UP561 Is your name on the list? The winners and losers in Two Circles' $174bn sports IP revenue league table

19:29Gareth Balch:I know you'd be interested to know that 16 % of all revenue generated by sports ip last year was from racing leagues good stat thanks it's a real public

19:37Richard:so the the tam is based on the 800 million racing number absolutely yeah and and i think the the nice thing about sail gp and i think the thing that gives us a lot of confidence around around our growth is while we're a disruptive sport we're not there's no sort of incumbents in our market so we have this kind of almost like luxury to say well we're gonna as gareth said we're gonna become the preeminent annual sailing championship the sailing audience automatically or they suddenly now love follow engage attend all of our races and our product so you've already got that kind of natural grassroots infrastructure and kind of ready-made fan base that then gives us a springboard to go and say develop a product that engages with the with the racing fan and that's why we've been so focused on creating this broadcast product that speaks to a non-broadcast audience creating a digital product yeah we've had 1.9 billion social views i think we get more social views than the bundesliga do so we've obviously got a product that people engage with at a very top level and and they like it because it's like formula one it's crashes it's near misses the question is is okay but i am now going to get bombarded with sailing content i haven't before but i've been i've been typing into my computer i've been searching sail gp i've been doing it yeah yeah And therefore, I'm now in that number and where I wasn't yesterday or the day before.

21:00Richard:So why that is important. So I get, OK, it's a bigger number. But again, you get back to, so what? I think we're getting to a point where I don't, and this is not just me. I'm playing a role of, you know, sceptic here. Well, I'm sceptical, but I don't think people believe numbers. I think we're getting to the point where because you get to the just the audience claims of sport has educated the marketplace to expect just a ginormous, absurdly high number. And everyone has got to play suit. Everyone's got to follow that and play that game.

21:36Gareth Balch:I don't I think that we believe in stories. We don't believe in numbers. I don't think we ever did believe in numbers. I think the industry and all the world has always believed in stories and the best.

21:44Richard:I guess we're using numbers as a proxy for facts. And now we've said we've now that.

21:49Gareth Balch:The line we use a lot internally is the best stories are ones that have data with a soul. And there's been too many stories told that don't have a soul. Right. Gareth, you're going to have to explain numbers with a soul. Come on then. Numbers with a soul are when there's truth and context and comparison put into them. And there's not exaggeration or generosity built in where it's in one's self-interest. than that i think when that i think that will always i don't think anything's actually changed there i don't think the world's changed in that regard i think yes we've been exposed you know we're seeing outside of sports industry chat here but as a society we've been exposed to data or numbers that are uh wrong wrong yeah and that does that clouds the mind but it doesn't change the middle it doesn't change the middle point which is that the best stories are one that you can relate to that also bring context and the and the world is awash with information that can bring you context i can tell you that the sports industry generated more revenue last june actually eight times more revenue than the global box office the movie box office it's like oh that's interesting and that's that's a story say okay so why is sport doing so much better than movies anyway you don't mean to go off on a tangent around that but you can build stories around things that does put a data in there's got so you're like yeah sports live sports and sports viewing is eight times bigger than movies it's like wow that's kind of interesting and we you can go off on a story there and sorry I'm tangenting here but but I think that people believe there is a I think people can get their head around there are a bunch of people who love and are avid about sailing in the world and then there's a whole more bunch of people several times about 15 times according to Charlie which I agree with who have got a disposition to that type of product I have fast thrilling technical national but global so formula one of sailing yeah we actually see that come to life all the time because I think one of the challenges that we have when we're selling sailing is that there aren't that many brands out there or investors out there that are saying i want to sponsor sailing or i want to invest in sailing so that's why we kind of have to go on this journey to convince people that we're so much broader than that we are a on water racing property we're a sports lifestyle entertainment platform etc so when you say sailing everyone has this kind of like concept in their mind of of what it is it's white triangle triangles on a blue background it's far away it's boring it's hard to understand it's posh people we we spend sailing is it is sailing posh byob means something different in this record doesn't it it does have those connotations of elitism as well and none of those things are necessarily positive

24:15Richard:and we we spend a lot of time sponsor sale though i mean a posh audience is a is a expensive audience yeah which we'll come on to i guess and and i guess we we spend a lot of our time trying to convince brands trying to convince investors cities that we can attract this broader audience and whatever numbers you put in front of them you know you say sale gp out rates formula one three to one on cbs versus espn it's like until they come to an event and and have the emotion the emotional connection to it see the grandstands that gareth has highlighted that's kind of the eureka moment for them where they say actually this isn't the audience i was expecting this isn't the scale i was expecting i can see the potential of this of this platform this sport So you're right.

