Long read

Cracking America: Can The Stars Group replicate the Sky Bet model in the US?

TSG is pinning its US ambitions to a 25-year media partnership with Fox Sports and the resulting Fox Bet product. EGR Intel speaks to Fox Bet CEO Robin Chhabra to find out more

The ‘Sky Bet model’ has achieved almost legendary status in the online gambling sector. It propelled the eponymous business to the status of ‘the UK’s favourite online bookmaker’ but has never really been replicated elsewhere – even by Sky Bet itself. However, Sky Betting & Gaming’s new owner The Stars Group is wagering it can repeat the trick through a new partnership with Fox in the US.

There will be two versions of the Fox Bet app – real money in states where it’s permitted and a free-to-play version to build an audience nationally. The partnership also calls for a full marketing integration, with traditional adverts as well as more native marketing in dedicated segments on Fox Sports networks and Fox’s digital assets.

The bet The Stars Group is making is massive. By the company’s own estimates, the US addressable betting market will be worth some $9bn by 2025 and Fox Bet will be the flagship brand for that market. The problem, as mentioned, is the media partnership model has never been successfully replicated.

And there is a school of thought that the model itself was not the driving force that made Sky Bet a success. Rather, the argument goes, Sky Bet succeeded because it was simply a good business; a talented team of executives who built a culture of innovation with a focus on technology and ultimately, a superb product. The launch of things like RequestABet, the Free Bet Club and instant withdrawals – all industry firsts – had nothing to do with Sky and were arguably just as important to the company’s success as a Super Six segment on Soccer Saturday.

Perfect conditions

Sky Bet also benefited in the beginning from a uniquely favourable context. Dominic Mansour, the CEO of Bragg Gaming, which has experimented with a media integration model, points out that Sky Sports had exclusivity for Premier League football in the early 2000s that Fox simply won’t have on sports leagues like the NFL or NBA.

“When they launched Sky Bet, Sky Sports had a monopoly on the best sporting content in the country, and eight million captive subscribers with a propensity to bet,” Mansour says. “Compare that to what Fox has today. ESPN is arguably better placed and then there’s competition online from the likes of DAZN which is absolutely motoring. US sports media rights are very fragmented which just can’t help.”

Richard Flint, the man who built that business, was asked recently by EGR whether the Sky Bet model was indeed replicable or whether they had caught lightning in a bottle in the UK. “Yes, it definitely can be repeated,” Flint said. He added, however: “A lot of what we did was how a good business is run in all sectors. We had a favourable context most of the time in a growing sector, and we had many things from Sky that were beneficial, but I think we would have been successful in a different context as well because of the fundamental ingredients of a great team and great culture.”

The question now for The Stars Group and Fox Bet is whether they can build a good business around the benefits they will get from the US media giant.

Greater reach

Those benefits from Fox Sports are indeed significant. According to Fox, it can reach 100 million people in a given weekend via its sports networks, social media channels and websites. Almost 80% of US citizens are aware of the brand and around 27% would consider betting with Fox – the second-best number among major US sports and gaming brands, only behind ESPN. And there is a very strong correlation between that betting consideration number and ultimate market share, Stars says.

Robin Chhabra fox bet

The Stars Group named Robin Chhabra as the CEO for Fox Bet in May

The key of course is integrating the Fox Bet brand properly into Fox Sports programming so customers feel as if they are betting with the network itself rather than a third-party bookmaker.

“This isn’t a badging exercise,” Robin Chhabra, chief corporate development officer for The Stars Group and the future CEO of Fox Bet, tells EGR. “Customers see through that. This is about deep integration, working with the talent and editorial staff on a daily basis.”

Fox Bet will have an office next to, or on the lot of, Fox Sports’ studios in LA, where staff will develop the kind of content that feels natural to viewers. At its Investor Day, Stars showed a clip of what it hoped to recreate in the US, showing Jeff Stelling and the gang engrossed in the dying minutes of a game where one goal would have given a Super 6 player a multi-million pound pay-out. It’s the type of organic marketing money can’t buy, and something Chhabra is keen to recreate with Fox.

