A report that DraftKings was looking to buy Bleacher Report (BR) was quickly shot down last month, but is the idea so far-fetched?
BR parent company Turner Sports said it had “zero interest” in a deal and the company was not for sale.
A nonstory then? Perhaps not, as DraftKings did not deny that some form of discussion had taken place.
A DraftKings spokesperson said the firm spoke to a “variety of companies regarding various matters in the normal course of business”. The company said it did not discuss the specifics of those conversations.
But with nearly $500m in cash on hand, the mere existence of talks suggests DraftKings could be on the hunt for some M&A.
DraftKings in a position of strength
DraftKings’ soaring share price could also help it pay for any acquisitions via offering equity in the company.
“I doubt this Bleacher Report deal happens but it does indicate DK is going to go on an acquisition spree,” says Nigel Eccles, former CEO of FanDuel and current industry consultant.
“They could definitely pick up a sports media asset fairly cheaply.”
Who’s the target?
As the original Front Office Sports article suggested, Bleacher Report could have been a target for DraftKings because its owner AT&T is looking to reduce a massive debt pile.
However, there are plenty of other cash-strapped media platforms that also could make sense for an acquisition.
SBNation, owned by Vox Media, saw swathes of staff furloughed in April thanks to COVID-related financial woes. Meanwhile, Sports Illustrated publisher Maven is expected to lose $30 million this year and been forced to make layoffs of its own.
Either of those could be tempting takeover targets.
Why would DraftKings want a media platform?
The betting industry’s interest in media outlets is nothing new.
They theoretically offer a direct channel for cheap customer acquisition in a market where user acquisition costs can run as high as $500.
Media brands also offer exposure to a different type of player too. Bleacher Report said last year it had more than 3 million daily active users. And a good chunk of those users are likely to be casual fans not already in the DraftKings DFS database.
Does the media model work?
While the model is widely understood, it’s not particularly proven.
Fox Bet posted a loss of $15 million in Q1, while another media-integrated operator TheScore lost more than $6 million in the same period. Of course, every firm is losing money in the US at the moment, but these companies’ losses are also coming on relatively small market shares.
Elsewhere, deals between Penn/Barstool and William Hill and CBS are still too early-stage to have proven anything one way or another.
The long game for US sports betting
So DraftKings’ relative financial strength appears to be at play, but what’s the strategic angle?
DK of course has dabbled in the media game before. It launched DK Live back in 2016 as a softer way to engage players alongside the core DFS product.
The concept has never taken off in a huge way, but whether DraftKings can actually run a media business might be mostly irrelevant.
“It doesn’t matter,” Eccles said. “The sole reason to buy these assets is to help them become the number one sports betting company in the US.
“If [as an investor] you are buying DK, you are buying into them spending billions to become the leader in US sports betting. Something the size of BR would definitely help – even if it might not be that efficient in terms of customer acquisition.”
If the US sports betting market truly is a “winner take most” market as some – including Eccles – suggest, then investing in a media platform from a position of strength could prove to be money well spent for DraftKings.
