- Sports Betting
- US Betting
- Daily Fantasy Sports
DRAFT is a mobile-focused fantasy sports operator that launched in December 2014. The app is currently available for real-money play in 35 states.
The deal will see PPB pay $19 million upfront. An additional $29 million in potential payments over the next four years is contingent on future results. PPB did not disclose full terms of the deal.
The purchase is an expression of PPB’s belief in the DRAFT product, approach, and team.
Despite an operational history stretching back over two years, DRAFT is a relatively minor player in the fantasy sports space in terms of liquidity.
In fact, several DFS platforms with superior liquidity and user bases have been available for purchase in the last 12 months. All were available at prices that amounted to a fraction of what PBB paid for DRAFT. Many of those platforms failed to find a buyer and ultimately shuttered.
In contrast, PPB paid an upfront multiple that I’d ballpark at 10x+ revenue for DRAFT. I’d be surprised if DRAFT was profitable.
Another underlying motivation for the acquisition is to provide PPB with an established foothold in America should legalized sports betting spread beyond Nevada. I believe the acquisition could help to accelerate the pace of sports betting liberalization.
Post-acquisition, DRAFT will likely branch out to additional states. PPB is already committing to a relatively substantial marketing spend, forecasting an EBITDA hit of $20 million in 2017 alone.
While that’s not nearly enough to break through on TV or to dislodge Fanduel and DraftKings from their dominance in pro sports partnerships, it’s certainly sufficient to generate a meaningful user base given the relatively low cost-per-acquisition of a fantasy customer.
PPB already has a material presence in the U.S. market through its race wagering subsidiary TVG and Betfair’s online casino in New Jersey. The company is rumored to be a suitor for the sports betting assets of CG Technology in Nevada.
The US entrance of PPB might seem like negative news for current leaders DraftKings and Fanduel.
But I’d argue that PPB’s purchase is actually a net win for the pair.
In a note regarding the purchase, Adam Krejcik of Eilers & Krejcik Gaming wrote that he is “cautiously optimistic” that PPB’s purchase “will help spur additional M&A and investments,” suggesting that “William Hill, 888 Holdings, bet365, GVC, and Unibet (among others), could be potential candidates to enter this market in light of the Betfair/Draft deal.”
The question really becomes whether or not there are enough compelling platforms to go around.
The majority of available fantasy operators are slight variants on the DraftKings / Fanduel approach. If anything, the purchase may spur development of new variants (with a heavy casual / mobile focus) aimed at immediate acquisition by a commercial gambling operator.
Meanwhile, the few existing platforms with a unique take on fantasy (Boom Fantasy comes to mind) are arguably in a much better position today than they were yesterday.