Over the past 18 months, cryptocurrency has become the “biggest” sports sector in terms of annual spending. GlobalData figures indicate that blockchain-based companies committed more than $3 billion for team and league partnership packages during this period.
But the recent crypto winter has halted spending within the category, jeopardizing at least some of the deals signed over the past year and a half. FTX’s bankruptcy filing alone is believed to put over $375 million in sponsorship obligations at risk.
New sports betting sponsorship deals are also becoming rarer. SponsorUnited reports that after deal volume in the big five leagues grew 95% in 2020 and 93% in 2021, it’s up just 8% in 2022.
A resurgence in traditional categories such as airlines, auto and financial services is expected to help offset some of the lost crypto and sports betting spending. But Adam Grossman (VP Business Insights & Analytics, Excel Sports Management) said that rightsholders looking to grow affiliate revenue would be wise to turn their attention to the generative artificial intelligence sector. The burgeoning industry has received “a lot of VC and PE attention” and could become the “next big sponsorship vertical,” Grossman said, especially as AI increasingly plays a role in the business of teams and leagues.
Bob Lynch (Founder and CEO of SponsorUnited) said he expects rightsholders to leverage their investments in AI technology – and natural synergies with the industry – to sign new sponsorship deals. Team and league partnerships can be valuable in creating brand awareness and are influential as a B2B platform to reach other potential customers. They can also serve as the basis for a compelling content strategy that reflects how the technology is being used internally.
Take by JWS: Generative AI refers to the merging of existing datasets 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 used to create automated match previews and recaps.
OpenAI is the most well-known company in the emerging industry. Its DALL-E 2 product is capable of converting text prompts into an image or a story. “A user could type in ‘cat flying on a bird in Las Vegas,’ and the engine creates the image for you,” Grossman said. The company declined to comment on our story.
Teams and leagues should follow the money to find the sport’s next big sponsorship category. “Generative AI is becoming increasingly popular [investment] Attention, particularly from the venture and private equity community,” Grossman said. According to Crunchbase data, OpenAI has raised $1 billion to date. Rival Jasper recently closed a $125 million round with a valuation of $1.5 billion.
The Excel exec suggests focusing on venture and PE activity, as institutional capital has historically seeped into other categories — such as sports sponsorship spending. “We saw the impact that crypto and sports betting companies that had raised hundreds of millions of dollars were having on esports,” he said.
Sponsorship is the most obvious way for a rights holder to generate direct revenue from a PE or VC-backed Generative AI venture. “Generative AI is still in the early adoption phase and people need to know what it is beforehand [a company] can embark on the journey of customer adoption and monetization,” said Grossman. “So it makes sense to use sport as a way to create some awareness of the product.”
The category is currently wide open. “Of the approximately 19,000 unique companies searched on SponsorUnited last week, OpenAI’s profile wasn’t even viewed,” said Lynch.
Teams and leagues are also likely to find licensing opportunities with generative AI companies. “If these engines are going to be direct-to-consumer products, people will want to create content about sports,” Grossman said, and they will want to use official trademarks in that content.
Generative AI is expected to impact rightsholder businesses beyond the direct revenue streams mentioned. The LPGA’s partnership with WSC Sports shows that they have already started creating content. “We see automated video being tested, which should ultimately enable teams with limited capabilities [resources]like small colleges and minor league clubs to generate more content at a lower cost,” Lynch said.
Content is used to grow the following and encourage engagement from existing fans. But rightsholders will also be able to sell sponsorships and digital advertising against it. Teams and leagues “can use these AI tools to create more ad space and generate more revenue,” said Lou DePaoli (general executive search and team consulting, General Sports Worldwide).
DePaoli, a former EVP for the New York Mets, Pittsburgh Pirates and Atlanta Hawks, believes that generative AI can be particularly valuable in helping rights holders reach the next generation of sports fans because of its ability to create content almost instantaneously and to spread. “By delivering that instant gratification, you’re reaching a younger audience,” DePaoli said.
The technology should also enable rights holders to offer greater value to brand partners. “If a club can immediately launch a video highlight showing branded signage on the pitch, it could include some branded content distributed and an offer at the end to drive further engagement and/or revenue. That’s where you can start to get a real one [ROI]’ said DePaoli. “It’s the real-time detection of something that happened that has tremendous reach and will move people to action.”
There will be use cases in esports that go beyond fan-centric content, especially as these engines continue to get smarter. Lynch envisions a day when Generative Pre-Trained Transformer 3 (GPT-3) text editors will be able to emulate speech, provide advice, and deal with unique situations, performing many of the manual, repeatable functions of an in-house ticketing team supplement or replace. GPT-3 is another generative AI product from OpenAI.
The SponsorUnited executive can also see how the technology supports a rights holder’s merchandising efforts. Using “plain language to create truly one-of-a-kind custom fan apparel and accessories is a natural extension of what Mattel did with Hot Wheels X DALL-E 2,” he said.
Teams and leagues burned by crypto partners may be reluctant to strike deals with companies in another emerging technology category. However, Grossman believes rightsholders will continue to trade in emerging technology for two reasons. First, new technology has always had a significant impact on sports revenue and fan engagement. “Just think of the early days of television or the frictionless payment technology being implemented today,” he said. Second, “From a partnership perspective, emerging companies are often the ones who can benefit the most from esports partnerships due to the need for top-of-funnel brand marketing considerations.”
DePaoli encourages rightsholders to do 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 lure of big sponsorship revenues from tech startups is tempting, but unless they’re backed by a 20-year-old blue-chip brand or are part of a blue-chip brand, rightsholders should do as much due diligence before engaging.” perform as possible. ”