Wednesday’s announcement of Flutter Entertainment’s acquisition of The Stars Group in a roughly $6 billion purchase, creating a company worth over $11 billion — pending regulatory and shareholder approvals — will ripple throughout the gambling industry worldwide. Like other blockbuster deals that came before it, the main factor driving the acquisition is the rapidly expanding sports betting opportunity in the United States, the carrot on a stick.
Just 18 months after the United States Supreme Court struck down the federal ban on full-fledged sports wagering outside Nevada, there have been scores of agreements and acquisitions large and small, but this one, given the scale and scope, has to be the biggest. At least, it will create the largest gaming company in the world.
“The [combination of these two companies] brings together a leading online sports betting operator in the United States (FanDuel) with a high profile national media partner in FOX,” the companies say in a press release. “The combined Group will benefit from a leading product ecosystem across free-to-play, daily fantasy sports, sports betting, horse racing, poker and casino to drive lower customer cost per acquisition and higher customer lifetime value.”
FOX Bet and FanDuel and what it all means
In May, The Stars Group (TSG) and FOX Sports unveiled plans for the since-launched FOX Bet, “the first-of-its kind national media and sports wagering partnership in the United States.”
While it’s still early times in the U.S. sports betting market expansion, geographically and otherwise, the Canada-based TSG and Flutter, previously known as Paddy Power Betfair, are clearly preparing for more market consolidation and survival of the deepest pockets.
Analyst at the stockbroker Davy told the Financial Times, “Our view is that [the US] will be a highly concentrated market with only three or four players at that top table. Flutter now owns two of those top four,” adding that other market leaders were likely to be bonus code-driven Bet365 and FanDuel’s rival DraftKings.
We’ll set aside most of the financials and global ramifications and focus narrowly on what this deal means and may mean for legal sports betting in the United States, from the vantages: (1) What the combination of FanDuel and FOX Bet will look like; (2) What it may mean for sports bettors (consumers); and (3) impact on other players and sportsbooks in the market, and a prediction.
1. FanDuel and FOX Bet: Two out of four ain’t bad
How many sportsbooks can survive in the U.S. on razor-thin margins getting sliced even further as more sportsbooks pay the price of peace with certain pro leagues?
Well it's obvious now why William Hill fell in line on "official league data" with @NBA: Today it was announced that WH sportsbook will be coming to Capital One Arena in DC.
Caps/Wiz owner Ted Leonsis is also Sportradar investor
Will be 1st sportsbook in US at pro sports venue https://t.co/ZdJOfgqGWa
— Sports Handle (@sports_handle) October 3, 2019
Because only a few are actually generating real revenue in New Jersey about a year after the majority of them have debuted. (European powerhouse Bet365 only recently came aboard in NJ). Those few include FanDuel, DraftKings and William Hill. FOX Bet, replacing the sunsetting BetStars operated by TSG, only recently entered New Jersey as well as Pennsylvania.
The most recent report indicating August revenues showed the DFS juggernauts-turned-sportsbooks once again far ahead, particularly on the online betting front. We can’t drill down all the way to FanDuel or DraftKings’ individual numbers, but know that in combination with the brick-and-mortar FanDuel shop at the Meadowlands, the FanDuel Sportsbook and fellow Meadowlands up-and-comer partner PointsBet apps accounted for nearly $9.3 mm of the industry’s $25.2 mm in August in New Jersey.
My colleague Robert DellaFave expands:
Right on its heels was Resorts (DraftKings, BetStars NJ, ResortsCasino.com), which pulled in $6.7 mm from online wagers and another $527k from its DraftKings-branded retail outlet. The gap between the industry’s two powerhouses should shrink further in September, thanks to the FOX Bet rebrand.
No other operator really came close to the top two, with Monmouth Park pulling a respectable $2.1 mm across its online and retail outlets, Ocean Resort clocking in at just under $1.2 mm, and the Borgata license coming up just short of the $1 mm benchmark with $931k. Borgata recently unveiled its spectacular Moneyline sportsbook, replacing the temporary book that was crammed into the racebook.
