Why Would DraftKings Need To Purchase A Media Firm?

A report that DraftKings was trying to purchase Bleacher Report (BR) was shortly shot down final month, however is the thought so far-fetched?

BR mum or dad firm Turner Sports activities stated it had “zero curiosity” in a deal and the corporate was not on the market.

A nonstory then? Maybe not, as DraftKings didn’t deny that some type of dialogue had taken place.

A DraftKings spokesperson stated the agency spoke to a “number of firms relating to varied issues within the regular course of enterprise”. The corporate stated it didn’t talk about the specifics of these conversations.

However with almost USD500m in money readily available, the mere existence of talks suggests DraftKings may very well be on the hunt for some M&A.

DraftKings able of energy

DraftKings’ hovering share worth might additionally assist it pay for any acquisitions through providing fairness within the firm.

“I doubt this Bleacher Report deal occurs however it does point out DK goes to go on an acquisition spree,” says Nigel Eccles, former CEO of FanDuel and present business marketing consultant.

“They may undoubtedly decide up a sportsbook media asset pretty cheaply.”

Who’s the goal?

As the unique Entrance Workplace Sports activities article prompt, Bleacher Report might have been a goal for DraftKings as a result of its proprietor AT&T is trying to scale back a large debt pile.

Nevertheless, there are many different cash-strapped media platforms that additionally might make sense for an acquisition.

SBNation, owned by Vox Media, noticed swathes of workers furloughed in April due to COVID-related monetary woes. In the meantime, Sports activities Illustrated writer Maven is predicted to lose USD30 million this yr and been pressured to make layoffs of its personal.

Both of these may very well be tempting takeover targets.

Why would DraftKings desire a media platform?

The betting business’s curiosity in media retailers is nothing new.

They theoretically provide a direct channel for reasonable buyer acquisition in a market the place person acquisition prices can run as excessive as USD500.

Media manufacturers additionally provide publicity to a distinct kind of participant too. Bleacher Report stated final yr it had greater than 3 million each day energetic customers. And a superb chunk of these customers are more likely to be informal followers not already within the DraftKings DFS database.

Does the media mannequin work?

Whereas the mannequin is broadly understood, it’s not significantly confirmed.

Fox Guess posted a lack of USD15 million in Q1, whereas one other media-integrated operator TheScore misplaced greater than USD6 million in the identical interval. After all, each agency is dropping cash within the US in the intervening time, however these firms’ losses are additionally approaching comparatively small market shares.

Elsewhere, offers between Penn/Barstool and William Hill and CBS are nonetheless too early-stage to have confirmed something a technique or one other.

The lengthy sport for US sportsbook betting

So DraftKings’ relative monetary energy seems to be at play, however what’s the strategic angle?

DK in fact has dabbled within the media sport earlier than. It launched DK Reside again in 2016 as a softer strategy to have interaction gamers alongside the core DFS product.

The idea has by no means taken off in an enormous approach, however whether or not DraftKings can truly run a media enterprise may be principally irrelevant.

“It doesn’t matter,” Eccles stated. “The only real purpose to purchase these belongings is to assist them turn into the primary sportsbook betting firm within the US.

“If [as an investor] you’re shopping for DK, you’re shopping for into them spending billions to turn into the chief in US sportsbook betting. One thing the dimensions of BR would undoubtedly assist – even when it may not be that environment friendly by way of buyer acquisition.”

If the US sportsbook betting market actually is a “winner take most” market as some – together with Eccles – recommend, then investing in a media platform from a place of energy might show to be cash effectively spent for DraftKings.