A note before we begin -

In August of 2023, while I was bouncing around the NFL, I took my first job in sports, media, and entertainment investing.

By this point, I had a firm grasp on the broader VC world, especially its intersection with human performance technologies and other sport-adjacent categories, but nothing had prepared me for what I was stepping into.

The institutionalization of sports as an asset class was happening in real time as the Big 4 was fresh off of opening up to private equity investment, dozens of emerging leagues were launching week after week, and new funds began flooding the zone.

I wanted to better understand the industry from the ground up, and I had just written my 60-page Senior Thesis on “Venture Capital Decision Making Following the Burst of the Dot.com Bubble” at Princeton University, so naturally I felt the compulsion to dive into the data in search of the patterns underneath it all.

Over the following two months I wrote a research white paper on the “Future of American Sports Investing,” and I titled it Evolution.

This white paper set out to articulate my understanding of the evolving landscape of the burgeoning sports, media, and entertainment asset class.

I didn’t know it at the time, but this exercise would go on to build the foundation of my career as a sports investor and lay the groundwork for what would eventually become this publication, 🧭 At the Center.

It’s now three years later, and I just got married.

This post goes out while I’m on honeymoon, and I am publishing that paper here exactly as I wrote it.

No edits, no retroactive wisdom. The version of me who wrote this had a thesis, and I want you to meet him on his own terms.

Evolution is a four-part essay series.

Parts I - III are the paper in full, exactly as it was written.

Part IV, when I am back and settled, is the debrief. Here, I will hold my years of experience up as a mirror to my initial theses, guiding you on where it held up and where it broke.

You will see seeds of my 🧭 At the Center register come through in these writings. Understand that Evolution, at the time of this publication, is 3 years old, and uniquely is the last essay I ever wrote which remains completely untouched by AI.

This essay, Part III, is the final part of the original white paper and covers what I often describe now as as the “Venture Capital-ization of Sport.”

The rise of emerging leagues and explosion in popularity of women’s sports is today’s subject. Can the challengers earn a place inside the monopoly that Parts I and II described? Will they be able to architect an enduring platform?

At the time of this writing in 2023, I bet on which of them would survive. Some of those bets look better now than others, which is exactly the kind of thing I want to come back to.

So that is next. In my next and final issue of Evolution, I will pick this paper back up and tell you what the last three years of actual sports investing experience has taught me.

Part IV will walk through where the original thesis held and where it cracked.

Class is in session, let’s begin. 📝 📝 📝

🎙️ Brent Peus and Dominyck Bullard continue to break it down each week while I am away on honeymoon 🌺✈️

With a celeb shot from our good friends Kyle Israel and Sam Foley!

While the Big 4 leagues have firm control over the domestic sports landscape, in recent years we have seen the rise of leagues that deal with “emerging sports” in America – soccer (MLS), lacrosse (PLL), pickleball (MLP), cricket (MLC), spring football (XFL, USFL), eSports and rugby (MLR).

These emerging leagues aim to grow the popularity of their sports as an alternative to Big 4 entertainment, and monetize their product.

The demographics are strongly in favor of these emerging leagues – over 50% of “niche sports” fans fall within the 25-44 age range, with 75% of those fans being male and 50% of them residing in urban areas.

Most importantly, 38% of the niche sports audience earn over $100k; these fans are more likely to fall into tech personas such as early adopters, health technologists, and mobile dependents.

We have already seen emerging leagues form in the past and grow to national success: the UFC was bought in 1996 for just $2 million, today being valued at $12 billion.

These emerging leagues do not need to become hundred-billion dollar businesses and supplant the Big 4 to be considered a success, but any one of them could grow to a few billion-dollar league that offers an exciting alternative to the legacy sports establishment.

Alongside the rise of these emerging leagues, we have seen the expansion of women’s leagues in established sports like the WNBA and NWSL. These women’s leagues are beginning to sign broadcasting deals that are reflective of their value, and with rising viewership and higher fan engagement, the league’s underlying franchise valuations have recently become some of the most lucrative investments in all of sports.

Soccer is the world’s most popular sport, with over 3.5 billion fans worldwide. America’s fifth-biggest league, the MLS, is a far more established league than the other emerging leagues and should be considered a close relative to the Big 4.

