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Play Madden Against Me For Cash?

By: Brian Zwerner

There is a new wave of startups looking to have people play video games against other players for cash. This can be single head-to-head games for $1 or even $100, or this can be larger tournaments with hundreds of players for prize pools of $1,000 or higher. So, who is ready to face me in Madden for some real money? Actually, forget that. The only football video game I would have a shot of winning would be Tecmo Bowl on an old Nintendo console.

Let’s dig in on this new phenomenon in gaming. The market for video games for cash is still emerging. Generally, video gaming for cash is considered a game of skill, so it does not require a gambling license. Since you can only wager on your own outcome and not other people’s performance, this type of gaming is legal in about 40 states. One of the important features of video gaming for money is making sure that the player matchups feature two people of similar skill and experience. This is a tricky proposition, since more experienced players try to mask their identity to prey on weaker opponents. It’s like the newbie sitting at a poker table in Vegas with a World Series of Poker champion. The platforms work to try and stop this, but it is impossible to get it right every time.

The biggest player by far in video gaming for cash is Skillz. Skillz offers simple mobile phone games for cash. You can play a blackjack style game or solitaire for cash against another player. Most of the games are fast, typically 1-2 minutes, and the usual price per game is $1-5. Skillz went public in December 2020 in a merger with a SPAC, and the stock now trades under the ticker SKLZ. The stock had a quick runup in price, but it peaked in February 2021. Their stock now trades right around their IPO price with a market cap of just over $7 Billion.

From a recent Skillz investor presentation, the company did $1.6 Billion in tournament prize pools last year on 2 Billion played events, and their take was $230MM in revenue from this. The company typically takes a 10% rake from the winner on each game. This is a big market with a ton of cash sloshing around. There are a few other competitors in the mobile games for cash space. So far Skillz has stuck with simple mobile casual games, but they could certainly expand in the future. At this time, none of the sports betting or iGaming companies have moved into this space, but they are certainly potential entrants too.

In the console gaming for money space, the early leader appears to be Players Lounge. The company offers head-to-head and tournament play on most sports games (Madden, FIFA, NBA2K, The Show) and also a few popular battle games (Call of Duty and Fortnite). The company launched in 2015, and they have raised from a strong list of investors including Courtside Ventures, Comcast, Drake, Marissa Mayer, and Y Combinator. There are a number of other competitors in this space. PLAYY has raised over $4 Million in funding from NBA All Star Bradley Beal and others for their offering around a similar list of console games. GamerSaloon is another serious entrant in the category. They focus on tournaments in the console space and have achieved meaningful traction. As an active venture investor in the gaming space, I have seen at least a half dozen others trying to break into the market.

Best I can tell, the bigger players are each doing 100K or more games per year. Add it up, figure at least 500K total console games for money were played last year, a significant number but nowhere near the 2 Billion games that Skillz has hosted. This is a space that deserves some attention as the upside is huge. It will be interesting to see if Skillz uses some of their stock currency to buy one of the existing leaders or eventually creates their own offering. More interesting would be DraftKings, FanDuel, or another sportsbook operator. It seems likely that the crossover in customers would be even higher with the sportsbooks and console gamers. Keep an eye on this space in the coming years.

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#gaming #skillz #playerslounge #gambling #igaming

Is VR Ready for Primetime?

By: Brian Zwerner

Virtual reality headsets have evolved significantly over the last few years, and the market heated up with the launch of Facebook’s Oculus Quest 2 last year. The hardware has gotten lighter, faster, and no longer requires a physical connection to a computer or power source. The software offerings have expanded from a handful of titles to a wide variety of options across gaming, fitness, business, and more. Businesses built around physical locations and experiences have sprung up. Is the sector ready for primetime? Can someone build a big company today or is that still years away? In today’s post, I’ll discuss.

Let’s start with a little context on the size of the market. I think it makes sense to compare VR headsets in circulation to the video game consoles market since gaming is a common entry point to VR. There are about 1.5 Billion gaming consoles that have been sold, versus about 5-6 Million VR headsets. The more recent versions of PlayStation and Xbox have seen sales around 100 Million units each. There are not published numbers yet for the Oculus Quest 2, the most recent offering from Facebook, but estimates put their sales around 2-3 Million units. The Quest 2 makes up about 50% of all VR headsets sold, and the product has only been around for about six months. Clearly the VR headset market is growing fast.

Another way to think about the size of the market is to look at sales of popular game titles. The top console games like Call of Duty and Grand Theft Auto see sales of 50 Million units and revenue of over $1 Billion per launch. The most popular VR game today is probably Beat Saber. In Beat Saber, you slash at music notes with a virtual light saber in tune to popular music. It’s kind of like a new age Guitar Hero. Estimates put sales of Beat Saber in the 1-2 Million units range, so at $29/copy, figure revenue around $50 Million. Overall, the VR market is small compared to console gaming, but there is fast growth that is giving the market hope.

The VR market has also already seen some interesting applications outside of gaming that can fuel future growth. There are several fitness offerings in the VR space already. Blackbox VR attached a VR game to a strength training system for a futuristic and fun workout. FitXR is a boxing style working that uses a Quest 2 to put you inside a game while you train. Workplace offerings using VR headsets are starting to be deployed. Vantage Point uses VR headsets for diversity and sexual harassment workforce training programs. Vestigo employs VR headsets to run employee innovation workshops. The military just awarded a massive $22 Billion contract to Microsoft to build out VR training for soldiers over the next decade.

