Athletes Limitless indicators Gatorade, Hyperice as sponsors

Team Piancastelli’s Haylie McCleney # 28 celebrates with her teammates after beating Team Ocasio on the final weekend of the Athletes Unlimited softball league at the Parkway Bank Sports Complex on September 28, 2020 in Rosemont, Illinois.

Quinn Harris | Getty Images

Athletes Unlimited, which creates and operates women’s sports leagues, announced that Hyperice and Gatorade will sponsor its volleyball season.

The season starts on February 27th in Dallas.

Athletes Unlimited co-founder Jon Patricof told CNBC that the AU model has gained momentum this week after its softball season that started last August. He said that AU’s media distribution agreements give brand partners more access to a unique fan base outside of traditional sport and access to global markets.

“We will be able to offer partners sports opportunities in different regions all year round,” said Patricof on Wednesday. “And this is how we will scale. And for a partner like Gatorade, who is so leading in the world of sports marketing, it is another great signal for a certain dynamic to come on board as well.”

Patricof co-founded the AU in 2019 with Jonathan Soros, CEO of investment firm JS Capital Management and son of billionaire George Soros. The company has top athletes such as Brooklyn Nets star Kevin Durant and American women’s soccer icon Abby Wambach on its advisory board.

AU operates a professional softball, volleyball and soon a lacrosse league. Athletes receive a base salary and bonuses based on the success of their team and a points system. At the end of each season, the leading player will receive the highest money from a prize pool.

For the softball season, AU paid out $ 1 million to 57 players who also shared a $ 300,000 pool. Top player Cat Osterman, a former University of Texas standout softball player, took home just over $ 35,000, including bonuses.

The players are not committed to one team, but change teams every week in a season. Drafts are kept on Facebook. Patricof said the AU model allows players to profile for possible branding opportunities. The model is designed so that fans can follow players rather than teams during a season.

“We want to model the success of leagues like the NBA with the ability to improve player profiles and personalities,” said Patricof, former president of NYCFC’s Major League Soccer organization. “I think that is becoming more and more important for the fans.”

Does the model work?

Patricof said players receive royal compensation if the league is successful. Women participating in a league receive a 20-year pact to share AU profits based on cost and expenditure. According to Patricof, AU offers players health benefits and covers the costs of accommodation, transport and food.

Although Patricof sees an “upside” opportunity in AU’s business model, start-up sports leagues often struggle to make sustained profits and typically have significant cash flow problems.

Smaller sports companies, including the Alliance of American Football, the Arena Football League, and the beach volleyball-powered AVP League, have had financial problems in the past, including multiple bankruptcies.

Patricof confirmed that AU will not make a profit during its 2020 softball season. He would not discuss Soros’ financial support and declined to provide other metrics such as subscriptions to his “Unlimited Club” ($ 19.99) that allow consumers additional access and virtual engagement for players and teams.

He said AU is inexpensive to operate because it avoids expensive investments that often harm start-up sports leagues. These expenses include stadium rentals, large rosters (payroll), and constant travel throughout a season.

AU leagues play in one place. Chicago will host softball again in 2021, and the lacrosse league will most likely be in the mid-Atlantic region.

“We have built a very rational and sustainable cost structure, which in my opinion was the biggest failure of AAF and XFL,” said Patricof.

Alyssa Naeher # 1 of Chicago Red Stars hits a loose ball during an NWSL soccer game between the Chicago Red Stars and the Orlando Pride at Orlando City Stadium on September 11, 2019 in Orlando, Florida.

Alex Menendez | Getty Images Sports | Getty Images

Show optimism

AU volleyball league has media agreements with CBS Sports Network and Fox Sports. Eight games will be shown on social media platforms including YouTube, Twitter and Twitch. The softball season had Disney-owned properties ESPN2, ESPN3 and ESPNU as media partners. The media deals are usually structured as one-year contracts.

A sports banker who spoke to CNBC on condition of anonymity said the network agreements were most likely split-revenue deals with AU. This means that networks offer free airtime in exchange for a breakdown of advertising profits. The bet here is that if the leagues should grow, AU can increase audience numbers to get more favorable terms with partners.

Patricof declined to discuss viewership, but said an independent auditor had set AU’s media value for its softball league at $ 25.9 million. The company did not provide the auditor’s name.

“It’s not the value of the commercial,” said Patricof. “It’s the value of integrated marketing, signage and everything else we’ve done on social media.”

He used the Olympics and NCAA as models that AU can emulate, especially for storytelling. AU wants the content around women to help build audiences.

“Every four years when the Olympics are held, people are intrigued by the personal stories and NBC Sports tells the stories about the players in amazing ways,” said Patricof. “That’s an essential part of what we want to do at Athletes Unlimited.”

Despite the challenges, AU is optimistic about women’s sports leagues.

Patricof said that free play games around his softball league through DraftKings have piqued interest in AU. He also used the announcement of Chelsea Clinton and Jenna Bush Hager’s investment in the National Women’s Soccer League on Wednesday as a sign of positive growth in the women’s leagues.

Patricof said he was more optimistic about AU than he was in 2019 when he built the model with Soros.

“You keep working on innovations,” said Patricof. “They keep questioning the status quo and keep looking for opportunities where other people don’t see them. The momentum is strong. … I think this is a good time to get into professional sport for women.”

Disclosure: CNBC parent NBCUniversal owns NBC Sports and NBC Olympics. NBC Olympics is the US broadcast rights holder for all Summer and Winter Games through 2032.

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