24:56The numbers are one thing, but it's the emotional connection, I think. And they're seeing that live experience, I think, tells people that certainly from our perspective, that this is this is not your traditional sailing.

25:07Richard:So, OK, let's step back for a minute and go back to the table, because I was looking at it and I was there was some under that bonnet of the 170 billion. Is that right?

25:19Gareth Balch:174 billion US dollars. $4 billion.

25:22Richard:You've got the two at the top are NFL and NBA. And then you've got the Hong Kong Jockey Club, which we talked about last time, Premier League, UAFA, UC3, TKO, Formula One, Churchill Downs, another horse racing, and USPGA and PGA Tour. Right. So you've got, that's the top 10. In there, you've got some enormous sort of outlier media rights deals. So the NBA, for example, I can't remember what the number was, it's 70?

25:48Gareth Balch:Lots of money.

25:48Richard:so i was thinking i know why you're framing this as a sort of all ships are moving up type thing but i wondered and there's a it's a question of is it just actually concentrating at the top end where you've got this small group of very elite rights holders it's the big get bigger question i guess yeah is that that's the worry if i was looking at the total at the table from one to 150?

26:18Gareth Balch:Indeed. So you just listed the top 10. They represent 34 % of the $174 billion. So the top 10 sports IP rights owners, they generate 34 % of the whole market. That's up from 30 % 10 years ago. So it's factually true. There was a soul and a data point. This is this story. The big are getting bigger. I'll just zoom out. Give you some data points quick. We analysed 200 distinct sports. We analysed 10 ,000 IP owners. so so sale gp are very much in the in the top of this albeit the the sharp bit at the top gets really sharp as i'll talk about in the moment as well in the top couple hundred here the the industry is more diverse than ever in terms of the number of sports and the number of rights holders take take that point there yeah the industry is more concentrated than ever at the top 10 point i've just put out there the industry is nowhere yet concentrated enough okay explain that the The sports industry relative to other mature industries is relatively unconcentrated.

27:16Gareth Balch:So it's got a fatter tail. Yeah. If you generated over$100 million, you were$286 million on the league table this year. And to be in the top$286 million, you'd represent 95 % of revenue generated. So we analyzed 10 ,000 sports IP owners. Those are a really long tail. But 95 % of those 10 ,000 were 286%. So 95 % of the money came from 286 of those entities. that number 286 is really high for number of entities driving 95 percent of hundreds of billions of dollars of industry so for example 85 percent of the of the banking industry will come from 100 banks yeah so our industry is driving 286 percent to get us to that sort of number so something like banking or airlines or luxury goods are much more concentrated than the sports industry is and what we see is that sports is becoming more concentrated the bigger getting bigger what we know to be true is that sports will continue to see this trend happen i get in on the jet stream as we go through this era of professionalization is really important for those that want to grow fastest because they're all whether you're in the top 50 or the top 100 you're growing faster than the market that is led by the biggest lead indicator which is a driving

28:29Richard:consumption okay so that's interesting because it's sort of that's there is an incentive then lower down to do what sale gp have done and say right okay there is a sport out there that we can then attack with a template with a way of doing things that that looks a lot like what they've done and my question is what's the difference between winning and losing in this so there's a there's i think and again using sale gp you've got the richest bloke in the world coughing to

28:56Gareth Balch:be get it going it was a year ago something happened last week i know but you know he's in

29:00Richard:the conversation so with these things is the sort of trying to get yeah but i'm looking at you know this isn't a meritocracy it's not a fair fight you've got larry ellison in there you've got you know an enormous amount of money to get into the race and i'm just trying to think if i'm going to start heaven forbid go off and start my sale gp of something i'm going to be that that is going to be a big barrier i need an enormous amount of money to get going to get the flywheels