Our group has seen new offerings that have recently arrived or are coming soon in the VR space that give us hope that VR is closer to becoming a mass market product. We have seen two immersive football game experiences built for VR that were truly amazing. You are transported inside the game. You feel the size and speed of the players coming to tackle you as the quarterback. You hear the roar of the crowd that you can view in the stadium by spinning around full 360 degrees. We have also seen VR companies that are building community within the digital world. Big Box VR’s Population One battle royale game is brain bustingly good. Newer offerings will allow families to play Pictionary style games with friends anywhere in the world. It is VR that will make the dream of the Metaverse possible, and I expect this is 2-5 years away, not 10 years or more.

The other significant development in the VR market is physical locations with experiential offerings. The two big VC backed players in this space were Sandbox VR and The Void. Both raised serious money and built out locations in big markets around the country. They offered 30-minute experiences that put you into virtual reality worlds to play games and have adventures with friends. They partnered with major movie studios to offer experiences tied to movies from Star Wars, Marvel, and Star Trek. I tried a Jumanji experience at The Void in Atlanta in December 2019 with my kids and their cousins. It was awesome. Movie quality graphics, great story. It was expensive but so much fun. However, notice I spoke in the past tense here. Both Sandbox VR and The Void were hit hard by COVID. They closed their locations and hit bankruptcy. Sandbox VR has been recapitalized and has started to reopen their locations. The Void has not reopened yet. Trust me that these types of experiences are coming back, and people will love them.

So back to the question that kicked off this post. Can someone build a big company today or is that still years away? It is unlikely someone builds a company doing more than $100 Million in annual revenue just from VR in the next year or two, but I expect we will see an innovative company combine VR gaming with console or mobile gaming to break that barrier in that time frame. When will we see a VR title break the $1 Billion mark? Probably not for 3-5 years as a standalone game, but I would bet sooner as an extension of a successful console or mobile franchise like Fortnite or Roblox.

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#vr #oculus #gaming

Tracking Devices Will Change The World

By: Brian Zwerner

Today’s tracking devices are really cool. They can assist you in monitoring your health and making better decisions to improve your lifestyle. Our group actively invests in this space, and we have seen a lot of new entrants that are coming soon or expanding existing offerings. The expansion from basic activity and body stats to more advanced analytics and recommendations is coming soon, and it is going to change people’s lives in amazing ways.

The first generation of tracking devices started at scale with Fitbit. Their first product came to market in 2009, with a device most people wouldn’t remember that clipped onto your clothing. Their more familiar wristband product Fitbit Flex was launched in 2013. It was a simple product with a low price of $99. Fitbit did a great job of getting people moving by tracking their number of steps and gamifying the count with a daily challenge.

The next big mass market product was the Apple Watch, which was released in 2015. This had much better connectivity to the iPhone, and it tracked movement much more accurately with GPS technology. It also measured heartrate and other body stats, and it tied to the powerful Apple Health and Fitness apps. Many other entrants followed from Garmin, Samsung, and more. Exciting new startups like Oura Ring and Whoop extended this technology further with more insights and a bigger focus on sleep and recovery analysis.

The next generation of tracking devices are going to make a huge leap from basic health and wellness stats to medical grade devices. We saw the beginning of this trend when both Oura and Whoop proved capable of early detection of COVID for their users. Because both devices are worn 24/7, they are grabbing massive amounts of data from their customer’s body. Both proved they could tell when their users were getting sick before the people even knew it themselves. I expect to see an expansion of this capability beyond simple heartrate and temperature tracking devices like Oura and Whoop. Both have raised huge venture capital dollars and are expanding their offerings quickly.

Two other companies that are looking to extend the trend from wellness tracking to medical grade capabilities are Eight Sleep and Levels. Quick disclosure note, our group Beyond The Game Network is an investor in Eight Sleep. Everything discussed in this post on Eight Sleep is from publicly available sources, mostly podcasts with their brilliant founder Matteo Franceschetti.

Eight Sleep makes a smart bed. They have included sensors within the mattress that are as good as a stethoscope. The Eight Sleep bed can read a person’s heartrate while they sleep, it’s super cool. They also have heating and cooling coils inside the mattress that automatically control body temperature while sleeping. All of that is awesome, but the future direction of the company blows my mind. Franceschetti talks often about how Eight Sleep’s bed will become a medical grade device. They will bring in stronger sensors to get more info from their customers bodies, all while they sleep. He talks about a time in the future where they will be able to identify diseases and warn their customers to get to the doctor for early treatment. Can you imagine? Full body analysis every night?

Levels is another company that has the potential to make major changes in the health of the population. Levels is a platform built around Continuous Glucose Monitoring (CGM). CGM is done through a small patch that uses light sensors to measure the glucose levels in a person’s bloodstream. This was a huge advance for diabetes patients since it alleviates the need for pricking their finger for a blood analysis. Levels took this to a broader market though by using CGM to help optimize their eating and activity. The company has users wear a CGM patch and track food intake and activity. They crunch all the data in the Levels app and give users recommendations to improve their lifestyle. A user might find out that almonds are great for their blood sugar but that bananas lead to spikes. Or something totally the opposite. Oh yeah, Levels is run by Josh Clemente whose prior job was life support systems engineer at SpaceX.

