GOLDMAN SACHS: There's a fortune to be made analyzing sports stats
There's a fortune to be made crunching stats in a post-Moneyball world, and the potential for profit extends far beyond baseball, into everything from soccer to basketball.
At the core of the story is what makes anything sports-related intriguing to so many people: an undying competitive spirit that has franchises — even full leagues — chasing any possible advantage. And in this case, that edge comes from statistically analyzing mountains of athlete data.
For some context as to what's at stake, and how much potential there is for the still-fledgling industry, consider this: the aggregate franchise value for teams in the NFL, NHL, NBA and MLB, combined with 20 of the top European soccer clubs, totals nearly $200 billion, according to Goldman Sachs. That's roughly equal to the GDP of Portugal.
And that value is growing all the time. For example, while the North American professional sports market already rakes in a whopping $64 billion of revenue per year, Goldman forecasts that number could easily exceed $70 billion by the end of the decade.
"The natural marriage of science and sport is only strengthening," Goldman analyst Christopher Wolf wrote in a client note. "The insatiable thirst for a competitive edge, coupled with new technologies and advanced computing power (e.g., IBM Watson) is driving the evolution of sports from the analog to the digital era."
So what kind of advancements are being made? According to Goldman, teams across sports at all levels are increasingly using GPS trackers, accelerometers, biometric sensors and advanced optical player tracking.
In other words, cameras, machines and monitors are being used to track nearly every action and muscle twitch.
One specific application of advanced analytics can be seen in the NBA. The metric in question is "expected possession value," and it assesses a combination of ball-handler skill and the positioning of other players on the court to estimate how many points a team will score, based on a weighted probability of possible outcomes.
The data set is used by every NBA team, and stemmed from the work of a team of Harvard researchers. And it's just scratching the surface.
Another big part of the growth story of sports analytics is the possibility of trickle-down into non-professional athletics. And the market outside of the major leagues is huge. While there are only 13,700 pro athletes, there are 480,000 at the collegiate level and nearly 8 million in high school, according to Goldman data.
Going beyond the massive profit potential of dissecting sports stats, the growing practice could also play a "crucial role" in preventing injuries and aiding recoveries. Biometric data specifically can "help identify signs of excessive exertion, stress or fatigue," says Wolf.
With all of that said, all you fantasy sports enthusiasts, gamblers and video gamers out there are probably wondering: what about us? Well there's an upside for you as well. The rapid spread of analytics will ensure you'll have an ever-growing set of data-driven tools to defeat your co-workers and those pesky friends from high school.
As for that fantasy football-obsessed buddy — you know, the one that drafted Odell Beckham Jr. and won't let you forget about it? He'll have even more to discuss now, so tread carefully.