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Chris Russo | What’s next for sports betting and media deals?

Chris Russo, chief executive of boutique consulting firm CRX Sports & Gaming, looks ahead to deal trends set to emerge in 2020's fourth quarter

In late August, NBCUniversal announced a groundbreaking arrangement with sports betting operator PointsBet. The five-year deal includes “a total committed marketing spend of $393m” and “a significant equity subscription received by NBCUniversal of a 4.9-per-cent shareholding in the company and 66.88 million options maturing in five years, conditional on shareholder approval”.

The NBC-PointsBet arrangement is the latest in a series of alliances between major media companies and betting operators, such as FOX Sports and The Stars Group, Yahoo Sports and BetMGM, CBS Sports and William Hill, and Barstool Sports and Penn National Gaming. Given the importance of these high-profile deals and the current momentum in US sports betting, a number of key questions have emerged regarding the future of betting and media partnerships:

Will other blockbuster betting and media deals be completed in 2020?

The current environment for deal-making in the sports betting space is very attractive for media companies. There are more than 15 sports betting operators seeking to gain shares in the US, and a number of these parties are very well capitalized. Also, the unusual sports calendar driven by Covid-19 means that the National Basketball Association, National Football League, Major League Baseball, and National Hockey League will all be playing at the same time in September.

This phenomenon presents an unprecedented opportunity for betting companies to secure new customers, leveraging media and marketing relationships. While the environment is ripe for additional blockbuster deals, the realization of these deals will depend, in part, on the appetite of major media companies that have not yet chosen their strategic partners in the space. It’s possible that some large media companies may forego strategic arrangements in 2020, waiting to better assess which operators will emerge as “winners” in this nascent, highly competitive American sports betting market. The importance of choosing a winning player is obviously more critical if a media company seeks an equity stake versus a basic marketing buy.

What components will be included in future betting and media arrangements?

The major betting and media deals announced to-date have included some combination of: 1) media buy 2) affiliate marketing, where payments are made based on customer referrals 3) equity investment/ownership and/or 4) brand incorporation. It is likely that future blockbuster deals will continue to focus on these four components. While media buys will be a common component, the decision to include affiliate marketing and/or equity ownership may depend upon economic, as well as regulatory considerations.

Finally, the most sensitive decision may involve the use of a media company’s brand in a betting app. On the one hand, this brand usage can be a key component, as is the case in the Barstool Sports and FOX Sports deals. On the other hand, the use of a brand for betting may have a broader impact on a media company’s positioning with respect to other areas of its business. Each media company will have its own value system and priorities with respect to the four major deal components, but it appears that betting companies generally prefer (and thus may be willing to pay more for) integrated relationships.

Will “long tail” sports media companies benefit from sports betting?

Long-tail media companies (e.g. smaller sports websites, mobile apps, podcasts, social properties) are likely to benefit from sports betting marketing expenditures, especially if they have targeted audiences. Properties that are focused on fantasy sports, sports betting information, and/or data and analytics may be especially valuable to betting companies for customer acquisition.

The challenge for some smaller properties will be securing the attention of the large betting companies, given the many priorities of these operators and their initial focus on larger partnerships. Also, the long tail media companies may receive less value based on their brand association and simply derive their betting related economics from the number of new customers they sign up. To this end, betting companies may be more inclined to strike affiliate deals with long tail companies versus guaranteed media buys.

How will sports leagues and media companies treat in-game betting integrations?

Thus far, there has been limited integration of betting messages into live game streaming and TV broadcasts. The PGA Tour recently incorporated odds-based content into its live streaming product (for the Wyndham Championship), and last year, NBC Washington created a separate RSN feed featuring betting related content for selected Washington Wizards games.

In general, though, the major leagues have been reluctant to allow in-game integration via their national game broadcasts or their teams’ local RSN telecasts. Leagues may be concerned about alienating fans not interested in betting and/or cautious not to repeat the mistake of excessive messaging experienced with daily fantasy.

Ultimately, in-game TV/streaming integration may be the most powerful customer acquisition vehicle, given the vast potential of in-game betting. While extensive in-game integrations for major sports broadcasts are not likely to occur in 2020, this integration will almost certainly be an important topic of discussion as the NFL and other leagues renew their television/media arrangements over the next few years. Regardless of whether this in-game “inventory” is ultimately controlled by the Leagues or the media companies, it represents a significant opportunity to generate new betting revenues and to engage fans.

What other initiatives will media companies pursue to enhance their betting opportunities?

Most sports media companies have already begun positioning themselves for success in sports betting by launching shoulder TV programming and digital features focused on betting. This creation of betting content is likely to accelerate over the next few years, as media companies seek to educate and engage fans across all platforms regarding sport wagering.

As content is created, media companies will need to create new experts and personalities to present this betting information in an authentic and entertaining manner. While developing this content with in-house resources is an option, larger media companies may also consider partnerships with and/or acquisitions of betting focused content companies. Over the last few years, a number of new high-profile players have entered the betting content space (e.g. the Action Network, VSiN), and more will surely be launched in the coming months and years.

Despite the pandemic, the growth of betting has continued to be a bright spot for the sports industry. Virtually every major media company and sports league is participating in or actively exploring opportunities to benefit from this new ecosystem. However, it is also important to recognize that the US sports betting industry is still in its infancy.

The most valuable marketing tool (i.e. in-game promotion) has largely not been deployed to-date. Also, the number of states that have legalized mobile sports betting is still relatively small. As such, media companies must carefully balance the benefits of a striking a long-term deal now with the risks of miscalculating this emerging market.

Chris Russo is chief executive of CRX Sports & Gaming, a boutique consulting firm focused on the intersection of sports, technology, and digital media.

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