From September 26 through 29, members of Bowen Asset Management attended the “Emerald Groundhogs on Tour 2019” investment conference in Las Vegas. This annual event, presented by the Lancaster County-based Emerald Asset Management, is an always informative and sometimes challenging look at investment opportunities, social trends, and emerging technologies and businesses.
Apart from the usual focus on economic numbers and the current state of investors’ attitudes and confidence in the market, the themes of this year’s conference were mostly centered on arena sports — whether competitions played on a physical field or virtual “esports” played on computer screens — with a smattering of consumer confidence analysis thrown in.
As always, our aim was to learn as much as possible and use that knowledge in the service of our investors. As we report on the conference, bear in mind that any specific companies we mention are part of our continuous information-gathering process. We are not recommending any specific firms, but we are looking at them as bellwethers for investment trends.
Besides presentations from companies, part of our time in Las Vegas was spent taking a deeper dive into the prospects for esports, which included visiting the state-of-the-art HyperX Esports Arena at the Luxor Hotel and Casino.
What is esports? It’s short for “electronic sports,” and it basically takes playing video games to a professional level, with sponsors, prize money, arenas, and broadcasts (primarily through streaming sites such as Amazon’s Twitch). Those involved claim it could rival the NFL or NBA someday, though that remains to be seen. The numbers are quite compelling from a marketing-revenue standpoint. It is a booming phenomenon, from teams forming at high schools to some professional competitors earning millions of dollars. The numbers show a growing global audience, both online and live.
At the Luxor, we attended a Fortnite tournament, took in a behind-the-scenes tour, and talked to management, staff, competitors, and competitors’ parents. (The age range of participants is from 12 to 20, and the winner of the tournament we saw was 15 years old and already being recruited to leave school and turn pro by sponsors). We’ll have a more in-depth look at esports in a future report.
As for more familiar sports, the kind played on a field, one of the more interesting presentations was by VICIS (pronounced vy-siss), a Seattle-based maker of helmets for athletes. The presentation by CEO and cofounder Dave Marver was compelling, emphasizing how concussions affect athletes, especially football players. For example, an NFL hit can exert one ton of force, and the health risks players are taking have been documented in news stories and medical studies. But the rates of concussion at all levels of competition are rising. The impact on a skull strapped inside a football helmet subjects players to rates of brain injury equal to that of soldiers in combat. The number of these injuries is rising and so is the potential liability of those involved in contact sports. Short of reducing the amount of violence in the game, improving the protective gear to lessen the possibility of injury seems to be the best solution.
Marver, while acknowledging that no helmet can eliminate concussion risks, pointed out that innovation has not kept up with what is “a major public health problem.” VICIS, founded in 2013, engages top athletes, engineers, and neurosurgeons to develop improved head protection in what has become a $5 billion market. By approaching the problem as a tech company rather than a sporting goods maker, VICIS hopes to make a difference. The firm won the NFL Head Health Challenge in 2017.
Marver particularly focused on VICIS’ Zero1 helmet, currently worn by NFL stars such as Kansas City Chiefs quarterback Patrick Mahomes and by players on 28 teams throughout the league. It’s also being used by a growing number of college programs, as well as some high school and younger athletes.
The helmet has shown to be significantly safer, depending on impact and velocity, Marver said. The Zero1 features a buffer of filament rods that buckle omnidirectionally to absorb impact, along with a flexible shell and an individual form-fitting capability to avoid the athlete’s head taking the brunt. (Still, as the firm’s promotional video pointed out, “a correlation between impact reduction and a reduction in concussion risk has not been established.”)
So far, the market of purchasers for these helmets is divided into three targets: the NFL, college football teams, and high school and younger players. The per-helmet cost can be as high as $1,500 or even more with custom colors and markings, but the NFL is the trend-setter for the other two markets. We were told that NFL teams generally make the purchase decision themselves, with each player making the choice to use one of five team-approved manufacturers’ helmets in a selection guided by the team medical staff. Reviews from NFL players using the Zero1 helmet include one from Dallas Cowboys tight end Jason Witten, who has special experience with injuries — he once returned to the playing field only a few weeks after suffering a lacerated spleen: “This [helmet] is like a Ferrari.”
The aim is that colleges, high schools, and younger players will follow the lead of the NFL market. The college-purchase decision on helmets, VICIS management indicates, is generally left up to the university and bought in bulk. The high school team purchases are generally made by the school district, but VICIS management indicated that they are also seeing parents purchasing helmets individually. The Zero1 helmet is expensive, twice the price of a regular helmet, but so far 20% of sales come from parents who buy directly, Marver said. The company target price is to bring the cost down to the $400-to-$600 per helmet range in these amateur athletic markets.
VICIS is also working on developing soccer headgear and has a deal with the world champion U.S Women’s National Team.
In addition to the firm’s work in athletics, VICIS is working to adapt their football helmet technology for use in advanced combat headgear for the military, after a 2016 request from U.S. Army medical staff. As of 2018, the company has a contract from the Natick Army Labs in Massachusetts to work with the Soldier Research, Development and Engineering Center to support this effort.
That was just the beginning of our visit to Las Vegas. More to follow on the interesting and informative presentations at this investment conference.
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