The Endurance Economy (Part 4) - Professional Leagues
The greenfield opportunity in professional endurance sports leagues
Introduction
In this series covering the endurance sports industry, I’ve discussed high-level industry trends (Part 1), M&A activity within endurance races (Part 2), and early-stage technology shaping the industry's future (Part 3). In Part 4, I’m going to discuss the greenfield opportunity in endurance sport-based professional leagues.
With the escalating franchise valuations in the major US sports leagues (NBA, MLB, NFL, NHL, MLB), many investors have turned their attention to the emerging league space, approaching opportunities with a venture capital mindset. The reality is the vast majority of emerging sports leagues will fail, but for those that are able to break through and succeed, investors could potentially see outsized returns that recoup the lost capital on the failed properties (think UFC, which was bought by the Fertitta brothers for $2M in 2001 and exited to WWE-IMG, Silver Lake Partners, and KKR for $4B in 2016). Sebastian Mallaby discussed this portfolio profile in his book, The Power Law: Venture Capital and the Making of the New Future, in which he describes the power law dynamic of venture capital returns as a return distribution in which a small number of investments generate the vast majority of returns for a portfolio. I believe emerging sports leagues will fit this return/failure distribution.
In order for one of these emerging leagues to deliver these types of returns, more than likely, they would need to augment total revenue through broadcast and media partnerships. Whether or not there is media demand for these types of sports is yet to be seen, but what is clear is the total addressable market is big enough to support an endurance sport-based professional league. Looking at just one segment, the bike industry, as of 2022, there were 54.7M cyclists in the United States spending $60B annually. The Global bicycle market is expected to surpass $127.83B by 2029.
Below, I highlight a few of the emerging leagues that are vying for consumer interest and investment dollars.
Emerging Leagues
Professional Triathlon Organization
The Professional Triathletes Union was formed in 2015 and rebranded to the Professional Triathlon Organization (PTO) in 2016. As the name implies, it’s an emerging sports property focused on bringing high-profile triathlon events with large prize pools to the mainstream.
The athlete-owned organization raised a $30M Series B round in December 2022, led by Divergent Investments, Sir Michael Moritz, and Warner Bros. Discovery, the latter also included a multi-year broadcast partnership.
The PTO offers both mass participation events and the professional circuit. On the pro side, the circuit is split up into 8 races in 7 cities (San Francisco, Las Vegas, Miami, Singapore, London, Ibiza, and Dubai), and 40 professionals compete for a total prize pool of $7M. The race format is T100, which consists of a 2KM Swim, 80KM Bike and 18KM Run.
National Cycling League
The National Cycling League (NCL) is a women-owned, minority-owned, professional cycling league that competes in short-format, urban courses throughout the United States.
In December 2022, NCL raised a high-profile $7.5M Seed Round led by Will Ventures with participation from various professional athletes, including Kevin Durant, Bradley Beale, and Jalen Ramsey.
The NCL built its race format around the prospect of a future media rights deal, making it a shorter, two-hour event compared to the standard multi-day events common in many international races. The 2023 inaugural season hosted races in Miami, Atlanta, Denver, and Washington, D.C.
Unfortunately, at the start of 2024, the NCL announced they were postponing the 2024 season and releasing all athletes from their contracts. They hope to restructure the company and relaunch in 2025.
Diamond League
The Diamond League, founded in 2010 and recently highlighted in the Netflix mini-series Sprint, is a professional track and field circuit. It takes place predominantly in Europe, with one race in the United States (Eugene, Oregon). The circuit consists of 15 meets around the world, culminating in a two-day final.
There are no publicly available details on the Diamond League fundraising status, but it's a Swiss Company owned by Diamond League AG, and the key sponsor is the Chinese multi-national conglomerate Wanda Group.
The Diamond League, which replaced the IAAF Golden League, secured a streaming partnership with FloTrack and FloSports Network for the 2025 season. However, it will face competition from up-start track and field circuits (more below).
SuperTri Triathlon
SuperTri Triathlon is a nontraditional format triathlon league that hosts events in urban environments globally. The races consist of team-style competitions in which competitors race three laps of a 300-meter Swim, 4KM Bike, and 1.6KM run course.
This most recent season consisted of five events: Boston, Chicago, London, Toulouse, France, and Neom, Saudi Arabia.
The league is approaching a more traditional sports league franchise model rather than a league-owned model, which allows individual investors to purchase teams and control local branding efforts. The league has four teams: Brownlee Racing, Crown Racing, Stars and Stripes Racing, and Podium Racing.
Grand Slam Track
Grand Slam Track, formed by former American Olympic Sprinter Michael Johnson, will compete with the Diamond League in the professional Track and Field space. Set to debut in 2025, the league will feature highly recognizable American athetes such as 400M Hurdle star, Sydney McLaughlin-Levrone.
The circuit will consist of running-based disciplines in 4 events domestically. Participants will compete for a piece of a $12.6M prize pool.
The league has received $30M in total funding, primarily from the Sports Marketing firm Winners Alliance.
TeamTrak Cycling
TeamTrak Cycling is a new velodrome-style track cycling league set to debut in 2025. It was created by World Cycling Limited and has a single entity, league ownership model.
The league plans four stops in 2025 and hopes to expand to 20 cities within the next five years. A unique element of its business model is that it won’t rely on a city's existing infrastructure to host the races but rather bring the portable and expandable track with 50-degree bank turns with it from city to city.
