{"id":3856,"date":"2022-01-27T08:44:42","date_gmt":"2022-01-27T16:44:42","guid":{"rendered":"https:\/\/wagers.com\/staging\/4285\/?p=3856"},"modified":"2022-01-27T08:44:54","modified_gmt":"2022-01-27T16:44:54","slug":"analysis-the-nfls-depreciating-data-asset","status":"publish","type":"post","link":"https:\/\/wagers.com\/staging\/4285\/news\/analysis-the-nfls-depreciating-data-asset\/","title":{"rendered":"Analysis: The NFL\u2019s depreciating data asset"},"content":{"rendered":"

Call it a lesson in what you can expect when investing in a newly listed entity.\u00a0<\/span><\/p>\n

When Genius Sports and the NFL announced last May last year what they billed as a \u201cstrategic partnership\u201d based around exclusive distribution of data ahead of the NFL season, it was r<\/span>eported as being worth up to $1 billion<\/span><\/a> over the life of the deal including potential extensions.<\/span><\/p>\n

It was a signal moment for Genius Sports which used the deal as a platform for its New York listing via a merger with the dMY Technology SPAC.\u00a0<\/span><\/p>\n

In a note issued at the time of the float, analysts at Goldman Sachs said Genius Sports was a \u201dbest-in-class provider of picks-and-shovels\u201d to the sports-betting sector.<\/span><\/p>\n

When it listed in late April, the share enjoyed an immediate bounce, rising 11% on the day of the float and in subsequent weeks hitting a high of over $25. At its peak, this valued the business at around $5 billion.<\/span><\/p>\n

Investors losing faith<\/b><\/h2>\n

Since then, however, the Genius Sports share price has hit the skids. From an intra-day high of $25.18 in Mid-May, the shares have collapsed by over 76% to a low of $5.85 at close on Tuesday.<\/span><\/p>\n

Recent news flow around enhanced distribution deals with European gaming giants Bet365 and Betway-owner Super Group have done nothing to arrest the slide.<\/span><\/p>\n

From the price on the day of the float, the shares are down over 70% and the value of the firm has suffered accordingly. As of today, the company is worth less than $1.3 billion.\u00a0<\/span><\/p>\n

Partly this decline is about the sector overall. But some of this is down to Genius itself and the evidence from the third quarter numbers where despite revenues rising 70% to $69.1m, the cost of the NFL deal saw adjusted EBITDA falling to a loss of $392,000.<\/span><\/p>\n

So why is this a problem for the NFL?<\/b><\/h2>\n

As part of its deal with Genius Sports, the NFL received a substantial element of the fee for the data exclusivity in share warrants.\u00a0<\/span><\/p>\n

A recent note from the analysts at UBS suggested that while the total value of the genius deal to the NFL was $720m, about $350m of that comes in the form of share warrants.<\/span><\/p>\n

Using the 69.5% fall in the share price since float, it means the potential value of the NFL\u2019s stake in the business including three warrants yet to be issued now stands at ~$104m. Within the cash element unaffected, it means the total value of the deal now stands at ~$470m.<\/span><\/p>\n

The shine has certainly been taken off what looked like a good deal at the time.<\/span><\/p>\n

The longer term picture<\/b><\/h2>\n

The question then turns to whether Genius Sports can turn its share price around and how that might happen.<\/span><\/p>\n

A recent initiation note on Genius Sports from the analysts at Credit Suisse used the dreaded (in these quarters) flywheel analogy.\u00a0<\/span>They suggested the NFL deal will lead to increased market share for Genius through a combination of the sport\u2019s body\u2019s requirement to use official data and the opportunity for Genius to win incremental business through the programmatic advertising channel.<\/span><\/p>\n

These echo the hopes of Goldman Sachs who said the NFL deal could broaden the company\u2019s reach and \u201callow them to cross-sell additional services such as outsourced marketing (in the media segment) and AV\/streaming services.\u201d<\/span><\/p>\n

What can be said is that Genius has seen the benefit of the exclusivity on NFL data with a series of supplier deals with all the major operators in the U.S.\u00a0<\/span><\/p>\n

But a UBS note from later last year said that translating those contracts to profitability is now in question. Pointing out that shares offered to a sports league \u201care a real expense. The UBS team suggest that Genius\u2019 definition of adjusted EBITDA doesn\u2019t fully encompass the cost of sports rights.<\/span><\/p>\n

Spreading the full ~$350 million of stock-based sports rights expense across the six-year lifetime of the deal means the UBS estimates for adjusted EBITDA in 2023, for instance, fall to $12 million from an estimated $70 million.<\/span><\/p>\n

Bottom line<\/h2>\n

Genius Sports addressed some of these questions when it conducted its meeting with investors Thursday, b<\/span>ut the wider issue of the value and worth of official data are yet to be addressed fully by the sector as a whole.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Call it a lesson in what you can expect when investing in a newly listed entity.\u00a0 When Genius Sports and the NFL announced last May last year what they billed as a \u201cstrategic partnership\u201d based around exclusive distribution of data ahead of the NFL season, it was reported as being worth up to $1 billion […]<\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","footnotes":""},"categories":[324],"tags":[745],"class_list":["post-3856","post","type-post","status-publish","format-standard","hentry","category-news","tag-genius-sports"],"_links":{"self":[{"href":"https:\/\/wagers.com\/staging\/4285\/wp-json\/wp\/v2\/posts\/3856","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/wagers.com\/staging\/4285\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/wagers.com\/staging\/4285\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/wagers.com\/staging\/4285\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/wagers.com\/staging\/4285\/wp-json\/wp\/v2\/comments?post=3856"}],"version-history":[{"count":4,"href":"https:\/\/wagers.com\/staging\/4285\/wp-json\/wp\/v2\/posts\/3856\/revisions"}],"predecessor-version":[{"id":3860,"href":"https:\/\/wagers.com\/staging\/4285\/wp-json\/wp\/v2\/posts\/3856\/revisions\/3860"}],"wp:attachment":[{"href":"https:\/\/wagers.com\/staging\/4285\/wp-json\/wp\/v2\/media?parent=3856"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/wagers.com\/staging\/4285\/wp-json\/wp\/v2\/categories?post=3856"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/wagers.com\/staging\/4285\/wp-json\/wp\/v2\/tags?post=3856"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}