But make no mistake, the growing popularity of the sport in America is in every essence “emerging,” and with recent tailwinds, the MLS is slowly positioning itself to become a premier soccer league amongst the global landscape.

In 2022, the MLS signed a 10-year, $2.5 billion exclusive streaming rights deal with Apple TV+. A large reason why the MLS took 20 years to get off the ground was because they lacked the appropriate broadcasting deals that the other American sports, and European soccer leagues, have: this deal changes that dynamic.

Further, in a free agent signing that shocked the world, Lionel Messi signed with Inter Miami FC – his 2023 contract guaranteed him $150mm over 2 years, while at the same time signing deals with Adidas and Apple TV, which guarantee Messi a percentage of all generated revenue.

Off the back of these two tailwinds, the MLS Season Pass on Apple TV+ recorded more than 110k new subscribers on July 21 (Messi’s debut), compared to 6,150 new sign-ups the day before on July 20. Over 288k total new MLS Game Pass members subscribed during July, more than March - June combined, 15% of which weren’t even Apple TV+ subscribers to begin with.

The MLS has gained 25mm Instagram followers this year, 22mm of which came after the Messi signing; Inter Miami is now the 3rd most followed sports team in America (behind only the Golden State Warriors and LA Lakers).

The MLS persuaded the most famous soccer player on the planet to join their league by structuring a contract that pays Messi a percentage of all revenue stemming from the content he creates.

This innovative contract structure will be a driving force for the future of the league, and with the World Cup coming to North America in 2026, a growing interest in the sport positions the MLS for explosive growth.

Lacrosse is the fastest-growing North American sport across youth and collegiate levels, but until recently, has lacked an established professional league.

In 2019, the Premier Lacrosse League (PLL) was founded, and in 2022, signed an exclusive 4-year TV partnership with ESPN and ABC, while also securing brand deals with TicketMaster, Cash App, Gatorade, Adidas, and DraftKings.

The PLL has operated with a tour-based format using venture funding; investors have a stake in the PLL and thus, all teams. But with growing viewership, the PLL is franchising in 2024, a move that would open up the opportunity for specific teams to begin inviting in their own investors.

Backed by some of the top sports investment groups in America (Joe Tsai, Arctos, Raine), the PLL raised a Series D round in 2022, doubling the value of the league.

The PLL operates as a sort of media company, creating content around the clock, leveraging game, team, and player narratives to drive engagement across the sports landscape. By uploading more than 400 posts per weekend, the PLL has full game highlights available on mobile within 30 minutes of the final whistle.

The PLL does hundreds of millions of impressions on social media annually, and on a per follower basis, they have the most engaged social media audience in all of sports – better than the NFL, NBA, MLB, NHL, MLS, and UFC.

The league has already expanded from six to eight teams, and their unique, content driven business model has grown annual revenues to $62 million. Lacrosse, having lacked a proper professional league for years, is finally capitalizing off the sport’s growing popularity, and the move to franchise the league’s eight teams in 2024 will only serve to grow the PLL as a top emerging sports league in America.

Cricket is the world’s second most popular sport behind soccer, with an estimated 2.5 billion fans worldwide. India and China make up the majority of this fanbase, while Australia, the UK, New Zealand, and America make up the bulk of the rest.

Virat Kohli, the top cricketer in the world, boasts 259 million Instagram followers, 100 million more than LeBron James. The Indian Premier League (IPL) is the most elite cricket league in the world; founded in 2008, the league has grown to a massive $15 billion valuation, whose two-month season brings in 1 billion total viewers, earning the league a $6 billion media rights deal with Disney and Viacom18 in 2022.

But with the international viewership of IPL matches growing by approximately 40%, in conjunction with the ever growing Southeast Asian population in America, a new American league is capitalizing on the rise of cricket.

Founded in 2019, Major League Cricket (MLC) is an American professional T20 cricket league looking to professionalize the sport domestically. History shows that cricket has very deep American roots, with leagues all across the USA in the 1800s until being supplanted by baseball after the Civil War.

In an effort to address the third largest cricket market with over 63 million fans, the MLC raised $120 million to build a six-franchise league whose tournaments tour the country. Games are aired on Willow TV, an American cricket pay-TV channel, and CBS Sports Network.

