Author’s note: Better Collective owns the website Sports Handle. Sports Handle was acquired in November 2018 by the owners of RotoGrinders and US Bets, which were both acquired by BC in June 2019. The author submits that the opinions expressed in this article are entirely his own.
Danish-headquartered Better Collective, a company in the business of referring sports bettors to bookmakers for a fee, on Monday made a nearly quarter-billion dollar bet of its own on a sports wagering data/tech platform that’s digging deep roots into fertile legal U.S. sports betting soil.
The first sentence of the news release announcing BC’s acquisition of The Action Network, representing the culmination of a high-stakes auction, strikes partly as a flex. “With the acquisition of Action Network, Better Collective gains clear market leadership within sports betting media and affiliation in the US and now expects to increase its revenues in the US to more than 100 mUSD by 2022,” the announcement begins.
The Action Network (“Action”) shirks the traditional, antiquated digital advertising model that relies heavily on video ad plays and page impressions. Instead, Action has two main streams of revenue: subscriptions to its premium content; and affiliate fees, also known as referral commissions for each customer that Action sends to a sportsbook partner.
The revenue trickle in 2018-19 from affiliate fees became a firehose in 2020 and the company’s main driver. The size of such fees varies widely across the industry. A broad ballpark figure is around $200-$500 per person. Big factors include the quality of referred users (their bankroll size) and user intent (whether they log in and/or bet routinely). The sheer volume of new depositing customers sent to the sportsbook will juice up the number.
After processing the weight of the $240 million purchase price — BC’s largest acquisition since its founding in 2004 — observers across the financial sector and sports betting industry are left to ponder the future of both companies, their sportsbook partners, the companies’ competitors, and, of course, the betting public that fuels the sports gambling economy.
Sports Handle gained some insight through conversations with both BC’s U.S. CEO Marc Pedersen and Action Network CEO Patrick Keane, who will now operate Action as a separate business unit within BC and report to the wider group through Pedersen.
“We do have very strong assets in the U.S. already, both on sports betting and on the DFS side of things,” Pedersen said. “Action fits into our portfolio very well, especially on sports betting and its tech profile, where the app and the user experience around data is second to none. So, we’re very excited about adding Action to the group, and we are excited about the quality and reach that Action has.”
Asked to identify his company’s flagship product or feature, Keane pointed to the Action Network app.
“It’s truly our app, and that app probably starts with the ability to track bets,” Keane said. “Half a million people have tracked nearly 150 million bets over the course of Action’s lifetime. So when you’re able to not just use Post-Its and spreadsheets and things like that, but to actually be able to track your bets in a platform like Action, we think is one of our biggest differentiators.”
It pays to differentiate in the legal U.S. sports betting ecosystem — to separate from other channels of acquisition supplying bettors with “only” news and information of some kind (such as this website), or game picks and analysis as seen across mainstream and sports gambling media. The addressable sports betting market — for sportsbooks fighting for market access as well as customers to make that access worth the expenses — is expanding at an Olympic mile runner pace. Consider Jan. 22, when regulators in both Michigan and Virginia flipped the switch for licensed sportsbooks in states with a combined population of 20 million.
Regarding BC’s acquisition of Action and the companies’ shared vision going forward, a few prominent themes emerged from both Keane and Pedersen: independence, entertainment, user experience, and recognition of problem gambling.
Action’s and BC’s roots
The Action Network was founded in 2017 with the backing of a majority shareholder, media and tech firm Chernin Group. That same company in 2016 also bought a majority stake (51%) in Barstool Sports, which itself has taken a deep dive into legal sports betting. In 2020 Barstool sold a 36% stake of the company to Penn National Gaming for $163 million, and it has since become Penn’s flagship online sportsbook brand.
The Action Network website launched in October 2017 a few months after the Supreme Court announced that it would hear the matter of Murphy v. NCAA, the case that would result in the striking of the 1992 federal law banning full-fledged sports wagering outside Nevada. That ruling came in May 2018 and changed everything. Key Action hires included Chief Content Officer Chad Millman, who left after two decades at ESPN, where he served as its website’s and magazine’s editor-in-chief.