So the trio of FD, DK and WH accounted for nearly three-quarters of the revenue seen in New Jersey for the past month. As for how this percentage is likely to increase even further, the joint Flutter-TSG announcement notes, “The combination brings together a leading online sports betting operator in the United States (FanDuel) with a high profile national media partner in FOX.”
Take a look here from the investor presentation:
Together, FOXDuel (not the actual name) will have a massive reach in the U.S., thanks in part to a FanDuel access agreement with regional operator Boyd Gaming that the FanDuel Group brought to the table. From a release:
The combined Group’s position will be underpinned by market access in up to 24 states, an established horse racing footprint in 33 states and access to daily fantasy sports in over 40 states. It is also expected to benefit from best-in-class distribution across the United States through over 100 million FOX Sports viewers, a FanDuel customer database in excess of 8 million and two wagering focused TV channels available in 45 million homes across the United States.
The parties are shooting first and will aim on integration and branding second.
“I think we’ll make those decisions as time goes on as to what is the best thing for the group in total, keeping in mind we both believe the dual-brand strategy works,” Fox Sports Chief Executive Eric Shanks told the Wall Street Journal.
Which brings us to the next angle: what’s this mean for the U.S. sports bettor?
2. Fewer choices
At present there’s about 15 online/mobile sportsbooks operational in the Garden State with just a few at the top. State lawmakers/regulators are setting up markets differently, some of them allowing three brands or “skins” per licensee (up to 42 in NJ and Indiana), others like Pennsylvania allowing just one apiece.
In some states, the price to play ball — the cost of an actual license — is a prohibitive barrier to entry. It will cost $20 million dollars for an online-only sportsbook to enter Illinois if the state’s enabling law goes unchanged. And just three will have the privilege to go online, joining online sportsbooks tethered to brick-and-mortars.
The combined financial firepower of these entities, and the extended media reach, will make it extremely difficult for even the best bookmakers and consumer-friendly offerings to be seen and heard and downloaded. This should not be celebrated by consumers. Many won’t notice or care — they’ll just use one of the four most well-financed sportsbooks and enjoy placing a $10 bet on Monday Night Football through a familiar name.
But with fewer operators, there will be less promotions and bonuses to be had, and perhaps less innovation as a result of narrower competition. Consolidation is/was inevitable, same as what we saw across the offshore sports betting marketplace in the late ‘90s and early 2000’s. The strongest and deepest pockets survived. Alternatively, the mega-company formation might trigger more innovation, by forcing smaller players and startups to bring something unique to the table. There will be venture capital funding, but the actual success of smaller niche operators is speculative.
FanDuel and FOX Bet will become friendly competitors, sharing certain advantages. Per the Wall Street Journal:
The FanDuel and Fox Bet brands and apps will continue to operate separately and compete for bettors as the U.S. sports wagering market expands into new states, said FanDuel Chief Executive Matt King and Fox Sports Chief Executive Eric Shanks. Both brands will focus on different segments of the market: Fox Bet on more casual bettors and FanDuel on more hard-core sports fans and gamblers, the CEOs said.
FanDuel will tap the market with specific promotions such as the “BarStool Sports Advisors,” through Barstool talent Big Cat and PFT Commenter, while FOX Bet will use sports shouting bloviators Skip Bayless and Shannon Sharpe, and radio guys including Colin Cowherd, to reach the more recreational types. Put another way, FanDuel may skew younger and also sharper, with FOX Bet shinier but less sophisticated.