29:28Gareth Balch:Charlie can jump on this too, but the SouthGP have done a fantastic job to generate over$100 million worth of revenue, $130 million worth of revenue they did last year. Within six years is a really impressive achievement. I can count on less than the fingers that I have of others who have done that this century. So sports IP revenue owners who generate - So something's gone right. Something's very much gone right. There's lots to learn from that. Catching lots of big trends, like a big globalized league, but with national following. the technology innovations the boats are amazing the ability to be able to take a sport that ultimately was underserved and it was underserved there are other sports that are underserved too hence why we're really looking forward to seeing your new league i think it's going to be great if it hasn't got gp if it hasn't got gp in it it's not going to work so they've really traveled on on the back of those on the back of those tailwinds and and and got to scale and it's like well is again over if it's getting over 100 million good enough or not well it gets you into a small group of rights holders to generate 95 % of the revenue so it says a lot and it's a good indicator to do it out of the ground with no supporting rights around it is interesting too because some of the fastest growing rights holders this century like IPL or or college football playoffs have done it out of an existing infrastructure and so LGP did it in their same rights so I think there's a lot to applaud there but anyway I'll stop applauding yeah no and I well we appreciate it the thing that's got us to this point is the fact that we've become the pinnacle annual championship in our sport so you see a lot of disruption happening in the sports industry and more established sports where there are very strong incumbents and that's really really tough there's obviously high profile cases around that at the moment i think where we're unique and i think what's given us license to grow is that there's none of that in our sport you know we're creating a new category almost yeah and yes it takes a lot of investment to do that but i think the the potential you know now that it's up and running and the flywheel is going is is massive but it but it's interesting because like we obviously see all of these trends going on and kind of the big get bigger and the middle gets squeezed and I think that's sort of dictating our strategy a little bit as well and and almost kind of our our approach over the next five years is like we want to elevate ourselves from kind of where we are now in the kind of in the 200s into a you know top 25 position really yeah so there's a huge kind of growth growth play and obviously kind of that's where you look at the intersection of fan base and revenue and kind of broadly what we need to do over the next five years to get to that point is 3x our fan base and and double well two and a half x our revenue so it's really interesting about that intersection but that the the trends i would say are kind of very much dictating that kind of go almost kind of go big mentality for us but also we see that because there's no competition for us you know we can own the whole kind of concept of on water racing and and that gives us a lot of growth potential.

32:17Richard:Yeah, almost by definition, that's a list. The sports IP top 150 is a list of the winners in the race in some way. There's a sort of survivorship bias thing going on here where you're saying, right, okay, we're going to learn lessons from people who have won. There's a counter list of probably one for every sale GP. There's probably 10 that have had a go and failed and disappeared and we don't think about them or look at them. But actually, what separates them winning or getting a spot on that list and not, I think is quite an interesting question, because it's really hard to get to the data of the losers in the race.

32:52Gareth Balch:It is. It is hard to get to that data. It's also mucky data, I would call it, mucky data, because you'll have a mixture of maybe it was a good idea, didn't have enough capital. Maybe it was a bad idea, too much capital. Maybe it was, you know, mostly right, but in the wrong mark. You can have one variable out in a startup and it could take you down entirely. I often say that as someone who started a business is that you have to get like 100 things right in a row and then you might still be in business at the end of it. And so you'll have lots of, well, I certainly see it where there's been a wealth of new sports IP come to market over recent times.

33:27Gareth Balch:I think there's been more in the last decade than any decade before, although it's hard to substantiate that data point because the data is mucky, as we suggested. but but but but there's it's very hard to get a lot of things right and sell gp had done really well in that regard formula e did similarly well the one championship is another in these in these kind of the winners category of new and getting up and over 100 million in revenue quicker than most yeah i think i think i think long capital is a really important characteristic here and that can come from from great partners like sell gp have got or indeed great shareholders also like sell gp have got that means that we know it's still going to be on earth in like 10 years time and you know some things that are kicking around at the moment it's like quite good but you're like is it going to come back next year i'm not sure it might look well i mean let's i mean

