Fox Sports and The Stars Group (TSG, dba BetStars in N.J.) have announced the formation of a JV (entitled Fox Bet) that will “create apps for both real-money sports wagering and free-to-play contests.” The 10-year agreement (which includes an option for an additional 15 years) positions Fox as the first legacy media company to put their name on an entity facilitating sports gambling transactions in the U.S. As part of the deal, Fox will pay $236 million for a 4.99% stake in TSG; Murdoch’s empire will have the opportunity to increase its interest in the Canadian gaming and online gambling company – up to 50% – prior to the completion of the partnership’s initial 10-year term. Fox Bet’s debut products are expected to be available “by this football season.”
Howie Long-Short: If your finger is on the pulse of the legalized sports betting industry, Wednesday’s announcement wasn’t a surprise. Eric Ramsey (LegalSportsReport.com) said “this sort of union was the natural next step in the overlap between sports media and sports gambling and it’s likely to be the first of many deals we’ll see like it.”
The entities involved have also long been on the radar of industry insiders. Alun Bowden (senior consultant, Eilers & Krejcek Gaming) wrote “a major media deal was trailed heavily by TSG. [The possibility] was mentioned in the last couple of [quarterly earnings calls and] there were only 3 companies it could have been.” JohnWallStreet pegged Fox to be one of them back in late January (Early Entrants Vol. II), when it reported that while talks were preliminary it appeared there would be a future where New Fox married live rights with sports betting.
TSG is the most valuable publicly traded online gambling company in the world (worth +/- $5.5 billion, shares spiked +22.5% on the news), but they’ve struggled to gain traction with sports betting here in the States (their poker and casino products have been relatively successful). A limited footprint (they’re currently only licensed to operate in NJ, though they do have access to the 13 states where Eldorado Resorts maintains licensure) and the inability to make their product “American friendly” have prevented the company from take a stronghold in this market. While Fox can’t solve either of those issues, they’ll certainly help with brand recognition (Fan has more on this below); critical when going up against household names like DraftKings and FanDuel.
The Stars Group has “a proven media strategy with Sky Sports in the U.K.”, so that’s the model they’ll be looking to replicate here with Fox Bet (in terms of pricing, marketing & advertising), but there are significant differences in the two markets (aside from consumer habits and gaming regulations); most notably “Sky Sports was the exclusive broadcast provider of the Premier League and Fox doesn’t have that kind of captive audience for any American sport.” That doesn’t mean Fox Bet is bound to fail, but it will have to work harder to capture the attention and earn the loyalty of the American sports fan.
One component of Sky Bet that should resonate with the American audience is their free-to-play Super 6 (pick 6 EPL games) contest. Ramsey said, “it’s not difficult to imagine a free-to-play NFL pick’em contest with a $250,000 or $500,000 prize pool. That type of product would be very appealing to the casual sports fan and a big asset for them as an operator.” The Fox Bet plan is simple – build an extensive database of prospective customers nationwide so that as states pass sports betting legislation, they can transition those playing free games over to the paid app.
Fan Marino: While Fox will be the first legacy media company to act as an operator, lottery suppliers, social gaming companies and digital media players have been flocking to the space in numbers. Fox has a leg up on all of them with a brand awareness amongst U.S. sports fans that Ramsey says exceeds “even the largest of gaming companies”; and perhaps even more importantly, it has “the distribution channels to get Fox Bet products in front of potential bettors.” As other outlets are forced to “purchase ad space if they want to be on television and radio, Fox has those native channels available to it.”
If you take the premise that Fox is positioned to succeed because they own the requisite distribution channels to reach the target consumer, it’s logical to reason that the 22 RSNs they sold to Disney would have been valuable assets to Fox Bet; “particularly those networks in the Carolinas, Tennessee and Indiana, states on the cusp of legalizing [or offering] sports betting.” Sure, they’ll be able to leverage their national platforms, but as Ramsey explained, RSNs “cater to a hardcore, dedicated, localized group of fans – the ones most likely to wager on games” – a valuable demographic to a sports betting company.
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