What comes next for tracking devices? I’m looking for medical grade improvements that will identify health issues through their continuous use and monitoring. I expect to see more precise recommendations from the companion apps to these devices to help users improve lifestyle, eating, activity, sleep, and much more. I think we’ll see the feedback loop continue to shorten, from today’s once a year doctor appointment with lab tests to daily or instantaneous feedback. People all over the world will have the opportunity to use these devices to catch problems before it’s too late, and they will save lives. I’m excited for this future, and our group will continue to look to invest in this market for sure.

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#wearables #fitness #health #future

Making Money in Youth Sports

By: Brian Zwerner

I have been involved in youth sports as a dad, coach, team manager, startup founder, and investor for the last twelve years. I have two kids in high school now. My son played pretty much every sport. He started with soccer before he hit elementary school, then transitioned to football and basketball for the next five years, with a short detour into baseball and lacrosse. When he hit middle school, he was hooping on high level AAU teams and traveling around the country. He’s a senior in high school now and is totally burned out on basketball. He won’t be playing in college, even though he probably could’ve. He was even on a travel team with Anthony Edwards, the first pick in the 2020 NBA Draft.

My daughter came to sports late. After one pre-school year of soccer, she focused on drama, but she picked up volleyball in middle school. She got good quickly, played on a travel team, and won a state high school championship last year. I share all of this to say, I have seen a lot of different parts of the youth sports ecosystem.

In 2017 I decided that I wanted to build a business in the sports market, and I launched a company called Sportal. We started with a simple idea to solve a problem I had seen a ton of times with my own kids’ teams. On the travel programs, we typically had to find a gym we could rent for practice and training. The experienced coaches usually had a few hookups with people at schools, rec parks, or churches. However, we would frequently lose access to our normal gym for one reason or another, and a mad scramble would ensue. A bunch of parents would be calling around to find a replacement gym, usually at the last minute. It was a huge hassle, and most of the time we struck out.

Our big idea at Sportal was an online platform that would be the OpenTable for renting gyms and also fields for outdoor sports. We launched this platform at the end of 2017 and quickly got over 70 gyms and fields onboarded. Unfortunately, we never got enough scale and could not figure out how to break through with the school districts in my hometown of Atlanta. Also, many coaches would use our site to find a location and just call them on their own. I shut the platform down after a grueling six months when it was clear it would never scale. A handful of others have tried similar platforms in other parts of the country. I don’t think any have fared much better than Sportal.

We tried pivoting the Sportal business a few times after that. We built a basketball tournament and camps business, but the events we held barely broke even. We got set up to sell uniforms and gear to high school and travel teams, but the competition was fierce and we quickly abandoned that path. We ended up creating a media company covering high school sports in Georgia. We sent reporters and videographers to hundreds of football, basketball, baseball, soccer, lacrosse, softball, and volleyball games. We also started livestreaming games with a professional commentary team. Nothing worked. The schools wouldn’t pay for anything. The parents were pretty much tapped out. There wasn’t much of an audience to watch high school games. Ultimately, we shut the business after a difficult 1.5-year battle.

In my role as head of the investment committee for Beyond The Game Network, I see tons of companies trying to disrupt the youth sports market. Some of these founders are traveling over the same ground that I covered at Sportal. Some are trying other areas like college recruiting or team management software, both areas which we investigated but decided to stay out of.

I’ll break down a few of the key areas here.

·Team Management: Hudl has been the long-time leader in software to the high school coaches. The last meaningful competitor to Hudl was Krossover, and Hudl bought them in 2019. This is an area that could be productive for new entrants. There are two big leaders in software for youth sports team management – Sports Engine and TeamSnap. I’ve seen at least a dozen people try to break apart this duopoly. The software is hard to build and expensive to market to a disparate market. I generally agree that the two leaders don’t make a great product but stealing share from them is really hard. I don’t know if there is a venture scale business in team management.

·Media: There are several meaningful media platforms focused on high school sports. MaxPreps is a great tool for scores, rosters, schedules, and more. It is owned by CBS Sports. Rivals and 247 Sports provide media coverage of high school sports with a focus on recruiting news. Rivals is owned by Yahoo! Sports, 247 is also a part of CBS Sports. PlayON! Sports operates the NFHS Network, where they livestream high school games. Overtime does short form highlights and docuseries on high school sports, mostly basketball. Both PlayON! and Overtime have raised substantial venture capital and are growing. I think there is room for new entrants in this space. High school athletes are growing huge followings on social media, so there is interest in what they are doing on and off the court/field. Access to the top talent is key, and the offering needs to find a home in a crowded media field.

·Recruiting: NCSA is the market leader at connecting high school athletes with college coaches. As a parent, I had some exposure to this company and hated it. They charge a ton of money for a dubious service. There have been a bunch of companies that have tried to do this better, and I generally agree there is room for improvement here. The problem is the massive scale needed to connect with thousands of high schools and hundreds of colleges. If you want to go after this market, you need major dollars to compete.

