[#9] Sports Tech: Where will the next wave of innovation come from?
As a professional athlete and a top-ranked junior, I always maintained a keen interest in different technology that made me better at my own game - from workout apps that tap into biomechanics, to match analysis technology, which can get you real-time input on a match being played live. Later, when I joined Sportzlive and helped conceptualize and execute top tier sports leagues such as the Premier Badminton League, the Indian Boxing League, and Cue Slam, I became more and more interested in the forms that the intersection of sports and technology could yield.
Currently, the sports market is valued at ~$550 - $600B globally and ~$3-5B in India. If we had to segment it out, it would be best looked at as a B2C Play, B2B Play, Sports Media Rights & the Creator Economy / Athlete Monetization segment.
Below is a breakdown of the global sports market, and respective segments.
B2C Segment
The B2C play would broadly fall into 5 segments: Fitness, Analytics, Wearables, Fantasy Gaming & Sports Betting.
1. Fitness ($5.77B)
Fitness is a global market valued at ~$5.77B, and within the fitness segment, I’d broadly divide it into the following categories (Workout Apps & Fitness Apparatus)
Workout Apps
You’ve got your guided programs, where you can log in, give basic details about your age, fitness levels, (GoWOD in fact has some guided mobility test that you can do using the app) and based on that and your goals, recommends a program in order to better your mobility or fitness. This usually evolves into a model which can have DIY or guided workouts either through recorded sessions or live webinars.
Then there are also free tools such as Apple Fitness, Nike, and nowadays almost every fitness influencer / actor / athlete sells their own customized training methodology which makes it a very crowded market to get into.
Fitness Apparatus
The fitness market also contains within it, the fitness apparatus market, which could be items like portable gyms, weightless weight-lifting technology, which is technology enabling weight training through resistance without actually having to use weights. Some examples are below:
1. Aroleap (Indian company founded in 2020). It is an AI/ML home gym system. Funded by Rainmatter & Chiratae.
2. SujiBFR (Company based in Edinburgh) which is a smart fitness device that can dramatically reduce pain and increase muscle strength during exercise based on BFR (blood flow restriction technology). Investors include Jamie Murray, Scottish Enterprise, Gabriel Investment Syndicate and the Creator Fund.
From my own experience as an athlete, this is a niche market, and the type of people who would invest in this would be either:
Professional athletes (actual or aspiring)
Serious fitness enthusiasts - who exercise at least 4-5 times a week
To be able to monetize this market efficiently, since the customer is paying a one time fee for the equipment, unless there is a subscription fee angle here, or in-app purchases, or equipment upgrades (like what Apple has done with its Iphones) the revenue TAM is limited.
2. Analytics ($10B)
Then you’ve got your analytics market, which is where every fitness app is trying to get into, since this is something that you can actually charge recurring revenue for. This is broadly divided into 2 categories (Biomechanical analysis & Match Analysis)
Biomechanical Analysis
This market is probably even more niche than wearables, because this is not even relevant for the regular folks. There is probably some penetration that Whoop or Ultrahuman can expect in the mass market, but this would not be more than 5%. And because biomechanics differs depending on the sport, this becomes a vertical play.
An example is Trackman for golf, which is a golf simulator, and is able to analyze your live swing and your shot to tell you what to adjust, and what to fix. It’s not a wearable, but tracks your swing speed, club path, and ball flight through video.
Another example is Tweek Labs. It’s an Indian start-up, and gives real time insights on your biomechanical performance through a compression suit, sensors and an app. They currently offer this for cricket (bowlers), but there is a lot of scope to expand to other sports.
Very niche, and very infrequent use. As a former professional athlete, I’d go through something like this maybe once every 6 months, so the market can’t even be sized by the number of people who would actually use this. Normally the way it works is one coach/ coaching institute has something like this which they then use to help their students. The TG is very different here as compared to other B2C apps - this is more of a B2B2C play, where you sell to the institutes, and even partner with sporting bodies. Good product, but a tough sell, and time to scale is high.
Match Analysis
Then you’ve got tools that can analyze matches - either record live & give real time analytics or through video upload. While tools like this exist, this is another niche offering. However, investments at least could see a resurgence here due to the rising tide of generational AI start-ups. The pitch “AI powered recommendations to improve sports performance” could be a powerful pitch.
SportsVisio raised $3M in seed funding this past month. It’s an app that can record your matches, generate insights, analytics, and allows sharing of these clips with a larger group. Once provides similar match analysis features where you can upload your videos, and do tagging, drawing on the video, and analyze trends.
This has a B2B & a B2C use case. B2B has more scope to sell, since athletes / serious fitness folks usually have coaches / advisors on board who they are heavily influenced by.
3. Wearables ($50B)
The wearables market is valued at approximately $50B globally. It can be looked at as the product catering to the mass segment, and the segment catering to elite athletes.
The mass market players are brands such as Apple (generic), Garmin, Fitbit etc fall here. While there are subscription models available here, by placing themselves in the “aspirational bucket” a lot of everyday athletes, and even non-athletes buy these to keep a track of basic features such as steps walked everyday, heart rate etc. There is also a style quotient here - it is cool to wear a Garmin or a Fitbit, even if you’re not really using its health and fitness related features.
