Investing in League of Play
The following excerpt is from Allied’s original deal memo to investors. To review investment opportunities in full, please consider joining the syndicate at Allied.vc/join
The pandemic accelerated society's digital transformation, particularly the creator economy, as people stayed at home creating and consuming unprecedented amounts of content.
Meanwhile, as sports leagues closed, amateur and professional athletes went online to connect with fans and monetize their brands.
As a result, creator competitions and online sporting events became one of the most popular types of content among younger audiences. In fact, prior to the pandemic, data shows that Millennial and Gen Z audiences were already shifting away from traditional sports and toward eSports.
Therefore, with younger viewers beginning to redefine the sports world (i.e. preferring to follow and engage with individual creators & athletes instead of large brands), it’s critical for sports franchises to attract younger fans by meeting them where they are – online, through platforms like Twitch, Snapchat, TikTok, YouTube, etc.
Enter League of Play (formerly XtremeWorld)
League of Play (LoP) is an online platform that bridges the gap between the fast-growing online creator economy and live sports.
LoP creates highly interactive and viral content by bringing together top creators and athletes, while also enabling significant monetization opportunities through D2C commerce, betting, and content licensing (among others).
As a result, creators benefit by growing their audience through shared distribution with other creators and athletes, and athletes benefit from crossover distribution via creators.
LoP is on a mission to become the global platform for creator competitions.
How it works:
League of Play brings together top creators and athletes from various platforms (TikTok, YouTube, Instagram, etc.) to compete in sporting events. These events are streamed live, and viewers can interact with their favorite creators in real-time via fan interactions during gameplay.
Interactions and engagement are driven and monetized through a variety of channels, including live voting, pre- and post-AMA sessions, special event passes, exclusive offers, NFT sales, live shopping, and more. LoP also makes money from brand sponsorships.
Our thesis:
We see this opportunity as the convergence of several major forces that are currently reshaping the content and consumer landscapes:
As the creator economy expands, younger audiences are increasingly migrating online to watch their favorite content creators (e.g. MrBeast now has over 100M YouTube subscribers).
As content creators grow in popularity, they will look for ways to monetize their brand beyond simple advertising, such as D2C products (e.g. MrBeast recently opened a burger restaurant in New Jersey).
Meanwhile, an increasing number of athletes are transitioning into content creation in order to develop closer relationships with fans and promote D2C products (e.g. F1 Drive to Survive made F1 the fastest-growing sport in America; LeBron James & Kevin Durant are among an increasing flow of athletes becoming content creators).
Creator Competitions are emerging as a highly-popular and lucrative new form of entertainment (e.g. the fight between Logan Paul & Floyd Mayweather drew 1M+ viewers and $50M in revenue).
Market Validation
In its first pilot event, Xtreme Ping Pong, the company assembled 12 of the top creators on the internet to compete with Olympic athletes. The combined subscriber base was over 180M people across the 12 creators.
The event drew over 1.1 million live viewers, had a phenomenal engagement rate of 100 votes per second, was the first event to offer live shopping on YouTube, and generated hundreds of thousands of dollars in revenue.
Why we are thrilled to support the team at League of Play
We are excited to invest in LoP for several key reasons, including:
It's a very unique business, unlike anything we've seen in recent months, and is driven by a proven team with deep domain expertise.
We believe that younger audiences will increasingly gravitate toward individual content creators, making brands less relevant as the primary focal point among consumers. To remain relevant, brands must develop content strategies centered on individuals rather than corporations.
Let's break each of these down:
1) It's a very unique business, unlike anything we've seen in recent months, and is driven by a proven team with deep domain expertise
We've seen hundreds of investment opportunities over the past few months, and to be honest, very few have stood out as contrarian and unique.
Rather, it appears that early-stage markets have shifted toward a very consensus-driven approach, in which only certain types of companies are funded (and they all look the same).
When we met the founders of LoP and learned about the impressive platform they are building, it immediately stood out as something very different from the other opportunities we were seeing. As Bill Gurley famously said, “Being ‘right’ doesn’t lead to superior performance if the consensus forecast is also right.”
The company is co-founded by Ben Grubbs, the Former Director & Global Head of Top Creator Partnerships at YouTube, and Hank Leber, a 5-time founder having built multiple companies in the consumer, advertising, entertainment and blockchain industries.
Therefore, to achieve truly asymmetric outsized returns, we must maintain a contrarian approach. However, we can try to mitigate risk by investing in an extremely talented team that is developing at the crossroads of several converging (and rapidly expanding) market forces.
2) We believe that younger audiences will increasingly gravitate toward individual content creators, making brands less relevant as the primary focal point among consumers. To remain relevant, brands must develop content strategies centred on individuals rather than corporations.
Firstly, young sports fans don’t follow sports the same way as their parents (i.e. following teams and watching entire games). Instead, Gen Z and Millennial fans prefer to watch highlights (not games), follow athletes (not teams) and are more interested in an athlete’s TikTok videos than last night’s box score (source).
As a result, what was once behind-the-scenes content to supplement the primetime broadcast has become the primary content consumed by younger fans.
Additionally, the sporting pie is expanding beyond traditional leagues like the NFL and NBA, with eSports now more popular among Gen Z than MLB, NASCAR and the NHL (source).
Therefore, whereas older audiences grew up being Laker fans and getting their news from SportsCenter, new generations prefer to follow LeBron James and get their news from social media (as evidenced by the Lakers’ 20M Instagram followers vs. LeBron with 130M).
As Gen Z comes of age, we believe this trend will become increasingly common and lucrative.
Second, celebrity status is no longer limited to those in primetime television, movies, or professional sports.
Younger audiences are increasingly migrating online to watch their favorite content creators as the creator economy expands at a 35% CAGR. For example, Mr.Beast now has over 100 million YouTube subscribers, and there are an estimated 46 million amateur creators (source).
However, because younger generations have grown up with online advertising and are more likely to tune it out, a growing number of creators are moving into the D2C space to further monetize their brand while building deeper relationships with fans.
Therefore, online content creation is not only changing the way to become a celebrity, but it is drastically expanding the breadth and depth of content creators who can achieve sizeable followings, thus creating millions of lucrative micro markets as eCommerce transforms creators into brands.
Source: Uscreen
Third, as sports leagues shut down during the pandemic, athletes and traditional sports franchises continue to double down on this content creator trend.
We believe this trend will not only continue but accelerate in the coming years.
Fourth and final, “Creator Competitions” are emerging as a highly-popular and lucrative new form of entertainment.
For instance, ever since American YouTube star Logan Paul (23M subscribers) squared off in a boxing match with British YouTube star KSI (24M subscribers) in 2018, there has been an explosion in demand and popularity for creator competitions.
As an example, the fight between Logan Paul & Floyd Mayweather in June 2021 drew over 1M viewers and $50M in revenue (source). Meanwhile, the online rap battle between Snoop Dogg and DMX drew over 1.4M views and broke Apple Music’s record for a live event.
Not only are audiences demanding more creator competitions, but we’re also seeing record amounts of capital rush into the space, with over $5B being invested into the creator economy last year alone (source). We believe this emerging market will continue to expand at a very rapid pace.
Therefore, as a result of their first-mover advantage and unique low-CAC distribution edge (as well as the convergence of numerous macro trends reshaping the content, sport, and consumer landscapes), we believe LoP has the potential to emerge as a multi-billion dollar content platform within the next 5-10 years.
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