Meanwhile, even before the high court took up the case that signaled a possible end to the longstanding betting prohibition, Better Collective had been monitoring the U.S. from overseas. It was already entrenched as a marketing affiliate and sports betting user generation giant in Europe.
“The U.S. was always on our radar given the potential of the market. But it came as a blue sky when PASPA was struck down,” Pedersen said. “I don’t think anybody really saw that coming. What we had been doing was focusing on [the] casino [market] and building around what we were doing in New Jersey. That was our focus, so it did come as a surprise with regards to sports betting. We’re very happy about how fast we reacted to the repeal of PASPA and secured the acquisitions of VegasInsider, Scores And Odds, and RotoGrinders — which has secured us an already strong position in the sports betting and DFS market.”
According to Wall Street Journal sources, here’s a glimpse of how things went down in the process leading up to BC’s acquisition of Action:
There was a competitive auction for Action Network, reflecting the high level of interest in media properties focused on sports betting, according to a person familiar with the matter. DraftKings, FanDuel Inc. and private-equity firms were all suitors for Action Network, which tapped investment bank Moelis & Co. to run a sales process, the person said.
Per the companies’ news release on Monday, Action is expected to achieve revenues approaching $40 million in 2021, “an increase of over 100% year-on-year, while also generating positive operational earnings in 2021.”
Action is a new animal in BC’s stable, and one that did not come inexpensively. Indeed, the price tag far exceeds the combined cost of all its earlier U.S. acquisitions. With the iron white hot, it was an open secret for over a year that Action was for sale.
Ultimately, Better Collective’s $240 million bid prevailed. Keane reflected on the process and result.
“I think one of the components that was most compelling to us is the fact that, unlike an operator where you’d see a singular source of affiliate conversion, the great thing about Better Collective is it allows us to continue to operate independently, and to continue to be an affiliate platform for other companies and other operators. And then [Better Collective] made it very clear that we would operate independently, and would have the opportunity to continue on the mission that we built as a company from the start of Action Network.”
The operational independence is one kind, and the other brand of freedom underscores both Action’s and BC’s long-term visions: sportsbook agnosticism, or non-exclusivity. The thinking is that if a media entity or conglomerate partners with all sportsbooks, and services them all, it will be subservient to none.
“Action will remain independent,” Pedersen said. “It’s an important point for us and for the users as well. You see a lot of the major media outlets, they team up with one sportsbook. And thus they basically tie their offering to one sportsbook. That’s obviously not good from a user perspective.”
Pedersen didn’t name names, but here are some exclusive sponsorships across traditional sports media painted with wagering material and sports betting-focused outlets: ESPN announced in September 2020 a “co-exclusive” agreement with Caesars (William Hill) and DraftKings; Dan Le Batard’s podcast and distribution rights, after his separation from ESPN, were bought by DraftKings in April for $50 million; Penn National, a regional casino operator boasting broad market access, made its play last year with Barstool Sports; DraftKings also bought the Brent Musburger-led Vegas Sports and Information Network in March for an undisclosed amount; CBS Sports is paired with William Hill; and Yahoo! is aligned with BetMGM, their box scores doubling as bet slips.
Pedersen said, “The way I see it with Action and BC — aside from the quality content and tech we have that’s one of our most important offerings — is that whilst having a commercial relationship, we’ll always strive at giving the users an educated choice between books, and then obviously try to educate them to get the most out of their money.”
Independence and trust
There is a spectrum of quality among websites orbiting in the sports betting-specific media space — the same as in regular sports media and, likewise, entertainment gossip outlets and beyond.
But a common criticism of media entities designed and monetized foremost as sportsbook affiliates and customer-acquisition engines is that they are “in the pockets” of sportsbooks. They are sometimes viewed as cheerleaders or shills, motivated only by volume of conversions and not to be trusted as a source of data, analysis, recommendations, or betting tips.
In some cases, that criticism is valid. Some outlets are credible, other less so, and some readers are much more discerning than others. They will serve as the judges. But Pedersen rejected such criticism as it relates to Action’s products and plans.
