The Digital Seats Revolution
By Keith Teare • Issue #316 • View online
An average sports stadium can hold 50-100,000 fans. But teams have millions and sometimes billions of fans. What is the true value of the rights to stream games? This week Amazon bought UK Champions League rights. Can we expect more money to come for sports rights and who should own them?
Live Sports — The Next Streaming War
- Will China Build Your Next Car?
- China EV Battery Breakthrough
- Howard Morgan’s Amazing Career
- Critiquing Crypto Promoters
- Startup Workforce Trends from Carta
- Does VC Investing Violate Crypto Ethics
- Software Salaries — Europe and USA
- Web3 Use Cases Part II
- Sequoia raising $2.25bn?
- EF raises $158m Series C
- Plural launches €250m Entrepreneur Led Fund
- Long Term Stock Exchange Raises $100m
- Normalyze Series A
- A16Z slows pace of investments
- VCs advise company sales
- Substack cuts 13 jobs
- Unity loses 4% of workforce
- BlockFi sold for $25m after raising $1.2bn?
Software is about to eat live sports. The signs have been coming for some time. Apple pioneered the trend by buying the rights to Friday night baseball and MLS soccer. It is rumored to be interested in Sunday Ticket for NFL streaming.
Now Amazon is strongly favored to buy the rights to one of the biggest football competitions in the world — the UEFA Champions League — in one of its biggest markets — the UK. This follows the deal announced in March, an 11-year deal, valued at $1bn (£824m) annually, for Amazon to broadcast live NFL football in the US.
These deals highlight the next stage in the competition between broadcast, cable, and satellite networks on one side and streaming giants on the other. Live sports and live news are the only significant content that consumers want and streamers historically did not have.
The value of live sports to a rights owner is that it compels sports fans to buy subscriptions to services that host their favored events.
Rupert Murdoch pioneered the approach with Sky Sports when building out his BSkyB franchise. It required every football (soccer) loving home to install a satellite dish and set-top box. And they did.
Now Apple and Amazon are playing their game and have very deep pockets for doing so.
The key to understanding how to play the game is to understand its value. I am familiar with the English Premier League so using it as an illustration here are the facts.
The EPL has 20 teams. Between them, they have over 2 billion global fans who have 380 games per season. That is a total market available of 760 billion viewers. The EPL is currently planning to sell the rights for £10.5 bn ($14.2) for 3 years:
For the 2022 to 2025 rights cycle, The Times says international deals will be worth UK£5.3 billion (US$7.1 billion), up 30 per cent, while domestic deals bring in UK£5.1 billion (US$6.9 billion), with commercial partnerships taking the total to UK£10.5 billion (US$14.2 billion).
That makes $4.73 bn per year. On a per viewer/game basis that is point six of a cent per viewer/game in revenue.
- Games Per Week 10
- Total Fan base 2,000,000,000
- Number of Weeks 38
- Total viewer/games 760,000,000,000
- Rights per year $4,730,000,000
- Revenue per viewer/game $0.006
Of course, the rights buyers monetize the games at a multiple of their cost, by selling subscriptions and advertisements. The total value of the league measured in income is unknown. But clearly, it is well over $4.73bn a season. Perhaps 9–10 times that.
The income goes to the rights buyers, not to the League.
So if streamers gain control of the EPL, how much might it be worth?
Let us assume that 50% of the fan base watches one game a week and pays $1 a game. That would be as follows:
- Total Fan Base 1,000,000,000
- Number of weeks 38
- Games Per Week Per Fan: 1
- Viewer Games Per Week 1,000,000,000
- Price per game: $1
- Weekly Revenue: $1 billion
- Seasonal Revenue: $38 billion
- Revenue per viewer/game $1
So at 1 game per week, at $1 a game, streaming could generate $38 billion per season. In reality, the price per game can be higher and most fans would watch more than one game per week.
The untapped fortune here is what I call digital seats. Liverpool FC can fit under 70,000 fans into its Anfield stadium. But over 500,000,000 would pay to watch live games. Double that for Manchester United. Streamers can create these digital seats. Over time they can deliver a better than stadium experience to those seats.
This means that the price Amazon is paying for European football is very small compared to the opportunity.
Beyond that, the EPL itself should probably retain the rights and offer ticket-based streaming directly to fans globally. In that case, the revenue would come back to the EPL and not be placed into the hands of middlemen.
