Media savvy: How will media giants attack the sports betting game?

Is talk of US media companies jumping into the betting business overblown, or are there real opportunities for the likes of ESPN, Sports Illustrated and Bleacher Report to cash in on the potential gold rush?

The demise of PASPA was hailed as a windfall of potentially epic proportions on both sides of the Atlantic. The promise of riches, however, was not just limited to gambling companies. “Sports betting could bring in billions for media companies,” stated a Variety headline. “Sports betting could soon be legalized and media companies can’t wait,” proclaimed Recode. The likes of Time Warner, ESPN, NBC and more were all linked in one way or another with sports betting, and not just as advertisers. Speculation ranged from media firms acting as operators themselves (ESPNBet anyone?) to acting as traditional affiliates with revenue share deals and the like.“The more risk people are willing to take, the more profit they can make,” says sports law professor John Holden. “If ESPN wants to turn their fantasy product into a sports gambling product, that’s the greatest opportunity for profit that exists.”

The model is indeed well-proven in Europe. Much of Sky Bet’s rise to prominence and a $4.7bn valuation was driven by cross-sell from free-to-play Sky Sports-branded games like fantasy football and Super Six, where players attempt to predict six correct soccer scores. After they’ve put their teams or picks in, players are offered the chance to place a bet on those results.It’s a perfect way to turn sports fans into recreational punters, and has spawned plenty of copycats. Most recently, former Full Tilt MD Dominic Mansour was named CEO of a newly created company that bundled together a betting and gaming platform with an online media company, GIVEMESPORTS.

Mansour said the firm would mimic the Sky Bet model, but with a 21st century twist.“We can put clips and highlights up, and the news alerts on the GIVEMESPORTS app are sometime quicker than the telly,” he said. “Imagine, ‘Cristiano Ronaldo just scored’ pops up, and you can click through directly to bet on Cristiano Ronaldo to score the next one. That’s what the 21st century betting experience is, and we can make that happen.”Mansour’s firm – Bragg Gaming – is taking aim at the US as well as the UK, and its model is a tantalising prospect for the likes of Bleacher Report, which uses push notifications as well as anyone and could simply partner with a white label sportsbook to get up and running.

Potential backlash

But, of course, there are significant risks with this type of partnership, as perhaps demonstrated by the absence of any major announcements in the US so far. First, there’s the operational challenge. For every Sky Bet, there’s a Sun Bets, the sportsbook established by the UK daily tabloid newspaper, which appeared to have all the pieces in place, with approximately six million people signed up for its fantasy football game. Indeed, the bookmaker reported very healthy sign-up numbers, but customers were quickly turned off by a poor product, ill-suited for the UK market (it was powered by Australian operator Tabcorp).

There’s also some legal and reputational risk. There’s plenty of uncertainty how the Wire Act will apply once firms are taking online bets in multiple states and beaming those bets back to servers in different states. “Does ESPN want that risk when it’s so uncertain and only 20% of the country is open for betting?” asks Holden. “If we got a new opinion on the Wire Act, that could get the ball rolling downhill.”  Charles Gillespie, CEO of affiliate company Group, agrees that the biggest media brands like ESPN are unlikely to be getting directly involved in betting, whether as operators or even traditional affiliates, with revenues share deals. “The Americans hold their brands as sacrosanct,” he says. “They are extraordinarily careful about how they spend with those brands and ESPN going to ESPNBet seems like a leap too far for them at the moment.”

The company itself has taken a very considered approach so far. It started airing a show on its ESPN+ streaming platform called ‘I’ll Take That Bet’, sitting alongside its Chalk section online and the Behind the Bets podcast. But the launch of one new show is hardly a sea change. “The [sports betting] space is very interesting to us from a programming perspective,” ESPN’s new president, Jimmy Pitaro, said in May.

“We have tried to find the places where it naturally intersects with the content,” Connor Schell, the network’s EVP in charge of content, said recently. “I think it’s something that we’re going to be thoughtful about and think about.” Indeed, with ESPN’s parent company, Disney, looming large in the background, it’s perhaps unlikely the brand would take such a major step in the short term. Disney was said to be one of the main reasons ESPN never invested in DraftKings back in 2015.

Taking it back to the old school

The more popular route into the gambling space so far has been the creation of gambling-specific content sections for the likes of Sports Illustrated and Bleacher Report. Both now churn out tips and betting article on a daily basis, albeit without a huge amount of substance. Fox Sports has also announced an hour-long weekday show dedicated to sports betting, called ‘Lock it In’.

“These media companies are licking their lips at the chance to cash in, but they are all looking to do it by traditional means and traditional media revenue models,” says Gillespie. “Sports Illustrated has a revenue model that works and it’s got no need to be an affiliate, it’s just selling advertising.”

The advertising opportunity alone is so vast there might not be the need to risk an affiliate play. According to a forecast from Evercore ISI analyst Anthony DiClemente, “sports betting could drive $7bn incremental US ad spend in 2019,” with around half of that money going to digital advertising. Barclays analyst Ross Sandler told investors he “wouldn’t be surprised if the online and offline casino and betting brands ‘scorch the earth’ with marketing spend right out of the gate.”

Howdy partner

But that doesn’t mean there aren’t native firms willing to make an affiliate play. The Action Network was formed last year through the amalgamation of several sports betting and DFS information sites, in preparation for the end of PASPA. While the site is ostensibly the bettors’ friend, charging subscription fees for insight and previews, its CEO sees affiliate fees and revenue share deals as the real golden ticket.

“If I have eight million qualified users spread around the country and each one can legally bet through a book and there’s an affiliate fee and a percentage of lifetime money, it’s like happy fucking birthday,” Szubski told Slate. “That’s the billion-dollar business.” Gillespie, though, is less bullish on US media companies successfully implementing an affiliate model, not least because of the regulatory issues they may face having already inked deals with illegal offshore books.

“At the moment in New Jersey they haven’t taken a hard-line stance against companies promoting offshore operators, but that will not be the case in other states, and I think New Jersey will continue to tighten its own restrictions,” he says. Even beyond that, US companies looking to compete on performance marketing could find themselves facing an uphill battle against listed European affiliates, which are unanimously making the US a priority. “The European firms have been doing this for 10 years and they understand it better than traditional media companies,” Gillespie says.

The big talk of media giants entering the betting world as affiliates and operators may be overblown in the current environment, it appears. The safe play of simply expanding existing coverage to include more gambling topics looks to be the route forward, and as noted above, should be plenty lucrative. Put ESPNBet on ice… for now.