Overtime's basketball league offers $100K salaries to teen players

A company called Overtime will pay young basketball players who are aged 16 to 18 years old a salary of $100,000 to play in its league. It would allow players to skip high school and collegiate levels before potentially being drafted into the NBA. CNBC's Jabari Young joins 'The News with Shepard Smith' to discuss. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi

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.

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The News with Shepard Smith is CNBC’s daily news podcast providing deep, non-partisan coverage and perspective on the day’s most important stories. Available to listen by 8:30pm ET / 5:30pm PT daily beginning September 30: https://www.cnbc.com/2020/09/29/the-news-with-shepard-smith-podcast.html?__source=youtube%7Cshepsmith%7Cpodcast

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