Genius Sports (NYSE: GENI) is one of the biggest sports data companies in the world. It provides its software to sports leagues and organizations. This UK-based firm largely makes money by selling the data to media companies and sportsbooks. With the huge interest in sports and betting in the U.S., many people are looking at sports data companies as a potential investment. Is Genius Sports stock a good buy?
Genius Sports became a publicly listed company through a SPAC merger in April 2021. It had reported strong growth in 2020, with revenue rising 31% to $150 million. A lot of its growth is organic, in contrast to its main rival Sportradar that is mainly fuelling its slower levels of growth through acquisitions.
The burgeoning sports betting market in the U.S. is a lucrative space for the company. Last year, 73.9% of Genius Sports' revenue came from sportsbooks that use the data to offer competitive in-play betting markets.
With some estimating that in-play betting will account for up to 75% of all sports bets in the U.S. by 2024, sportsbooks have plenty of reason to pay for the best available data. The U.S. sports betting industry is forecasted to be worth $9.2 billion by 2025.
Genius Sports signed an exclusive partnership with the NFL in April. This deal can transform the company's outlook going forward as people bet on NFL games more than any other major league sport. It also has partnerships with many other significant sporting bodies like the English Premier League, PGA Tour, NASCAR, and NCAA.
Another attractive aspect of Genius Sports is that it has a number of different revenue streams. The sports technology and services side of the business accounted for 10.7% of total revenue in 2020. The media technology category was the fastest-growing segment last year, increasing 94% year-on-year to $23 million. This accounted for 15.4% of the business.
There are concerns that Genius Sports has bitten off more than it can chew with the NFL deal. In order to make up for the $120 million annual data fees for the six-year term, Genius Sports will likely have to pass on some of these costs to its partners. With sportsbooks operating off slim margins already, they could struggle to deal with increased fees for NFL betting data. Half of the annual fees will be paid by Genius Sports in equity.
There is also an ongoing battle regarding exclusive sports data deals in both the U.S. and overseas. Certain U.S. states are looking to make it mandatory for sportsbooks to use official league data. However, some courts have ruled that sports data is public domain info and not protectable. Leagues might also allegedly be consolidating a data monopoly through this stance that would violate antitrust laws.
Genius Sports and its main rival Sportradar have been embroiled in a legal battle in the UK on the matter. The latter sued as it believes that Genius Sports' exclusive deals with the likes of the English Premier League were anti-competitive and gave the company a "superdominant position" in the sports data sector.
Genius Sports claimed in a countersuit that Sportradar infringed on its exclusivity by sending scouts to games during Premier League games. Investors will be closely watching the latest developments on these legal matters to see how it affects those companies in the sports data space.
If you are looking at an alternative way to invest in the sports betting sector, then a sports data company like Genius Sports is worth keeping an eye on. Genius Sports appears to have a good position in the U.S. betting market with its exclusive NFL deal. The share price is also not as volatile as most betting stocks. While explosive growth might not be on the horizon, appreciation over the long term looks likely.
Who is the CEO of Genius Sports
Mark Locke is the co-founder and current CEO of Genius Sports
Is Genius Sports profitable?
No. Genius Sports recorded a net loss of $30.3 million in 2020 and a net loss of $40.2 million in 2019.
Who is the main competitor to Genius Sports?
Sportradar is the other major player in the market and it has partnerships with the likes of the NBA, NHL, and the MLB.
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