In recent months, DraftKings has been investing more heavily in its media arm. The company hired former Verizon executive Brian Angiolet, who had been in charge of VZ’s Go90 platform, to serve as its first chief media officer. They bought VSiN for nearly $70 million and signed a three-year deal, worth more than $50 million, to distribute (and monetize) Dan LeBatard’s podcast. The company also announced partnerships with both Sling TV and Dish Network.
DraftKings has yet to publicly disclose its media ambitions, but some have speculated that the online sportsbook operator could look to leverage synergies between gaming and content by building or acquiring an over-the-top streaming service. Oppenheimer internet analyst Jed Kelly wrote in a recent DraftKings update that he believes the company’s “ultimate strategy is to become more than an OSB operator and more of a sports entertainment platform with multiple revenue streams. We see DKNG making a larger push into streaming, where they can put the sports book experience into users’ homes and integrate sports analytics content. With nearly $3B in cash, DraftKings has the wherewithal to build or acquire their own vMVPD (think: YouTube TV, Fubo TV) to stream premier sporting events.”
Our Take: Oppenheimer believes DraftKings could enter the virtual multichannel video programming distributors business (vMVPD) to hedge against potentially unfavorable regulatory outcomes (think: New York’s uncertain, high-tax operating structure; sizable tribal influence in Florida). In addition to subscription fees, Kelly (executive director, senior analyst) suggested there would also be an opportunity to use the “data [collected] to develop a pretty compelling advertising product. So, they could create two or three additional revenue streams they currently don’t have with an engaged user base.”
Perhaps more important, the construction or purchase of a vMVPD would enable DraftKings to deliver a personalized sportsbook experience in-home (think: quad box with live odds on screen, ability to bet through a single screen). “If [DraftKings] can deliver a sportsbook-like experience to the user, where they are able to control a lot of the streaming capabilities (think: latency, networks available), then they can increase engagement on their [sports betting] platform,” the OPCO strategist explained.
Controlling a streaming service would in theory help DraftKings with user acquisition, too—particularly if the company can distinguish itself in terms of programming and/or technology. Presumably, a portion of those fans who come for the content would eventually open sports betting accounts with the company. “And then they would be getting [the next generation of sports bettors] coming up through legal channels,” Kelly noted.
The OPCO analyst assumes the next generation will be watching because a vMVPD with big four sports events (which DraftKings would want) would almost certainly also have to include family-friendly networks. “[DraftKings] is going to have to take channels like Nickelodeon and MTV if they want to get the NFL because Viacom makes you buy everything,” Kelly explained. It is not as if the sportsbook operator has the option of constructing a lineup solely of sports channels.
Kelly acknowledges that constructing/acquiring a sports-centric OTT service is an expensive endeavor (see: Fubo TV’s ongoing struggles with Turner). But he says that with “the market willing to let companies spend right now if they can produce a high level of revenue—even if [they are] going to have to spend $300-500 million of free cash flow,” cost shouldn’t prevent DraftKings from taking a calculated risk. Of course, with nearly $3 billion in cash, one could argue it doesn’t really have to worry about short-term fluctuations in the markets, anyway.
DraftKings CEO Jason Robins would not let us in on the specifics of his company’s future media plans during a conversation late last week. But he acknowledged the synergies between online sportsbook operators and vMVPDs, and he suggested his company would look to take advantage of them. “People who are watching the games, who are consuming the content are the same people playing our games. People who are playing our games have a higher propensity to consume content,” Robins said. “So, there’s a really nice flywheel there. I think you’ll see us doing things that allow us to generate value by really capitalizing on that flywheel to be able to have even more efficient customer acquisition, better engagement and retention of our customers.”
Angiolet was hired to help take DraftKings’ media efforts to “the next level” and Robins said having “some internal capability is important to our long-term strategy.” But that does not necessarily mean the company intends to launch or acquire its own vMVPD. In fact, the CEO insists the company is “not going to try and do it all on [its] own.” In addition to the restrictions on broadcast rights, which are tied up in contracts that the company wouldn’t have access to without a partnership, “We still have many great relationships with media companies that we rely on for a lot of what we’re going to do in the content space,” he said. It sounds as if the company’s future streaming endeavors are more likely to be done in collaboration with partners who own channels and distribution networks (think: Turner, ESPN).
To be clear, DraftKings isn’t likely to be the only sportsbook operator exploring streaming opportunities. Kelly thinks other large operators will “probably look to do the same thing” (in terms of launching a vMVPD).