Eilers & Krejcik Gaming: Could DraftKings be eyeing up another acquisition as well as Entain?

US online sports betting revenue leaderboard: FanDuel pacing the market

In the table below, we show our proprietary estimates of online sports betting gross gaming revenue (GGR) on a by-brand, by-state basis in the three-month period through July 2021. FanDuel is winning the biggest markets – Illinois, New Jersey and Pennsylvania – which is helping it win the national market. Indeed, the Flutter-owned fantasy sports specialist currently has 43% national GGR share, according to our tracking, which includes the low-visibility markets of Nevada, Colorado and Virginia.

*Only available online sports betting brand in the state

Source: State regulators/Eilers & Krejcik Gaming estimates

DraftKings eyeing up FuboTV?

This could-be acquisition is the latest indicator of DraftKings’ interest in plumbing the intersection of sports betting and media – and in potentially establishing a media enterprise of its own.

In FuboTV DraftKings would get a streaming television service with a growing base of nearly 700k subscribers through which it could play the sync-your-betting-app-with-your-TV concept that FuboTV is piloting; in this respect, a FuboTV acquisition would appear to be an extension of DraftKings’ own bet-through-your-TV strategy, which it is executing via a recently inked partnership with DISH Network.

Meanwhile, a deeper, flagship-style VSiN integration at FuboTV (through which DraftKings-owned VSiN is already offered) raises interesting possibilities. As do FuboTV’s existing subscription and advertising revenue streams, which the company expects to generate a combined $516m this year (+116% YoY).

DraftKings, for its part, would offer FuboTV what it lacks on the sports betting side –namely, brand recognition, a sizable market-access footprint and an in-house technology platform (we hear FuboTV’s forthcoming sports betting app will utilise Amelco source code).

Mash all of this together, and DraftKings-FuboTV is a not-uninteresting strategic combination. But we do note that with FuboTV, DraftKings would be putting itself behind a paywall, which is non-optimal from a user-acquisition perspective.

We also note that in the current climate of frothy sports betting (or sports betting-adjacent) valuations, FuboTV won’t come cheap; indeed, the company’s enterprise value at the time of writing was $4.1bn, or ~8x projected 2021 revenue. We also note that heavily loss-making DraftKings would be acquiring in FuboTV another business that is currently heavily loss-making.

theScore’s stack rumored to be running on Kwiff code

Since theScore recently announced that it would be launching on its own tech, questions about the provenance of that tech have come in thick and fast. And we understand the company bought source code from Kwiff to build on itself.

Kwiff is an online sports betting operator. It has licences in the UK and Malta and was founded by former Unibet creators Anders Ström and Karl Engström. The brand targets a more casual demo, with “random” odds boosts a key feature of its product. The Kwiff technology received some mixed reviews from industry channel checks – “fine but untested by heavy volume” was a typical response.

As for the general idea of riffing on acquired code, it’s a popular one in the US at the minute. Fox Bet iterated atop of Amelco source code; Hard Rock and FuboTV, meanwhile, are rumoured to be doing the same. This is a strategy that has proved successful in the past for others, and much of the UK online sports betting industry is built out on top of third-party technology.

The first high-volume test of theScore’s new tech will likely come in Q4 2021 or Q1 2022, when we expect the brand will launch in the Ontario online sports betting market.

Big online sports betting brands cooperating to corner markets

This summer, we’ve noted the emergence of a new trend in operator legalisation strategy, in which major sports betting brands that usually compete for market access and share are cooperating to acquire access for themselves, thereby delaying or shutting out altogether newer and up-and-coming brands that could eventually and collectively erode their market share.

In Florida, the DraftKings- and FanDuel-backed ballot initiative would expand a tribal-only market to include commercial online operators, but, critically, the first 12 months of operation (beginning no later than July 2023) would be restricted to brands “authorised to conduct online sports betting in at least 10 states for at least one calendar year.”

Any brand that didn’t make the cut for the July 2023 launch (but managed to be licensed in at least 10 states for all of 2023) could launch a year later, but it would be difficult, if not impossible, to contest a year-old market completely controlled by established brands. Per our tracking, DraftKings, FanDuel, BetMGM and Caesars are on track to make the cut for the first wave. Barstool, TwinSpires and BetRivers are in “maybe” territory, and most other brands are likely to be relegated to the second wave – if they make the cut at all.

Elsewhere, in New York, DraftKings, FanDuel, BetMGM and Bally Bet responded to the Gaming Commission’s Request for Applications with a single bid designed to, in FanDuel’s own words in its Executive Summary, “eliminate the need to select any other proposals”. The proposal is stacked with initial licence fees totalling $100m, a revenue-sharing scheme that is projected to deliver $600m to the state annually at market maturity, and a brand selection that includes the current top three brands in the US, which, per our estimates, currently control about 73% of the national online market.

Eilers & Krejcik Gaming LLC is an independent research and consulting firm with branches in Orange County, California and Las Vegas, Nevada. The firm’s focus is on product, market and policy analysis related to the global regulated gambling market. Clients include operators, suppliers, private equity and venture capital firms, institutional investors and state governments. To learn more about the firm, visit http://www.ekgamingllc.com.