New York's mobile-betting push could be a gold rush for media companies. But big questions remain about what model the state will adopt for sports gambling.
- New York governor Andrew Cuomo this week announced legislation that could bring mobile sports betting to the US's largest media market.
- Industry experts told Insider the state's sports-betting expansion could have big implications for both national and local media companies, as well as sports-media brands.
- It could create a windfall of new advertising dollars, spur deeper relationships between media companies and gambling operators, and boost the valuations of some sports-media brands.
- But there are still many questions about how the state roll out mobile sports betting that will affect how big the opportunity is.
- Visit Business Insider's homepage for more stories.
New York governor Andrew Cuomo this week announced legislation that could bring mobile sports betting to the US's largest media market.
Word that mobile betting might soon be coming to the state, where gambling on games is currently only permitted in-person at casinos, has propelled the stocks of sports-betting providers including DraftKings.
But industry experts say New York's sports-betting expansion could also have big implications for both national and local media companies based in the state. The legal sports betting industry, which is currently more focused on growth than margins, could create a windfall of new advertising dollars and spur deeper relationships between media companies and gambling operators.
As the nation's fourth-most-populous state and the home to professional sports leagues, national broadcasters, and the financial sector, New York is also a symbolic tipping point that could bring legal sports betting to the national stage. It's one of major four states, along with California, Texas, and Florida, that the industry has been eyeing as a catalyst since the Supreme Court struck down the federal ban on sports betting in 2018.
"New York will be viewed as something of a watershed, as the first of the big four states to open up," said Chris Grove, gambling-industry analyst and partner at Eilers & Krejcik Gaming. "It reframes everyone's thinking about, 'When does the future come? Is the arrival of the future imminent?'"
There are still many questions, such as whether New York's legislation will shape up to look more like DC, which stumbled out of the gate with its city-owned betting app, or New Jersey, which welcomed myriad betting providers and has outpaced Nevada in dollars wagered on sports. Cuomo is expected to make his proposal as part of his State of the State address next week, which will likely be followed by negotiations with the legislature and other parties such as tribal interests.
"What it ultimately manifests in and how long it takes for this moment to translate into action is an open question," Grove said. "But this is legitimate momentum."
Sports betting could send more ad dollars to national media, and seek deeper partnerships
Pretty much every major US broadcaster has made inroads into sports betting already. Fox, CBS, NBCUniversal, ESPN, Turner Sports, and Sinclair Broadcasting all have various partnership deals with betting providers.
Some of them are mainly marketing or sponsorship deals, where a sportsbook makes a big media buy and a media company links out directly to the sportsbook, for fees. Others include on-air integrations, like using a sportsbooks odds, betting data, and logo during broadcast segments.
New York's sports betting expansion will likely bring more attention to the industry, and pave the way for deeper integrations by these companies. That could include more media companies taking equity stakes in betting partners, like NBCUniversal took an equity stake in PointsBet as part of their $500 million pact.
The most promising media and betting tie-ups have "an alignment of interest between the media company and provider," said Ramy Ibrahim, managing director at Moelis & Company, pointing to the NBCUniversal and PointsBet deal as an example.
It might also encourage national broadcasters to make sports gambling — once taboo in national discourse — a larger part of the conversation on-air during live matchups and other programming.
"Once it's in your backyard and you see and breathe and experience what sports betting has to offer, it raises the awareness of the industry," said Sara Slane, founder of gaming-industry consultancy Slane Advisory. "The mainstream piece of it becomes more palatable."
The more immediate windfall for media companies could come in the form of greater advertising dollars. Daily-fantasy-sports companies DraftKings and FanDuel flooded the airwaves with advertisements was fantasy was getting big. And, in states where sports betting is legal, betting companies are also pouring money into ads and opportunities to link out to their sportsbooks, as they vie for gamblers and try to grow the pool of sports bettors.
In the early days of legal sports betting in New Jersey, DraftKing revealed in filings that it had cost, on average, $371 to acquire each new customer in the state during the second half of 2018 and $406 during the first half of 2019.
In New York, the ad dollars could flow not only to local radio and TV stations, but to national outlets. New York is the largest media market in the country. For operators with sportsbooks in multiple states, New York could tip the scales and make it more cost effective to consider national media buys.
"You'll start to see the pendulum shift to a desire to create and use more and more national media outlets versus what's been happening now," Slane said.
The size of the advertising opportunity hinges on how the state ultimately structures access to the New York market. If, for instance, it limits access to one or a few betting providers, there might not be as much competition for bettors, and consequently, as many advertising dollars to go around.
Betting providers also need to be careful with their marketing blitzes, lest they tick off regulators like the daily-fantasy-sports sites did back in 2015 by bombarding audiences with ads promising easy money.
The spotlight New York brings to sports betting could also boost the valuations of digital-first sports-media brands
New York's new sports betting ambition could also propel the next round of dealmaking with sports-media outlets.
Last year, regional-casino operator Penn National made waves buying a stake in Barstool Sports, and making the popular sports-media brand the face of its sportsbook.
That tier of sports brands, including such outlets as The Athletic, Sports Illustrated, The Action Network, Bleacher Report, and Overtime, are likely to be even hotter targets for potential partnerships or takeovers by other operators who want to reach their audiences of sports fans. The hope of sportsbooks is that tying their platforms to media brands with loyal sports followings will get more people to place bets and become loyal users.
"This is great for them, those digital-first, younger generation offerings," said Ibrahim, the banker at Moelis & Company. "That second big bucket of sports-focused companies is going to benefit from higher valuations."
There are also quite a few special-purpose acquisition companies circling the sports and sports-betting space that are likely to consider acquiring sports-media outlets this year.
"You're going to see in next 12 months just about every media company you can think of with a sports or sports- gambling angle credibly mentioned as candidates for roll up within a SPAC," said Grove, the Eilers & Krejcik Gaming analyst, who is also working with a SPAC.
Beyond media, there are other big deals that could gain momentum
There are other big deals beyond media that could gain momentum from New York pushing further into sports betting.
More US casino companies have been targeting European and international betting operators since the pandemic halted much in-person gambling. MGM Resorts is in talks to acquire Isle of Man-based Entain, for example.
Operators like 888 Holdings could be snapped up by a brick-and-mortar casino looking to move into online gambling like Wynn Resorts, or even a SPAC, according to Jason Adler, gaming analyst and CEO of SpringOwl Asset Management. He added that there are only a handful of big deals left to be done.
"The speed at which these companies are consolidating is massive," Adler said.
He said that while New York's interest in mobile betting isn't surprising given the state is strapped for cash amid the pandemic, it could help boost this trend even more.
"It was inevitable," Adler said of New York. "It's really amazing how this pandemic has accelerated so any trends."
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