Bally’s Corp. recently announced the acquisition of the Association of Volleyball Professionals (AVP). On the surface, the gaming company seems to be a curious steward for the domestic pro beach volleyball tour. Owning a sports league is certainly “not on page one of the sports betting playbook,” Chris Grove said. But as the Eilers & Krejcik Gaming partner explained, “When you put [the acquisition] in the broader frame of the [ongoing] convergence of sports and sports betting in the U.S., it makes much more sense” (think: sportsbooks in stadiums, sports teams holding operator licenses, team owners investing in sports betting businesses).
Terms of the deal were not disclosed, but the pact is believed to be relatively immaterial to Bally’s on both a financial contribution and purchase-price basis—at least in the short term.
Our Take: It is reasonable to wonder why Bally’s opted to take over an asset unlikely to contribute top- or bottom-line growth for some time. Grove said the nominal asking price made the acquisition a low-risk roll of the dice. “Creating the narrative that the company is more than just a casino or sports betting operator is as reasonable a strategy as any to stand out [to bettors and Wall Street investors] in a crowded marketplace,” he said. The AVP transaction gives them the opportunity to tell that story.
While there was not an obvious financial incentive for the purchase, Grove indicated that there are “a number of ways [Bally’s can] generate incremental benefits [from the AVP] that cumulatively make the acquisition [worthwhile].” In addition to a change in narrative, the gaming company will be able to use the tour as “a sandbox for this kind of [vertical integration],” he said. Remember, Bally’s has made a series of acquisitions over the last 12-18 months (see: Stadium, Monkey Knife Fight, SportCaller) in an attempt to construct a broad ecosystem around sports content and sports betting.
Bally’s values AVP content (both the matches and shoulder programming) for its ability to grow portfolio businesses (including the ones referenced above) and to satiate channel partner demand (see: Sinclair). There has been speculation that the agreement between Bally’s and Sinclair includes language requiring the betting operator to bring programming to the table (which would explain why Bally’s submitted multiple bids on World Poker Tour). The gaming operator did not respond to our request for confirmation. But if true, the AVP acquisition would theoretically help the company satisfy those obligations. Still, Bally’s would have to find a way to manage the needs of both the RSNs and NBC (the AVP’s long-time broadcast partner).
From a sports betting perspective, the audience Bally’s will inherit should be valuable. AVP events typically draw more than 1 million unique streaming visitors each day (tour stops span three days) and the sport pulled in 732,000 viewers in its sole 2019 appearance on NBC (the biggest events will attract 60,000-75,000 fans in person). While it remains to be seen how relevant the fan base is (i.e. can they be converted into gamblers?), Grove believes it was a gamble worth taking. “Regulated sports betting is hand-to-hand combat,” he said. “[Operators] are happy if they are picking up a couple hundred, couple thousand new customers in a given state. So, an audience doesn’t need to be huge for it to be meaningful.” Bally’s intends to convert AVP fans into sports bettors by gamifying the matches, and it could potentially host events at their casino properties.
Moreover, the sport’s touring nature should help to increase the gaming operator’s presence in markets without brick-and-mortar properties. The Tour stopped in seven locations in 2019, the majority of which now have legalized sports betting and/or daily fantasy sports (SportCaller gives them a free-to-play option in markets that do not). The AVP will hold an abbreviated season in 2021 before returning to a full slate in 2022.
Bally’s acquisition of the AVP was novel because the U.S. had not seen a gaming company take ownership of a sports league before. It is hard to suggest a series of similar deals is on the horizon, even if it works out, simply because there are not a ton of niche sports properties for sale. But with operators willing to explore any opportunity for growth, it would be foolish to rule out more nontraditional acquisitions. If Bally’s does intend to target additional sports leagues, the technology and personnel acquired in the AVP transaction should serve the company well.
While it is uncommon for a gaming company to own a pro sports property, it is not unheard of. MGM Resorts International used to own the WNBA’s Las Vegas Aces (the team has since been sold to Raiders owner Mark Davis), and the Mohegan Tribe, owner of the Mohegan Sun casino, still controls the Connecticut Sun.
There is also precedent to sports betting companies focusing their customer acquisition efforts on niche sport leagues. DraftKings has exclusive partnerships with both the Drone Racing League and Premier League Lacrosse. “[Ownership] is a natural extension of what other operators are doing [in trying to meet sports betters where they live],” Grove said. “The distance between an in-depth multi-year partnership with a small league and owning that small league isn’t necessarily that great.”
The sports betting consultant acknowledges that, with an operator owning a league, there are going to be questions about potential conflicts of interest. But he says, “[With] the lack of apparent concern about the convergence of sports and sports betting [elsewhere in the sports ecosystem], I don’t see it as a huge issue.”