Following the publication of the Sportradar Q2 results last week, SBC spoke with CEO Carsten Koerl to gain some deeper insights on the growing opportunities in the US and the changing trends in data consumption.
How much of a priority is the US market (say, compared to Europe) when it comes to the continued growth of Sportradar in 2022 and beyond? And what do you attribute this growth to?
So at the moment, the US accounts for approximately 15% of total revenue – that’s a yearly figure. It is still a small proportion, but it is rising to more than 60%. The CAGR from 2019 to now is around 59%, which is very strong!
If we look at what is powering that growth, it is undoubtedly sports betting and the changing legislation round this. Those changing regulations have of course influenced the availability of sports betting across the US, which has then had an influence on media business and advertising which, in turn, has had an impact on teams and leagues.
These different segments are all touching our business – so if we continue to see a positive impact from the roll out of sports betting, then that growth will continue. But what is even better for us than just new states coming online is the changing trends of what is consumed and the products that we provide.
If I had created a company which solely distributes data, I’d have stopped that 15 years ago. I started out in informatics but I wanted to be creative. I want to do something with that data, and create something that is innovative. So what we do is we are growing our company with both products and services. Based on the data, we’re beginning to predict potential match outcomes.
Sports betting is not like a casino game where you have strict mathematical rules which may rule in your favour. For example, on the roulette table, mathematically you will have a profit of around 1.7%. But if you take that mathematical expression, there is no chance to win against the casino that has a fixed margin. Lottery is even more extreme. In the lottery, you have a proportion that’s going to play out – that’s what you’re cashing in and it’s very simple to match.
Sports betting is a different beast entirely. There are surprises that happen all of the time! I absolutely love sport, sport is my life. But managing the risk for a game, making a prediction and having the knowledge and understanding of the players – to me, that’s exciting.
If you look now at our business, those three components of risk management, predictions and data insights all require a lot of skills. Whatever you process, live from a data perspective, from audio visual, from predictive models and risk trading requires much more effort and costs much more money to do this. That’s the segment of the business which, besides the growth of state by state, is the fastest growing segment for sports betting.
We are seeing that sports fans want to bet during the match on potential outcomes. They’re looking at whether LeBron will score under/over 10 points, whether a certain team is going to win, they enjoy these kinds of markets. From our side, it takes much more time and effort to process these data points.
This trend is only going to accelerate in the years to come – and more so now that more states are beginning to legalise sports betting. We have the capabilities to help our partners develop these services for their customers.
What we’ve learnt is that you need to find a way to understand why your client is interested in risk management services for the NFL. We’re speaking about 256 matches here – it’s not so difficult to have five traders focusing solely on those matches.
The NBA is a bit more difficult because you have more matches over the year. When you get into quick sports like table tennis, which can have more than 10,000 matches per month, it’s impossible to do this on an economic scale. But at Sportradar, we can offer a modular scale – we have that capacity. We can offer that service to our clients. That is something which is super exciting for us!
This is a huge growth market, not just in the US but around the globe. So you can probably understand why I am so passionate about this. It’s more than just data – we’re really having to interpret the strengths of teams and players, and package those insights into products that will help our partners create a better offering for their customers.
The future here is, I believe, going to be diving even deeper into player and team activities and using those insights to predict outcomes. The core technology to do this is computer vision. You’re using fast video feeds, which is not so easy with low latency. You’re extracting the data points from players and beginning to integrate this into the machine learning process. This will then flow down into the betting markets.
But what does the future look like for sports betting? We can look at what’s happening with technologies like the metaverse and other visualisations like virtual reality – both of which are bringing the bettor closer to the sport. Actually, the United States will be the prime candidate for these developments because sports fans consume data in such a different way to the rest of the world. I think in the next two years we will see much more of a tailwind for legislation and with the development of live betting, this becomes even more exciting.
Speaking of data, we’ve been hearing a lot about game stats in recent years. But how important is it for operators – and subsequently bettors – to have access to more granular data, say individual player stats? And what role can biometric data play in doing this?
I think the skill here is considering that the US sports fan is very much driven on the data side of things. There is an inherently deep understanding of statistics. It’s the reason why the US is the only relevant fantasy market where you can combine the replays from different teams in your game; there is no other country where you do this. So that very deep passion for data consumption and understanding this on a player level will no doubt drive a demand for more granular data.
Looking now into the hardware, where is that then developing? And where is it going? In my mind, over the last 10 years, there are now so many people looking at the big screen. More and more people are watching games via broadcasters. We are living in a digital age so the availability of screens to watch a game is much more prominent.
The way in which we consume games is completely different. There have been times when I have been hanging out with my friends, we have had three or four games on different screens. It’s no longer the case that people are solely fixated on one individual match at any given time. The next step in this game consumption seems to be virtual reality.
Virtual reality will somehow give you an avatar that has real parameters. You might be a part of a Formula One team and be able to drive the car. There are already a lot of car simulations on the market. But now, you can get real data from the racetrack based on speed and performance of the cars as well as the racecar driver. We get that data from Formula One in realtime, with a 20 millisecond delay, so we can accurately simulate you racing this car plus your reactions during a race. Players will then be able to bet on this.
But I think this is where the market is heading. I’m deeply convinced that the United States is the market where this will be created – the companies are there already, as is the appetite from bettors. On a personal level, I want to fully understand the market and trends – there is much more to understand, especially when it comes to identifying new opportunities.
So looking back at your results, Sportradar noted that sports rights costs increased quite considerably during Q2. Do you expect this to pose a continued challenge moving forward?
That’s right. As you saw in our results, I said that with sports rights going forward, we have good visibility for the next two to three years. We assumed that the cost of these rights would increase, and we were right. But we are also confident that we will also continue to increase our revenues – so that increase in cost is ok.
For us, we have gained the rights to some fantastic leagues – ATP, ICC, NHL and UEFA. All of these sporting bodies are new partners for us. But to ramp up new rights, you not only need to build the data and products that create that story, but you also need to package it up. That can take quite a long time for you to actually be able to monetise on it. And then once you are able to do that it’s straight on to the next innovation! This is how you can create added value for your clients.
This is the same case with our 10-year rights deal with the NBA. The nice thing about this is that it gives us so much more runway to invest into the sport and truly understand the sport deeper. I think we did exactly the right thing with the NBA and the NHL. When we first announced our deal with the NBA there were a number of critics saying how expensive the deal was. But that’s the best compliment in the world! It’s also the deal which fits in the best with Sportradar.
I absolutely love basketball. I love the way that our Commissioner is working. I love all of the teams and the innovation that is taking place. Both the teams and owners are very supportive. They are tech driven. The sport itself drives two billion eyeballs worldwide. There is nothing better than working with such a league like the NBA!
So we’ve touched upon some of the highlights from your Q2 results – but what’s next? What would you say are the top priorities for Sportradar going into Q3 and 4?
A lot of our plans are still underwraps, but nice try! A big priority is to deliver our guidance. What we said at the beginning of the year is that we planned to raise our revenue guidance in 2022 – and from our Q2 results we have done just that. We want to continue delivering operational efficiency and control.
We want to make investments in spaces where we see that there is creative value for our company. We’re going to continue doing just that and focus on the execution of our company growth strategy – that is a very clear priority for us.