HUDL: The TikTok of the Sports World

A Play on the Coming Monetization of Student Athletes

Imagine a company with a technology service that 98% of all US high school football teams, 80% of high school soccer teams, 29 of 30 NBA teams, almost 70% of the MLS teams, and half the NHL use. Internationally, every soccer team in the English Premier League, most of the other major European soccer leagues, the Chinese Basketball Association, and more, are also users.

Let me introduce you to HUDL, the leader in video, data analysis and streaming for collegiate and high school athletics in this country. HUDL is positioned to become the TikTok of the sports world in the sense that they arm athletes, coaches and teams with video, data, and the tools to analyze, cut and post anything anywhere.

Want to analyze your performance using video and data analytics? Use HUDL. Want to create highlights and post them easily? Use HUDL. Want to livestream your games seamlessly and with minimal effort? Use HUDL.

HUDL’s purpose is to “give every athlete the shot they deserve.” And the company based in Lincoln, Nebraska is a powerhouse that no one seems to have heard of. Consider they have 6 million users, 180,000 teams and 40+ sports worldwide. HUDL has 1 billion highlight views and counting.

The reason investors should follow HUDL is that big changes are happening in the amateur athletic world. The “Name Image and Likeness” policy (NIL) of the NCAA just changed and it now allows collegiate athletes to profit off social media posts, appearances, sponsorships, endorsement deals, private training classes and more. In short, for the first time, college athletes can and will be paid. This is huge!

“I think a lot of college athletes are ready. We all have platforms, and all use social media.” Clemson University senior running back Darien Rencher told the USA TODAY Network and other media outlets.

ESPN surveyed experts and found “that star athletes could earn up to $1 million through social media while athletes in non-revenue sports could make between $1,000 and $3,000.”

In the age of Internet scale and economics, I think those numbers might be too low. Consider that BYU just inked a deal where all female BYU athletes can earn up to $6,000 a piece annually for sharing about a company on social media and participating in a few events. I think that $6,000 could be a bargain for the sponsoring company. Think of having 300 smart young women whose incentives align with promoting your company and themselves using social media.   

If anything, social media, especially TikTok, Instagram and Twitter have shown us what happens when you motivate smart, funny, and charismatic young people to create content and monetize themselves. They flourish.

The economic seismic shift this represents is probably one of the most under-reported stories on Wall Street. So, as an investor, how does one play this tsunami of capital headed towards student athletes?

I think social media companies like Facebook (NYSE: FB), TikTok (Private), Snap (NASDAQ: SNAP) and Twitter (NASDAQ: TWTR) will obviously benefit from student athletes leaning into social media even more. Twitter would be smart to focus on their new Tipping and Superfollows features to capture some of the tsunami that is coming (Reminder, I’m a bull on Twitter).

But the best positioned company is HUDL. While HUDL has made major inroads into high school football and soccer, the real opportunity is in smaller sports that traditionally are not filmed or easily shared. So, while 80% of soccer teams are using HUDL, how many wrestling or lacrosse teams are? Smaller sports, sports that haven’t filmed as much such as wrestling have huge upsides. Now that collegiate athletes can monetize their NIL, the value of producing video for these sports will skyrocket. In an era when schools and student athletes are supposed to promote themselves and are provided incentives to do so, how do you do this without video?

The challenge can be to create high quality video and that is why HUDL now offers their own video cameras that are incredibly easy to use including cameras that automatically follow the action and then upload and stream the video live. They already have an indoor camera; they just launched an outdoor camera and will soon be offering a portable camera. This will make it so anyone can operate it or just set it up in a fixed location and let it work all by itself.

This allows teams to provide professional-looking livestreams to people following online. They already have 150 cameras in stadiums, and this number is growing rapidly. HUDL even has an option where a camera costs nothing upfront outside of a small installation fee, but with a monthly subscription fee. Many coaches simply tweet out, check it out on HUDL:

Its indoor Focus system has already captured more than 190,000 basketball games and 95,000 volleyball games since it rolled out, so there obviously is a lot of potential there.

HUDL is backed by Bain Capital and Accel Ventures. Bain Capital has been pushing the company to be as aggressive as possible asking “how it can get its Focus cameras in as many stadiums as possible as quickly as possible.”

With the new rules around how student athletes can monetize themselves, HUDL has a massive tailwind that should accelerate its growth besides just its cameras. Just see HUDL’s recent marketing partnership with Gatorade or how it is now partnering on ticketing.

Ok, so excited by the upside potential of HUDL? Great, but why am I writing about a private company?

Well, because you can own a piece of HUDL too, when you invest in Nelnet (NYSE: NNI), a company that I call the “Quiet Technology Compounder” that is growing its technology investments through cash flow derived from servicing student loans and its massive student loan portfolio.

Nelnet, which owns 20% of HUDL, also runs an education payments division that has 40% market share of the private K-12 schools, owns 45% of a fast-growing fiber network division, a massive student loan portfolio in runoff and more. HUDL is just another example of hidden value inside Nelnet.

At a time when so many SPACs (Special Purpose Acquisition Corporations) are searching for great merger candidates and anything sports or gambling related is gaining crazy multiples and valuations (see DraftKings, ticker: DKNG), how is HUDL still private? I’m not Bill Ackman hunting acquisitions for my SPAC, but if I was, I would be begging HUDL to merge and go public.

But even if HUDL stays quiet and private, I know the company is growing by leaps and bounds and has a massive runway ahead of it. I would not be surprised if one day, Nelnet’s stake in HUDL is worth more than Nelnet’s current market cap ($3 billion). Nelnet may seem like a boring student loan company, but with holdings like HUDL, investors would be wise to pay attention to what is going with this quiet technology compounder.

P.S. I’m fascinated by the changes in the student athlete world. If you know of any other investments that are primed to participate in the great monetization of student athletes, please share it with me!