The owners of TeamTrak, World Cycling Limited, and Legends Growth Enterprises hope to achieve traction and fan interest by taking a different format than many other competitors in the cycling space. The team will be mixed-gender and consist of an easy-to-follow format in a short two-hour window. The league will emphasize an engaging fan environment with participatory events, beer gardens, television production, and sports wagering, all while seated within an arena, which few other cycling formats can offer.
Life Time Grand Prix
The Life Time Grand Prix is a circuit of professional cycling events that combines Gravel and Mountain Bike races. As the name implies, it was created by fitness giant Life Time Inc.
The 2024 season will consist of 7 races: Sea Otter Classic, UNBOUND Gravel, Crusher in the Tushar (canceled due to forest fire), Leadville Trail 100 MTB, Chequamegon MTB Fest, The Rad Dirt Fest, and Big Sugar Gravel. The 2024 season will also see the largest prize pool of $300,000, which will be split evenly between the male and female competitors.
What is really unique, and I believe smart, with the Life Time Grand Prix is the professional racers compete alongside the mass of participants, which is both a way to reduce the costs of hosting an entirely different professional event and a selling point to participants as they get a chance to race alongside the top athletes in the sport.
Here Come the Saudis
Almost all professional sports leagues currently face or will face the threat of a well-capitalized competitor, and increasingly so, that competitor is financed by the Kingdom of Saudi Arabia (Saudi Arabia and Sports). Endurance sports aren’t immune to this competition, and early talk of a Saudi-backed cycling league has major implications for the sport.
The nation’s sports investment arm, SRJ Sports Investments, is leading a syndicate to invest $270M into a new professional cycling league. This new league/circuit will consist of both new and established races (the Tour de France and Giro D’Italia are not involved) and have two primary goals:
Create a structure with more favorable economic incentives for the cycling teams compared to the current sponsor-focused model.
Grow the sport of cycling beyond the traditional confines of continental Europe.
Details are still scarce about the league itself, but I believe the Saudi sovereign wealth fund has deep enough pockets along with enough sports operating expertise to create a sustainable cycling league and is most likely in the best position to succeed compared to the existing competition.
Biggest Obstacles for Endurance Professional Leagues
Given the crowded marketplace and the competitive environment for a share of the sports fan's attention and dollar, any emerging sports league faces significant hurdles to creating an enduring and profitable entity. On top of that, there are some unique obstacles that operators in the endurance race world must face.
Difficult to Capture in Broadcast Format: Perhaps the most daunting issue facing emerging endurance sports leagues is the difficulty in capturing an endurance event in a broadcast or arena format. When races span 100+ KM, it’s difficult to host an event in a confined area that can be fully covered by cameras and fan eyeballs. This makes it difficult to create an engaging product from a fan's perspective. Andecdotally, I experienced this watching the women’s mountain biking in this year’s Olympics. The announcers often didn’t know what places certain riders were in, and the cameras often missed big overtakes or crashes. Unlocking the broadcast capability opens the doors to potentially lucrative media rights deals, which is really the lifeblood of the major successful professional sports leagues.
Lack of Recognizable Names: A second major obstacle is that the endurance sports world lacks definitive household names to build leagues around. People are ultimately drawn to a sports entity because of the story behind the individuals competing, and endurance sports need more of these personalities for their leagues to succeed. The greatest opportunity to capitalize on household names was in the ’80s, ’90s, and early 2000s with the presence of Lance Armstrong and, before that, Greg LeMond. LivGolf has built its entire strategy around poaching top names and personalities from the PGA tour. The product can become a secondary consideration if the fan feels a connection with the participant. NBC highlighted all of the key American athletes leading up to their events in the Paris Olympics, and that created a reason for a fan to watch a sport they wouldn’t have considered watching in 100 years (I’m looking at you, Pommel Horse Guy).
American Interest: A final consideration is whether or not there is actual American interest in professional endurance sports. There is proven demand at a participant level, but participation isn’t necessarily positively correlated with interest in watching the sport at the professional level (one of the reasons I’m slightly bearish on professional pickleball). The largest cycling event in the world, the Tour de France draws 15M in-person spectators annually and has an annual TV audience of 47M daily. Unfortunately, so little of this is coming from American consumers. At its peak during the Lance Armstrong era, the Tour drew ~500k American TV viewers. More recently, the average has been around 350-400k. This pales in comparison to the 124M US consumers who watch the Super Bowl and even the 18.9M who tuned into the South Carolina vs. Iowa women's basketball national championship game. Numerous attempts to build a Tour de France-style stage race in the US have ultimately failed, including the Colorado Coors Classic, the TourDuPont, the West Virginia Mountain Classic, the Tour de Georgia, the Tour de Missouri, the US Pro Challenge, and the Amgen Tour of California (all defunct).
Conclusion
In summary, there is a greenfield opportunity for professional leagues in the endurance sports space, but I am a bit more bearish on the potential of an enduringly profitable league that is pursuing the major league sports playbook.
The difficulty of capturing action for either spectators or broadcast partners, along with simply limited fandom bandwidth for the typical US sports consumer will be the biggest obstacles for an emerging property to overcome.
I would encourage aspiring league operators not to try to be the next NBA, MLS, NFL, etc. but rather approach this greenfield opportunity with a more creative mindset. Pairing professional events with mass participation events such as the Life Time Grand Prix is a perfect example of creating a more sustainable business model while still creating an outlet and earnings possibility for the most talented athletes in the sport.
Thanks as always for reading! In Part 5, the final part of this series, I hope to put a bow on my thoughts on the investment potential within endurance events by summarizing my bullish and bearish predictions.