The real promise of streaming is to cut out the middlemen and simply pay for production and transport, as a cost. Movies, TV series, News, and Sports will all go that way. This week Amazon is shining a light on this.
That Was The Week’s video cast streams live each Friday. The recorded version is available only to subscribers. Subscribe here
Live Sports — The Next Streaming War
Amazon close to deal over Champions League rights in UK
US retailer and streaming giant set to split UK rights with BT Sport, while BBC to broadcast highlights in new Match of the Day edition
Amazon is close to securing a groundbreaking deal to broadcast live Champions League football in the UK from 2024, with highlights returning to terrestrial TV for the first time in nearly a decade in a midweek BBC Match of Day show.
The US internet retailer and streaming giant, which already has a broadcast portfolio spanning Premier League football, tennis and rugby, is understood to be set to split the UK rights with existing holder BT Sport in a new deal with the governing body, Uefa, running from 2024 until 2027.
Essays of the Week
China Built Your iPhone. Will It Build Your Next Car?
RUMORS OF AN Apple electric car project have long excited investors and iPhone enthusiasts. Almost a decade after details of the project leaked, the Cupertino-mobile remains mythical — but that hasn’t stopped other consumer electronics companies from surging ahead. On the other side of the world, people will soon be able to order a vehicle from the Taiwanese company that mastered manufacturing Apple’s gadgets in China. Welcome to the era of the Foxconn-mobile.
In October 2021, Hon Hai Technology Group, better known internationally as Foxconn, announced plans to produce three of its own electric vehicles in collaboration with Yulon, a Taiwanese automaker, under the name Foxtron. Foxconn, which is best known for assembling 70 percent of iPhones, has similar ambitions for the auto industry: to become the manufacturer of choice for a totally new kind of car. To date it has signed deals to make cars for two US-based EV startups, Lordstown Motors and Fisker.
Foxconn’s own vehicles — a hatchback, a sedan, and a bus — don’t especially ooze Apple-chic, but they represent a big leap for the consumer electronics manufacturer. Foxconn’s ambitious expansion plan also reflects a bigger shift across the auto world, in terms of technology and geography. The US, Europe, and Japan have defined what cars are for the last 100 years. Now the changing nature of the automobile, with increased electrification, computerization, and autonomy, means that China may increasingly decide what car making is.
If Foxconn succeeds in building a major auto-making business, it would contribute to China becoming an automotive epicenter capable of eclipsing the conventional powerhouses of the US, Germany, Japan, and South Korea. Foxconn did not respond to requests for an interview.
The automobile industry is expected to undergo big transformations in the coming years. An October 2020 report from McKinsey concluded that carmakers will dream up new ways of selling vehicles and generating revenues through apps and subscription services. In some ways, the car of the future sounds an awful lot like a smartphone on wheels.
That’s partly why there’s no better moment than now for an electronics manufacturer to try car making, says Marc Sachon, a professor at IESE Business School in Barcelona, who studies the automotive industry.
China’s CATL Announces 1,000-Km / 620-Mile CTP 3.0 EV Battery
The company says its energy density is 255 Wh/kg and that it will debut in 2023, although it did not mention for which application.
Founding Renaissance Technologies & First Round Capital, The Origins of Idealab, Reasons Not to Grow your Fund, and How Sourcing from YC Has Changed (Howard Morgan) | The Full Ratchet
Howard Morgan of B Capital Group joins Nick to discuss Founding Renaissance Technologies & First Round Capital, The Origins of Idealab, Reasons Not to Grow your Fund, and How Sourcing from YC Has Changed. In this episode we cover:
- Starting the First Quantitative Hedge Fund
- Idealab’s First Check
- The Story Behind the Founding of First Round Capital
- What’s Ahead in The VC Funding Markets
The host of The Full Ratchet is Nick Moran, General Partner of New Stack Ventures, a venture capital firm committed to investing in founders outside of the Bay Area.
The Petty Pleasures of Watching Crypto Profiteers Flounder
Behind all the Web3 bluster is just “hollow abstraction.”
I cannot stop watching videos of Web3 boosters failing to explain the usefulness of the technology. I realize this is petty, but the videos are deeply cathartic.
