Is Overtime CEO Dan Porter losing his mind?
The sports company’s co-founder recalled that reaction from former National Basketball Association Commissioner David Stern when he pitched establishing another hoops league.
Overtime announced on Thursday that it plans to start a basketball league for 16-to-18-year-olds allowing them to earn at least $100,000 per year.
The Overtime Elite league will let players bypass traditional high school and collegiate levels while building their brand before becoming eligible for the NBA. It will start in September with 30 players, and will be based in a single location, which is still under discussion.
In an interview Wednesday, Porter confirmed Overtime would pay all health insurance and allow players to earn bonuses and equity in Overtime. He also recalled the Stern’s skepticism.
“It’s a pretty interesting opportunity,” Porter said of starting OTE.
Overtime distributes original sports content on social media outlets, including Snapchat, Google-owned YouTube, and Facebook-owned Instagram, and sells apparel with its logos and branding. Most of the content revolves around high school or other amateur players, but it does not license highlights or material from major sports leagues.
Porter and Zachary Weiner, both former William Morris Endeavor executives, founded Overtime in 2016 with investments from Stern and others.
Since then, the company has built a massive Generation Z following from high school basketball players. The company has over 40 million followers across its social media channels and has built credibility among NBA stars like Zion Williamson and Atlanta Hawks point guard Trae Young.
The company says its content is streamed more than 1.7 billion times a month across all social platforms — mostly by Gen Z. Polls have suggested this group of 13-to-24-year-olders prefers highlights and quick sports content over traditional formats, and they favor basketball over other sports.
Overtime’s revenue comes from two sources. One is indirectly aligning with brands by integrating them into its content and making money off video ads. The other is direct revenue via e-commerce, where Porter says the company makes “millions of dollars” from apparel.
“Just like a sports team when you buy a hat or jersey,” Porter said, “people feel a part of that community, and they buy apparel to represent that. We think there is a big opportunity to lean into what is at the core of basketball for young people and create an apparel brand.”
Overtime declined to disclose its financials.
With OTE, Porter expects the revenue model to change a bit “from e-commerce and media to e-commerce, media, rights and licensing much like a league.” He said OTE eventually wants to sell its media rights.
“Not early on. We’re going to take our time,” Porter said.
Overtime is also engaged in active talks for brand partners and distribution for the league.
A new basketball farm system?
Porter said he spent two years speaking with families of top athletes to seek input about OTE. He said the families expressed disapproval of the current path to the pros, where prominent colleges make millions off talent in exchange for a free education.
OTE says it will provide top education, residences and training and will offer advanced analytics of players’ performance to help them improve. But the big advantage is that OTE will give players the right to capitalize on their brands while getting paid to participate.
“We are the only country in the world that forces you to go to high school and then go to college to become a pro athlete, at least in basketball and football,” Porter said.
As part of its collective bargaining agreement, the NBA prohibits players under age 19 from entering the league. Some players attend at least one year of college while they await eligibility; hence, the popular “one and done” term.
Porter referenced players like former NBA guard Brandon Jennings and Charlotte Hornets guard LaMelo Ball, who both bypassed college.
“We’re doing it based on the observation of how these young athletes are trying to change the system and make it work for them,” said Porter.
“We are a big platform, and that makes us a good place to go out and find talent,” Porter said. “We’re starting a league from scratch. We don’t have any legacy overhang. We can build a model that feels like a 21st century model both in terms of how start-ups and how digital companies are created.”
Porter said OTE could serve as a new pathway to the NBA. The NBA already has a noncollege route with its NBA G League Ignite program, featuring top high school prospects Jalen Green and Isaiah Todd. This route allows younger players to train in the program until they become eligible.
Should OTE players not pursue a professional career, it will provide an additional $100,000 for college tuition. But if youths do participate in the league, players lose their NCAA eligibility because they are receiving payment.
“It’s a professional path,” Porter said. “But unlike a pure farm system, this is competition. We expect tens of millions of people will want to tune in and watch. And why do we expect that? Because they are already watching on our platforms today.”
Portland Trail Blazers forward Carmelo Anthony, an OTE investor and board member, said many athletes aren’t properly prepared for the life of a professional athlete.
“We need to do a better job of empowering the next generation of players and setting them up for success,” he said. “OTE is leading the way on that front by offering players a comprehensive route that fully develops the athlete – not just basketball skills, but education, economic empowerment and building their own brand. Having this type of guidance for high school players is critical in setting them up for a successful career, both on and off the court.”
Seeking approval
Porter said early reaction around the league is positive, and it’s built with NBA names that can help OTE operate efficiently.
In addition to Anthony, investors include Brooklyn Nets star Kevin Durant and Silicon Valley venture capital firm Andreessen Horowitz. The commissioner is former NBA executive Aaron Ryan, and ex-Sacramento Kings assistant general manager Brandon Williams will oversee league operations.
“There is a lot of NBA DNA in this,” Porter said.
But Stern was most the influential. He was the first investor in Overtime, helping it raise $2.5 million in 2017, three years before his death.
Porter remembered Stern telling him to avoid starting a league. “I spent 30 years doing this. You do not want to do something like this,” Porter recalled him saying.
“But we’re annoyingly persistent,” he added.
As Stern watched Overtime take off among GenZ, he became convinced that OTE was a good idea and approved of it, Porter said.
“He said, ‘I think not only can you guys do this, but you need to do this,” recalled Porter. “We were like wow. That’s like a 180. That’s when we felt we could do this. When you build a company in this world, you can’t count on people giving you opportunities,” Porter added. “You have to make your own way.”
Source: Business - cnbc.com
