This SportTechie Legal article was written by Brian Socolow, an attorney in the New York office of Loeb & Loeb LLP.
Technology is a major disruptor in sports today. There is not an aspect of the industry that it has not touched. The way that sports are played, viewed, broadcast, monetized, and regulated are all being revolutionized by the deployment of technological innovations.
Technology also drives the development of new or emerging sports. The growth of esports from a niche subculture into a $1 billion (and growing) global industry is the most obvious example, but there are certainly others. Some sports you may have heard of, like drone racing, which in the last few years has grown from a backyard hobby to a sport with international leagues, professional competitions, and a solid (if small) fan base.
And some you may not have heard of—yet—like Speedgate, a live-action sport created with the help of artificial intelligence. According to AKQA, the digital agency behind Speedgate, everything about the game, from the gameplay and rules to the logo, was developed through AI. Deep-learning algorithms analyzed data on more than 400 different sports, 7,300 sports rules and 10,000 sports brand images. A team of humans then narrowed down the resulting output of 1,000 potential games to 10, three of which were field-tested. The winner: a game with elements of rugby, soccer, and croquet. Six-player teams kick or pass a ball up and down a 180-by-60-foot field with three gates (one at the center and one at each end). The object is to score points by kicking the ball through one of the end gates.
The short-lived Alliance of American Football, which launched in February 2019 but didn’t even survive its entire inaugural season, was also technology focused, but in a different way. In fact, still-in-development technology was so integral to the league that Memphis Express team owner Kosha Irby described the AAF to the Memphis Commercial Appeal as essentially “a tech company running a football league.”
According to the AAF’s investors, the real draw for fans (aside from being able to watch professional football year-round) was innovative technology that would provide greater control over how they engaged with the sport—including streaming and, in particular, sports wagering. The AAF app promised to deliver live streaming that included data feeds collected from sensors worn by players and constantly updating in-game gambling odds, all without transmission delays.
Eight weeks into the inaugural 10-week season, the AAF suspended operations and filed for Chapter 7 bankruptcy. Rumors and conspiracy theories abound about what really happened to an emerging league that seemed to have a lot going for it, including its innovative technology.
Technology alone, however, is not enough to ensure sustained commercial success for any sport, and especially for new sports. To succeed, emerging sports must meet several key challenges: creating sound and appropriate legal and business structures, protecting and exploiting intellectual property, managing media and broadcast distribution, and generating revenue—all while acknowledging the sport’s cultural roots. Without these solid underpinnings, any emerging sport or league, whether technology focused or not, faces major challenges.
Business and legal structures: No single business and legal structure can guarantee success . Some leagues follow a single-entity model like Major League Soccer (and now the XFL), while others are franchise-based, like the “Big Four” U.S. major league sports (the NFL, Major League Baseball, the National Basketball Association, and the National Hockey League). The most appropriate structure should make sense for all stakeholders—not only at inception, but also as a sport matures. Legal considerations include investment structures, tax issues, and a centralized infrastructure. As they move from the amateur to the professional realm, emerging leagues may also have to consider basics like formalizing a rule book, code of conduct, and organizational leadership.
IP assets: Developing league and team intellectual property, including trademarks, negotiating licensing relationships, and protecting and monetizing intellectual property is essential for new and emerging sports. They must also consider copyright issues related to logos, publications, slogans, photographs, and video.
Media and broadcast distribution: Distribution of content, whether through broadcast, cable or digital platforms, is critical for emerging sports. New sports may have difficulty selling their television rights, and may have to consider digital strategies for visibility. Lower-profile sports might opt for streaming their contests, and owning and producing their own events. Gaining visibility through a time buy on a broadcast or cable channel or adopting an over-the-top digital strategy are also options.
Generating revenue: Emerging sports face the same challenge as all sports: How to generate revenue. But for emerging sports, gaining enough traction with fans and sponsors to jump-start revenue streams can be a challenge. As those sports mature, they also often grapple with the tension between revenue generation—and the influx of fans, money, events, and structure that go with those efforts—and athletes and fans who want to maintain the authenticity of a sport and its culture.