Start-ups & Football
Football affects millions of lives, if not billions. Yet, most of us can do little to impact the sport beyond supporting our teams from afar. We may have harboured dreams of being players as kids, and subsequently, of being coaches (England job anybody?) or commentators. Realistically though, these jobs are out of reach if you haven’t been part of the system from your early days. How then can we be a part of the sport? As a technology enthusiast, my response to this is: start-ups. In this article, I’m going to explore ideas for building start-ups centred on innovation in the beautiful game.
Before exploring start-up opportunities, let’s take a look at some of the well-established methods of making money from football:
1. Television: Broadcast rights for football games involve big money. This year, BSkyB and BT paid $1.7 billion for Premier League television rights. In fact, television was the reason the old English Football League was rebranded to the “Premier League”. The amount of capital involved here makes this market prohibitively difficult for newcomers to enter.
2. Clubs: Buy a club if you have the spare cash. Be warned though, football clubs aren’t very sound investments. More than half the clubs in the Premier League made losses last year, and most are grovelling in debt, a state of affairs consistent across Europe. Occasionally, some even slip through the cracks (Leeds United), a function of the increasing levels of risk introduced by high wages and transfer prices. If purchasing clubs at the top is not palatable to you, you could buy a lower division club and guide it to promotion through good management. In general though, buying a club is not be the best way to make money.
3. Physical Merchandise: Nike, Adidas and the like have a firm grip on the market for sports goods having secured rights from players and clubs, delivered quality products and built brand consciousness. There’s certainly a lot of money to be made from the sale of boots, shirts and scarves, best exemplified by the fact that David Beckham shirt sales alone have generated in excess of $1.7 billion in revenue. Once again though, the path for entry here is blocked by intensive capital needs, established competitors and long-standing incumbent relationships.
4. Digital Merchandise: EA Sports reportedly generates ~$300 million annually from its FIFA series. Other titles like Pro Evolution Soccer and Football Manager haven’t done too shabbily either. If you’re planning to compete head on with EA Sports, you’ll have to match their technological sophistication built upon years of effort, unless you manage to build a more minimal but viral game a la Angry Birds. Also, be ready to work without naming rights, which are often exclusive to EA (if you’ve played PES with modified player and team names, you know what I’m talking about).
This list is by no means comprehensive; there are many hundreds of businesses that profit from football including beverage companies, bookmakers, event organizers and more.
Now that we have an understanding of how money flows in football, I’d like to explore opportunities for you, the reader, to tap into these existing streams, or create new channels where none have previously existed:
1. Analytics for Clubs: Moneyball like insights, but for football – a much discussed idea that hasn’t yet come to the fore in a big way. One of the reasons for this is that football, unlike baseball, is a fluid game, i.e., it does not have discrete plays. Of late though, companies like Opta Sports have managed to define and quantify a whole gamut of events on the football pitch quite thoroughly. While this has in turn led to the growth of predictive analytics, there still remains a lot of scope for improvement along several lines:
- Transfers: Success in the transfer market remains unpredictable as ever. The people making these decisions are not mugs and work in tandem with statisticians; nonetheless, these decisions often go horribly wrong. Can you develop better methods of modelling player ability and compatibility? Can you account for additional factors such as a player mentality, or ability to adjust to new surroundings? Deep learning is all the hype these days; can you apply smarter approaches to existing data? Even a marginal improvement in transfer success rate is worth a lot of money, considering the sums involved.
- Strategy: Managerial decisions on formations, starting elevens and substitutions can certainly be aided by analytics, and to be fair, they are already playing a hand. That said, how often do we see a manager marauding his touchline with an iPad in hand? During the 90 minutes or so that spectators come in contact with their clubs, do we ever see any explicit signals of the utilization of analytics? Once insights derived from data prove reliable and actionable, they will be more openly accepted and become a more intricate part of the process.
- Scouting: Ideally, clubs prefer to sign-up the starts of tomorrow when they are in their early teens, before their prices skyrocket. This is, however, difficult to do since ability at a young age doesn’t directly correlate to success in the bigger leagues. Or at least that’s what traditional methods have shown. Can you find a better way to unearth future superstars and optimize the scouting process?