The MLC has been able to entice overseas players to join their league by offering salaries that are on a par with the top T20 leagues around the world, IPL-excluded. Because all cricket league’s seasons only last one to two months, the shorter seasons allow professional players to rotate between leagues and play elsewhere. This also means that the MLC only has to operate 1/12th of the year, increasing the margins of the business and driving valuations.

The United States is co-hosting the 2024 Cricket World Cup with the West Indies while the 2028 Los Angeles Olympics is looking to add cricket. Most importantly, USA Cricket, the governing body of the sport in the USA, awarded the MLC the exclusive license to run a professional T20 cricket league in the USA: no one else can start a league like this.

This effectively provides the MLC with a monopoly on the American cricket market. Soaring off of the sport’s tailwinds, spearheaded by the IPL, the MLC is in a unique position to cater to a growing fanbase and professionally commercialize the sport.

It seems like everyone and their parents are playing pickleball in 2023, it’s all the rage.

Participation in the sport grew 159% between 2019 and 2022 and is encouraging all types of people to stay active in this unique form of exercise. In 2021, capitalizing off of the sport’s growing popularity, Major League Pickleball (MLP) started the sport’s first national league.

Split into two divisions (Premier and Challenger), the promotion / relegation league consists of 12 geographical franchises of 4 players in each division. In 2023, the MLP will hand out up to $5 million in prize money, and with famous franchise owners like Tom Brady, Patrick Mahomes, LeBron James, Kevin Durant, Michael Phelps, Naomi Osaka and Justin Verlander, the league is poised for explosive growth.

No other leagues have this many professional athletes as owners, and since they have a real vested interest in the success of the league, these owners provide built in branding and marketing for the MLP.

Professional pickleball has already landed an extensive list of sponsors, with all matches being live streamed on YouTube. If the MLP can secure a media rights deal with ESPN, YouTube TV, or another major broadcaster, then this league could really take off. MLP franchise valuations have already seen 100x growth, soaring to $10 million valuations after being acquired for as low as $100k when the league began play in 2021.

In fact, billionaire Marc Lasry, who sold his majority ownership in the Milwaukee Bucks, has publicly stated that he sees franchise stakes in the MLP as offering a better ROI than the NBA.

With tennis courts across the nation being converted to pickleball courts to further engage the amateur player, national interest in the MLP is only increasing. The MLP’s 40 by 30 project aims to bring the number of national pickleballers up to 40 million by 2030, a feat that they are already on pace to surpass.

The star-studded investors behind the league will only grow its franchise, promotion / relegation business model, and with more sponsorships, tournaments, and broadcasting deals on the horizon, the MLP could become America’s next emerging league.

Domestic non-NFL football leagues have popped up in the past, competing with the CFL to become the go-to feeder league for NFL hopefuls.

The XFL and USFL are the latest leagues to take a shot at becoming the world’s #2 football league, operating in a Spring schedule that smoothly coincides with the NFL’s offseason so as to attract players that hope to make it to the world’s most lucrative league.

The USFL’s investors included the Murdoch family and FOX, while the XFL raised capital from the likes of Dwayne ‘The Rock’ Johnson and Dany Garcia. With each league’s inaugural season occurring in 2022, this time around, it looks like a non-NFL American football league may finally be able to stand on its own two feet and see extended success.

In September of 2023, the two leagues announced the intent to merge in the hopes of creating one unified Spring football league that provides the nation sufficient football entertainment year-round, while simultaneously feeding talent to the NFL.

The success of these leagues, and thus their franchise valuations, will depend on the league’s ability to secure a lucrative media rights deal and send talent to the NFL.

With existing relationships at FOX and ESPN, the merger will encourage these broadcasters to invest in the league, while in the short history of the league, the XFL and USFL have already sent 160+ players to the NFL.

This merger is one to watch, as it may affect the player pool that the NFL pulls from, and should the two leagues capitalize on the synergies of their merger, this new Spring football league could be poised to become the premier non-NFL football league in the world.

American football is the most lucrative sports market, and should this league become the world’s #2, there will be hundreds of millions to be made.

The rise of organized professional eSports leagues in recent years are a result of capitalization off of broader trends.