The big question is whether the media giant is fully bought in, or whether it sees the opportunity for a quick buck. After all, Murdoch-owned media brands have a chequered history with failed bookmaking ventures.

Pot committed

Chhabra, however, says Fox is all in. “The reason this deal took a while to put together was the sheer depth of integration,” he says. “Fox is doubling down on live content in news and sports, and this is a key part of their strategy. We’ve had engagement from the top down. This wasn’t a typical M&A deal with lawyers and bankers thrashing out terms. We spent more time with the creative staff and the production teams, working out the fit and the creative terms. And it sounds cheesy but without that buy-in we wouldn’t have the success we believe we will have.”

The minutiae of the deal also suggests this is no get-rich-quick scheme for Fox. The agreement could run for up to 25 years; a nod to the potential slow roll-out of mobile betting in the US, and the fact that it took Sky Bet itself over a decade to really nail down the model.

“Fox understands this is a long-term play,” adds Chhabra. “You speak to the Murdoch family, and [Fox Corporation chair] Lachlan Murdoch has taken a keen interest in this. This is one of the longest deals they’ve done which gives you an idea of their view.” Fox also has the option to become a full 50:50 partner within 10 years if it is willing to go through licensing. If it does exercise that option, it would forgo the licensing and affiliate fees it will take under the current deal structure.

Fox Sports has brand awareness of 78% in the US. Photo: VI Images via Getty Images

Fox Sports has brand awareness of 78% in the US. Photo: VI Images via Getty Images

It seems like a tidy bit of business for the network; shares in the wider corporation jumped around 15% on the day the deal was announced, and it’s thought that other media brands want a piece of the action. Does that limit the appeal of the model, if it’s not unique? As Alun Bowden of Eilers & Krejcik Gaming noted: “Sky Bet was largely left to its own devices in the UK market to mine its brand-led niche.”

Fox Bet is unlikely to enjoy the same luxury, with NBC and CBS also seriously looking at their sports betting options. “I’m pretty sure some, if not all, of the other media brands will play a role,” Chhabra confirms. “We made no secret of the fact we were seeking a partnership, so we spent time with the other companies and I believe they’ll do something. It took years for Sky Bet to get this right though, and we’re coming into this relationship with that DNA in place, so we feel we have a sustainable advantage.”

But just how much of that Sky Bet DNA can be ported stateside? Several high-profile, well-respected executives have left the business since the Stars takeover, including former CEO Flint. One former Sky staffer admitted the exodus was a potential concern for Stars but pointed to the presence of Sky Bet MD Ted Moss on the Fox Bet advisory board, as a stable hand on the tiller.

Chhabra also dismisses any concerns, adding: “As far as talent is concerned, Ted is on board and he’s one of the architects of the model. Ted is giving significant time every month to this process and there’ll be a lot of transfers and secondments from Leeds. There’s over a thousand people in Leeds who are inculcated in the model. Richard [Flint] built a phenomenal business and the Sky Bet way is ingrained in all ways of working. A lot of that know-how and talent will be directly ingrained in the US business.”

Building a base

One of the most important areas for the Fox Bet teams to replicate will be the free-to-play (F2P) games due to be launched alongside Fox Bet ahead of the next NFL season. The football scores prediction game Super 6 has been a rich mine of new customers for Sky, and Chhabra expects more of the same in the US, with NFL predictor games a focus, but products on the way across a variety of sports.

As highlighted by marketing strategist Brendan Tinnelly, the F2P format could give Fox Bet the type of head start in not-yet regulated states that the DFS brands have enjoyed in New Jersey. “Today, three out of every four sports betting app downloads [in the US] are DraftKings or FanDuel,” Tinnelly noted.

“These are two operators who came to market with essentially zero expertise in sports betting, but who were able to parlay their brand and userbase into a significant lead in NJ. Their brand equity and userbases were built on an (almost) nationwide DFS business over the past five years, having a F2P product sidesteps the wait for regulation, allowing The Stars Group to build the Fox Bet brand ahead of time across the country.”