They’re backed by good stats pic.twitter.com/V52wsPD1Ds
— Tommy Smokes (@TomScibelli) September 15, 2019
While NFL broadcast partner CBS purposefully avoided gambling talk during last year’s Super Bowl telecast, FOX Sports will be broadcasting Super Bowl LIV from Miami in Feb. 2020 and you can be damn sure the broadcast team, on screen and probably through the lips of Joe Buck and Troy Aikman, will get the FOX Bet logo and slogan before the eyes and ears of nearly half of the U.S. population or an average of 100-something million.
An aside: We have come a long way from NFL’s apocalyptic proclamations about sports wagering’s threat to on-field sporting competitions! Here’s NFL Commissioner Roger Goodell in 2009:
“State-sponsorship of sports gambling threatens to confuse fans into believing that the NFL supports sports gambling, thereby allowing casino operators and other sports-betting operations to trade unfairly on the NFL’s goodwill and image of fairness,” wrote Goodell on July 29, 2009. “Because of the threat that sports gambling poses to the goodwill and integrity of NFL [f]ootball, and to the fundamental bond of loyalty and devotion between fans and teams that the league seeks to maintain, the NFL has repeatedly and consistently been a leading opponent of legalized sports gambling.”
Back to the betting board: As certain sportsbooks begin to become available in multiple jurisdictions (Indiana’s first online sportsbook hits the market today!), there’s growing homogeny across the U.S. and little (but sometimes meaningful) variance in odds and prices. FanDuel’s own president Kip Levin knows that choice is quite desirable for customers.
Stating the obvious but betting customers need options and state lawmakers considering betting legislation need to pay attention to this. By comparison, here are the current lines @oddsfire across the top books in #NJ: https://t.co/ezuDdWhtMu https://t.co/1e2y2pR13P
— Kip Levin (@kip) September 9, 2019
Will larger gambling-entertainment companies such as MGM recede from the sports betting world? Keep it as an amenity and extension of physical properties but not invest that much into the space? Whether inevitable or not, the just-announced Flutter-TSG union ultimately will mean less choice, unfortunately.
3. DraftKings probably will be next to get acquired by/merge with a public media company
Who are you picking tonight? pic.twitter.com/pFzwIqyhZo
— DraftKings Sportsbook (@DKSportsbook) October 2, 2019
We’ve seen a horse race in several states already between FanDuel and DraftKings. DK beat FD to the punch in NJ; FD raced ahead in PA; both have brick-and-mortar books in New York State and will be ready to launch there online when possible (may not come sooner than 2022); DK will go first in Indiana imminently and both will likely end up in Illinois after getting punched by common foe Rush Street over “ill gotten gains” resulting from when the DFS platforms continued operating after the state’s attorney general in 2015 handed down a non-binding advisory opinion, which stated that daily fantasy sports “clearly constitute gambling” and was illegal in Illinois.
Also on Wednesday, Business Insider reported (paywall) that DraftKings is currently looking to raise funding at a $2 billion valuation as it approaches an IPO.
FanDuel Sportsbook and FOX Bet’s reach through all channels of media has just gotten so strong that DraftKings is likely priming for an acquisition by or merger with a major media company, too.
Maybe it also has to join forces with another big-time player such as William Hill. Yeah, DraftKings CEO Jason Robins and William Hill CEO Joe Asher are mortal enemies, but Asher and the pro leagues including the NBA had pretty extreme differences of opinions up until just yesterday, when WH became an “authorized gaming operator” of the NBA and then today announced the forthcoming entry into Capital One Arena of a William Hill sportsbook. Necessity can compel.
— Hilary Russ (@HilaryRuss) March 28, 2019
Which giant corporate buyers?
Certainly AT&T is examining the new landscape; scooping up DraftKings would put it together with DirecTV, Turner Broadcasting System and Bleacher Report. That’s a pretty powerful combination. Verizon, CBS, NBCUniversal (Comcast) and Viacom must be looking around, too. Disney (ABC and ESPN under the tent) has not been a friend to gambling in the past, so I’d rate them less likely.
But a lot of unexpected and exciting things have happened in a matter of just 18 months.