34:10Richard:again to be obvious if we had this conversation last year i think we and we did or two or three years ago it would have been live gulf the assumption would have been saudi sovereign wealth was going to be his long patient capital and that's going to be a battle for the next decade and now obviously that's shifted and changed and things have altered and you sort of think i've said this before but that patient capital is one of those phrases that people use but you know it's unless you've got someone who is extraordinarily rich and has a personal interest in it then it's you're always going to have that challenge and one of the questions you've got about so women's football to be obvious you've got at the moment we're looking at durham who have done everything right and then no you know they can't get an investor in and the only new brand that's appearing the WSL is is backed again by a billionaire so there's gonna be several new brands in the WSL next year but watch this space okay interesting but you get my point in that that that sort of okay how you get on the list from a standing start without that enormous amount of of source capital and and the assumptions because quite often the question is yeah but when you know you get this all the time I get the top numbers but when am I going to start making money when when is the flywheel going to go for me?

35:27Richard:And people are looking at women's football as the case study. Yeah, but is there a business model to it? Are there enough fans? Are they real fans? Do we believe them? So those questions that buzz around in the gap between having a good idea and doing everything right and something happening or something picking up.

35:44Gareth Balch:I don't know the data point off the top of my head, Richard, so I'll send it to you and you can use it as your pre-marketing for this podcast. I will. Which is the average year that the top 50 were established, but it's a very long time ago. I just don't have the number to hand. And indeed, we did a cohort analysis on it and analysed every decade in which they got founded off the top 150. And what you see is that the older you are, the more likely you are to be on that list.

36:07Richard:So one of the questions then is just by being a lot of them, you're right, NFL, NBA, you know, they have been around for, well, they were famous before the social media era. and they have capitalized on that period in a way that it's what we've seen recently and Charlie mentioned it about you know the incumbency the incumbency is really in sport is really hard to attack if there is a sort of something in the middle that you have to have and you see the

36:36Gareth Balch:capital run over there too and you know off topic from sailing here but the the Liv story talks to this a little bit which is that the science experiment that one of the benefits of the science experiment that Live Golf has brought to the sports industry, I believe, is it started to evidence the value of generational fandom and the history and the heritage that comes off that has been underestimated in terms of how valuable that is. And indeed, it should be marketed more effectively to be able to get more juice from that.

37:04Richard:So older people are valuable.

37:06Gareth Balch:We obsess about Gen Z.

37:08Richard:It's a good point. We obsess about Gen Z, but it's the Bernie Eccleston point. They don't pay the bills.

37:12Gareth Balch:I actually massively believe in the silver pound and dollar in that regard but that's not the half of the silver that's not necessarily the point i was trying to make well it was part of it it's the generational effect i.e sport bound society together bind society together and the ability to have fandoms that you know that others in your family and what elder members of your family have have taken on before and you walk in their footsteps that means a lot and then being able to use that context of of a long history of playing that game or that sport or that course or that circuit or whatever to be able to create a sense of the footsteps in which one's walking in behind you.

37:49Gareth Balch:We had an all-British Grand Prix podium at Barcelona, first time since 1968. It's like, oh, immediately, that's just interesting. It creates a story. And I think that's one of the big benefits that the incumbents have and it's been underestimated and why being well-established for a long period of time is a real asset to be able to build a motor. Isn't it a little bit about kind of how much does the sport matter? Because I think the live thesis was that people want to see the best golfers playing against each other week in week out but actually the the outcome was people actually just want to watch the memorial tournament because it's got history and heritage and it matters who wins that and to some instead it doesn't matter who wins live in hong kong you know totally and the thing i find fascinating is the hypothesis you said though about they just want to watch the best golf in the best tournament that was believed by everybody in the industry it wasn't just believed by live i i think i think it was you know i think it was you know never it's never it's never everybody so i don't oversell you've been

38:41Richard:tozle it which included spurs i always remind people well we're in the primary league so that's

38:45Gareth Balch:a good start isn't it so the uh but everyone and i don't think it's quite as binary as everyone believed it before and it definitely wasn't true and it's not quite true that you just want to watch remember we're talking but the answer was definitely nearer it was definitely nearer the prevailing hypothesis was nearer uh like best players and it wasn't that it's definitely near history and heritage and we should market that more effectively and i think that's like when when we were setting sail gp up and and again you see this in a lot of the other disruptive sport when they're kind of trying to create teams from scratch.

