🏟 Investors Believe in the WNBA, So Should You
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Executive Brief: The WNBA raised a historic $75 million last week while receiving a $1 billion valuation as various investors buy shares in the league. The league plans to use the money to aggressively invest in marketing, digital assets, and the game's globalization. Today’s newsletter breaks down the raise, how I think they’ll invest, and where I think the league might go. Grab a hot cup of your favourite drink and enjoy!
A Record-Setting Raise for the WNBA
This week marked massive news for women’s sports and the WNBA.
The WNBA (Women’s National Basketball Association) raised $75 million in what the league has called the largest-ever financing for a women’s sports property ever. After the funding round, the league and its 12 teams were valued at around $1 billion.
According to the league, Nike, already one of the WNBA’s premier partners, made a “significant equity investment”.
Some of the investors include:
Carnival Corp. Chairman and Miami Heat owner Micky Arison
Dell Technologies Inc. CEO Michael Dell
Washington Wizards and Mystics owner Ted Leonsis
Former secretary of state Condoleezza Rice
Laurene Powell Jobs
Paul Gasol
Baron Davies
The league began raising money in January 2020 after it signed a new collective bargaining agreement (CBA) with the players. However, the funding mandate took a back seat due to the coronavirus pandemic as the league had to focus on its business surviving instead of raising money.
Near the end of 2021, the pandemic’s effects started to slow down in the U.S.
Meanwhile, the league reported growth in sponsorship revenue and social media engagement.
These factors combined gave the league the momentum required to complete the raise.
The WNBA’s raise comes when investors flush with cash have increasingly invested in sports leagues and teams. Sports investment is entering a period of growth that leagues and teams have happily welcomed with open arms due to significant losses incurred due to the pandemic.
The WNBA is currently owned half by the 30 NBA teams and half by the 12 WNBA teams – ownership on both sides will be diluted as part of the deal.
The league has no current plans to raise additional money but would consider doing so if it successfully deploys this capital into sustainable growth for a few years.
How will they do this?
Deploying the Capital
The present raise is the first time the WNBA raised money from investors since being founded by the NBA in 1996, a little over 25 years ago. Financial struggles have been constant, and stark disparities in revenue, media attention and player pay distinguish the women’s league from the NBA. However, the league has seen promise recently on which they hope to capitalize.
ESPN announced TV ratings for the WNBAs 2021 playoffs hit their highest mark since 2014, and that regular-season viewership was up 49% in 2021 compared to 2020 and 24% compared to the 2019 season before the pandemic. The 2021 postseason and WNBA Finals saw their highest viewership figures in years.
Based on those metrics, the league expects to revamp the WNBA’s business model as players call for expansion, higher salaries, and better benefits.
Commissioner Cathy Engelbert stated multiple times that her goal is to transform the league into an economic model worthy of the players on the court.
Context about the financial barriers faced by the league:
The minimum salary for the 2022 season is currently $60,000, and the maximum compensation is $228,094. Team salary caps are just under $1.4 million. For context, a single-player minimum salary in the NBA is between $925,258 and $2.6 million.
Teams currently have 12 roster spots on each of the league’s 12 teams. Thus, there are 144 positions which means many talented players who should be playing cannot find a team year-to-year.
Unlike in the NBA, where teams take private flights, WNBA teams fly commercially. This has long been a major complaint from players, particularly for tall players who must upgrade their seats using their cash.
The league expects to deploy its new capital strategically to fix these problems.
They’ve stated they will listen to ideas from the player’s union regardinig how to use the money. However, the league will prioritize marketing and improvement of digital products, including its website, app, and league pass, which allows fans to watch games that are out of the market and not on national television.
The WNBA has struggled to land TV broadcast deals. So, it will likely strategically lean into digital and streaming platforms to distribute its product as widely as possible under financial constraints. The league must consider what direct-to-consumer product means for their assets and determine how best to capitalize on that service.
This idea comes at a great time as streaming wars play out across the various media rights holders as live sports assets continue to digitize. Streaming services are continually in bidding wars for rights. The WNBA will likely capitalize on this as a new appetite for sports rights as services look to distinguish from one another in the fight for fan attention.
