Network of Pro Sports Leagues Looking To Avoid Pitfalls That Have Felled Those Who Have Tried Before
Athletes Unlimited (AU) has announced the formation of a professional indoor women’s volleyball league, the second in a growing network of upstart leagues (AU softball will debut in August) that intends to buck the traditional team format (rosters will be selected weekly by player captains) and city-based business model (all games will be played in a single market). Set to launch in February of 2021, AU volleyball will feature 48 of the world’s best players (including several members of the U.S. National Team) competing in a condensed six-week season. Athletes will accumulate points for team victories and individual performances and be compensated based on their position in the final standings. A high-profile advisory board (including: Kevin Durant, Abby Wambach and Caroline Wozniacki) has signed on to help guide the organization and promote the growth of its leagues.
Howie Long-Short: Athletes Unlimited was founded on two basic principles: that “opportunity and upside” exist within women’s professional sports and that by forming leagues from scratch co-founders Jonathan Soros and Jon Patricof could maintain the flexibility needed to avoid many of the pitfalls that have felled other startup sports leagues.
The rise of NWSL valuations and interest in the league’s clubs over the last 18 months supports the notion that there is growth potential in the women’s game. Back in December, OL Groupe (the parent company of Olympique Lyonnais) agreed to buy +/- 89.5% of Reign FC at a record $3.51 valuation (expansion clubs were last reported to be selling for just $1 million). Patricof says that "the success softball experiences at the collegiate level - with ESPN broadcasting more than 1,500 games/year" - is also indicative of the tremendous opportunity he and Soros envision.
As the former President of NYCFC, Patricof understands the difficulties associated with developing a fan base in an established sports town. “It's expensive for a new league to spend a lot of money on marketing teams at a local level in multiple cities when there are 7, 8, 9 pro teams already competing for the fan’s time and discretionary income in many markets." He also knows "its hard to make the economics work renting large venues” (see: NYCFC + Yankee Stadium). By “adjusting those operational deficiencies”, Patricof believes that the organization can avoid spending all of its time and resources on selling tickets and instead channel its efforts towards building “global engagement across social, digital and broadcast television platforms.” While Athletes Unlimited has yet to announce where its volleyball league will take place (softball will be played in Rosemont, IL), the entirety of the season slate is scheduled to be played in a single 'right-sized' building.
The pro sports leagues hit hardest by the Coronavirus outbreak are the ones reliant on gate revenues (see: MiLB), but with ticket sales expected to be just an ancillary revenue stream for Athletes Unlimited Patricof argues that his organization is positioned to thrive even if social distancing guidelines remain in effect for an extended period of time. The minimal player travel required (since all games will be played in one city) should also serve the upstart organization well in a post-COVID world.
It’s critical to understand the Athletes Unlimited capital structure to appreciate that the leagues’ long-term asset value isn’t driving business decisions. Patricof said that the mandate has always been to build “something meaningful and long-lasting.” Soros (the lead investor) and the balance of the league’s stakeholders are capped at a 10% ROI. “The balance of profits are earmarked for the players and the people working on the leagues' day-to-day operations.”
Of course, reaching profitability is a challenge for startup sports leagues in a good economy - it might be damn near impossible for an unproven property heavily reliant on sponsorships and corporate partnerships to pull off in the midst of a global recession (though the scale and diversification AU intends to offer by having multiple leagues under one roof should help). Remember, businesses worldwide are widely expected to slash marketing budgets. Athletes Unlimited does anticipate "a modest amount of ticket and merchandise sales” and there are plans to roll-out a “national membership program”, but even with modest expenses it's fair to assume Soros and Co. will be floating the business until the economy bounces back.
The leagues underneath the Athletes Unlimited umbrella (there are plans to launch a 3rd in '21) won’t have the benefit of relying on natural city-based rivalries to spark interest (think: NY vs. Boston), but if the Gen-Z sports fan is in fact a 'fluid fan' (think: follows players, not teams) it may not matter. Patricof said his organization (which has Sports Innovation Lab's Angela Ruggiero on its advisory board) is fully committed to the concept and intends on devoting all of its “time, energy and resources into helping the players build their profiles.” An emphasis on “short-form digital story-telling and real time highlights” - along with live game coverage - should help fans get to know the athletes on and off the field.
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