I’m talking about two clips in particular, both of which were posted by Liron Shapira, a tech investor and writer, and a critic of crypto and Web3. The first is of Packy McCormick, a newsletter writer, investor, and advisor to A16z’s crypto venture-capital team. I urge you to watch this clip before reading any further (but I’ll also summarize parts of it below):
McCormick is questioned by Zach Weinberg, a crypto skeptic who asks McCormick to reason through why a given problem might be better solved with a Web3 or blockchain-based project. McCormick offers up the example of a blockchain-based real-estate transaction, which he says hasn’t been done yet but is touted as one of Web3’s “promised” examples. Property buying outside of the blockchain is a long, onerous process, McCormick argues. He suggests that, “theoretically, you could make all these things NFTs … you could transact very quickly, borrow against them in the global market as opposed to going to Bank of America to take out your mortgage. You have a more open system that people are able to transact in more creative ways in.”
Weinberg stress-tests this particular scenario (putting your house on the blockchain) first by asking: What would happen in a decentralized mortgage market if a mortgage lender couldn’t get its money back? McCormick responds, essentially, that the lender could take legal action via the courts. They go back and forth a bit about smart contracts, and at every turn Weinberg pushes McCormick with some version of the same question: What makes this blockchain version better than the current system? McCormick has no answer. Here’s a transcript of the end of their exchange:
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Compensation report: The state of startup compensation, H1 2022
For most startups, payroll is the primary driver of cash burn. And with inflation and economic unease on the rise, knowing trends within compensation is critical. How can a founder balance the need to conserve capital with the imperative to grow? How can leaders pay employees fairly through boom and bust cycles?
At Carta, we see it as our responsibility to share the insights that come from an unmatched amount of data about the private market. That includes data on startup headcount, payroll and equity metrics, salary medians, and remote work. We created this compensation report from data using more than 127,000 employee records from startups that use Carta Total Comp, the premier compensation management platform for private companies.
- Remote hiring soars: In 2019, about 35% of new hires were based in a different state than the primary company headquarters. So far this year, that number has ballooned up to 62%.
- Geo-adjusting is the norm: The vast majority of companies (84%) take employee location into account when deciding on compensation packages.
- Engineering is a key hire: Engineering accounts for nearly half of payroll spend in companies valued between $1 and 10 million.
- Terminations rise: Across all of Carta’s platform, involuntary terminations made up 29% of departures in May 2022 (the rest were employees leaving their jobs by choice). That’s nearly double the 15% termination share recorded in August of 2021.
Note: If you’re looking for compensation benchmarks against companies like yours, you can also download the addendum to this report to get an extended dataset.
Does Venture Capital Investment Violate the Ethos of Crypto? Sequoia Says No — Ep. 367
The Trimodal Nature of Software Engineering Salaries in the Netherlands and Europe
Update: dozens of hiring managers confirmed this trimodal model applies to all global markets: from the US, through Asia to Latin America as well. Also see TechPays.com for data recorded for a growing number of countries in the three tiers. (Watch this article as video narrated by me, with
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Web3 Use Cases: The Future
Will web3 justify the hype?
Today, real people are spending real money to use real products, even if some seem silly or circular.
But the real question isn’t whether there are any use cases, but whether there will be use cases that, collectively, are worth the hype.
In other words, will web3 produce use cases that justify all of the venture dollars, investment, and talent dedicated to the space? I think it will. That’s what today’s essay is about.
There are two time-scales on which I’m excited about web3’s potential: the next few years and the next few decades.
If there is another bull cycle in the next few years, I think it will happen on the backs of real products that people use at scale, not speculation. When those hit, speculation will follow, but that will look more like a traditional tech bull run than pure speculation. These products are on the way — the applications are coming and the infrastructure continues to improve.
In the next few decades, I believe that web3 infrastrastructure will become the fabric of much of what we do online and in our financial lives. I also believe that the experiments web3 protocols are running in economic design, incentive alignment, and governance will jump out of the internet and impact “real-world” institutions.
Today, I’ll dive into some of the future use cases and potential benefits I’m excited about.
The Next Few Decades
So let’s begin with the future. If all of this pans out, so what?
Sequoia Capital Targets $2.25 Billion for Two U.S. VC Funds
Sequoia Capital, defying the tech market sell-off that’s chilled startup fundraising, is asking investors to commit money to two new U.S.-focused funds, according to two people familiar with the matter.
The Menlo Park, Calif.-based venture capital firm behind Airbnb and DoorDash expects to dedicate $1.5 billion to a U.S. growth fund focused on more mature companies, the people said. It’s also planning a $750 million fund focused on earlier-stage deals, one of the people said. The firm expects to close the new funds in July.