The demographic that is most likely to be a fan of this niche sport is younger audiences who are tapped into the recent increase in popularity of professional streamers on Twitch and YouTube.

Coincidentally, this is the same demographic that is most likely to be fans of players rather than teams in the Big 4 leagues. This bodes well for the eSports landscape, as fans engage with professional streamers and are then funneled towards eSports competitions.

The various eSports leagues have seen explosive growth because of these dynamics, with broadcasting rights for the League of Legends World Championship being acquired by multiple networks, including ESPN, for $113 million in 2020.

Overwatch League franchise slots have been sold for up to $20 million each, with global eSports revenues reaching $1.3 billion in 2022, projected to reach a near $2 billion by 2025.

There has been an 838% YoY increase in eSports investments as of 2021, and the sports betting market associated with eSport gameplay reached $14 billion in revenue in 2020.

Prize money is now reaching upwards of $40 million in top leagues, but the value of these leagues still remain largely untapped. With fragmented audiences, split between multiple games and leagues, eSports has struggled to secure a landmark lucrative broadcasting deal that adequately values the sport as a whole.

By consolidating eSports organizations and growing audiences to a critical mass, this could persuade broadcasters to invest properly in the sport. These broadcasts would in turn improve production value, introducing a better viewer experience which will then drive more viewership.

Finally, with limited geographical loyalty within the sport, a move to increase communal ties via franchising could increase these leagues revenues by catering teams to a regional fanbase.

As international viewership continues to grow and leagues begin to franchise, eSports could capture a serious share of the niche sports market.

The final emerging sport worth noting is a startup professional rugby league, Major League Rugby (MLR). With thirteen teams, and one expansion franchise on the way, the league has seen solid growth since its inception in 2020.

After signing a broadcasting deal with FOX and gaining national exposure, the number of televised MLR matches has doubled in the past three seasons, international viewership has grown by 40%, and the average match attendance has increased by 30%.

With grassroots growth occurring at the amateur and collegiate level, the talent of the MLR draft pool has increased substantially, leading to better play and a better product. This better product has resulted in a 35% increase in sponsorships revenue since their inaugural season.

The United States is hosting the Rugby World Cup in 2031 (men’s) and 2033 (women’s) – this is the world’s third largest global sporting event, bringing in over 800 million viewers across 170+ countries.

This 7-week event brought Japan, the 2019 host, over $5.3 billion in total economic impact, selling over $350 million in ticket revenue, $134 million in sponsorship revenue, and $173 million in broadcasting revenue.

In anticipation of this inevitable American success, the MLR is raising $100 million from private investors now to grow operations and interest in the league. The league will likely roll out a player’s CBA within the next few years, a move that will further cement the MLR as a legitimate professional rugby league on the global landscape.

As it stands, rugby is one of the most under-appreciated sports in the United States, and for years has lacked a proper professional league, but with increasing popularity and the coming Rugby World Cup, the MLR could become a premier Big 4 alternative league.

While there are plenty of opportunities for emerging sports to enter the American sports landscape and capture market share, women’s leagues in established sports like the WNBA and NWSL have performed incredibly well in recent years, and are projected to substantially increase their markets and influence.

In August of 2023, Nebraska women’s volleyball set the world record for largest women’s match attendance, with over 92,003 people selling out Memorial Stadium in Omaha, NE. The Women’s NCAA Basketball Final in March 2023 brought in a 95.2% YoY viewership increase, drawing an audience of 9.95 million on ABC’s main broadcast.

Indicative of a larger narrative at play, women’s sports are finally garnering the attention that they deserve, and the professional leagues are no exception.

The WNBA is the nation’s oldest running professional women’s league and has served as a North Star to many other women’s sports startup leagues. The league has seen a 46% increase in viewership from 2022-23, and closed a $75 million funding round in 2022, signaling strength for the future direction of the league.

The NBA’s new CBA now allows NBA players to own minority stakes in WNBA teams, expanding the principal pool of investors, a pool that already includes the likes of Dwayne Wade, Joe Tsai, and Qatari Sovereign Wealth Fund.

The 2020 WNBA CBA ensures that players receive a 53% increase in cash compensation and allows WNBA players to gain increased control over their personal branding and commercial opportunities.