“It is true we are collaborating with sportsbooks, but we are aiming at cooperating with all sportsbooks,” Pedersen said. “And for us, it’s important to give the right and best user experience. So, we always strive to give the users a transparent overview of the best sportsbook options available for them. It will be very short-sighted if we don’t. For us, maintaining credibility with the users is really what we need to do.”
The official release announcing the acquisition describes Action thusly: “A trusted source for sports fans, Action’s media platforms provide an enhanced experience for its users through original sports news content, premium insights, deep menus of odds, and proprietary betting tools and data.”
Keane likewise does not agree with the idea that Action, as an affiliate, is any less deserving of consumer confidence due to its relationship with sportsbooks.
“Sportsbooks are our partners, but they don’t dictate or mandate our coverage,” Keane said. “We partner with them and create content around their odds and their pricing and things like that. If they don’t make sense or they don’t work for users, we’re not going to showcase them. We’re not in their pockets. We’re not mandated to do anything that we’re not comfortable with.”
While visibility varies depending on which jurisdiction the user is in and which sportsbooks are licensed there, partners include DraftKings, BetMGM, PointsBet, 888sports, theScore, SugarHouse, FanDuel, William Hill, Unibet, FOX Bet, and Bet365.
“We want to give users choice, and we want to give users the best opportunity,” Keane added. “Chad [Millman], who’s our head of content, doesn’t dictate his decisions on what he covers or what he’s going to produce for his team based on how folks are compensating us.”
Entertainment purposes only
“Engagement” is the king of the buzzwords in the sports betting industry, uttered from all sides including, as of May 2018, professional sports league commissioners who once vilified sports wagering. Sports fans who wager are known to watch games more frequently, watch them longer, and watch more broadcasts that do not involve their home team.
“Sports bettors are some of the most engaged users of any mobile content genre,” Keane wrote for Sportico in November 2020. “Our users are spending an average of 123 minutes per month in our app.”
Another buzzy word that’s used by Action for branding purposes is “action,” which is defined by ESPN’s vertical Chalk as “having a wager on a game.” The sports betting lexicon also includes phrases such as “I need some action.” Having action means interest, adrenaline, a stake, an opportunity to correctly predict a game. And for some, it also means addiction.
One of my own concerns with the expansion of legal sports betting is that people who had not previously wagered somewhere in the shadows will get hooked, and sink. There’s no betting on credit in the regulated world, but credit isn’t required to empty a bank account. Many outlets and lone wolf “touts” promise or suggest profits, some more absurdly than others.
Just look at this banner and hashtag from one website that sells picks.
And then there’s the other end of the spectrum. For example, ESPN’s paywalled articles from ESPN Betting Insiders, including “best bets on 2021 NFL season win totals.” My point is that the message sent by content creators — including Action and all of BC’s assets — is important. People want and seek this information, and there’s an abundance living on the web. Trust must be earned. Once breached, it’s hard to get back.
I asked Keane if there’s a line between providing information and encouraging action, or potentially problematic gambling behavior.
“Just like any of the operators, responsible gaming is something we think about on a daily basis and want to make sure that our users are thoughtful and responsible, are making the right decisions,” Keane said. “But we can’t really control consumer output or consumer activity. And I’m not going to necessarily always compare it to investing, but we want to provide tools and resources to help you make decisions that will make you more comfortable with how you’re betting, but we’re never going to guarantee.”
The messages contained in Action’s content don’t make promises. They deliver what most users want — analysis, data, and systems for consideration — but they do seem to suggest an arrow pointing upward.
“We’re never going to tell a user that we’re going to be right or wrong,” Keane said. “That’s just not something that’s right. And it’s nothing we would ever do. So again, we see this as entertainment, and it’s fun to be smart about that, with the ways that you want to be entertained.”
Asked what percentage of the Action user base is breaking even, or even profiting over time, which is extremely difficult long-term in sports wagering, Keane said it was hard to tell.
“Sports betting is about entertainment,” Keane said. “It’s not necessarily about making a living or making profit, but it’s not something that we really track or really focus on. We just want to create great tools and offer them to bettors, and have them bet responsibly and thoughtfully with whatever makes sense for them.”