39:12It's like, it's incredibly hard to do. And we went down the route of national teams because the national team has a national identity already. It's got a ready-made fan base. Like it matters when the British team are going around the court. Actually, the Australian team kind of pipped the British around the corner in New York and won that race. And like, you know, although our audience isn't as big as the F1 audience, like the people watching it can see that it matters that the Australian team beat the British team. And when you kind of project that out to the end of the season and we do a$2 million championship race at the end of the year, in our final race, the top three teams go into that.

39:46It's like people, you know, you noticeably see the people in our hospitality lounge or in the grandstand leaning forwards and they really care about this race. You know, it matters to some extent. And I think that's what we've been really focused on is like, how can we create sport that matters? Because ultimately then it comes back to how big and how engaged your audience is. and that is a big factor. I think that's right.

40:07Gareth Balch:And I think one of the things that CellGP's done really well and others will increasingly follow is the cross-stitch between the countries from where the teams are participating with the cities and the countries in which they do it. That cross-stitch between where it is and who is doing it is really good. It's the envy even of, relatively even of Formula One, which wants a more diverse driver base. Explain that again. You mean the geographical? Yeah, the geographical cross-stitch between where it is and who's doing it is really good. And you'd be like, oh yeah if I was building it from scratch I'd make it more like that rather than you get other amazing products like MotoGP have heartlands in really you know relatively narrower geographic yeah that's rugby's problem isn't it very much so yeah well rugby's opportunity they got the

40:49Richard:fans in the wrong place so NBA Europe is again an interesting case study because you've got two maps you've got the map where the fans are yeah and the map where private equity and the investment wants the cities yeah and those aren't you know there's one in London and I'm we'll see

41:04Gareth Balch:we'll see well will we see we'll see we'll see what happens won't we yeah we'll see i talking of geographic concentration just to put some more data points in there because it's been at least three minutes since i gave you one 56 of revenue generated by sports last year was from u.s headquartered rights holders 56 of the market so it's a very u.s dominant 45 of the top 100 sports IP owners are american however here's the skew on that we predict over the next 10 years and it's already starting to happen that one in four of the new dollars by american headquartered rights holders will be captured from international fans i what americans were called international

41:41Richard:fans non-domestic u.s fans so the the non-american money of on the is you've got switzerland presumably you've got fifa uefa the ioc that's where a lot of that is going to come from and we could argue the toss whether or not well we know that money isn't coming from switzerland so actually the headquarters sort of matters

42:02Gareth Balch:and sort of doesn't yeah I mean it's a proxy it's a proxy because the US do have high well you could listen

42:08Richard:to that and say right okay well we need to go the American route which again has become a trope and a cliche but actually you've got to be careful with that because it doesn't apply in lots of different places I want to ask there's a question okay IP and I've been watching as everyone has the run into the FIFA World Cup and Gianni Infantino and the tickets and all of the stuff that's been bubbling around. And I keep coming back to a number that you talked about last year, which is about leakage.

42:39Gareth Balch:Yeah.

42:40Richard:And I think that there is something in the idea of IP leakage, i.e. the money that disappeared doesn't go back to the rights holder. I think there's something very central in the way Infantino looks at the world, which is coloured by that idea. because I think the ticketing question, trying to capture money from stopping, you know, owning the secondary market or trying to tax it, taxing YouTube and TikTok and trying to get some money from that leak. You've got the betting market where, again, it's much more difficult and complicated to work out how you do that. And then things like computer gaming and then you obviously got piracy.

43:19Richard:So these are big leaks from the ecosystem. system when you look at infantino people just jump to the morality of it or the you know they they i was listening to the moral maze on radio for it drove me i knew it was through the fucking radio away it just drove me nuts because they're missing the point i think actually you know get in his head try and separate these things i'm not an apologist for him by any stress of the imagination but i do think there is something going on there that people are missing and i've

43:45Gareth Balch:got a feeling it's in that you make a really good point i completely see what you said and yes i I think that FIFA have a very strong sense of the value that they're creating in the economy and they want to participate at every turn in which they are the originator of that value. I think that's a really fair and reasonable position to do. At times, that flies in the face of convention or history and how that's worked.