Then there are products within this segment catering to the elite segment.
Whoop is a great example. It’s not for an everyday person or an athlete, but for more serious fitness folks, and it is marketed & priced like that also. It was initially developed for elite athletes, and gives advanced and accurate analytics on workout intensity, sleep performance etc. They also charge a membership fee of $30 a month, and the fitness band is free, solving for the one-time payment issue in a niche market, giving rise to a big Revenue TAM. It’s also got elite Olympic Athletes on board (CrossFitters, Nelly Korda - Olympic gold medallist in golf, Lebron James, Michael Phelps etc), which further cements their positioning. It’s valued at $3.6B.
Ultrahuman is another example, it is an Indian company based in Bangalore. It’s valued at ~$100M, and raised close to $17.5M in 2021 from Alpha Wave Incubation, Steadview Capital, Nexus Venture Partners, Blume Ventures. It aims to monitor an individual’s performance by keeping tabs on blood sugar, and giving analytics on nutrition, sleep and performance activity. It has two products, one is a skin patch that monitors blood sugar, and the second is a ring that monitors sleep, performance & recovery. The pricing for the ring is one-time, but for the skin patch is recurring every month.
Massy products have a FOMO / style / aspirational quotient attached to them, and the one-time revenue is off-set by the size of the entire market. Niche players which are focused on the top 1% of fitness have a subscription model.
4. Fantasy Gaming ($40B)
While here you’ve got your Indian stalwarts such as Dream11, MyTeam11 who are into fantasy gaming, the recent 28% GST law on total bet placed is going to impact new entrants. While existing players who have already achieved scale will be less impacted, this will severely impact new players trying to enter this market, as investors could be cagey about this.
Fantasy gaming has seen a lot of use-cases with NFTs.
NFTs have a huge use case in gaming since it allows users to own in-game assets and all transactions are recorded on the blockchain, so it allows users to buy / sell and essentially monetize their investment in a game’s assets. Collecting sports collectibles & player cards is not a new concept, and NFTs are a perfect way to leverage this behavior in a gaming format.
Some notable examples are Sorare which raised a whopping $680M from Softbank in 2021. Sorare has built a fantasy football (soccer) platform based on NFTs, or non-fungible tokens. Each digital card is registered as a unique token on the Ethereum blockchain. Players can buy and sell cards from other players. Transactions are all recorded on the Ethereum blockchain. What makes Sorare unique, and what they probably raised all that money for is the fact that they have partnered with 180+ football organizations such as Real Madrid, Juventus etc, creating a barrier of entry due to these exclusive partnerships. It reportedly has 5M users, and can easily use this model to expand to other sports.
Cricinshots is another “Made in India for the world” Web3 based fantasy game that is worth checking out.
5. Sports Betting ($121B)
Easily the biggest market in the B2C space - globally sports betting is ~$121B. Still not legal in India, although my personal opinion is that it should be - since it happens anyway. Making it legal will allow it to be controlled better, but that’s a topic for another day.
B2B Segment
Moving to the B2B segment, this falls into the Event Organization Market, Fan Engagement, & ERP Solutions for Organizations markets
1. Sports Event Organization ($186B)
Solutions like AI powered commentary, real time analytics, highlight reels etc. All the things you see while watching live sports, which includes ball tracking, trend analysis etc. This also includes analytics like swing speed, past matches & how they relate to today, win-loss odds. In short, anything that makes the sports experience richer.
Most of these solutions are provided by big tech companies such as IBM, Wipro, TCS, & Infosys. Infosys in fact has deep partnerships with ATP to give tennis focused insights, and have recently roped in Rafael Nadal & Iga Swiatek as global brand ambassadors.
There are also solutions coming up that directly help in event planning. A company called OnePlan helps in accurately planning the event - by marking out the area on the map, OnePlan is able to accurately give measurements, areas size & capacities. It allows for vendor management directly through the tool, accurately plots road hazards, potholes etc, and helps in streamlining capacity planning, site planning, crowd management & security.
2. Fan Engagement (~$10B)
Enhanced experiences - could be in the form of in-stadium experiences using AR/VR. VR headsets are one example. Quintar is a company doing exactly this. It essentially is able to layer a 3D digital world on top of the physical world, providing immersive experiences for fans during live sports. (similar to what you see on TV, but bringing it to the stadium). You also don’t need a headset to consume this, this is all 3D & and can be perceived with the naked eye.
An example of Quintar’s offering is below (snapshot of their website)
Another innovation could be bringing the actual playing experience to the fan. Experiencing is a match from the view of a player - through the players eyes. Recording matches through cameras on the player to get that perspective, and converting it into something that can be experienced in immersive reality would be very interesting, both from a fan, and a professional training perspective. An example that comes to mind is putting a GoPro on a helmet during practice/ matches - Delhi Capitals (IPL) did something like this with Steve Smith during net practice to give fans a perspective of what facing world class bowlers is really like.