Pedersen also underscored that “gambling is entertainment, and it must never be seen as anything but entertainment.” And he described Better Collective and Action’s role in an industry that, after all, is centered on gambling. “Our vision is to empower the iGamers to make the most knowledge-supported decisions. So we try our best to educate our users into how they can gamble responsibly — how they can make their money last the longest.
“We also have a very important role in educating them about when the entertainment part gets out of hand and becomes an addiction,” Pedersen continued. “There, we really need to be on our toes in order to educate and prepare the users for what loopholes to look after, how can they identify themselves as people with a potential gambling addiction problem. … We have invested and become the majority owner in Mindway AI that specializes in software solutions based on artificial intelligence and neuroscience for identifying, preventing, and intervening in at-risk and problem gambling, where we are supporting the scaling of their innovative products.”
What the future holds
The COVID-19 pandemic that froze and frightened the sports and sports betting worlds in March 2020 brutalized the worldwide and U.S. economy. It resulted in job losses at Action and pay cuts throughout the entire company.
“It was a dark time, I’ll be the first to admit that,” Keane said. “We had to make some really challenging fiscal decisions around operating the business. But it gave us the opportunity to really evaluate what we needed to build. And it was a team that locked arms on trying to figure out what we were going to build and how we were going to sustain for the football season.”
The pandemic also battered state budgets across the U.S., and lawmakers in several states expedited legislation to legalize sports gambling — not a windfall but an established source of tax revenue levying no new direct taxation on citizens.
The U.S. economy has rebounded, fueled by vaccinations, optimism, and a massive amount of federal stimulus dollars. The NFL is expecting full stadiums in September. For Action, things were already looking up last September.
“We ended up having a business that became profitable in September ,” Keane said. “We just exceeded every expectation we had and every budget we had built.”
“One of the things Action does better than anyone else is retaining the users,” Pedersen emphasized. “And that’s where we really see the long-term potential of Action is not just acquiring users, but returning the users and continuously driving engagement through our various partnerships. And Action is better suited than anyone to retain the users.”
The future continues to brighten for Action and BC as more and more states will come on line and grow the U.S. market.
“This is a market that’s going to be massive,” Better Collective co-founder Jesper Søgaard said in an interview with the Wall Street Journal. “We expect that eventually, it’s going to surpass the European sports-betting market.”
The massive U.S. market will soon extend into New York, Maryland, and Arizona, all of which legalized online sports betting this year. That’s another 33 million people, a good slice of them located in New York City and the Maryland suburbs where inhabitants possess substantial amounts of disposable income.
And other big-boy jurisdictions like Florida may represent huge upside, though that state has suboptimal opportunities for affiliates if the market bends toward a Seminole Tribe sportsbook monopoly. There’s still a lot of work to be done to get ahead and stay ahead of the competition.
After news of the acquisition broke on Monday, BC’s stock surged over 17% from 229 SEK to a high of 278 and currently remains in that range.
Keane said that post-acquisition, Action users should not see any change at all.
“We’re going to continue to try and super serve our users and produce the best content, the best video, the best podcasts.”
While Action has forayed into streaming video with a show airing on ESPN Plus, and it also produced Bet Casts with both the PGA Tour and NBA last year, Keane indicated that Action does not have its sights set on launching its own streaming TV network.
“I don’t see us necessarily building our own,” Keane said. “I don’t think that that would be cost prudent, but I do believe we’ll continue to see an opportunity for partnerships with big media companies, rights holders, and leagues. And we’ll definitely continue there.”
Noting the surge in stature of former Indianapolis Colts punter turned media guy Pat McAfee — his show is sponsored by FanDuel — media companies and sportsbooks will be competing to find talent, drive sports bettors to the virtual sportsbook window, and keep them as loyal customers for years to come.
“I think there’s an open call for the best content creators you can find and the best talent you can find,” Keane said. “They’re all in short order, so it’s going to be increasingly competitive for us, too, as we try to maintain, sign, and find a next generation of new talent.”