Inside that Two Circles acquisition; Betting on inflation; Say it ain't so, Bo; The meritocracy myth; The Pro Debate with Ugo Monye and Tanni Grey Thompson; Rugby lessons; Ricardo Fort on Cindy Cone
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Two things on Two Circles
Gareth Balch has become one of the most successful plumbers in the sports business: He’s very expensive and you can never get hold of him on a bank holiday (Woof).
This week, UP went to Two Circles HQ in Holborn to ask why they’ve bought Livewire Sport. This follows on from last year’s buyout of TRM Partners and adds content creation (Livewire) to commercial sales (TRM).
It was a conversation about plumbing, the bit that runs below the surface between sport’s rights holders and fans - which is not a bad analogy for the sports business as a whole tbh.
I'm biased, but the pod is a good way in to understanding the critical relationships between the big abstract nouns of data, insight, content, commercial, relevance and growth.
The looming culture war
Two Circles’ clients are rights holders, usually a governing body or league.
So TC is wedded to the middle of sport’s value chain between athletes at one end and fans/viewers at the other.
This is the battle line of the next ten years, between two conflicting ideologies backed by money.
Depending on where you sit, you’ll see NGBs and IFs as the essential and enduring centre of the sport economy or, as complacent rent takers from the relationship between athletes and fans. (Caveat: it’s possible to hold two conflicting views simultaneously)
Blockchain and DAOs are about removing, or replacing, the intermediaries. In sport, that’s the rights holder.
So, Two Circles’ job is to defend them from this attack by building value and selling the argument for the essential middle.
Can they do this without selling their soul?
Now throw in betting.
Scratch the surface of sport’s business model and you’ll quickly get to a question: Will you promote gambling?
The job of Two Circles is to find fans, establish what they want and give it to them, via content.
Quite often, what sports fans want is to bet.
It’s becoming clear that much of the investment money coming in to sport tech is predicated on this fact - see Buzzer, below.
Two Circles’ corporate values align perfectly with the ethos of most NGBs and federations, who exist to share the money with people throughout the participation pyramid.
But to make the money the grassroots needs, they may need to employ Two Circles data insight, content and commercial expertise to help fans become better gamblers.
It’s a fascinating issue. Gareth and Pranav Soneji, one of Livewire’s founders, give really good answers to this question. Listen tomorrow.
UPNext….The next Two Circles acquisition target will move them in to live media rights
Here’s an intriguing nugget, at 19mins:
UP: Is access the point of difference for rights holders, compared to the content fans can get elsewhere on the internet? To be clear, we're not talking about live sport here.
Gareth Balch: Not yet.
UP: That's interesting. So the next conversation we might have is a media rights agency.
Gareth Balch: Um, probably not one of those specifically, because most of those media rights agencies, don’t share values that are right for us, of the ones we’ve found so far, so we're still looking for the right one of those, but we think that the media rights space is undergoing a large level of transformation at the moment is a space we'd love to be more active in. So for sure we'll be more active in that space soon.
Form a queue…
Say it ain’t so, Bo
Buzzer has been the darling of the sports media tech conversation over the past year.
This week was a learning moment.
Buzzer’s FanDuel deal poses a good question for every business seeking to thrive in the sports economy in 2022.
What are you, really?
An innovative way to connect sport with the media consumption habits of Gen Z and late millennials.
Or a customer acquisition tool for the betting industry?
Again, it’s perfectly possible, perhaps even essential, to be both those things at once.
The game is changing
The most important stat of the week was buried in The Economist’s piece on inflation.
But first, some context.
Consumer price inflation in America has hit 7%.
Private sector wages are up 5% in a year.
What happens next?
The US Federal Reserve wants inflation down to 2% by 2024.
To do this, expect rates to rise by 1.75% in 2022.
This is the biggest hike in a year since 2005.
Since 2012 all G7 interest rates have been lower than 2.5%.
In 1990, they were all above 5%.
The cycle is back.
So what?
Inflation changes the game.
There's the thing itself (prices rising), and the response to the thing (increased interest rates). And then the response to the response (how interest rates impact investment decisions).
This is also about the centrality of US economy to the global one.
Sport is a microcosm of this. America matters.
Cheap American money has largely funded the sports tech boom of the last decade.
From Infantino and Bach down, the tenure of most of today’s generation of sports leaders has taken place in a period of near zero interest rates. Trends and blue sky ideas come with little cost downside and calcify into received wisdom.
Inflation brings with it a reckoning, a tallying up.
