🏆 TKO’s $2.4B World Cup Success Comes With A Caveat

“The World Cup put On Location’s capabilities on the biggest stage in the world and confirmed what we’ve been saying. Premium experiences are in demand way beyond the 1 percenters who historically chased these experiences.”

Our Take: There’s a lot here, and the opening quote basically describes the whole thesis behind why we started this publication.

But behind the big numbers there is some nuance.

1) Following TKO’s earnings in August, I wrote the following about Shapiro’s comments that On Location’s margins weren’t up to snuff with UFC and WWE:

“What this tells me is that the middleman layer, while performed admirably by On Location, will become a commoditized business with compressed margins. And specifically, what On Location has done here is provide a playbook to not only itself, but also other rights holders. It shows why they would be best off operating these tiered offerings internally given that they’re 1) high-margin when they’re owned inventory and 2) there are only a small handful of third-parties that can make the economics work for outsourcing, since even a company with the scale of On Location struggles to be reasonably profitable as a third-party.”

Indeed, I feel even better about this call after the sentiment Shapiro shared in the Q3 call:

"Speaking of the Olympic Games, I should mention that while we are currently evaluating a partnership with the IOC on the French Alps, Brisbane and the Salt Lake City, Utah Games, we continue to demonstrate financial discipline and will only proceed if the return profile meets our internal thresholds, similar to our FIFA World Cup strategy."

The 2028 Olympics - which On Location holds the rights to - will likely be the largest sports hospitality event ever. AND YET, Shapiro is hinting at the possibility that it won’t bother with future games. [That, or a public negotiating tactic. Maybe both.]

And never mind the fact that conversations on earnings calls around On Location continue to end up back in qualitative talking points about learnings for UFC and WWE events and building a CRM.

2) Global demand is growing.

When you listen to the call and the effusive way in which Shapiro talks about UFC and WWE, you quickly begin to realize that growing global demand for sports properties with finite in-person inventory provides yet another tailwind for premium offerings and increased ticket prices.

You have more fans chasing attendance at a limited number of events.

UFC and WWE can serve a global audience more easily, because they can take their show on the road in a way that other major sports can only do to an extent (like NFL Games in London). But even they need to expand the surface area for revenue at some point through brand extensions, marketing and partnerships. Shapiro gave the example of some combo John Cena-WWE-Disney World-Avengers promotion in December. It was like a Mad Lib of Team America words, but clearly it’s all the same demo and WWE can be leveraged to reach it.

Sports assets are like one of those squeeze toys kids have — you squeeze hard enough (demand) on them and they either pop (bad, gross, probably toxic) or need to squirt out the side of your hand to provide some pressure relief. The little appendage outside your palm becomes movie promotions, experiences, merchandise, and more— it materializes as a result of the demand. It’s no surprise Fanatics and Disney were referenced here, because sports properties increasingly will need to function like Disney through in-person experiences combined with content, brand and marketing opportunities.

From a hospitality perspective, treating every trip to the stadium like a day at a Disney park would be a good place to start.

Our Take: I think loyalty points and premium hospitality events are a fascinating cross-section we’re still in the early innings of. The opportunities seem limitless as billions are being poured into mixed-used entertainment districts all over the world. Teams want to know who their biggest fans inside and outside the walls are and where they spend their money on gameday and non-gamedays.

Not to mention, clubs have the opportunity to generate year-long revenue for team-owned or partner hotels, restaurants, and bars with rewards they could put toward tickets, merch, or hospitality experiences and upgrades

Our Take: Allow us to borrow a few words from our last send:

Access. Access. Access. Baseball, more than any other sport, with its long seasons and drawn out games, could benefit more than any other sport when it comes to packaging premium and access.

The distinction here is that the experience exists outside traditional game day operations. Still, it highlights the ways in which clubs can monetize existing assets and generate incremental revenue without live competition. For the Rangers, it’s an example of how experiential access can be marketable in its own right, which may prove particularly valuable with a potential MLB work stoppage looming over the 2027 season.