As sports betting takes off, athletes’ data may become as valuable as their ability to sink three-pointers. Genius Sports, a UK-based firm that collects live data and feeds betting shops, plans to go public through a special purpose acquisition company this quarter at a roughly $1.5 billion valuation. Companies that gain an early lead in sports data may be tough for future competitors to catch.
Genius Sports has been on offense since October’s SPAC announcement. The company run by Mark Locke already has over 650 partnerships with sports leagues, like the National Basketball Association and the English Premier League, and gaming organizations – it announced a marketing deal with FanDuel last week. And it recently acquired a U.S. scoreboard data company and set up a handful of exclusive partnerships.
The pandemic has helped sports betting, too, which is a $100 billion global market and growing, according to IBISWorld. Teams and leagues that lost sales from live games last year – Major League Baseball had operating losses close to $3 billion, according to commissioner Rob Manfred – may seek other revenue sources moving forward, including the trove of data sports generate, which companies like Genius Sports can help synthesize and commercialize.
There are some battles ahead. While it has recently received a license to work with betting operators in Michigan and Virginia, Genius Sports needs approval to operate in other states, too. Sports betting is increasingly gaining regulatory approval across the United States, but still it’s not guaranteed. And the company faces stiff competition from rivals like Sportradar, with which it’s currently involved in a legal squabble. The development of new technologies, like artificial intelligence, could also blunt its edge.
Still its valuation looks reasonable if revenue expectations hold. The SPAC deal values the company at an enterprise value-to-estimated 2021 sales ratio of 8 times, while sports betting operator DraftKings trades at 23 times, according to Refinitiv. And Genius Sports has impressive global scope, covering over 250,000 sporting events. It also focuses on collecting official data, which may be increasingly important as the industry matures and scrutiny of the misuse of athletes’ data or cyber hacking grows. SPACs may remain a gamble, but Genius Sports looks like a smart bet.