Making a point: PointsBet’s push for widespread recognition

Having entered the US back in 2018 as a small and largely racing-focused Australian betting operator, PointsBet sought to conquer the country’s betting audience with its savvy proprietary product and nuanced promotions aimed at sharps and high-spend bettors.

Two years on, the company boasts established headquarters in New Jersey and Colorado and has signed a myriad of sponsorships with sports teams after entering four states, in two of which it plans to operate igaming. After a ceaseless search for a meaningful media partnership to rival its competitors’ continued efforts to gain traction with media giants and institutional investors, the operator penned a five-year contract to integrate its betting product into NBC Sports’ multi-channel broadcasting estate.

Where PointsBet and NBC Sports’ deal stands out above the rest is in the equity agreement that will see NBC take an initial stake of 4.9% in the operator, as well as options for shares worth $77m after those first five years.

Unpicking the NBC Sports deal

PointsBet US CEO Johnny Aitken says having NBC Sports take an equity position in the operator was a crucial facet of the partnership to differentiate it from more affiliate-style media deals across the industry and to ensure NBC has fully invested in the PointsBet narrative.

“Having had a seat at the table of other potential media opportunities, equity just wasn’t in the discussion,” he tells EGR North America. “The others were more cash deals and in those you have to question how motivated the media partner is to drive continued success for the partnership. Once they have the cash, what’s their extra motivation to extract that value? We made that very clear with NBC Sports,” he adds.

From NBC’s perspective, PointsBet is likely to be in a position to offer up more of an equity stake than other operators, Eilers & Krejcik Gaming partner Chris Grove recently noted on Twitter. “That equity stake isn’t as complicated by other factors. For example, PointsBet doesn’t have the same international or retail overhang as some other operators,” he added.

Since entering the US, PointsBet often had a seat at the table to discuss many established media partnerships but had always intended to secure a partner that shared PointsBet’s brand quality and overall ethos – regardless of how lengthy the process might have become.

Back in January, the firm hired former CBS Sports executive Eric Foote to lead the charge on establishing a perfect deal as its peers also scrambled to tie down partners to aid customer acquisition efforts and offer expansive national or regional reach via digital marketing.

Chief commercial officer Foote told EGR NA in April that PointsBet was seeking a media firm with an expansive digital technology footprint, and not just the traditional broadcasting reach of television and radio.

Today, Aitken echoes the same sentiment as he details NBC’s technology assets. “Part of the NBC decision to partner with PointsBet was not only the people that we have, the alignment of the management teams and how they see sports betting and sports media evolving, it was also technology,” says Aitken.

“The fact that we completely own our technology in terms of integrations across a huge portfolio of assets was of extreme appeal.”

As the two parties explore the potential of their technology synergies, Aitken says they are already considering smart home opportunities that would tie-in aspects of both tech stacks. One such example is integrating PointsBet odds and promotions into NBC-parent Comcast’s Xfinity remote, which already possesses built-in voice assistant technology.

“That gives us the capability to speak into the Xfinity remote, and say, ‘Give me PointsBet odds, give me a PointsBet promotion, what price is LeBron James?’ But I believe, over time, we can unveil custom content creation as partners,” the chief executive suggests.

A regional perspective

And with access to NBC Sports’ array of regional sports networks (RSN), Aitken envisions PointsBet odds and bettors’ picks being integrated into live streams of games to create a truly immersive experience.

“That’s a future vision that both of us have,” he adds. NBC’s localized spread will offer a significant breakthrough for the Australia Securities Exchange (ASX) listed company in bolstering its marketing reach.

RSNs in Chicago, Boston, Philadelphia, and Washington DC will help close local advertising gaps and increase the firm’s exposure in certain regions of a state where access would otherwise have been limited.

“We have a handicap of not being live in Pennsylvania or New York and therefore all of our activities have been very disciplined in relation to marketing investment through digital channels,” Aitken notes.

“New York supplies the North of Jersey with above-the-line media and Philadelphia supplies South Jersey with above-the-line media. If you’re not live in New York or Philadelphia, there’s an incredible amount of wastage and spillage of spending on expensive assets,” Aitken explains.

