G2E conference may propel transformational deals in sports betting

Chris Russo, a managing director at Houlihan Lokey’s Technology, Media & Telecom (TMT) Group, briefs on what to expect from next week’s key event.

Chris Russo

Beginning on October 14, the sports and gaming worlds will converge in Las Vegas, Nevada, for the annual Global Gaming Expo (G2E).

Given the growing impact of betting on the US sports ecosystem, this year’s conference could be particularly significant, as transformational deals will likely be conceived or completed at the event. Arrangements involving market access are expected (market access deals enable sportsbooks to operate in particular states through partnerships with casinos or other in-state entities). However, this year’s conference may also propel a number of other important commercial and financial transactions, including:

Media/content partnerships: Perhaps the most high-profile media/betting deal to date has been the arrangement between Fox Sports and The Stars Group to create Fox Bet. Given the visibility and financial potential of this deal, many other media companies are exploring strategic opportunities to leverage their audiences and brands to drive new revenues in the betting space. While a number of media companies will likely focus on short-term marketing and advertising deals, the opportunity to create a deeper relationship akin to Fox Sports and The Stars Group may be compelling to some industry players. As these media companies conduct discussions at G2E, they must weigh the financial upside of creating a comprehensive arrangement now with the risk of moving too quickly and locking into an exclusive partnership before the market has matured and “winners” emerge.

Sponsorship arrangements: Certain gaming companies have been aggressive in pursuing sponsorship of national sports leagues in order to build their brands with future sports bettors. For example, MGM Resorts completed arrangements with the NHL, the NBA, and MLB, while Caesars Entertainment inked a deal with the NFL. While these national deals are important, the real action may ultimately occur within individual states as betting companies seek local team sponsorships to drive brand awareness and new customers in states with legal sports betting. Some team sponsorships have already been completed, such as the Caesars deals with the Philadelphia 76ers and New Jersey Devils. Many more are likely to be forged in the coming weeks and months, perhaps at G2E. Numerous professional teams benefited from significant sponsorship deals with DraftKings and FanDuel when daily fantasy ad spending was at its peak a few years ago. Whether this phenomenon repeats itself with sports betting may ultimately depend on league policies and the degree to which they provide flexibility for robust local deals.

Data licensing: Just prior to the NFL season, Sportradar and the NFL announced a groundbreaking arrangement whereby Sportradar became the “exclusive distributor of official league data to global media and gaming markets.” Other sports leagues have also completed global data deals, and some leagues have even required betting companies to license official data in order to execute a local team sponsorship. Since the leagues’ integrity fee concept has not been widely embraced, data licensing represents an important leverage point and opportunity for betting-related revenue. As such, leagues are forging partnerships with player tracking technology companies to create next-generation data that will appeal to bettors and drive lucrative licensing deals.

Experiential venue deals: The advent of sports betting in the US may inspire a new type of “sports bar experience”. Recognizing this opportunity, MGM Resorts and Buffalo Wild Wings announced a multi-year partnership that they believe will “revolutionize [the] sports bar experience with national free-to-play games and sports betting tests” – among other in-restaurant and mobile features. Other venue-based businesses have also embraced sports betting. For instance, Topgolf partnered with PointsBet to provide live game odds, special on-site offers, and a PointsBet-branded environment in its New Jersey locations. While the Buffalo Wild Wings and Topgolf concepts are compelling, the talk at G2E will likely center around the recently announced William Hill and Monumental Sports & Entertainment partnership to create the “first sports book at a US professional sports venue”. According to Ted Leonsis, chairman, founder, principal partner, and chief executive of Monumental Sports & Entertainment, the partnership will “enhance the fan experience with innovative gaming opportunities and transformational dining and culinary options not just on event days, but year-round”.

Mergers and acquisitions transactions: A number of betting entities have embraced M&A as a key part of their US growth strategies. One of the more aggressive players to date has been Better Collective. Over the past several months, the company has acquired RotoGrinders, Vegas Insider, and Scores and Odds. On a larger scale, it was announced last week that Flutter Entertainment would be acquiring The Stars Group in a multi-billion-dollar transaction. This creates a combination of powerful brands – such as FanDuel and Fox Bet – that may have a profound impact on the marketplace. As a result, many betting companies at G2E will need to consider their competitive positions and strategic options, and new M&A deals may be hatched.

Capital raises: Numerous institutional and private investors will attend G2E seeking opportunities to deploy capital. Similarly, many emerging companies in the betting space will view the week as an important capital-raising opportunity. The market environment in the US for funding of certain betting-related entities has been attractive. For example, the Action Network raised $17.5m earlier this year from The Chernin Group and Fertitta Capital, among others. More recently, theScore raised $40m from Fengate Asset Management. While some institutional investors have been hesitant to make gaming investments – perhaps due to LP restrictions or concerns about licensing – the growth in the betting market appears to be gaining momentum and may ultimately move some traditional investors from the sidelines and onto the betting field of play.