Recent news that the betting-odds and data-supplier Sportradar was in talks to go potentially public through a special purpose acquisition company (SPAC) wasn’t surprising.
Rumours that the Switzerland-based company would list via either an initial public offering or a SPAC have been circulating for some time and when one notices the breadth of U.S. stakeholders actively looking at a market that is just finding its feet, it is easy to understand Sportradar’s motivation.
If Sportradar does go for a SPAC listing, it has yet to decide which one it will be. According to industry reports, it could be ex-MGM CEO Jim Murren’s Accies or Horizon Acquisition Corp. II, the SPAC headed up by Eldridge Industries boss Tedd Boehly that saw its shares rise 28% last Wednesday when the news came out. As a company, Sportradar’s valuation is likely to be within the $8bn-$12bn range.
For the hundreds of online sportsbooks the group supplies, the more important issue will be whether Sportradar’s move onto the public markets will affect the prices it demands for its odds and data feeds.
And when it comes to sports betting, the issue can be simplified as to whether the data sold by suppliers like Sportradar, Genius Sports or IMG is officially sanctioned by the sports leagues.
The rationale is obvious enough. As a sales tool, offering data that is officially approved by the NBA, PGA or ATP makes for stronger marketing and a higher price can be asked for it. Any supplier that has a data partnership with a sports federation or league will leverage it with that idea in mind.
Making it official
In the U.S., the concept of official league-approved data has been much more prevalent than in Europe since the post-PASPA sports betting regulatory wave started in 2018. The leagues and some of the country’s biggest sports teams, such as the Chicago Cubs and Dallas Cowboys, being proactive stakeholders in regulatory efforts is one reason for this.
Another is that team owners such as the Dallas Mavericks’ Mark Cuban and leagues like the NFL are also investors in Sportradar and the group has data partnerships with sports bodies like the NHL, ITF or NBA; its thinking on the topic is clear.
However, when it comes to official data, the issue is specific to in-play betting, as Michigan’s betting regulations make clear, and the key concern is latency — in other words, how quickly and with what delay (if any) suppliers transmit data to their operators.
Sportradar will say that in practice, it means data sent by official league representatives will reach sportsbooks without delay, compared with a TV feed, which in general has a latency of seven seconds, or even a scout in the stands who could be having connectivity issues.
Lloyd Danzig, founder of igaming investment firm Sharp Alpha Advisors, echoes the point about in-play: “There is minimal difference between the accuracy of official league data and the leading competitors’ offerings when it comes to pricing pre-match markets. However, in-play markets rely on high-fidelity, low-latency data feeds with little room for error. The current regulatory landscape appears to recognize this distinction.”
For in-play, the more quickly a bookmaker receives a price and how long they keep a live market open will determine how much volume they can record. Still, it is hard to know or quantify how much of a difference it all makes to in-play or pre-match offers. Danzig adds that operators paying higher fees for official data may also come down to maintainng good relations with the sports leagues and suppliers.
“Legislative requirements aside, the largest operators benefit significantly from harmonious relationships with league and team front offices. As such, they may be happy to pay for official league data, whether its use is mandated or not.”
As mentioned, this is in marked contrast to Europe, where bookies have been using non-official data since the earliest days of the industry and many view the ‘official data’ label as a way for suppliers to justify higher fees and revenue share agreements.
New data opportunities
However, such a scenario also presents an “opportunity to serve smaller operators and early-stage companies that can’t afford Sportradar or Genius Sports pricing,” Danzig says.
“Sportradar and its main rival Genius Sports have leveraged significant first-mover advantages and economies of scale and grabbed the lion’s share of what could be called the top-tier level of the market.”
But Danzig adds, “There are also companies, like SportsData.io, which have generated significant traction among small and medium-sized businesses. The growth of e-sports has also brought new participants into the space, with former Genius Sports and Sportradar executives launching services like GRID and Bayes. Additionally, technology start-ups like Pandascore and Rimble are using a branch of Artificial Intelligence known as ‘Computer Vision’ to automate the entire data-collection and cleansing process.”
Buying and selling at the right price
For Sportradar, the focus will continue to be expansion into the U.S. sports betting industry, which so far represents only 6% of its revenues. U.S. media groups also represent a major growth opportunity for the firm.
Looking into the financial detail of a Sportradar float, a report by Fitch Ratings published in January said the group would record less than $120m/€100m in EBITDA this year, which is “small compared with other publicly rated data analytics companies”; and with EBITDA margins at less than 20% due to the high cost of audio-visual rights in the U.S., any “potential inflation in the price of these rights could pressure EBITDA margins further.”
In the end, and much like its main rival Genius Sports, the price Sportradar pays for audio-visual or ‘premium’ official data rights, and whether it manages to sell them to enough of its clients at a good enough price, will determine its success.
This was illustrated in the Fitch report by the revelation that Sportradar had taken a $43 million hit on the NBA rights it had acquired as part of a five-year, $250 million deal signed back in 2016. The reason for that write-off was that operators did not want the data.
The U.S. is now a completely different environment for sports betting, but it does serve as a reminder that data and media rights are only worth what customers are willing to pay for them.