They’re the latest of what Sequoia is calling “sub-funds,” launched after the firm overhauled the structure for its U.S. and European business. In a bid to make it easier to hold stock in companies after their initial public offerings, Sequoia set up an evergreen main fund called the Sequoia Capital Fund. The firm is now inviting investors in that fund to place their money in these new sub-funds.
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Why we’ve raised our $158M Series C to invest in the next generation of co-founders — Entrepreneur First
Entrepreneur First (EF) is the best place in the world to find a co-founder and start a startup from scratch. We are excited to announce we’ve raised a $158 million Series C round from a global alliance of some of the world’s top technology founders and investors. They include: Patrick and John Collison, co-founders of […]
Wise’s Taavet Hinrikus among four co-founders in group seeking to disrupt traditional venture capital in the region
Plural launches €250mn entrepreneur-led fund for European tech start-ups — Financial Times
Four European entrepreneurs have launched a €250mn fund to back tech start-ups across the region, seeking to disrupt the traditional venture capital model by creating a peer-to-peer investment platform. Called Plural, the new fund’s co-founders are Taavet Hinrikus, co-founder of the international payments company Wise; Ian Hogarth, the co-founder of Songkick; Sten Tamkivi, the co-founder of Teleport; and Khaled Helioui, the former chief executive of Bigpoint. The group aims to invest in more than 25 start-ups over the next 18 months, taking early-stage stakes of between €1mn and €10mn. If successful, Plural will enlist dozens more entrepreneurs as investors and raise bigger funds to boost the European start-up sector. The move comes during a tech downturn which has led many VCs to slow investment, complaining that it has become difficult to value start-ups at a time of turmoil in public and private markets. But Hinrikus, who last year floated Wise in London at a valuation of close to £9bn, said the fund was a response to the European start-up sector beginning to mature like Silicon Valley, with one generation of successful entrepreneurs backing the next.
Stock-Exchange Startup Gets $100 Million Investment Funded by Walton Family Member — The Wall Street Journal
The Long-Term Stock Exchange, a Silicon Valley firm trying to push for sustainable investing, said it raised $100 million in June from James Walton, part of the famed family associated with Walmart Inc. WMT -0.16%▼
The investment comes as traditional venture-capital firms are pumping the brakes on funding startups right now, wary of taking on new risk when the markets and economy appear to be in a tenuous position. Companies are instead having to strike deals at big discounts to their prior funding rounds, cut costs or look to less common investors, such as corporations, to write checks.
Mr. Walton, the grandson of Walmart founder Sam Walton, is a philanthropist and conservationist, a co-leader of the social impact fund Wend Collective. He and The Space Between, the venture fund with which Mr. Walton partnered to provide the funding, started discussions with the exchange months ago.
The exchange was talking to Mr. Walton, TSB and several other investors about a Series C funding round this winter when the markets “dropped out on us,” said LTSE founder and chief executive Eric Ries. Other investors who said they would participate in the funding round backed out, skittish from a stock market roiled by soaring inflation, a war between Russia and Ukraine, and a swift retreat from fast-growing companies, including most tech stocks.
Normalyze’s multicloud management tools aim to tighten security and lower cost | VentureBeat
Data security has become more complex due to the proliferation of data, an explosion of microservices, rapid cloud adoption, hybrid work environments, compliance, remote work and more.
“Today’s enterprises ﬁnd their data scattered throughout their various cloud environments with limited visibility of where sensitive data resides. It’s a massive problem that current cloud security offerings aren’t equipped to handle,” said Amer Deeba, cofounder and CEO at Normalyze.
“We built Normalyze to classify and secure sensitive data across all public clouds,” Deeba said. Normalyze announced today that it’s coming out of stealth with $22.2 million in series A funding. This round brings the company’s total funding to $26.6 million to date.
“Our graph-powered platform is a hub that connects all data with assets, identities, accesses, misconﬁgurations and vulnerabilities to help security teams continuously discover sensitive information, determine attack paths and automate remediation efforts to secure it,” said Ravi Ithal, Normalyze cofounder and CTO.
Even A16z Is Slowing Its Investing Pace
Andreessen Horowitz is one of the most-recognized venture capital firms in Silicon Valley and it just keeps growing. But amid a broader pullback in venture investment, the firm also appears to be slowing down its investing pace this quarter, at least compared to where it was last year.