2. Buy Shares in Young Players: The better the analytical insights you can provide, the easier your sell to clubs who are interested. If your insights on players are really good though, why give this knowledge away? You could invest capital in purchasing the rights of promising young players, in exchange for a slice of their future earnings. These young players will in turn benefit from access to better resources. Think of this as an analogy to early stage funding in technology – you can be the venture capitalist and your players can be your start-ups. Back a future star and you might make it big, even if your success rate is 1 in 10. Whether such investments make sense depends on how accurate your insights turn out to be.
If you don’t wish to be a traditional VC, you could take a crowd funding approach, or setup syndicates, the way they’re done on AngelList. If you don’t have the insights yourself, you could choose to be the enabler by building a FundersClub or an AngelList for players looking for scholarships and sponsorship. [For those who are genuinely interested, wyscout.com might be a useful place to get started.]
3. iTunes/Spotify for Football: WatchESPN has been my saviour this world cup. I’ve had the luxury of watching matches on my phone, laptop and TV (via Chromecast). The television gods aren’t always this kind though. Once the league season gets started, cord cutters like me with no cable subscription will be left hanging. Several folks around the world find themselves in the same situation and are often forced to resort to illegal streams, even though they’re willing to pay for quality and convenience. This state of affairs reminds me of music piracy pre-iTunes. I’m not sure if the monetary damage caused by pirated streams is as yet sufficient for football leagues to ease control on television royalty channels, but the day will come when consumers win their battle for choice. Will television networks themselves deliver this choice, or will a new entrant step in? Once this happens, will be begin to see innovative business models; for all you know, broadcasters might one day provide football streams for free in exchange for digital ad revenue and opportunities to upsell.
4. Asia-Centric Efforts: Some of the lesser-known Asian clubs of today will turn into the powerhouses of tomorrow. When this happens, the fan bases of these clubs will skyrocket, even as the average spending capacity of Asian fans rises. You can tap this potential by selling merchandise or experiences as an early mover in the market, before incumbents step in.
5. Game-time Innovation: Football has traditionally resisted change; yet, new innovations are gradually finding their way in. Had you developed the vanishing foam spray used at this world cup (915fairplay.com), you could’ve netted yourself a fortune. Win a contract with UEFA for implementing goal line technology across all European leagues, and you have yourself a large recurring revenue stream. Further such possibilities are likely to rise over time, especially once Sepp Blatter bids us goodbye.
6. Wearables: Devices for real-time monitoring of player fatigue or heart-rates carry obvious value. Think of a scenario in which tiny devices gather millions of data points from players and feed them to the cloud, from which strategic insights are beamed down to the managers’ iPads.
Once you’ve achieved product-market fit, you’ve got to evaluate the cost of customer acquisition and the size of the addressable market. Football centric businesses can choose to go B2B (i) Clubs ii) FIFA iii) Regional Associations like UEFA and CONMEBOL iv) Leagues like EPL, Serie A and La Liga) or B2C (direct to fans).
B2B: FIFA recognizes 327,008 clubs, 265,000,000 players and 5,000,000 referees. Despite these large numbers, most of the wealth in football is controlled by the top 100 or so clubs, with the largest Real Madrid, valued at $3.44 billion dollars. This number drops off quickly, with the 20th on the list, Napoli, valued at $296 million. I’d venture a guess that not more than 250 clubs are worth more than a million dollars. This means that if you are selling to clubs, you’ve got to target the top clubs and make sure that your average customer order is sufficiently high. It’s safe to say though that you aren’t going to build the next super-unicorn ($100 billion+ company) in this market alone, since your customers don’t command enough revenue themselves. If you do plan to go this route though, you could choose to either sell directly to clubs, or strike deals with governing bodies like FIFA, UEFA and La Liga. The disadvantage of the former is that you’ll have to handle several repeated sales cycles, including, possibly, repeated demands for exclusive access to your product. On the flip side, signing deals with governing bodies will leave your revenue stream highly vulnerable.
B2C: If you are looking for a larger market, you can choose to sell directly to football’s 3.5 billion fans. While the number of genuine supporters is probably a fraction of that number, the market remains massive whichever way you look at it. If you can link your product to people’s love for the sport, you stand to generate a lot of revenue.
Some of these thoughts and ideas were inspired by discussions at an event titled “Innovations in the Beautiful Game” held recently in San Francisco. Details of the talk here.