44:08Richard:I think it's a question about whether you can or whether you should. When you get to the ticketing thing, I was watching it and thinking, do you know what, I wonder if that is a mistake. because just from a brand perspective it's getting them into territory that no one loves

44:22Gareth Balch:the secondary ticketing marketplace yeah we're really we're we our start position as a business is that the secondary market is not advantageous for the fan or for the seller and for the buyer or the seller and and there's other ways to do it so i think that fifa's ticketing intentions are excellent that their outcomes will be somewhere between fine and really good because because the IP so strong but the execution in between could have been better. What do you think

44:48Richard:about that question in terms of you because you've got a sale GP is that model where you are almost built from the ground up to try and prevent that question you know you like Formula One you go in and everything it used to say that you know Eccleston and it's still the case that they used to take a there's a cut wherever I'm buying it's going back to the centre and there's a sale GP is sort of on that model I can see that the leaks would be far fewer Yeah, and one of the privileges of setting something up in 2019 is you can design it from scratch to learn from 75, 100 years of how Formula One's done this, how others have done it, and develop a model that we think is more kind of commercially viable for the whole ecosystem.

45:31And you kind of referenced a bit earlier, kind of Larry Ellison's involvement in this and having a multi-billionaire behind you is great. But he set up SailGP to exist for the next 100 years. He set up SailGP to be commercially viable and he has no intention of continuing to fund this exercise. And I think where we've done a really good job is creating the kind of the commercial ecosystem that kind of makes this work. And we've gone from this sort of this on this amazing run over the last three years where we started with six SailGP teams of which Larry Ellison or the league owned all six. And this is very much kind of a US star model.

46:09So you were talking about that. And this is the approach that we've taken. but really strict cost caps, really strong revenue potential. I'm only questioning it. I'm not questioning it for its own sake.

46:18Richard:I'm just, it doesn't apply. People want to apply it in the wrong place. It can't planch. It can apply. Cat is a perfect model for some sports. There's a logic to it, isn't there? Where you're kind of, you know, if you're controlling your costs and you've got a good revenue generation model, then that's good business. But essentially kind of what we've done is we started with six teams of which we owned all of them. And over the last three years, we've gone from six teams to 14 teams. of which CLGP now owns none. They've all been sold to a combination of private equity investors, high net worth individuals, sports VC, celebrities as well.

46:53And I guess they're investing into it. And these, you know, Blitz has invested, Blue Pools invested, Mubadla has invested, Aries have invested, you know, top tier names. And there'll be lots more to come from across the sports and the business world. world. And I guess what they like about it is that they see that this is a business that's been set up in the right way to maximize the commercial opportunities for the whole ecosystem. And ultimately, I think they like the balance of power between the league and the teams and the ability as a team to generate a decent amount of revenue. Out of the 13 teams that we got on the start line this weekend in Halifax, five of them are profitable, which in a couple of years is amazing you know Hugh Jackman and Ryan Reynolds own the Australian team you had Hugh Jackman on Jimmy Kimmel earlier this week or last week talking about sale GP so it's kind of like the the role and the value of them in the ecosystem is obviously massive but I think it kind of demonstrates actually kind of the commercial structure when you're selling these things up is absolutely fundamental and if you get it right you see this kind of influx of of capital into it which has massively diversified or de-risked Larry Ellison's involvement because you've got 14 different teams owned by different stakeholders all kind of committed to the future of SailGP.

48:12And that's meant that the first team we sold basically for a dollar, and I think the last sort of stated or publicly available figures, we'll see teams trading at well over$60 million. So I think that's probably more than a MotoGP team or a Formula E team, which for a sailing team, you know, is an amazing story. But again, it kind of goes back to how do you set up the commercial infrastructure around it to be sensible.

