BetMGM recently announced a strategic partnership with SportsGrid. The deal will see BetMGM odds, content and talent integrated across the free, 24-hour-a-day sports wagering streaming network’s slate of original live programming. The tie-up is the latest indication (also see: Penn National Gaming’s investment in Barstool Sports, FanDuel’s $30 million deal with Pat McAfee, Bally’s AVP purchase) that content and distribution will play an increasingly important role within sports betting businesses as operators scale back their marketing efforts and focus on reaching profitability. David Van Egmond (CEO, Bettor Capital) says the approach makes sense. “Digital platforms offering betting-focused content, powered by leading technology and reaching a significant audience through distribution partnerships, is clearly a winning formula in this market,” he said.
JWS’ Take: Operators are starting to place a greater emphasis on lower customer acquisition costs (CAC) and, by proxy, content and distribution, as they recognize the customer-acquisition arms race they’ve been participating in is not sustainable. In many cases, the cost of acquiring customers is greater than the lifetime value of those individuals. This is particularly true for operators without an expansive brick and mortar presence (and the ability to raise a bettor’s LTV).
The need for a new approach has become evident as the public markets rotate away from the growth-at-any-cost mentality. As SportsGrid COO Adam Kaplan explained, when the market “is in growth mode, operators can spend up on marketing, lose money and be rewarded in their share price. But when the markets are focused on profitability, the approach has to shift, and marketing is going to be the biggest and easiest lever executives can pull.”
Top-tier operators are also starting to invest more heavily in content and distribution because they understand that as the U.S. market continues to mature, the competition will shift from customer acquisition to “share of wallet.” As Kaplan put it, “If you want to be in a position to constantly influence customer behavior [and ultimately share of wallet], then you need to have connectivity with the customers.” Content is that connectivity, especially because many sports bettors are signing up with multiple sportsbooks to capture free bets and sign-up bonuses.
Operators realize they can’t continue to “just give away money.” They need to improve conversion and heighten retention, which is why the content strategy has emerged. But each has taken a different approach. For example, while PENN bought a stake in Barstool (and is reportedly preparing to buy it out entirely in early 2023) and intends to leverage its app, website and robust social-media following, Kaplan pointed out that “FanDuel is mostly paying to rent their content through commercial partnerships with SportsGrid, Pat McAfee, Minute Media, Associated Press, Outkick the Coverage, Wave [Sports + Entertainment], The Ringer and more.” He would know. He did the deals as the company’s VP and GM of content before joining SportsGrid late last year.
It’s not clear which company—if any—has the formula to alleviate the CAC-to-LTV ratio imbalance that exists, but efficient media deployment can’t hurt. “In these legal betting states, the price of paid media has gone through the roof,” Kaplan explained.
In fact, Van Egmond attributes a big part of FanDuel’s success to date (see: market share leader) to a “diversified marketing strategy that includes their own content, leading influencer sponsorship (see: McAfee, Outkick) and significant distribution with media partners and platform tech providers. [That] includes SportsGrid, who FanDuel has partnered with for several years,” he said.
SportsGrid may not be a household name. But it is the most widely distributed sports betting television network, and its digitally native nature has enabled it to reach the cord cutter. The channel reaches more than 200 million devices in the U.S. alone across OTT, streaming, connected device platforms and through its broadcast deal with Nexstar Media and satellite deal with SiriusXM. In 2021, the company “had 52 million unique viewers” across OTT, streaming and connected devices, Kaplan said.
SportsGrid provides an out-of-the-box media solution, assisting operators like FanDuel and BetMGM with content creation and distribution (the company will be announcing additional partnerships in the weeks ahead). While some believe an operator needs to control the pipes to efficiently and cost effectively deliver content, promotions, brand and agenda into the marketplace, Van Egmond says the “companies [with] the broadest distribution will be [best] positioned to deliver on the goal of lowering CPA and [obtaining] higher retention, as they’ll reach a larger audience in a targeted manner.” It does need to be noted that Van Egmond (not Bettor Capital Fund I) has a “very small” stake in SportsGrid, obtained as part of an individual advisor role served following his departure from Barstool Sports in 2020.
The broad distribution approach has worked for FanDuel to date (the company owns TVG and numberFire, so it does control some of its pipes). “Our strategy has resulted in delivering unmatched unit economics in the category. Our CPA rates are the lowest in the industry and the rich long-term value of our customers points to a healthy business built for the long run,” Mike Raffensperger (chief marketing officer, FanDuel Group) said.
The operator that does the best job of transitioning into a gambling tech media company could end up doing more than just reducing CACs, though. It could upset the balance of power in the industry. While FanDuel and DraftKings are currently one and two in terms of market share, that does not mean the leaderboard will remain the same forever (or even for the next couple of years). That seems particularly true when one considers that public markets have pressured operators to attain high market share (i.e., it’s not organic growth), and that there are so many more states still to open (including California, Florida and Texas).
If sports betting operators are going to reduce their marketing spend, it is logical to wonder what that will mean for the big four sports leagues and their teams. The answer is likely not much. There is brand value in those tie-ups, beyond any customer-acquisition value the operator may realize, that operators are not going to want to forgo. Instead, look for the greatest spending cuts to occur in customer bonuses.