Last week’s cycle of sports betting headlines featured one of the biggest pieces of news the industry has seen in quite some time.
By now you’ve probably heard that Fox Sports announced its entry into the gambling business via a landmark deal with The Stars Group. The duo plans to offer both a free contest and real-money sports betting in eligible states via a new Fox Bet platform.
The partnership was the primary topic of conversation during the most recent episode of the LSR Podcast, with Matt Brown and the gang chatting about their immediate reactions.
Five thoughts on Fox Bet
We have some thoughts, too:
The price is right for Fox Bet
Nobody in the US can really make the claim to be experts in this space, as our young market is still meandering around like a newborn calf.
What we do know is that developing and launching a competitive sports betting platform requires a significant investment. Licensing a white-label platform is a costly path, but not nearly as costly as building a product from the ground up. If you want something modern and scalable, you’re looking at a number at least deep into eight-figure territory.
There’s staffing and tech upkeep too, and a myriad of other recurring costs. However flush they might be, young operators like DraftKings Sportsbook must swallow major costs to establish a fractured foothold one state at a time.
Under this new partnership, though, TSG will bear the majority of that burden. And by the power of its brand, Fox still gets 4.99% of the world’s largest public online gambling company with an option to purchase more during the first 10 years.
It’s too early to call the asking price a bargain, but it looks like good value from our chair.
For that matter, a quarter-billion dollars is a heck of a lot for TSG to work with, too. Expect to see a good chunk of that allocated to marketing, including a mandatory minimum ad buy through Fox.
Bet big on Fox Bet
It looks like New Jersey is going to have an immediate, legitimate third contender.
Early leaders DraftKings Sportsbook and FanDuel Sportsbook have dominated the market since debuting their platforms late last year, and the gap is not shrinking. Between them, the companies are responsible for more than 80% of the total online NJ sports betting revenue.
Much of that success speaks to their willingness to trade profitability for customer acquisition in the early days (as was the case with daily fantasy sports) to maintain a national database of prospective bettors. With its access to US sports betting (and bettors) more limited, BetStars had little incentive to invest the resources needed to compete with the leaders.
Now, though, Fox has every incentive to get the platform in front of as many customers as possible. It can throw considerable resources behind Fox Bet and the native advertising channels from which to promote it. Expect it to cut into the current leaders in NJ within a few months of its debut.
Building a roster of prospective bettors via free-to-play contests could pay big dividends for Fox Bet in the long run, too.
Will Fox dabble in policy?
One of the more intriguing corollaries to this partnership involves the relationship between Fox Sports and sports leagues. Here’s a thought-provoking comment from analyst Alex Weprin:
Fox Corp. plans to acquire local TV stations, should they become available. targeting markets with MLB/NFL teams, and stations in political battleground states.
— Alex Weprin (@alexweprin) May 9, 2019
The media superpower holds lucrative broadcasting rights to events in dozens of categories, including some NFL and MLB games. It is the exclusive broadcaster of the World Series through 2021, and it’s in the rotation for the Super Bowl, too.
Stepping into the legal sports betting space, Fox suddenly has priorities that might be misaligned with its league partners.
MLB, in particular, has actively lobbied to force operators (like TSG) to pay them a percentage of all money wagered off the top. Unprecedented in the US, such an integrity fee would put a dent in the bottom line of Fox and its new partner. It’s at least possible that the duo could involve itself in policy discussions at the state level.
From what Weprin says, Fox is also looking to rebuild its empire of regional sports networks after shedding its existing portfolio earlier this year.
The Sky(Bet)’s the limit
Eben Novy-Williams wrote on the news for Bloomberg, and drew the logical parallel to TSG’s operations in the UK.
“The model here is @SkyBet,” Novy-Williams tweeted, “which Stars bought last year for $4.7 billion. Sky Bet is has heavy emphasis on tech, and grew quickly by utilizing the brand of a regional media giant.”
In this post-PASPA world, the sports and gambling industries are deliberately marching toward such a full embrace in the US.
- TV networks have begun to roll out standalone sports betting shows, including one within the Fox Sports family.
- Existing products like ESPN Streak and the NBA prediction contest approximate sports betting.
- March Madness bracket pools are definitely gambling. Especially when DraftKings runs them.
- For that matter, fantasy sports contests are butting up against sports betting these days.
This TSG partnership represents a huge escalation, though, and another step toward the sort of comprehensive integration of sports and speculation found in mature markets abroad. The broadcast component is an enormous one.
In a world …
Come take a little journey of imagination with us. We want to show you where this is going.
It’s September 5, a brisk and beautiful fall evening in West Virginia. You turn the television on at 7 p.m. to watch some pregame coverage before the Packers and Bears kick off the NFL season.
The game will be on NBC, but you surf around for Fox Sports 1 because they’re talking about Week 1 props on Lock It In. You heard about their Fox Bet app on your local Fox Sports Network radio affiliate on the way home from work.
Oh yeah, they also mentioned that the show was moved to the primary Fox Sports network. There we go, channel 10. There’s a promo code in the corner of the screen — BETFOX — offering a free wager on the season opener.
You put a Hot Pocket in the microwave, download the app, and register through Facebook. There’s $100 in your account already, and you’re on the Packers and the points in a divisional matchup. Just as you confirm your first-ever sports bet, the microwave dings.
Three hours and another Hot Pocket later, you have a major sweat on your hands in overtime. A Prince Amukamara pick-six gives the Bears the win and the cover, though, so you and the Packers are both 0-1 to start the season.
Just before you turn out the lights, you get a notification on your phone. It’s an email from Fox Bet.
“Sorry for your loss,” it says. “Here’s $25 on us.”
You decide you’ll try again on Sunday, since the Falcons are getting four in a dome against the Vikings.