Fox Sports’ reach in numbers

2 – Second-most recognised US sports brand

99%+ – Reach of Fox Sports TV network

100m+ – Number of viewers Fox Sports can reach in a single weekend

4 – Main sports brands including FS1, FS2 and Fox Soccer

18m – User base across digital properties

28m – Facebook followers across the portfolio

The DFS comparison falls down somewhat because those players were already wagering money on sporting outcomes – of course they were easily converted to betting. Players on an NFL free-to-play game might not convert so easily.

However, the F2P format has other benefits beyond warming up customers for the eventual RMG app. In the UK, customers acquired via F2P tend to be stickier, Chhabra says. They also invite their friends to play in prediction leagues creating a network effect and regular activity that’s carried over into RMG. Around 60% of Sky Bet customers only bet with Sky Bet, suggesting the company is indeed reaching customers that traditional bookmakers can’t. “We’ve said all along that Sky Bet retention is off the charts compared to other firms in the industry and that’s a lot down to free-to-play,” Chhabra says.

Lightning in a bottle?

So far so good it seems, but there is one elephant in the room. Why has the model summarily failed in Italy and Germany? It raises that question again; was the UK a simply unique confluence of factors? Chhabra, however, argues that the model isn’t flawed, but rather the Sky Bet product wasn’t up to scratch in those European markets.

“The lead generation capability was very strong, but the issue was technology and our ability to convert and monetise those players,” Chhabra says. “So it was less to do with the model. The customers were coming through but the platform wasn’t what it was in the UK. And we’re addressing that now by moving Italy and Germany onto the BetStars platform.”

Indeed, an exec from a rival firm notes that Sky/Stars was the type of business to have learned from those failures and would be unlikely to repeat them. So how will Stars ensure the Fox Bet product is up to scratch? Chhabra declines to give specifics for commercial reasons, but the business is thought to be working on new US-sport specific models and CX that will reduce the amount of time in-play markets are suspended, and push customers towards higher-margin products like multiples, and request-a-bets.

The BetStars platform is also relatively well-regarded in the industry, with one rival sportsbook exec describing it as ideal for the US market. “It’s quick, clean, easy to use, and does everything you’d want it to,” the exec said. Another analyst was somewhat less bullish, suggesting it didn’t compare favourably to market-leading European offerings as currently constituted.

Fox Bet mock-ups released by The Stars Group

Fox Bet mock-ups released by The Stars Group

“Although certainly fit for purpose in the US, it likely lacks the cut-through needed to help the brand stand out at the current time, with marketing probably needing to do a lot of the heavy lifting in the early days barring some big leaps forward in front-end,” the analyst said.

Stars ultimately plans to move Fox Bet onto the global sports trading platform (GSTP) it is building, but that project is thought to be a couple of years away from being operational. Meanwhile, GVC and William Hill could have products live on new platforms for this upcoming NFL season, potentially putting Fox Bet behind the 8-ball on the product front.

“They will have to hope not too much ground is lost prior to that,” the analyst said. There may be some respite in the fact that product could be relatively less important in the early days of the market, with initial market share won or lost with marketing, where Fox Bet should have the edge. As Mansour notes: “With rapid market growth, product is secondary. It’s when the market stabilises, you need a great product to stand out.” That development was the case with Sky Bet, and Fox Bet will be looking to follow a similar arc.

End game

Looking back to the original question then; can Stars replicate the Sky Bet model in the US? There are plenty of concerns, starting with the relative fragmentation of US sports rights; Fox won’t have a captive audience the same way Sky did, and other media giants could soon join the sports betting fray.

There’s also uncertainty around product. Fox Bet could conceivably be behind rivals upon launch for this NFL season, and achieving parity or superiority will likely be reliant on the GSTP which at present is closer to a twinkle in a programmer’s eye than an operational sports betting platform. That said, there are some unique advantages and opportunities for Fox Bet. Many of the architects of the original Sky Bet model are still in the business and bring almost two decades of direct operational experience with a media partner. The same can be said for F2P games, which could provide a massive acquisition edge.

Finally, Fox seems committed to this partnership for the long haul, having already invested some $236m in Stars, with options for more equity in the US business down the road. It seems if the Sky Bet model is ever to be replicated, it will be Stars with Fox Bet.

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