·Coaching: This is definitely one of the more interesting spaces in youth sports. There is really no market leader nationally. Most coaching is done at the local level by individual coaches. CoachUp is a platform that helps youth athletes find a coach. HomeCourt has basketball training in an app. Diamond Kinetics and Mustard are doing cool things with baseball training. We have seen startups using connected devices or clothing and computer vision to try and systemize sports training. I think this will be an interesting space to watch in coming years. The biggest challenge is finding something affordable for the parents and then getting the word out to a dispersed youth sports audience.

Overall, the youth sports market is a big one. In 2017, Time Magazine called it a $15 Billion industry. I think there is room for disruptors and challengers, but based on my personal experience it is a difficult market to compete in. If you are going after it, do your homework upfront. Understand the incumbent players and make sure you figure out if they are really making money. Do a meaningful amount of customer surveying to figure out whether your idea is likely to find a receptive audience. Stay niche and solve a problem that someone is willing to pay for, and then expand to bigger areas.

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#youthsports #vc #startup

How to Buy an NFT

By: Brian Zwerner

The last month our team at Beyond The Game Network has been doing a ton of work on a new type of digital art called Non-Fungible Tokens (“NFTs”). If you are not familiar with NFTs, you can read a prior blog post I wrote on the topic. For this post, I’m going to assume you readers have a base understanding of NFTs and are interested in actually buying something. After just one NFT from a major influencer, music artist, or athlete in February, there were nine in March with offerings from megastars like Patrick Mahomes, Gronk, and Calvin Harris. Already in the first three days of April, we have seen NFTs from Zion Williamson, Snoop Dogg, and The Weeknd. This is not a fringe thing anymore, it is big business.

I decided I wanted to buy an NFT. First, I tried watching some videos on YouTube. Forget that path, I was more confused than before I started. Next, I tried a Google search and read some articles. I was disappointed by those as well. Most of the articles had a lot of jargon and crypto-speak. I ended up just jumping on OpenSea and giving it a try. It wasn’t so bad once I started making decisions and doing stuff. I’ll walk you through the steps here.

Let’s start with a quick review of some of the bigger NFT platforms. OpenSea is the biggest one right now. I think it is best compared to eBay. Anyone can create (or “mint”) an NFT of just about anything and post it from sale on OpenSea, much like selling a physical good on eBay. There is a fee to create an NFT, which is called “gas” in the NFT world, and then it is up there on OpenSea for anyone to buy. Right now, there are 14,510,000 items for sale on OpenSea. Items on OpenSea can be sold at a fixed price or put up for auction, much like eBay. The biggest drawback of OpenSea is you cannot buy an NFT with USD cash on a credit card or bank debit, only with cryptocurrency.

While OpenSea is an open platform where anyone can list an NFT, there are a bunch of other popular platforms that are more like art auction house Christie’s or Sotheby’s. You could also think about these platforms like art galleries. These companies need to approve an NFT before it can be listed for sale to buyers. SuperRare, Nifty Gateway, and Makers Place are a few of these closed platforms. These companies are generally looking for unique artists or big-name celebrities before they approve an NFT to be listed on their site. They often will schedule a “drop”, like the sneaker sellers or Supreme. Buyers will queue up for a chance to buy newly launched NFTs at these drops. Many of these closed platforms have set things up where buyers can use a credit or debit card to purchase NFTs, which is a big plus. However, since they are working with bigger name product, the prices tend to be a bit higher.

I was looking for something cheap to buy, so I decided to look on OpenSea. There are millions of choices, I figured I could find something cheap that I liked. First thing to know is that prices on OpenSea are mostly quoted in a cryptocurrency called Ethereum (“ETH”), which right now costs about $2,000 for one ETH. Items on OpenSea can cost ETH 0.1 (about $200) or they can cost ETH 100 (about $200,000) or whatever. The prices on OpenSea are not quoted in USD terms, only ETH. Don’t worry, we’re going to cover how to transact in ETH later in this post.

I searched around OpenSea and ended up deciding I want to buy something in the CryptoDuckie series. They are fun animated ducks with cool styles. I picked CryptoDuckie #004, which was available for sale by the artist for ETH 0.05 (about $100). It’s a yellow duck with a pink mohawk and a beer can, cool right?

The first step in buying something on OpenSea is a bit weird. Unlike a typical website where you set up a login and password, that is not what you do on OpenSea. This is where your crypto journey starts. You need something called a crypto wallet. This is a place you can hold onto cryptocurrency and your NFTs, it is like a wallet in your pants pocket. OpenSea makes it easy to connect with one of the leading desktop wallets called MetaMask. MetaMask is a web browser extension, you download it to Chrome or whatever browser you like to use. Then when you navigate to OpenSea, it will automatically connect to your wallet. You will set up a password and a “seed phrase” to evidence your account ownership. A seed phrase is 12 random words used for account verification. Be super careful with these two things, there is no way to restore your password or ownership of your crypto wallet without the seed phrase. No resetting it, nothing. More on this below.

The second step is getting yourself some ETH so you can buy a CryptoDuckie or whatever you want to buy on OpenSea. The nice thing about MetaMask is that they have a button that says “Buy”. This connects with a service called Wyre. On Wyre, you can purchase ETH with a credit card and it goes directly into your MetaMask wallet. Go ahead and buy the amount of ETH you need on Wyre and then watch the ETH pop up in your MetaMask wallet. If you happen to have a crypto trading account at a place like Coinbase you can transfer ETH from your trading account to MetaMask. However, I am not going to cover that process in this post.