48:38Richard:Let's talk about just on the data. It was very good data. I've got a question when I think about leakage, just to finish off on this pick. I mean, if you look at betting and piracy as the big ones, and I was talking the other day to someone about whether, you know, whether people will pirate the World Cup. it's on free to air and is it behavioral or is it about cost is the question a hundred percent yeah so it's just what we do or what they do or whoever and one of the things is actually it's a barometer of people caring deeply about the sport so people don't pirate stuff they don't care about and they don't bet on stuff mainly well that might not be true they bet on anything potentially i

49:20Gareth Balch:think you're giving them too much credit i don't think there's a bet yes okay so the betting is

49:23Richard:slightly different but piracy is an indicator of something you care you care about i don't think

49:27Gareth Balch:people understand the implications of what is an illegal an illegal thing to do i don't think it's known or it's not educated upon this and it certainly doesn't have it doesn't have any societal sort of black mark against it does it or less than ever it's now sort of approved and normalized in a way that you know people write and tell me that stealing a steak from a supermarket seems to be increasingly normalized it's the same kind of uh erosion of values that's happening

49:52Richard:There's a sort of Rory Sutherland thing, isn't it, about the it's gone up since they took people out of shop. So as in, you know, now we are, we don't care about, I'm talking about myself as I do all these things.

50:05Gareth Balch:Dehumanize them.

50:06Richard:Well, yeah, just you don't care about stealing from a machine as you whip the thing through, but you won't do it face to face with someone. So again, the costs, the people who put the machines in initially would have got a big bonus. And now that, you know, the revenue is shifted. Indeed.

50:22Gareth Balch:anyway yeah i think that paris and betting are uh are the great two of the great frontiers for sports ip owners to to get their arms around and and i think we will i think the industry is professionalizing certainly on our bucket list to do so we have a bucket list of two circles of things we want to do before we get put out to pasture and what else is on that bucket list

50:41Richard:oh so much should we do a whole pod we could do a whole pod on that we have a bucket list

50:46Gareth Balch:let's go for it we have it's but if you don't care about what you do you shouldn't bother doing it and we care deeply about what we're doing so there's a bunch of stuff we should problems to solve problems of the industry being in a better place and and piracy is right at the front of that the ability to to reduce leakage in places where the industry creates value so that it can be more fan-centric that ultimately is what should happen so since last year when i've and again i've written

51:10Richard:a few things and and i've got interesting amounts of pushback from people who say it's it's a totally wrong framing of the world as in sports rights holders it's a small government argument you should just get it get out of the way of the marketplace let the market decide what's popular what isn't let betting run free let the secondary ticketing market run free because they are that's a totally different business and it's not up it's not sports job to wrap its arms around all of the

51:41Gareth Balch:money it's there to generate the opportunity it's ideological my politics your politics there's some validity to that approach it we don't believe in it we believe that well it's the free market approach yeah maybe not but the boat the most successful sports ip owners in the world right now are the ones that have the most control and the around their rights and do so in a way that makes fans love them more and they're getting that they're getting that tension right and that you can get on the wrong side of that tension and clearly it's not every day that that we love fifa more or less because of what they're doing but i think the net position on that is that the consumption of the biggest sports IP owners in the world is going up faster than the middle or the smaller and I believe that they are doing that with a higher level of control to participate in more and more of the value as there's less well there's more disintermediation in the world than has ever been before it means I can get directly to my fan and I can know and value that in ways that I couldn't before and therefore we strongly believe that those that are going to win most by value but if we measure it by revenue or by profit or by enterprise value are going to be the ones that have the greatest control reduce their leakage and participate in in places where they haven't always economically because that's also the way of like capturing revenue most effectively isn't it because ultimately kind of the revenue that's coming into this is not individual consumers kind of paying for it it's coming from big media it's coming from big sponsors it's coming from big venues so you wouldn't be able to structure it any other way really yeah I don't know if there's examples of that free market working at scale and certainly not.

53:15Richard:Well, the American model, you know, it's funny where people say, oh, you know, the NFL is the most socialist sport in the world because of its distribution. They don't want competition. The whole point of the market is that you want to remove as much competition as you can in the market to build a moat. You want monopolies. That's the that's the running ethos. Libertarian free marketers actually don't want competition in the marketplace. They want to remove it. And American sport is modelled on that ethos. So it will act to remove competition in the marketplace.

53:47Gareth Balch:Maybe. I can see how you'd say that within the world of professional American football. Clearly, there's a lack of competition. But NFL's competition isn't professional American football. NFL's competition is any media format or sleep, as it was famously claimed once. So I'm not sure.

54:04Richard:The other bit to it, again, we'll finish on your list, is the star, as in the athlete.

