Scoring Big: Growing Sports Interest and the Rise of Sports Management Software

While professional sports management software presents a viable opportunity, this article will focus on community sports, which has seen a rapid acceleration in participation growth in recent years. There is a symbiotic relationship between professional sports and community sports—followers of professional sports are more likely to partake in non-professional/community sports in the form of gym membership, local sports leagues, after-school sports programs, etc. For example, the influx of high-profile athletes like David Beckham and Lionel Messi to the MLS has contributed to the growing popularity of soccer, resulting to increased participation in youth soccer academies across the United States.

Within the non-professional/community sports segment, non-scholastic, and adult sports clubs (i.e., privately owned) present the largest market opportunity, as the scholastic segment is largely captured by full-suite software providers that offer integrated solutions across sports and other scholastic applications (e.g., academic, music, attendance, etc.) For example, the youth league management software market alone is estimated to be worth ~$1B, driven by a strong culture of competitive team sports for children aged between 6-17 years old.

Note: Vendors play across market segments as workflows do not differ materially, e.g., non-scholastic youth clubs and adult non-professional clubs have largely similar use cases.

The vendor landscape in community sports management software is varied. Solutions range from full-suite platforms such as TeamSnap, which handles workflows across the entire player journey to specialized point solutions such as TeamSideline, which exclusively handles league management and tournament organization. Community sport clubs that adopt technology require a software solution for player registration. Other point solutions further along the player journey are then integrated into the database structure of the registration platform. As such, customer stickiness is highest for vendors which have registration offerings.

Participation in community sports among both youth and adults have accelerated over the past four years, with this trend reflecting consistently across different sports. Despite headwinds in the form of other activities competing with sports as leisure activities for youth (e.g., video games, social media, etc.), the overall outlook for participation remains positive, buoyed by the drivers outlined below. This interest has translated into a larger number of amateur/community sports clubs, each with its own software needs. The number of amateur sports clubs in the U.S. has grown from 57k in 2020 to over 78k in 2023, with total revenue growing by 65% over the same period from $11.3B to $18.7B.

Most of the positive tailwinds driving increased sports participation are secular, particularly within the youth segment where parents prioritize consistent and ongoing training for their children. Thus, dips in sports participation are uncommon, even in a recession.

In addition to rising participation, there has been a notable increase in software adoption by club organizers and league administrators. This upswing can be attributed to three primary factors.

An uptick in investment from VC and PE investors drove innovation in sports management software over the past five years. This includes sports-focused funds (e.g., Arctos Sports Partners) as well as larger outfits that have signaled their confidence in the sector (e.g., Bain Capital, Apollo, EQT Partners, etc.) While PE activity remained at a similar level through 2019-2022, most completed deals towards the end of that period were add-on deals for existing portfolio companies. VC activity remained robust, with a wave of innovative new entrants seeking early funding.

Innovations in technology mean that factors once considered key purchasing criteria, such as UI/UX quality and database flexibility, have become table stakes, making product differentiation more difficult to achieve. Therefore, the strength of vendors’ go-to-market strategies has become an important differentiator. For example, GameChanger, owned by retailer Dick’s Sporting Goods, has built out a strong sales machine and customer network among baseball and softball clubs, although its software is applicable to other sports as well. Alongside a strong GTM strategy, specialized offerings (e.g., golf ball-tracking at driving ranges and underwater apparatus to track swimming strokes), and flexibility with customization (e.g., adjusting data structure to fit customer needs) are increasingly the main differentiators.

2022 saw the first substantial wave of PE add-on deals completed in the sports management software space and suggests that sponsors are preparing their portfolio companies for exit. It is worth noting that following a spike in average deal size in 2021, 2022 saw generally smaller deals, as the set of assets of suitable size for PE sponsors had been largely acquired in the years prior. As such, activity in 2023 was muted in line with broader M&A trends across sectors.

However, the maturity of assets acquired over the past five years, coupled with strong macro tailwinds, mean that deal activity is expected to pick up again in the next few years. This is particularly true for PE compared to VC as the average vendor size has grown due to increased tech adoption and consolidation in the vendor landscape.

Over the next few years, deal volumes, average deal size, and valuation multiples are all expected to increase. Consolidation could be driven by strategics, such as NBC-owned SportsEngine and Dick’s-owned GameChanger, or by the growing universe of PE investors interest in the space. This consolidation is expected to take the form of combining point solutions with complementary use cases that serve a similar customer base.

Such consolidation would allow specialization at scale – while the total addressable market (TAM) for niche subsegments (e.g., Little League baseball, amateur swimming clubs only, etc.) is not sizable enough to attract mid-market and large-cap PE interest, the market opportunity can be attractive through a roll-up of multiple assets. Although there is currently an absence of an “800-pound gorilla” in the sports management software space, continued innovation and improvement in integration capabilities may enable successful specialization at scale.