You are now ready to buy something on OpenSea. Just like eBay you can “buy it now” or bid on an item in an auction. The ETH will be deducted from your MetaMask account, and the item you purchase will show up in MetaMask. It is now yours. You can digitally display it, put it up for sale, and even destroy it if you want.

OK, a few notes of caution here. First is that MetaMask has some properties like a real wallet. If you lose your wallet from your pocket while walking on the street, anything in it is gone. Yes, I understand a good Samaritan might return your physical wallet, but that is not possible with a crypto wallet. If you lose the password or the seed phrase, you are totally out of luck here. Anything in your wallet, whether it is cryptocurrency or NFTs, is going to be gone forever. Second note is that the platforms I chose here – OpenSea, MetaMask, Wyre – may not be the best choice for everyone. Do your own homework. Maybe you want to buy on a different platform like Nifty Gateway. Maybe you want a different crypto wallet from a MetaMask competitor or even a hardware wallet. Maybe it is cheaper or will offer a better price if you buy ETH on a service other than Wyre. All of that is your choice, I just found the process above to be the quickest and easiest for me. Third note is that the while OpenSea makes everything look liquid and easily tradeable, these are really illiquid items. Think of NFTs like rare items on eBay. Some might see their values skyrocket, and others might be worthless. Just because something has value today is no guarantee of the future. Pick items you want to own and display and you won’t be as bummed out if the price drops a bunch.

I hope you found this review helpful. Hit me up with any questions. Happy NFTing!

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#NFT #digitalart #opensea #metamask

A New Gambling Affiliate Model

By: Brian Zwerner

There is a ton of interesting stuff going on in the sports gambling space right now in America. With states legalizing fast and the major sportsbooks spending money like drunken sailors to acquire customers, sports betting is red hot. Building a new sportsbook is super expensive, so we are not seeing startups tackle that area. However, we are seeing tons of new entrants on the periphery. The most popular areas that startups are chasing are data and analytic tools and social networks for the gambling crowd. In the data and analytics space, we have met with Betsperts, Fanalyze, abe Bets, and more. In the social betting space, we have spoken with VigIt, FantasyLife, uStadium, and more. It’s a big list, trust me.

Most of these are being built on an old school affiliate model. They build a cool product that attracts a bunch of users, and then they try to make money by giving them offers to open new gambling accounts with the big sportsbooks. “Get a $50 match on your initial deposit to DraftKings.” “Here’s a free $50 bet when you open a FanDuel account.” These new apps get paid every time they get one of their users to open a new betting account. Typically these are sizeable payments of at least $100 per new user.

I hate this type of marketing. To me, this feels so unnatural. I live in Georgia, so I don’t yet have legalized betting on my phone, but I know when I do I am not going to want five or ten different sportsbook apps. I will likely open a DraftKings account, since I bought their stock, and maybe I will eventually open a second one. Setting up a new betting account is a hassle. They have to do identity and age verification, and you need to connect a bank account. The average gambler doesn’t want or need more than 1-2 of these. So how are all of these new startup apps going to make money if the current affiliate model is not a great opportunity?

I have a new gambling affiliate model that I want someone to build. Heck, I’m in the VC world. I would invest in this if someone figures it out, and I am confident others will too. What I am about to propose isn’t easy, there are regulatory hurdles, but someone needs to get on this. I want to see the Robinhood style pay for order flow in the sports betting affiliate world. Robinhood makes all of its money by getting paid from stock market makers to route their trades to those market makers. It is just a fraction of a penny on each share, and it added up to over $600 Million in 2020 revenue.

How would this new order flow affiliate model work? Likely a new company would need to sit in the middle between the data/social apps and the sportsbooks. Say I am on a data app researching the Lakers versus Heat game. I crunch the numbers and decide I want to bet on the Heat +5. Instead of closing the data app and opening up Draftkings to lay the bet, I now get to put the bet directly on the data app. The data app allows me to connect my Draftkings account, through some type of Plaid style software, and they route the bet to Draftkings. In this example, Draftkings is excited to have the extra bet and pays out a small order flow affiliate fee. This fee probably has to run through this new middleman company, that will likely have to get its gambling licenses. Then they somehow share back some money to the data app that helped convince me to make the bet in the first place.

How will all of this work? I don’t know, I’m not a gambling attorney. Maybe there is some type of blockchain answer to all of this or something. This middleman company would connect to the data and social apps. If I am talking junk with my friends on about that Lakers Heat game on a social app, then bam I would place the bet, just one button push away. And this would allow the social app to get rewarded properly for hosting that trash talking conversation.

So, who wants to build out this great new gambling affiliate solution? Let’s talk!

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#gambling #sportsbetting #startups

The Future of Workout from Home

By: Brian Zwerner

One the areas most disrupted by the pandemic has been the fitness sector. Gyms across America closed in March 2020 and many are still dark. Gyms large and small have gone bankrupt and will never return. People around the country have rushed to buy new connected equipment, signed up for fitness apps, and have going outdoors for a run or bike ride. Our group is an active investor in the fitness space, and we have seen a ton of new challengers in all these areas. As the vaccine rollout is reaching critical mass, it feels like the right time to share my thoughts on the future of Workout from Home (WFH).

