will want to create content about sports,” said Grossman, and they want to use the official mark in that content.
Generative AI is expected to have an impact on eligible businesses, beyond the direct revenue streams they refer to. The LPGA’s partnership with WSC Sports shows that it has already started on the content creation side. “We’re seeing automated video being tested that ultimately allows teams to be limited [resources]like small colleges and minor league clubs, to produce more content at a lower cost,” Lynch said.
The content will be used to grow the fan base and drive engagement among existing fans. But rights holders will also be able to sell sponsorships and digital advertising. Teams and leagues “can use these AI tools to create more ad space and generate more revenue,” said Lou DePaoli (executive director of team search and consulting, General Sports Worldwide).
DePaoli, former New York Mets, Pittsburgh Pirates and Atlanta Hawks EVP, believes that generative AI can be particularly valuable in helping the rights holders reach the next generation of sports fans, because it allows for content to be created and distributed almost instantly. “Delivering instant gratification is how you engage with younger audiences,” DePaoli said.
The technology should also enable rights owners to deliver greater value to their brand partners. “If the club can directly highlight the video that displays the brand’s signature on the playing field, it can include some branded content distributed and offers at the end to generate more engagement and/or revenue. That’s where you can start to get real. [ROI],” said DePaoli. “It’s a real recognition of something that’s happened, that has tremendous reach, and it’s going to get people to take action.”
There will be use cases in sports beyond fan-centric content, especially as the machines get smarter. Lynch envisions a day where Generative Pre-Trained Transformer 3 (GPT-3) text editors can emulate speech, give advice and handle unique situations, which can improve or replace many manual, repeatable functions of the internal ticketing sales team. GPT-3 is one of OpenAI’s generative AI products.
SponsorUnited executives can also see technology helping franchisees trade. Using “plainspoken language to produce unique custom fan clothing and accessories is a natural extension of what Mattel is doing with Hot Wheels X DALL-E 2,” he said.
Teams and leagues burned by crypto partners may be reluctant to do deals with companies in other emerging technology categories. But Grossman is confident that rights holders will continue to push new technologies for two reasons. First, emerging technologies are sure to have a significant impact on sports revenue and fan engagement. “Just think about the early days of television or the frictionless payment technology we have today,” he said. Second, “from a partnership perspective, emerging companies are the ones that often benefit from sports partnerships because they require top brand marketing considerations.”
DePaoli encourages rights owners to pursue generative AI deals, as they will generate additional revenue. However, he would recommend approaching the category on a “crawl, walk, run” basis, given the history of startups overspending on sponsorships and eventually going out of business. “The insurance of large sponsorship profits from startups in the technology sector is attractive, but unless they are supported or are part of a blue chip brand that has been around for 20 years, rights owners should do their due diligence before participating.”