54:11Gareth Balch:Yes.

54:11Richard:And it's quite an interesting time because you've got the way in which you've, I can't remember what the name of the phrase was, annualized new to ecosystem revenue. That model, as we said at the beginning, does over-reward the center, so the governing body model, and actually under-represents the contribution to the economy of the athlete and the team. So I think the first team that appears is the Dallas Cowboys. No, it's not. It's Real Madrid at number 22. And then you've got some famous ones in the sort of 20s and 30s. But you have to go a long way down before you start to get to other teams.

54:52Richard:And the athlete question is quite an interesting one, because I think we spend a lot of time talking about the Messi-Ronaldo's of this world, at the very very top the top one percent and you've got the cost question so i think so when you see here kirstie coventry say she doesn't believe in athletes getting paid i sort of think i wonder how well how that goes down at the the athlete level i think she amended her comments

55:18Gareth Balch:latterly didn't she did she i think so to say what i i don't want to misquote her okay sorry but I did read that she had.

55:25Richard:So what do we do with this question of giving the credit for the 174 billion to the organizations at the top? It's giving credit to bureaucracies. It's giving credit to governing bodies.

55:38Gareth Balch:I think you're on the, yes, although I wouldn't look at it like that. It's giving credit to aggregation of rights. Simply what I look for. What that then brings is bureaucracies and governing bodies all sit around that, right? Because you need someone to govern these rights. that's how I read it.

55:52Richard:I think there is an argument to say is that the sports market doesn't punish bad decisions at the top end. I think you can make a series of very, very I think bad decisions and I think we go back to Infantino, I think he's made a series of quite bad decisions over the course of his tenure but he's protected by the sheer wall of money that comes into football via the World Cup

56:11Gareth Balch:Yeah, I mean maybe if someone's made a series of bad decisions and you're at the top, yes there is a bigger moat and the incumbents are protected through their history their heritage the depth and the avidity of their fandom means that it is more forgiven than than it would be if you're a startup league a hundred percent but that's how i'd say it more is is it's ultimate expression of the fandom the resilience of that fandom and it and it is deeply resilient that's highly attractive to to lots of people at that point it's highly attracted to sponsors highly attracted to broadcasters it's very reliable at this point it's also highly attracted to investors i think that's all you know sunny side off it's all redeeming qualities of the sports IP industry.

56:50Gareth Balch:So I, so I, so, but I think it ultimately does punish them. I think over a 20 or 30 year horizon, you'll see more of the big folk taking really good decisions repeatedly and then get themselves onto new jet streams. Yeah, we, it's 174 billion today. We think it'll be 260 billion by the year 2033. We've said that now for several years. We stand by that. It still looks to stack up. That's not data. That is a projection, which is slightly different. But so the industry is going to continue to grow well. and those that grow fastest will be ones who stand on the right side of good decisions as we define those i would define those by ones that deepen the attention and the affection that the that their ip can garner from from from humans and fans around the world and and the little the the middle and the big the new and the old can all benefit from that now there's there's incumbent benefits that means that the biggest can survive a bit longer i don't know if that picks up in your point there to your point about athletes absolutely athletes are central to story other people tell that story really well which is why we've refrained from doing so but there's really good data in the world around how athletes are making more money than ever which i think coupled with the fact that sports ip owners the institutions that help create the stages for those athletes are also doing better than ever i think that's a really good health report and sit on the therefore on the side of the of the bull market that is to come on on all things sports ip and does individual or athlete earnings outside of sport sit above the 174?

58:15Yes. That's outside of that. Yeah.

58:17Richard:Because that would be a duplication of the money coming in. It would be a duplication of the money. Well,

58:21Gareth Balch:not if it's individual sponsorship deals for Emma Rundle or something like that. No, that's outside. Yeah.

58:26Richard:Yeah.

58:26Gareth Balch:Would it? Yeah. That's not in this. Yeah, we're doing this on IP owners.

58:30Richard:Right. We started on an accounting question. We're finishing on an accounting

58:34Gareth Balch:attribution question. Exactly. Ben Affleck gif is right in front of us. Off we go.

58:39Richard:Exactly. I'm not sure accountancies like that but anyway thanks a lot for your time really enjoyed that thank you very much thank you Richard