In general, I expect that WFH will be much like work from home, a hybrid world driven by personal preference and people’s individual home situation. People have generally found a way to workout without going to a gym over the past 12 months, but many don’t love their current fitness routine. I know people that are jamming their workout into spaces far too small in their house or apartment, or they are trying to workout at home while tending to their children. I know lots of people are running or biking that hate it, but it’s the only option. I am also certain that people will crave the community aspects of returning to their local gyms to be around other people.

For all the negatives of WFH, the huge positive is the flexibility and convenience. You get to train whenever it is a good time for you, and you cut out the travel time. For me personally, this is a big attraction. I live in Atlanta, in normal non-COVID times it can take awhile to drive to a gym. I would rather have that extra time for other things. The other factor that is going to keep WFH prevalent is that people have invested in their home fitness plans. Plenty have bought equipment like a Peloton or a Tonal system, and many more have bought dumbbells or a bike or nice running shoes. They will be hesitant to walk away from those sunk costs. I recently bought a Peloton bike, and it is amazing. The bike is a great ride, the instructors are top tier, and they offer an amazing range of classes.

The COVID period has also seen an explosion in the usage of fitness training apps. Our venture group has invested in Future, and they have seen a fantastic growth in their user base. Future pairs their users with a fitness coach who sets their workout plans and holds them accountable. I use a simple but highly effective app called Fitbod which helps me build strength workouts for the dumbbells in my home gym. There is so much choice now whether you want to have a coach or do it yourself. The evolution of tracking devices like Oura Ring, Whoop, and the Apple Watch have made WFH more effective and accountable as well. People spent good money on these products and will want to get their money’s worth.

So, what will the return to gyms look like? I live in Georgia, so it’s a little different here. Most gyms in Atlanta have reopened with limited capacity, and lots of our citizens are happily going to gyms wearing masks. I think we will see the gym market experience more bifurcation, a barbelling of sorts. The extremely low cost, no frills gyms like Planet Fitness will see their customers return. These types of customers want a cheap and convenient place to use equipment. They are not looking for fancy classes and a smoothie bar. On the other side, gyms that have created a community around a high-end environment like Barry’s Bootcamp and Equinox will also see their customers come back quickly. These operations do a great job connecting with their customers and offering something not easily recreated at home. The gyms in the middle are in trouble. They made their money on the lack of usage by their members who were only lightly engaged and had limited loyal. They are going to have a heck of a time getting people signed up again.

That’s all I have to say on this topic for now. As the country reopens and we continue to see new entrants in the space, I am sure I’ll be back to this topic in future posts of this Consumer Gems series.

See prior Consumer Gems posts here

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#fitness #workout #consumer #tech

The NFT Avalanche

By: Brian Zwerner

Non-Fungible Tokens (NFTs) are all over the place these days. The NBA partnered with Dapper Labs for a product called NBA Top Shot, where they sell single play video highlights called Moments to collectors. This is Dapper Labs second big product, the first was even weirder, a digital cat collectible called CryptoKitties. Top Shot has racked up over $200 Million in sales in a matter of weeks, you can read more about the product in this Forbes article. The artist Beeple sold a piece of digital art last week for an eye popping price of $69 Million, more on that here. Twitter CEO Jack Dorsey has created a digital art version of his first ever Tweet and is auctioning it now, pricing is above $2.5 Million already, more here. Is this a genius collectible for early buyers or lunacy? Great question, short answer is that I’m not sure yet.

Let’s get some of the basics out of the way. What is an NFT? Wikipedia defines an NFT as a digital file whose unique identity and ownership is verified on a blockchain (a digital ledger). Basically, an NFT is a piece or art, a video, a picture, a meme, a Tweet, or really anything that is individually numbered and sold to collectors. Your ownership is validated on a blockchain ledger, and NFTs are usually purchased with a cryptocurrency like Ethereum.

Some items are one of a kind, like the Beeple item listed above, and others can have thousands of items created, like NBA Top Shot. NBA Top Shot is more closely associated with a pack of baseball or basketball cards. They create a limited quantity of a collectible highlight, typically 1,000 up to 25,000 or more. Each one is unique and carries a number in a series. The #1 sells at a vastly higher price than #24,322. The difference can be $100,000 for the first item in a series all the way down to $50 for #24,322.

So the first question everyone asks about NFTs is the obvious one – “why would I pay for something I can get for free on YouTube or the internet?” This is a legit question, one I wrestle with. My favorite explanation came from Marc Andreessen on a recent Clubhouse conversation on the topic. He basically said that the paper and ink from the famous Honus Wagner baseball card is worth a few dollars, but the card sold for $3.25 Million a few years ago. The value of the card is in the scarcity and the belief of collectors that the card is desirable. Like I tell my wife when she asks what our house is worth, “it’s worth what someone is willing to pay for it.” Yes, you can find the same highlights on YouTube or Twitter, but you can’t own a licensed, numbered copy that you can later sell to someone else, hopefully at a higher price.