3. ERP & Analytics for sports organizations (NBA/NFL/EPL teams: ~$24B)
There are obvious analytics plays here which are being provided by both start-ups & incumbents. However, the trend that we’re seeing is twofold.
One: that sports & teams even by themselves are huge. Manchester United is worth $6B. The Golden State Warriors (NBA) are worth ~$7.6B. The EPL is worth close to $20B. Using this as a proxy for the value of that sports market, the market size of these sports are in the billions.
Two: since these individual sports markets & organizations are huge, there is potential to build:
1) Sports specific analytics solutions: Homecourt - does basketball analytics and is an official NBA partner. Griip provides motorsport specific analytics, and is partnered with ESPN & porsche.
2) Team / organization specific enterprise solutions: At the end of the day, all these teams are professional businesses. There are recon requirements, opportunities to optimize costs, and a lot of financial data coming in that needs to be cleaned and analyzed. Clubview is a company that does exactly this: it provides teams with an understanding of how they perform compared to clubs of a similar stature, and offers insights into revenue mix, investment priorities, and expansion opportunities. While there are general forecasting tools & forecasting softwares that are available, there seems to be value in a verticalized play here - Clubview has partnerships with 114 teams in the UK, and has plans to expand into Europe.
The graph below shows the market size & the number of fans in each sport in billions. These are some sports that we can expect to see vertical specific solutions, both from a B2B and a B2C space. And we are already seeing this: Trackman & Shot Scope for golf are sport specific analytics and wearable devices.
Clubview (B2B) & Sorare (B2C - fantasy gaming) both started out with football (soccer) because of the industry & fan base size.
Creator Economy / Athlete Monetization (Market not mature yet)
This is a new segment that has been growing due to the web 3 revolution, and is yet to mature. There are two segments to this:
1. Community Management: Tools specifically allowing athletes to create & manage their community directly. This space is a bit crowded due to apps such as Instagram/ X(twitter) / TikTok allowing fans to engage with athletes directly. However, a company called Iconome raised a seed round of $2.5M in 2021 to do exactly this for athletes.
2. Athlete stock market: The best way to describe this would be to equate an athlete to a company. By creating a digital identity of the athletes, and selling shares in the form of crypto assets or NFTs, it can allow athletes a revenue stream, and fans a way to invest in the future of the athlete, as well as access to exclusive perks that the NFT can bring. Fantium is a company doing this. The risk here however is liquidity - for an alternative investment platform like this to take off, fans need to be able to cash in and cash out immediately, and for this to happen, the start-up needs to maintain a fairly large liquidity pool. If this isn’t present, it could impact user experience, and future onboarding.
The Future
Workout Apps: Very little scope for disruption in this market, since it is pretty saturated, and gradually everything will move to in-person, or influencer led
Fitness Apparatus: Niche market (similar to elite athletes) but because these aren’t wearables which removes the FOMO / style quotient, things become tricky, and figuring out recurring streams of revenue is important.
In B2C Sports Betting & Fantasy will see more start-ups: Going back to first principles thinking, the market beats all. I expect that we will continue to see Sports Betting & Gaming innovations since the market is 2x - 10x the size of the other segments. Access to live sports across the world, fan communities, and analytics is at its peak, and new age companies will leverage new & alternate forms of data to better this offering. India may see some hiccups due to the 28% GST law passed. Fantasy gaming using NFTs could see a lot of traction going forward.
AI/ML Match Analytics: My personal view is this is gaining traction now due to the AI hype, However, actually sustaining the momentum on the B2C side is a question since these tools already exist and are used by sports organizations. It’s become easier to provide & distribute these products to the average customer, but the use-case is quite limited here, and has way more scope on the B2B side.
Wearables for the mass market are saturated, but there is scope for sport specific wearables & elite athlete solutions: It’s tough to compete with existing providers such as Apple, Android, Fitbit etc. Eventually every D2C electronics brand will create a product line around fitness tracking, making this a pretty saturated market, However, solutions for elite athletes, while requiring significant investment (both through capex & marketing) could be a possible play. There are already start-ups experimenting with new ways of generating data - Ultrahuman which does this by monitoring blood sugar is one, Nextiles (electronics with sewing technology to create “smart fabrics”) & Playmaker (a boot based wearable partnered with FIFA) are others.
Disruption in the Sports Event Management Market: Going ahead I believe that there can be more innovations coming about here, both in event organization & in-stadium fan engagement experience, which companies like OnePlan (mentioned earlier) are already doing.
B2B Sport & Organization specific solutions on the rise: Just looking at individual sports market sizes, and not sports as a whole, each individual sport & team is easily worth millions & billions of dollars. Sports specific analytics solutions & wearables will continue to grow. There will also be organization & sports specific ERP softwares, customized to the needs, financial data & seasonality of each sport.
Web3 & NFTs in athlete ownership will mature: While the concept is new & exciting, the path to monetization & retention is still not clear, and until the business fundamentals are not solid, it’ll be tough to build a sustainable business in this space, but this is rapidly evolving.
There are exciting times ahead for sports and definitely a lot of space for innovation in the ancillary markets & value chain.