Previously, the WNBA struck a multiyear deal with Google in 2021, which helped sponsor 25 regular-season games on ABC and ESPN. The WNBA also signed a multi-year streaming deal with Amazon Prime to broadcast games and has streamed games live on Twitter over the past five seasons.
The league will further integrate streaming partners while doubling down on its assets.
When it comes to attracting eyeballs, the WNBA’s calendar does not do itself any favours. The league’s regular-season crosses over with the NBA playoffs and Major League Baseball’s season. Both leagues have developed fandom, assets, and branding for 75 years and 100+ years, respectively. So, it’s tough for the WNBA to incentivize eyeballs to switch over.
The WNBA plans to invest significant marketing dollars into making its players household names both in the U.S. and internationally to compete with those known entities. The goal would be to utilize this marketing to increase viewership, increase player salaries, and provide NBA-like benefits and amenities to its players eventually.
Previous reports suggest less than 5% of all sports media coverage and less than 1% of all sponsorship dollars go to women’s sports. By investing aggressively into marketing, the league hopes to move the needle in elevating the brands of its players, teams, and ultimately the league.
Ideally, this investment will globalize the game and expand the league, eventually attracting sponsorship dollars, sports media coverage, and higher revenues.
Where The League Could Go
The WNBA’s aggressive investment in digital assets and building their own product make sense. The league also knows its fan base skews young and female currently, a demographic that is underserved by their current digital strategy, per the league.
I expect the league to lean heavily into building a community with that fan base and lean into products and assets that attract Gen Z viewers.
Beyond the aggressive investment in marketing and digital assets, the league should take a long look at sports betting options. They struck a licensing deal with PointsBet in spring 2021, becoming the first professional women’s league to do so. However, the sports betting market is a tidal wave now as states legalize the activity. The league should and will continue to pursue opportunities in that space.
I expect the WNBA to integrate online virtual experiences and partnerships with NFT companies like Dapper Labs and other digital collectible platforms. The league will also build partnerships with streaming platforms like Buzzer. The more revenue streams, the better, especially when you’re a young league trying to grow.
More revenue invested wisely means more fans, more engagement, more investment, more revenue, and eventually expansion.
With 12 franchises currently, the league is apt for significant growth once they develop its economic model and establish reccurring fan buy-in.
Rumoured cities for expansion include Oakland, California, and Toronto.
Final Thoughts
This fundraising round is the latest indication of the momentum and investor attention towards women’s sports at professional and collegiate levels.
For so long, women’s leagues could not get the investment or sponsorship they required to grow their assets to generate revenue. Without dollars coming in, it’s challenging to scale or grow. How the WNBA deploys this capital and the investment results could serve as a historical case study in the business of women’s sports. Other women’s leagues will be tracking the WNBA’s success intently with hopes of leveraging it to create opportunities in their respective sports.
We are seeing massive success at the college level with female athletes regarding capitalizing on name, image, and likeness. Many of the top earners across the NCAA are women. New age media serves as a much more level playing field between men and women, and the WNBA will aim to capitalize while they can.
Here’s to hoping it happens.
Thank you for reading. Have a great day, and we’ll talk next week!
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Kendal
Question of the Day
What should the WNBA do with their new capital?
Games of the Week
NBA
Mon, February 7: Phoenix Suns @ Chicago Bulls at 8:00 p.m. (E.T.)
Tues, February 9: Golden State Warriors @ Utah Jazz @ 10:00 p.m. (E.T.)
NHL
Mon, February 7: Carolina Hurricanes @ Toronto Maple Leafs at 7:00 p.m. (E.T.)
Thurs, February 10: Tampa Bay Lightning @ Colorado Avalanche at 9:00 p.m. (E.T.)
NFL
Sun, February 13: Super Bowl LVI: Cincinnati Bengals @ Los Angeles Rams at 6:30 p.m. (E.T.)
Beijing Winter Olympics
Winter Olympics occur in Beijing, China, from February 4th to February 20th.