Right now, you have big influencers talking up the value of NFTs. If you look at Gary Vaynerchuk’s podcast episode list right now, the last six posts all have NFT in the title. Gary Vee is a big buyer of sports cards, and he is going all-in on NFTs now. Mark Cuban is a big fan of NFTs as well. He has turned a few of his Tweets into NFTs that have sold for thousands of dollars. NBA players like Terry Rozier and Josh Hart are very publicly buying their own Moments on Top Shot. I’m personally dipping my toe in the water on NBA Top Shot. I bought five moments in their marketplace a month ago. One Zion Williamson highlight I bought for $20 then I was able to flip for $189 today, a fantastic 7X return, albeit on low dollar amount. Top Shot also releases new packs of highlights, much like buying a pack of traditional basketball cards, which is a lot of fun.

But let’s get back to the original question, why do people even buy these things in the first place? Well if you read my prior post on the Metaverse, you know I believe this will be big. Like everyone on the planet big. I see a future where people have digital homes on the Metaverse, maybe 5-10 years from now. In those digital homes, we will want to display our digital collectibles. Maybe a piece of art in my digital living room or dining room, and maybe a cool sports highlight in my digital man cave. Could I just put up a free copy from the web on the walls? Sure I could, but that’s going to be seen as lame. I don’t have a fake Van Gogh on my walls, and I won’t want a fake highlight up on my digital walls. Right now all these NFT have limited utility, you can basically show them off on your social channels, but in the future the utility might be sky high. Will every NFT work like this in the Metaverse? Who the heck knows, but possibly.

One major note of caution, some NFTs will get bid up in a crazy frenzy and later be worth absolutely nothing. Which ones will have this fate? I don’t have a clue. CryptoKitties was red hot for a minute, then not so much. So were physical collectibles like Cabbage Patch Kids. As discussed above, collectibles have limited intrinsic value, they are all about what people are willing to pay so be cautious. It is probably OK to dabble and have some fun in the sector, but I am not putting my nest egg into NFTs any time soon. I expect that I’ll have more to share on NFTs in the future so stay tuned.

See prior posts here

#nft #NBATOPSHOT DigitalCollectibles

Explaining the Metaverse to my 74-Year-Old Mom

By: Brian Zwerner

The concept of the Metaverse was first introduced in the 1992 novel Snow Crash by Neal Stephenson. The book was set in the future where people across the globe congregated in a massive online virtual reality world that Stephenson coined as the Metaverse. The concept of the Metaverse grew further into the mainstream with Ernest Cline’s Ready Player One in 2011. Cline didn’t call his massive online world the Metaverse, in his book it was a corporate run product called the OASIS, but the concept was the same. The OASIS was a place people would work, go to school, watch movies, and compete in video game style tournaments.

I am a huge believer that the Metaverse is coming, likely in the before 2030. I am not sure if it will be one giant Metaverse or a series of smaller metaverses (is that the plural?). I don’t know if it will be controlled by one of the tech giants that is pushing hard on virtual reality headsets or AR glasses like Facebook, Apple, or Google. Maybe it will be more of an open world considered by Stephenson, sort of like the internet today with millions of websites/worlds built by developers. One way or the other, the Metaverse is coming.

So, I had a funny experience recently when my mom asked me what I was working on the other day. I told her I was attending a conference on something called the Metaverse. My mom is 74 years old, but she is a curious gal and wanted to learn more. When I told her the basics, her immediate reaction was “that’s not for me”, but it got me thinking. Will the Metaverse be for just tech-focused young people, or will it be for everyone?

We started talking through some ideas, my tech-scared mom and me. My mom loves to watch TV shows like The Bachelor and Dancing with the Stars. When she watches these, it is usually live when the show premiers while she talks to my sister on the phone. They experience the show together, using old technology. I asked my mom if she would be willing to put on some simple glasses and watch the show in a new way where she could turn her head and see my sister sitting next to her on a digital couch, and wow did that get her excited. Next, I asked her about watching my daughter in a volleyball match live through these new glasses. That one is a definite “yes” for her too. Then I hit her with the idea of a virtual dinner party, where she sits at her table with the glasses on and sees our whole family sitting around the table with her. She would love that one.

It is experiences like these that make me certain the Metaverse is coming. Zoom works fine, and Facetime calls are nice, but a truly immersive experience will be a gamechanger. For this to scale, it can’t be imbedded in an Xbox or iPhone game. It will require a new type of hardware, likely something light weight like the rumored Apple glasses. Maybe Facebook’s Oculus can get their hardware simple and small enough to scale as well. Either way, it is going to be exciting to see this emerge over the decade ahead.

See prior posts here

#Metaverse VR AR Tech

New Media to Continue Growth in 2019

Sports media has gone Over The Top (OTT) with new content delivered via the internet and not through traditional TV/cable. Consumers want their content on their phone and through their favorite apps, and content creators are responding. This has led to new OTT online networks, and it has led to the biggest traditional networks building online channels. We have seen amazing new content creators starting on social channels that are now expanding their reach. These will be big trends for 2019 and beyond.

Online sports networks FloSports and DAZN have made major inroads into the sports landscape in 2018. They are rapidly signing new rights deals and moving into new sports. While both began outside of the areas covered by ESPN and the major network sports, we are now seeing them make more aggressive pushes into football, basketball and more. With large war chests of capital, FloSports and DAZN will continue to expand. They will be challenged by ESPN+ and other streaming options from the networks. The audience has shown an interest in watching sports matches on their internet devices and TVs, and the market is responding.