To be clear, a16z hasn’t hit the brakes. In fact, it’s still one of the most active investors in the United States, according to Crunchbase data, along with Tiger Global Management.It’s just not investing at the same rapid pace it adopted last year, according to our data.
The firm has participated in 46 funding rounds totaling around $2.5 billion so far in the second quarter, the lowest levels since before 2021, Crunchbase data shows. The number of rounds it has participated in and the amounts raised in those funding rounds is also down quite a bit from the first quarter of this year, when the firm participated in 62 funding rounds that totaled around $6.1 billion.
Andreessen Horowitz did not respond to a request for comment or to verify our data.
‘Put up the for-sale sign,’ more VCs tell founders as market sours — PitchBook News & Analysis
After years of telling their portfolio companies to grow at all costs, investors are dishing out an entirely different type of advice.
Cut expenses, borrow venture debt, or raise additional capital at a flat or even slightly lower valuation than the previous round.
But if after trying to take those steps the startup is still at risk of running out of cash in 12 months or less, then some investors are telling companies to resort to even more drastic measures: try to sell to a strategic buyer at a discount rather than risk going out of business.
“I’ve called founders [to say], ‘I think you should sell,’” said Chris Farmer, a partner and CEO at early-stage firm SignalFire. “A sale could be attractive to founders because they don’t have to lay off everyone, and investors can get some or all their money back. It’s a soft landing.”
Some startups that are short on capital are trying to raise a financing round and run a sale process simultaneously, said Wayne Kawarabayashi, a partner and head of M&A at Union Square Advisors, a technology-focused investment bank.
“There are a lot of these dual-track conversations now,” Kawarabayashi said.
So far, there haven’t been many low-priced acquisitions in this market cycle. But we may soon see more sales like that of Tile, in which investors barely make their money back. Tile, a developer of tracking devices for personal items, was sold to Life360 for $205 million. Prior to the January sale, the company had raised a total of $150 million from investors like Bessemer, GGV and Khosla Ventures, according to PitchBook data.
Substack cuts 13 jobs to avoid raising more venture capital — TechCrunch
The newsletter platform Substack laid off 13 employees today, mostly in HR and writer support roles.
Co-founder and CEO Chris Best informed the company after holding meetings with the affected employees. The meetings also included founders Hamish McKenzie and Jairaj Sethi. That’s probably a better way to deliver the news than some other companies’ approaches (cough, Coinbase), but the news is still rough for a company that raised $65 million from Andreessen Horowitz (a16z) just last year. Even then, we were skeptical about how the company managed to earn a $650 million valuation so soon.
Like several other companies that boomed in a time when venture capital flowed more freely, Substack must figure out how to survive in a hostile economic time.
Substack reportedly tried to raise another venture round as recently as last month, but the platform chose not to take on more funding. According to The New York Times, Substack earned about $9 million in revenue in 2021, which comes from the 10% cut it takes from writer subscriptions. Aside from a 3% credit card processing fee, that means that Substack writers are earning around $90 million a year — though the top 10 writers earn $20 million of that pile of cash. These figures would have made it challenging for the company to raise at a higher valuation than its last round.
Unity lays off 4 percent of its workforce to realign its resources
Unity has laid off hundreds of employees in its offices across the globe, according to Kotaku. The video game software development company known for its popular game engine has reportedly let around 300 to 400 staffers go so far. Layoffs are still ongoing, sources said, so those numbers may be higher by the time the company is done. Unity has confirmed to Engadget that it’s “realigning some of [its] resources,” which has led to the dismissal of approximately 4 percent of its entire workforce. That’s consistent with the report that it has let around 300 people go, since its LinkedIn page lists 8,048 employees.
The company told Engadget:
“As part of a continued planning process where we regularly assess our resourcing levels against our company priorities, we decided to realign some of our resources to better drive focus and support our long-term growth. This resulted in some hard decisions that impacted approximately 4% of all Unity workforce. We are grateful for the contributions of those leaving Unity and we are supporting them through this difficult transition.”
While the mass dismissal affects Unity’s entire workforce, Kotaku said it’s mostly concentrated on its AI and engineering divisions.
Startup of the Week
Pave, whose software analyzes HR data to help companies close pay and equity gaps, raised a $100M Series C at a $1.6B valuation and acquired rival Option Impact
Allison Levitsky / Protocol:
Option Impact, a benchmark compensation product from Advanced-HR, has a new owner. — Pave, a fast-growing Option Impact competitor …