Content kings: Are betting media acquisitions here to stay or just a fad?

As the old adage goes, content is king. And it seems DraftKings has once again proved itself a trendsetter as its acquisition of betting broadcaster VSiN has shone a light on the value of owning one’s content.

As with product and trading technologies, operators are coming around to the idea that building a content and media proposition inhouse is likely to be the most efficient and effective route to take on rising customer acquisition costs and attract a new demographic.

“Everyone is looking to replicate the Penn/Barstool transaction,” says David VanEgmond, founder of industry investment vehicle Bettor Capital and who was involved in the Penn National Gaming and Barstool Sports tie-up. “I think you’re going to see more operators deeply invest [in content creators].”

VanEgmond alludes to the rumored partnership between 888 Holdings and Sports Illustrated, as the two companies are said to be in talks to establish an online sports betting joint venture.

“I think that shows you how much a brand and marketing engine is needed to succeed in the US, or at least that’s the perception from where we are today,” VanEgmond says.

But DraftKings’ VSiN purchase signals a move away from large-scale, national media partnerships, looking instead towards more betting-specific content that is targeting a new kind of analytical and savvy bettor.

“It’s a pretty sophisticated sports bettor that’s going to listen in on the VSiN content,” Daniel Kustelski, founder of free-to-play sports game specialist Chalkline, tells EGR NA.

“It’s not going to be a $10-a-week parlay bettor, but somebody who’s gambling a bit more. It feels like DraftKings was probably trying to tap into the access that VSiN has [to those bettors].”

Beyond that access to higher-spending customers, it appears DraftKings is seeking to build a fully-fledged media empire, having just hired Verizon’s former SVP of corporate strategy and chief business officer Brian Angiolet as its first ever chief media officer.

In a statement announcing the appointment, DraftKings CEO Jason Robins said Angiolet deeply understood the value of content in boosting engagement, while Angiolet himself insisted he saw a massive opportunity to “unleash” the VSiN platform and integrate it with the world of content.

Jefferies analyst Dan Katz has projected the VSiN purchase would expand DraftKings’ acquisition channel and help achieve greater CPA efficiency. Katz does not expect the deal to meaningfully alter its near-term profitability, but rather positions the operator for greater profitability in the long term.

The Nasdaq-listed operator further added to its media armoury through a $50m rights distribution deal for ex-ESPN host Dan Le Batard’s popular sports podcast.

DraftKings has invested $50m into an exclusive rights distrubition deal for Dan Le Batard’s sports podcast

Le Batard’s podcast will be sub-licensed to radio stations and other streaming platforms as DraftKings also seeks to make money from selling advertising. The podcast, which averages 10-12 million monthly downloads, will also feature DraftKings odds and betting and DFS stats provided by the operator.

Elsewhere, Wynn Resorts made its own move into investing in content in February by buying a $3.5m stake in sports podcasting network Blue Wire in a deal that will include a podcasting studio built in the Wynn Las Vegas’ lobby.

The two will partner to produce a branded podcast for WynnBet, while the operator will also get advertising slots during broadcasts. Before approaching VSiN, Axios recently reported that DraftKings was in talks with The Action Network, although that fell through.

The report said the sale process for The Chernin Group-backed media platform had accelerated in recent weeks.

The end of independence

But where exactly is the value in acquiring these independent content creators versus a traditional media partnership JV, or advertising deal? For one, owning the content and not having to share it with competing operators can differentiate an operator’s offering.

VanEgmond also points out that a one-time acquisition payment could save money in the long run when considering the long-term nature of marketing deals.

“This is a five-to-10-year opportunity and you don’t want to be paying X million dollars every year when you could just pay to buy the company right now, own the content and get exclusivity such that you don’t have to share that content with other operators,” he says.

“If you look at what FanDuel, DraftKings, and BetMGM are likely to spend on marketing this year, it wouldn’t shock me if all three spent $500m+ in 2021 and by 2022 they are probably looking at closer to a billion dollars each,” he states.

“So, to spend $100m or $200m now on an acquisition that can help you own content for the next decade and reduce your customer acquisition cost, I think that’s an interesting strategy and probably a winning one to help fortify the moat against these smaller market share players.”

Some industry stakeholders have lamented this transition could signal the end of independent content providers, and ultimately, independent content.

Yet Chalkline’s Kustelski rightfully points out that Betfair (now under Flutter’s remit) has been in the content game for over 10 years, having acquired racing broadcaster TVG in 2009 for $50m.

At the time, the media considered Betfair’s incredibly early entry into the US via TVG a huge gamble but said the operator would have a significant head start over its competitors as the US opened up.

Sure enough, TVG enjoyed a record year in 2020 as average monthly players increased 60% and it also doubled its share of the overall racing market to 20%.

Kustelski says: “It’s a good example that might be a little outside the box. TVG is owned by Flutter and there is a horseracing tote [attached], but it’s not like they’re always pushing the [pari-mutuel betting product], they’re just promoting the sport and they’re providing betting angles.

“If you can provide angles, information, and insights it doesn’t really matter whether or not you’re owned by DraftKings, or FanDuel, or Barstool Sports, you’re just providing a pretty valuable service.”

Both VanEgmond and Kustelski believe new content creators will creep onto the scene to meet the growing demand for in-house media resources.

VanEgmond’s Bettor Capital invests in SportsGrid, another betting broadcaster that has worked closely with FanDuel for a number of years, including hosting branded content at its Meadowlands sportsbook venue in New Jersey.

Last year, SportsGrid dismissed questions from EGR North America on whether it was looking to be swallowed up by a betting operator, as it would rather continue to grow organically as a self-made startup.

“Most people see and recognize that their future is in sports betting. Whether it’s the biggest advertising opportunity for you if you’re a media company today, or if it’s the way you can build your legacy in the long term, you can be part of a big public company and a huge new opportunity in the US market.

I think most people are excited about that,” VanEgmond notes. Ultimately, the biggest hook for independent media companies should be the high valuations being handed out to companies affiliated with the betting industry.

It is easy to forget that in February 2020, when Penn National snapped up a 36% stake in Barstool Sports for $163m, industry commentators scoffed at the price, insisting it was hugely over-valued.

Just over a year later and Penn National’s Barstool-branded sportsbook has clearly been proving its worth, having scooped fourth spot behind, albeit a fair distance, FanDuel, DraftKings, and BetMGM in Michigan’s online betting market in February, with handle just shy of $40m and revenue of $4.7m.

Moreover, Penn National’s stock is up 535% in the past 12 months mainly due to the potential of Barstool Sportsbook and Barstool’s legions of fans, although the share price was up over 900% at one point in March.

The question really is ‘when’ and not ‘if’ more content-driven acquisitions will be carried out by operators. And if Flutter’s TVG business is anything to go by, the real value will be seen in the long term as to whether independent content  is not at risk of being lost to the corporate world of sports betting.