PointsBet is particularly vocal in its views on the limited outlook for mobile betting in New York. The Empire State’s latest bill supports a single-skin system that will only grant licenses to a handful of operators including DraftKings, FanDuel and Fox Bet.

New York is a key state for PointsBet, but under the current proposed legislation it might be left out of the market. “The idea that single-skin legislation should move forward [when multiple skins is an option] will effectively create two different starting lines for operators and consumers, likely years apart,” says Paul Hannon, PointsBet VP for strategy and retail.

“It will also limit the market’s potential and consumer choice and ultimately force the state to revert to another gaming expansion to fix it. We encourage New York to get legislation right from the start so the issue does not need to be corrected years down the road.”

The likelihood of mobile betting being set live in New York during its current legislative session is low, as the discussion continually gets pushed back in favor of what the house considers more pressing matters. But as the state clambers to secure funding lost during its challenging fight against Covid-19, the topic could crop up again.

And when it does, PointsBet will be ready to lobby the cause. One state Aitken has high expectations for is Illinois, which the operator entered in early September. NBC Sports’ regional Chicago networks are expected to provide the operator with a digital reach of 5.2 million viewers, including Spanish network Telemundo.

PointsBet will also earn exclusive advertising rights for local sports teams. “In relation to remote [betting], we now have the force of NBC behind us, and with that RSN, which has the rights for the Chicago Bulls, Blackhawks and White Sox, we could be a really dominant player,” Aitken explains.

“If the governor and the regulators make the decision to re-implement the in-person registration requirement, we have the superior footprint when it comes to placement via the four sportsbook locations throughout the metro area of Chicago.”

He adds: “We’re positioned to lead the way and we’ll let the governor and the regulators make the best decisions for the wider community, but we have plans to be strong in either scenario.”

PointsBet is equally as bullish about Michigan, particularly considering the state’s intention to launch igaming in the next few months. Michigan will offer the operator a clean slate to supply its in-house-developed casino offering, which it will also roll out in the already saturated market of New Jersey.

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An eye for gaming

It seems only natural for PointsBet to make the move into igaming to tap into a world of customers it is currently missing out on while boosting its buoyant mobile betting business through the magic of cross-sell.

On this topic, PointsBet chief innovation officer Seth Young says: “We’re a sports-led brand but having a world-class product on the sports side means we want to have a world-class product on the igaming side too. It’s about creating a holistic entertainment experience for our customers as we continue to scale in the US.”

But as with any proprietary product, the concept, development and integration into an already fully fledged sports betting tech stack will all take significant time and effort. And in that respect, PointsBet has chosen to forego early entry into the igaming space in favor of building its entire product stack.

“We thought, owning what we can, controlling what we can control, having the flexibility and adaptability to do what makes sense in this market was really, really important for us,” Young says, echoing the operator’s ethos to control its own technological journey.

While Michigan might offer the firm a clean slate from which to gain igaming market share, New Jersey will be a much tougher nut to crack. Eilers & Krejcik Gaming’s latest breakdown of igaming share across the established igaming states of New Jersey, Pennsylvania and Delaware (West Virginia launched in June and was not included in the graph) estimates that 54% of the market is dominated by FanDuel, DraftKings, Rush Street Interactive and Roar Digital, leaving the remaining 20 or so brands with single-digit shares.

Covering May to July, Eilers & Krejcik Gaming’s breakdown reaffirms the increasing value of Pennsylvania igaming in the fight for market share and overall brand recognition. But it is not a state of interest for PointsBet, with Aitken revealing the firm had deliberately chosen to avoid it – for now.

“Pennsylvania is a state that we assessed early on and, due to many reasons, it’s a state that we deliberately chose not to participate in,” he says. “We have opportunities within the state there that we could potentially unlock and we’re assessing that at the moment, but our focus for the next year is to roll out Illinois, followed by Colorado, followed by Michigan.

After that, there is probably another five or 10 states we could go live in. Pennsylvania might be one of those or it might not, we’ll see.”

