Does the valuation of the Miami Dolphins help determine profits at ESPN?

5 better valuation metrics for esports, sports, and technology investors than knowing how much the Miami Dolphins franchise is worth

Just like pro-team franchise value, Super Bowl prize money is also not a reliable indicator of revenues or profits in almost any of the ecosystem surrounding the NFL or even the sports-related businesses around Miami Dolphin stadium. What about esports?

With esports, Forbes (‘Awful Business’ Or The New Gold Rush? The Most Valuable Companies In Esports Are Surging) and other financial analysts focus on esports team valuations and prize money of various tournaments as current proxies for the health of the industry. If the value of NBA and NFL franchises is irrelevant to the profits in the sports industry, are investors focused correctly when summarizing franchise value in esports? If only a very few sports franchises are public-traded companies, are esports investors focused on the metrics that indicate the future value in the esports industry?

The Miami Dolphins franchise value has nothing to do with the value of sports gambling leader DraftKings; broadcasters like ESPN, NBC, and Tencent; sports equipment makers like Nike, Dick’s Sporting Goods, SportChek, and Riddell (makes football helmets and maybe sells several dozen to the Dolphins)? There is almost nothing important to know about the Miami Dolphins to determine the value of Electronic Arts, a company that makes NFL video games?

What are the other metrics, other than the valuation of the Miami Dolphins, that would help investors understand the value of the sports and esports industries and its various segments?

The way we analyze ESPN or Draft Kings has little to do with the valuation of the Miami Dolphins. We don't use the valuation of FazeClan to determine the value Twitch and ESPN that broadcasts esports. The valuation of an esports franchise does not indicate the value of Riot Games, Electronic Arts, or ePlay Digital - game intellectual property and audience owners.

6 perspectives on why IP ownership and audience matters

There are over 2 billion gamers worldwide. Only a very small percentage of gamers watch professional esports teams. In a recent article, Investing News Network (INN) dug into some meaningful metrics. Danielle Edward's INN article interviews various investment advisors, esports, and gaming leaders focusing on audience size and diversity of revenue sources.

Sean MacGillis, an investment banker at Haywood Securities, is quoted as speaking about how monetization of games is an "order of magnitude larger than the ability to monetize traditional forms of content".
Erik Dekker, of Canaccord Genuity, noted: "gaming is bigger than film box offices and TV".
Raj Lala, CEO of the Evolve esports ETF, talks about revenue from downloadable content and advertising and diversity of revenue sources in gaming.
ePlay's CEO, Trevor Doerksen, is quoted in the Investing New Network piece as focusing on audience size and monetization.
Enthusiast Gaming CEO Menashe Kestenbaum focuses on the size of the gaming audience as an indicator of growth in the INN article
Purpose Investments Nick Mersch talked about one gaming intellectual property and the size of its ground-up supported community

5 valuation metrics for investors

Unless we are investing in the Dolphins or FazeClan, which may be awesome investments, we should logically look at 5 fundamentals for gaming and esports investment.

How do companies earn revenue? What is their Average Revenue Per Daily Active User (ARPDAU)?
How big is their owned audience? What is the growth potential?
What intellectual property do they own and control?
What unfair advantages can they lever?
What are the companies that compare to them?

If we don’t use the value of the Dolphins to understand the value of Dicks Sporting Goods or other parts of the sports industry, there is no reason to use the value of a sports or esports franchise to determine the opportunity for theScore, Electronic Arts, Twitch, Riot Games, ePlay Digital, Apple, Google, or Blizzard.