Sports leagues, franchises and businesses are deploying tech to improve outcomes and experiences.
Key takeaways
Innovation has paved the way for advancements in sports betting, including in-game wagering.
AI has strengthened performance analysis while improving the fan experience.
The sports industry is in the midst of a transformative shift as it focuses on embracing emerging technology. Technological improvements across the industry are requiring leagues, franchises and related businesses—especially those in the middle market—to invest significantly in technological solutions to improve team outcomes and the fan experience. Below we look at two areas—data analytics and artificial intelligence—that are transforming the industry.
Data paves the way for macro growth in sports betting
Analytics are becoming increasingly integrated into every aspect of the industry, providing enhanced insights into athlete data for teams and extending into the consumer realm, particularly the sports betting vertical. While sports betting initially revolved around predicting game outcomes, the introduction of faster processing speeds—facilitated by 5G and accessibility—and advancements in data and AI have ushered in a new era. It’s now common for bettors to engage in in-game betting, or “microbets,” predicting specific moments within a game, such as who will score the next point in a tennis match or win the tipoff in basketball. Without the ability to rapidly analyze in-game data, these advancements would not be feasible.
Bolstered by these developments, online sports betting has seen significant growth in recent years, with projections indicating a sustained trend over the foreseeable future. The average revenue per user is expected to exceed $250 in 2024, according to research from Statista—a surge expected to translate to a remarkable 26.5% increase in total revenue, from $7.62 billion to $9.65 billion, for U.S. online sports betting compared to 2023.
Another driver of growth is legality of the industry, which has grown exponentially since the striking of the Professional and Amateur Sports Protection Act in 2018 by the Supreme Court. According to Legal Sports Report, today, sports betting is legal in 38 states (plus Washington, D.C.), with more than 75% of states legalizing it in some form since the ruling. The states that currently do not allow sports betting are consistently reviewing potential legislation.
A concurrent rise in partnerships with diverse professional sports leagues is reinforcing this upward trend. Sportradar, a leading global technology platform, acts as the primary data provider for multiple leagues and betting platforms, with partners that include the NBA, NHL, MLB and Caesars Sportsbook to name a few according to their website. These partnerships enable live betting platforms to harness real-time, in-game data. Notably, according to Broadcast, Sportradar recently introduced its Computer Vision software, powered by AI, to monitor crucial data points during gameplay. This innovation enhances fans’ understanding of and, consequently, engagement with sporting events.
AI is enhancing league and team insights, while also boosting fan engagement
The continued adoption of AI by teams has empowered consumers to gain deeper insights from in-game data, ultimately boosting their knowledge. This evolution is essential for the sports industry to not only sustain its growth but also secure a wider customer base.
The widespread investment in AI by leagues since the beginning of 2023 has propelled franchises and athletes to unprecedented levels of innovation in performance analysis and strategic decision making. Teams now have the capacity to leverage extensive data sets, enhancing precision in coaching techniques and enabling organizations to optimize training, recovery and in-game performance. Consumers, too, are reaping the rewards of AI-driven insights. Beyond just watching an activity, they can analyze and engage more deeply with it.
CONSULTING INSIGHT: The middle market AI playbook
Artificial intelligence is changing how organizations do business, with tools and applications creating valuable opportunities for increased productivity and deeper insights. But before you can implement an effective AI strategy, you must understand how to align rapidly evolving solutions to your business processes and goals. Learn more about successfully deploying an effective AI strategy in our new guide.
AI tools, including the now common use of visual and wearable technology, allow athletes and teams to analyze data and create predictive models. The ability to track movement, speed, patterns and related metrics enables extensive data analysis by both teams and fans. According to Future Market Insights, the sports analytics market is anticipated to reach a valuation of $31 billion by 2034, a nearly 30% increase from the anticipated 2024 valuation, largely due to advances in artificial intelligence.
The global AI market was valued at $2.2 billion in 2022 and it is projected that it should increase at a 30% compound annual growth rate to nearly $30 billion by 2032, according to Allied Market Research. Consistent with that growth, AI also continues to revolutionize the way fans and consumers engage with sports.
For example, in professional baseball, MLB’s Statcast AI tool tracks in-game metrics, such as pitching velocity, hitting distance, running speed and fielding/catching probability, enabling fans to see the same information as coaches and teams. Teams such as basketball’s Golden State Warriors and soccer’s Manchester United have introduced an AI chatbot for an additional level of engagement, allowing fans to directly interact with the team to get information about stats, ticketing and scheduling.
TAX TREND: Software development
Sports leagues, franchises and businesses looking to implement software that analyzes data and applies artificial intelligence may develop the software themselves or license it from a third party. The tax and accounting implications of each approach will factor into overall cost-benefit analyses.
A business that licenses software usually deducts each year’s license expense from its taxable income in that taxable year. Conversely, the tax treatment of software development expenses became less favorable in 2022 when a law change took effect. However, Congress is considering legislation to restore more favorable tax treatment of those expenses.
The takeaway
Data analytics and AI are key technology trends that sports organizations must embrace to remain competitive in a rapidly evolving industry. Ensuring data compliance and security is paramount, along with extracting key insights from league or team data to enhance fan engagement. Leagues outside of the Big Four (NBA, NHL, MLB and NFL) should especially prioritize advancements in these realms to build success through data-driven insights, ultimately nurturing an expansion in fan interest and engagement.
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