It was during the Covid-19 lockdown and the professional sports lull that the operator was left with a very limited business offering compared to its multi-vertical competitors, resulting in the decision to pull a vast amount of marketing spend between March and July.

“We don’t have an online casino and so our discipline when it comes to CPAs is very different to other competitors,” Aitken insists.

“When Covid-19 hit and all the headline US sports ended, we didn’t feel confident that we could continue spending and that what was left in terms of the sporting calendar would allow us to monetize clients to get that payback. So, we basically turned off the taps in relation to marketing investment from the middle of March to part of July.”

Full steam ahead

But the firm was back in full force by August, signing multiple sponsorships with sports leagues and teams as it reached a turning point. That was when Aitken realized the next phase of growth could predominantly come from a major marketing boost and integrating its product deeper in sports.

The NBC deal opens the operator up to a potential audience of 184 million sports fans via multiple channels and verticals, including its golf booking app GolfNow, the aforementioned Telemundo, and fantasy content provider Rotoworld.

“That diversification of assets, specifically their existing digital footprint and their intent and capability financially to invest a lot of money to be at the forefront of digital technology and digital platforms and how sports play a part in each platform, was of high appeal,” Aitken reveals.

The PointsBet US CEO says this turning point came around shortly after the operator entered Indiana in March. Having been live in New Jersey since January 2019, the firm hit a barrier in the Garden State, solidifying a maximum market share of 8.7% for betting in June 2020.

And although the percentage dropped slightly in the first three months of the year, it has grown steadily overall despite the operator’s lack of igaming and retail betting. “Our growth in New Jersey in some respects has been remarkable by the fact we’ve had to build a brand solely through digital channels,” he admits.

“But now, as we enter markets like Indiana and Illinois, these are states that have clean DNAs and clean TV markets and having that superior product and knowing how to be creative with promotion and pricing, we can now really support that with heavy duty TV spend, and I guess run a more ‘traditional’ marketing mix.”

New Jersey was the test bed for the operator, enabling it to gauge a betting audience response to its product. And with the Garden State having proved a success, it now seeks to heavily increase spend across the business to make a play for the big leagues, alongside the likes of DraftKings, FanDuel, and Roar Digital’s BetMGM.

To do so, the operator sought to raise upwards of $250m by restructuring its shares and offering up 23.6 million new stock options. Under the Entitlement Offer, proposed in early September, current PointsBet shareholders could subscribe for one new share for every 6.5 existing shares.

Although Aitken could not reveal any details of the capital raising efforts or how the funds were to be distributed, a company prospectus released to investors said the money would be invested in customer acquisition efforts and further developing the technology platform as it continues to hire developers for both igaming and betting.

Undoubtedly, this additional capital will contribute to PointsBet’s $393m marketing splurge pledge it made as part of the NBC Sports contract. Beyond that, Aitken is eager to express his intention to secure more major media deals in the future.

“This isn’t the sole deal for us. It isn’t 100% or even 50% of our planned investment in the US market over time, it’s just part of our defined product marketing strategy,” says the CEO. “This isn’t all of our spend. This is planned money that was always allocated to be invested in TV and digital.

“We still have the capabilities and the capital to go and look at other material opportunities in the digital and TV spaces. This isn’t the only deal that PointsBet will do.” Elsewhere, the operator has set itself the target of achieving one million active users.

The firm also aspires to win 10% market share in each state it enters. During its 2020 financial year, which ran to June 2020, PointsBet’s US net win increased from a $0.5m loss in 2019 to a $5m profit, with turnover also rising by 317% to $228m.

“We feel very confident in our strategy, we’ve never deviated away from it,” says Aitken. “These estimates and numbers are very achievable because it’s America and it’s the biggest market to ever open up to legalized sports betting.”

He concludes: “We put a date on the board when it comes to market access, but there’s still a lot of key states to come and having the weight of NBC behind us, and continuing to show our execution capabilities in New Jersey, Indiana and Illinois, puts us in an extremely strong position to win future market access.”