With the rise of NCAA stars like Angel Reese, Caitlin Clark, and Haley Van Lith, who are capitalizing off of lucrative NIL deals to grow their brand, the WNBA is poised to welcome an influx of talent from the college pool that carry their own growing fanbase.

Commercial sponsorships have increased substantially for the league, having recently signed multi-year partnerships with Nike, Mielle, CarMax, Discount Tire, PlayStation, and Meta.

The broadcast market for women’s sports is at an inflection point. After ratings for the WNBA surged during the pandemic, the league signed a broadcasting deal with ESPN worth $27 million annually (increasing to $33 million by 2025), and in April of 2023, signed a deal for $39 million with ION to air Friday night games.

The under-valuation is clear when you compare the league to some of the smaller men’s professional leagues, where their media rights are 12-15x that of the WNBA. With the existing ESPN deal set to expire in 2025, riding current tailwinds, the WNBA could be positioned to secure a lucrative broadcasting deal that will boost the league’s franchise valuations.

In 2022, FIFA released their annual report describing the state of affairs for the game of football globally. For the first time ever, the report explicitly reported the growth of women’s football, as FIFA’s President described women’s football as “the biggest growth opportunity there is in all of sports.”

A friendly exhibition between the USA and UK attracted 78,000 fans, with tickets selling out within 24 hours, while the UEFA Champions league quarterfinal match garnered 91,000 fans, setting a world record at the time.

Across all 30 women’s football leagues worldwide, broadcast revenues were up 22% YoY, while commercial revenues were up 33% YoY, on average across 300 clubs. The growth in popularity for women’s football globally cannot be understated, and the Nation Women’s Soccer League (NWSL) in America is capitalizing off of these tailwinds.

Founded in 2012, the NWSL has grown to become the top women’s football league in the world. The NWSL commissioner Jessica Berman called the year of 2023 an “inflection point for women’s soccer” – the league is expanding to 14 teams by 2026, and across every measurable metric, the league is outperforming.

The NWSL’s 2023 season broke the all-time attendance record by week 18 of the season, with more than 1 million fans attending games. Eleven of those games have brought in over 20,000 fans, and because NWSL franchises make about 50% of their total revenue from ticket sales, increases in attendance are largely reflected in franchise valuations.

Alongside attendance, sponsorship revenue is up 87% YoY, with the average franchise carrying 37 total sponsors. Viewership has risen too, with the 2022 NWSL Championship game bringing in 915k viewers on CBS, while the average match brings in anywhere between 350-450k viewers – these numbers are on par with the MLS’s viewership before their recent deal with Apple TV+, a men’s league that has been around for 20 years.

Lastly, the NWSL recently signed into effect a new CBA through their player’s association, increasing the salary cap 25% and base pay 30%. The players will also now receive a 10% share of broadcasting revenue if the NWSL turns profitable by the third year of the CBA.

These major tailwinds are reflected in the league’s franchise valuations: Angel City FC’s valuation has skyrocketed from 5 to $100 million since 2020, while Bay FC recently paid an expansion fee to the NWSL valuing the franchise at $53 million. While Big 4 franchises are often valued at anywhere between 4-8x revenue multiples, the average NWSL franchise is being valued closer to 10-12x revenue, reflective of the growth potential that investors see in the league.

Most importantly, the NWSL’s $4.5 million deal with CBS is up this year, meaning that they will announce a new broadcasting deal by the end of 2023. With the San Diego Wave averaging 20,194 fans per home match, and with viewership up 20% on CBS and 50% on Paramount+ for the 2023 season, the NWSL’s negotiating power ahead of their next media rights deal is at an all time high.

Generally speaking, distribution for women’s sports has picked up dramatically in recent years – the NCAAW Final Four, Nebraska volleyball, the WNBA — and the NWSL is leading the charge, expecting to sell out their 32,000-seat stadium for this year’s NWSL Championship match.

Finally garnering the attention they deserve, the NWSL is positioned for explosive growth.

This concludes the Evolution white paper I wrote in the fall of 2023.

In two weeks, Part IV will lean on my earned perspective as a sports investor to call balls and strikes. Let’s run the tape!

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