A recent report, or perhaps rumor, suggested that DraftKings was aiming to buy Bleacher Report (BR), a dwindling media company facing financial challenges.
Although the news was immediately dismissed, it is yet to see if the idea was completely improbable?
While refuting the veracity of the news, BR parent company, Turner Sports, clarified its position saying it had “zero interest” in a deal. “The company is not for sale,” BR said.
Was it just a rumor then? Well, it’s not because DraftKings did not rebut that some kind of discussion was underway.
A spokesperson said that DraftKings spoke to a “variety of companies concerning various matters in the usual course of business”. The firm, however, said it did not discuss the particulars of those conversations.
But with around $500m cash, it’s naïve to believe that DraftKings is merely roaming around for a window shopping.
DraftKings in a strong position
DraftKings increasing share price could also facilitate the payment for any acquisitions through offering equity in the company.
According to former CEO of FanDuel, Nigel Eccles, “I doubt this Bleacher Report deal takes place, but it indicates DK is going to go on an acquisition spree.” He further said that the company could surely pick up sports media assets on fairly favorable terms.
Who’s the target?
According to the Front Office Sports, DraftKings targeted Bleacher Report as its owner, AT&T, is focusing on reducing a huge debt pile. Yet, there are lots of other cash-starved media organizations equally vulnerable to acquisition.
For instance, a significant number of staff was furloughed from SBNation in April due to the pandemic-led financial crisis. Also, Sports Illustrated publisher Maven faces a possible loss of $30 million in 2020 and is forced to downsizing.
Weren’t they equally vulnerable targets?
Why would DraftKings want to buy a media company?
It’s not the first time that betting industry has expressed its interests in a media outlet, which provides a direct channel for cheap customer acquisition in a market where user acquisition costs may run as high as $500.
Besides, media outlets give exposure to a different kind of player too. In 2019, Bleacher Report claimed it had over 3 million daily active users. A significant proportion of those users could be casual fans in the DraftKings DFS database.
Does the media model work?
The rumors are that it does, but there is no proof.
Fox Bet revealed a loss of $15 million in Q1; TheScore, another media-integrated operator, reported a loss of over $6 million during the same period. Indeed, every company is reporting losses in the US currently. However, their losses are coming on comparatively small market shares.
Besides, deals between Willian Hill and CBS, and Penn/Barstool are at an embryonic stage, and can’t be predicted.
Playing the long game for US sports betting
Having said, let’s come back to DraftKings. Although its relative financial stability seems to be one of the decisive factors, it’s strategic aspect needs is yet to find out.
DK has been an old player in the media game as it launched DK Live in 2016 to engage players alongside the core DFS product.
Despite its flirting record with dabbling media, it’s still uncertain if DraftKings could actually handle a media business.
But Eccles downplays the assertion by saying it doesn’t matter for them (DraftKings). “The sole reason to buy the assets is to help them become the number one sports betting company in the US.”
“If, as an investor, you are acquiring DK, you’re buying into them spending billions to become the leader in the country’s sports betting. Something the size of BR will surely help- even if it may not be that efficient in terms of customer acquisition.”
So, if the US sports betting market is a “winner takes most” market as some experts believe, then investing in a media outlet could be lucrative for DraftKings.”