Content creators such as Overtime, Mars Reel, Bleacher Report and others have started on social channels but are expanding. They are raising capital or partnering with larger networks, and they are producing longer form content and exploring new distribution channels. These new media entrants have great audience penetration with the hard to reach young generation, and advertisers are taking notice. They are also expanding into events, merchandise and other activations that will allow corporations to create experience for their customers. We look for more capital to move to this sector, and we expect to see more networks acquiring these start-ups.

Another trend to keep an eye on is news sites getting their customers to pay for content. The Athletic is an online only, paid website that has raised significant capital from industry titans. They used these funds to hire established reporters from large newspapers and national media outlets. The Athletic has been credited with a number of big scoops in the sports world, and this will continue as there readership grows providing further revenue to hire talented writers. ESPN Insider has long had a portion of their content behind a pay wall as well. We expect this trend to continue, as readers are more than happy to pay for content that is impactful to their sports interests.

As the new media entrants make more headway with their viewers, it will be interesting to see if consolidation is a big theme in 2019 in the sector. At some point, the major TV networks and media outlets will likely try to acquire these upstarts to fold in their attractive audiences.

The Growth of Sports Wearables

Wearable devices are a hot growth area in sports

January 25, 2019: the number of connected devices for the professional and casual athlete has multiplied at an amazing rate, and this trend will only grow stronger in 2019. Pro athletes are using devices to optimize performance and to avoid injuries, and casual athletes are using devices to track health, receive coaching and push themselves. Companies big and small are looking to cash in on the wearables craze.

Devices such as Apple Watches and Fitbits can be used for athletes to track their bodies with heart rate and other monitoring statistics. They can be used to track steps, mileage or calories burned as well. Software and hardware companies that can innovate in this area will have a big advantage as these devices proliferate. New entrants will develop apps that integrate with the most popular devices and will also develop their own devices.

Using wearables for training is becoming increasing popular, especially for youth athletes. Connected soccer balls have been launched by companies such as DribbleUp and InsideCoach are allowing players at all levels to receive immediate feedback and development on their skills. Connected basketballs from Wilson and start-up ShotTracker are available to players in that sport. Apps are available for swing analysis in baseball, golf and more from companies like Blast and Zepp. New tools are hitting the marketplace fast and this will continue into 2019 as players of all levels look for an edge.

Pro sports leagues are using wearables and other embedded tech to connect with fans by providing inside the game stats and information live to viewers. NBC Golf Channel and Top Golf announced they will use a new tracking tool to provide detailed flight information in their broadcasts. The NHL has teamed with new technology firms to provide player and puck tracking in realtime. The NFL is using chips in shoulder pads to provide information on player location and speed. This new data will be fed to live viewers to give a new look inside the action. We expect much more of this in 2019 as the technology of wearables become more pervasive.

TOP TRENDS IN SPORTS FOR 2019

We break down the top investment areas in sports for 2019

January 15, 2019: The sports marketplace is rapidly evolving as new technologies are changing everything from professional sports to the youth game. Read about the top areas of development here.

Here are the top trends we are focusing on for 2019. In future blog posts, we will provide a more in depth look at these sectors.

Wearables: from the simple Apple Watch and Fitbit to more sophisticated tracking devices used at the professional level, wearables are changing the games we love. The casual athlete has a number of options to track their performance. Youth athletes are getting access to training tools previously only available to college or pro athletes with connected balls, swing evaluation tools and much more. On the professional side, chips are being placed in should pads and other athletic gear to measure speed, movement, and a variety of other stats.

Gambling: with the Supreme Court's groundbreaking decision to allow gambling in the United States, this will be a hot area to watch in 2019. The NHL already has a team in Las Vegas and the NFL is coming soon. Leagues are partnering with casinos for sponsorship and sharing their game data. Fans are looking to find easier ways to place and monitor their wagers, and they are also looking to make in game bets. Lots of innovation is coming to the U.S. in sports gambling as the states roll out new rules in 2019.

New Media: sports media has gone Over The Top (OTT) with new content delivered via the internet and not through traditional TV/cable. Streaming services like FloSports and DAZN are fighting with the networks for sports rights, and outlets like ESPN and others are launching their own streaming services. Highlight companies like Overtime and Mars Reel are social network only companies making waves in sports, and The Athletic is an online only outlet competing with newspapers. Expect much more to come in this area as fans want their content on their mobile devices.

eSports: online gaming has become a huge business and will continue to expand in 2019. Professional sports teams are launching their own eSports efforts, and high school associations are adding these as regulated sports too. Gaming personalities are amongst the most popular content producers on social channels like YouTube. Cable networks are developing eSports leagues as primetime offerings. As the younger generation is demanding this content, more is certainly on the way.

Fan Engagement: As the cost of tickets for professional sports events continues to rise, teams are struggling to keep fans coming out to the arena and stadiums. Teams have to create new experiences that prove to discerning fans that spending the money and making the trip is worth the cost. They are launching new in arena services to improve the fan experience and give them access to the exciting new data coming from athlete wearables. Content producers are integrating data and information into their broadcasts to keep eyeballs engaged. Teams and leagues are working to launch new online collectibles to build their brands. New companies are launching to upgrade the fan engagement and keep the money flowing for teams.

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