How does the price of borrowing money impact on sport?
This is where it helps to put some definition to the generic term of the 'sports business’.
Because inflation is unfair, it impacts different people differently.
This is true through the entire sport ecosystem: There will be a variety of implications on the value chain of clubs, sports rights, franchises, governing bodies and vendors.
Some are obvious: It will be more expensive to borrow money to pay for stuff - a new stadium, that palatial new HQ, an Olympic-sized OTT Channel, that move to D2C or Erling Haarland - and so some of these things just won’t happen.
So the people who build the stadiums and construct the OTT channels don’t get employed. And so on.
But there’s a but. And it comes back to that stat mentioned at the top.
Intellectual Property accounts for more than two fifths of American business investment.
Over 40% of US investment goes on IP, and it’s been almost Covid-proof - see chart.
The signal is clear: Tech is what's different about 2022 compared to the downturns of 2007 or the 1990s.
More specifically, investor optimism about technological progress is fuelling spending on IP.
Intellectual property now makes up 41% of America’s private non-residential investment, compared with 36% before the pandemic and 29% in 2005. In 2021 the big five technology firms—Alphabet, Amazon, Apple, Meta and Microsoft—alone spent $149bn on r&d.
In this bit of the jungle, Microsoft just paid $70billion for gaming IP (aka Activision Blizzard). Others huge M&A deals will follow.
More than ever, the money is giving sport a steer: There’s a huge incentive for every sport organisation to reframe itself as a tech-led IP based business, rather than an advertiser and broadcast funded one. And that ain’t easy.
Pic of the week
For someone who could see Uxbridge ski slope from his bedroom window…I see nothing wrong with this photo from the Winter Olympics in Beijing.
The meritocracy myth and the downside of professional sport
Nicholas Tomalin was killed by a Syrian missile in the Golan Heights, while reporting the Arab-Israeli war in 1973.
But he’s best known for this quote:
"The only qualities essential for real success in journalism are ratlike cunning, a plausible manner and a little literary ability".
That was then however.
Good luck getting a job in journalism today without a degree, probably a Masters.
Because journalism is a trade that likes to think of itself as a profession.
There’s some upside to this shift: in status and expectations of standards of behaviour.
But professionalisation erects barriers, which by their nature keep people out.
This week’s podcast flips this question in to sport.
Hear here: UP224 Re:Thinking Sport, episode 10 of our collab with Portas Consulting.
Guests: Baroness Tanni Grey Thompson, Ugo Monye and Rowena Samarasinhe.
Are the women about to make the same mistakes as the men?
Rugby’s move to professionalism has been a car crash - calendar chaos, internecine squabbles, competitive imbalance, broken financial models, narrowing of participation pathways.
As women’s rugby moves unevenly toward professionalism, can the game learn from the experience of the men?
Ugo Monye: The men's game has been professional 27 years now, and it's just not viable, it's not a sustainable business model.
Now professionalism is coming into the women's game. They can sit back, take their time and learn from the men's game.
In fact, I fully believe the women's game in the next 18 months should be the litmus test, barometer or compass for the men's game. It should be totally flipped on its head, because the men's game has made a real mess of it.
Reap what you sow: Fun with ambush marketing
Nothing propels the tedious mechanics of sports sponsorship in to the mainstream more than idiotic ambush marketing protections.
See also last week’s Champignons League pizza snafu.
The comms line from the big governing bodies is that this is just over eager locals organisers misinterpreting the rules.
But, this is what happens if you spend thirty years scaring the shit out people with lawyer letters and trying to police what brand of water people drink.
Vote Cindy Parlow Cone
There’s an election coming up for the presidency of the United States Soccer Federation.
It’s a two horse race, between the past and the future. And it’s closer than you might think.
We’ve got the future - Cindy Parlow Cone - on an upcoming podcast.
The past is Carlos Cordeiro, who left the job two years ago, with the USSF in chaos.
He oversaw a regime that fell out spectacularly with the US Women’s National Team who protested by wearing their warm-up jerseys inside out during the national anthem to obscure the federation logo.
In legal papers submitted to federal court in Los Angeles as part of the USSF’s defence of a gender discrimination suit by players on the women’s team, the USSF asserted the women have lesser physical abilities and responsibilities than their male counterparts.
Several USSF sponsors issued statements backing the players, including The Coca-Cola Co., Anheuser Busch Cos. Inc., The Procter & Gamble Co. and Volkswagen Group.
As head of Coke’s global sport programme, Ricardo Fort was one of them.
He’s written a good piece here:
