Who Will Win the Sports Gambling Gold Rush?

Friday afternoon the Wall Street Journal reported on one of the worst kept secrets in sports media -- ESPN is shopping for a major partner willing to wrap itself in the network's brand and produce an ESPNBet sportsbook. ESPN is seeking billions of dollars for this partnership. Just a couple of years ago, ESPN said they would never get involved in the sports gambling space, and now they are effectively conducting a public auction of their brand to the highest bidder. And ESPN is not alone in this rapid pivot. The NFL, which once fought the expansion of sports gambling legalization, is now allowing sports gambling companies to advertise during its games. Even college football, once loath to be connected to sports gambling at all, now has individual bowl games signing deals with gambling companies. It doesn't stop there. Each pro team now has its own exclusive deals with gambling companies. As a season ticket holder of the Tennessee Titans, I get emails from the team encouraging me to wager with BetMGM, their chosen gambling sponsor. And during the Titans games themselves, in-stadium ads flash on the jumbotron for BetMGM as well. The great gambling gold rush is upon us. Since I've spent the past three years on the most viewed daily sports gambling show in the country, FoxBetLive, and run Outkick, which has one of the largest affiliate partnerships in the country with FanDuel, I feel like I know the sports gambling industry pretty well.  By the way, while you're here you might as well go ahead and gamble on Georgia-Clemson. Bet $5 on the winner of Georgia-Clemson and you get back $150 if you're right, that's a 30-1 payout for new users. Heck, find a friend to take the other side and for a $10 bet the two of you are guaranteed to win $140. This past spring I sold OutKick to Fox, in a large part because of OutKick's success in the affiliate gambling market. That deal came on the heels of deals for sports media companies like Barstool to be sold to Penn Gaming and for the Action Network to be sold to a larger affiliate company. There have been many other smaller transactions in the media space as well. Even more substantially, sports gambling companies continue to be gobbled up this year -- the Score by Penn, William Hill by Caesars, Golden Nugget by Draft Kings -- but we still haven't seen the seismic move that will create aftershocks in the entire business community and hasten consolidation on a massive scale. All of this is a symptom of the sports gambling gold rush, the most transformative moment in sports since the advent of cable sports on television and of the rise of fantasy sports. Sports gambling holds the potential to be a much bigger business than both of these major paradigm shifts in the sports industry combined. In fact, I think it will be the biggest sports business opportunity in the lives of anyone reading this right now. If anything, most sports fans -- and business analysts -- are still undervaluing the overall impact of how truly transformative sports gambling will be. Want the best analogy I can think of? Right now, sports gambling is like America when Prohibition ended. The same companies that gobbled up alcohol market share in the 1930s are still powers today. Right now, sports gambling in 2021 is where the American alcohol industry was in about 1935. Presently, the market shares of sports gambling companies look something like this: 1. Fan Duel 35% 2. Draft Kings 24% 3. Bet MGM 12% 4. William Hill, Barstool, FoxBet, PointsBet, BetRivers, and others are all single digit market share competitors Yes, the only three sports gambling companies with a double digit market share are FanDuel, Draft Kings, and BetMGM. The biggest surprise over the past year has been BetMGM, which effectively came out of nowhere and established itself as a clear No. 3 in the marketplace. There are other big money sportsbooks launching this year that will flood the marketplace with additional cash -- Caesars and Wynn, among them -- but it remains to be seen whether they will be capable of ever attaining a double digit market share in the space. It also remains to be seen just how durable these early markets shares truly are. Especially since these companies are not currently focused on profitability, they are focused almost entirely on market share. The clear business imperative here is that profits will eventually follow the market share. While I think the best analogy for the sports gambling industry is Prohibition ending, the easiest recent business analogy is the internet Gold Rush -- the goals are the same: get big fast. As we enter into a new college football and NFL season, what might happen over the next six months that could change the calculus of the existing businesses and their market shares? I think we're going to see multi-billion dollar acquisitions coming, big swings by big companies that might not even be involved in the industry in a definite way yet. This will be the year when seismic sports gambling moves shock the casual viewer, when the table stakes get raised an enormous amount. So what are those plays? Here are five big ideas that I'm going to write entire articles on in the days ahead, but I want them to be here all in one place in the meantime. My big thesis driving most of these moves? Sports gambling companies and media companies are going to become even more inextricably intertwined over the next year. Here are my five big ideas for the sports gambling industry: 1. Amazon buys Fox, CBS, NBC, or ESPN and goes all in on sports gambling. This idea makes the most business sense. (It might also face the most regulatory scrutiny too, given the current FTC perspectives). But instead of dabbling in sports rights with, for instance, Thursday Night Football streaming inside Amazon Prime, why wouldn't Amazon buy the entire Fox or CBS networks? With Fox, for example, you'd get all of the NFC TV package with Fox Sports, you'd get MLB, NASCAR and the World Cup, FS1 and FS2, you'd get the FoxBet gambling brand, and you'd get the Fox television network and the studio in west Los Angeles to allow you to produce as many shows for Amazon Prime as you'd like at a time when LA studio space is at a premium and difficult to find. You'd have the ability to advertise your Amazon Prime shows using the Fox television network -- how many people who would love Amazon Prime shows never see them on a streaming service? -- and you'd have the ability to use your Amazon Prime service to directly target sports gambling sign ups to the people you know are already watching your sports products, driving down customer acquisition costs to minimal levels and allowing FoxBet to immediately become one of the premier brands in sports gambling. Fox could then spin Fox News, which provides the lion's share of the company's profits, into a new monstrously influential conservative media company, putting the Wall Street Journal, the New York Post, and other entities back under the same ownership as Fox News, creating incredible synergies there. It's actually an incredibly good fit for both companies. But the same could be true for CBS, NBC, or ESPN, I just think they are a bit harder to swallow. By the way, this doesn't just make sense with Amazon. The same logic would apply for Apple, Google or Netflix, for any big tech company in the media business that wants to be involved aggressively in sports and sports gambling. (Google is in through YouTube. Could you imagine the value that could come from driving direct sports gambling ads via YouTube advertising?) 2. Disney spins off ESPN to a sports gambling company. If Disney doesn't want to align itself aggressively with sports gambling, what sense does ESPN's sports gambling licensing deal really make long term? Do you want to own the business or do you want to lease the business? Shouldn't a sports gambling company buy all of ESPN, including ESPN+? Imagine if Draft Kings, which ESPN already owns a stake in, could allow early access to Adam Schefter and Adrian Wojnarowski's sports scoops inside its gambling app. What if ESPN.com effectively became DraftKings.com. That is, you went to check your favorite teams' sports stats inside of a sportsbook app, which then allowed you to place bets on games without ever leaving the existing site you're already visiting? ESPN doesn't really make sense to Disney from a streaming perspective either. Think about it, Disney+ and Hulu are predicated on Disney creating and owning all the original content forever. The Mandalorian and WandaVision, two recent Disney+ shows, have lasting value for generations, and Disney owns them in perpetuity. Right now, ESPN just leases its sports content, which is disposable news a day later. Sports and news are great live content, but they have almost no long term value. You could even see a future in which a company like Draft Kings buys the UFC or WWE and makes it a wholly-owned subsidiary of the company, streaming under the ESPN+ app, where you can conveniently live wager on fights. Everything is elegantly connected in one company. If Draft Kings isn't interested in buying ESPN, what about Caesars or Wynn? Right now, they are afterthoughts in the sports gambling marketplace. If they want to be players in the space, could ESPNBet be their pathway to relevance in a market they might otherwise have missed? I'd explore that if I were them. The other option, of course, would be Disney reverses course and instead of saying they don't want to be affiliated with gambling, they see sports gambling as an irresistible business opportunity and buy one of these sports gambling companies themselves. But is Mickey Mouse going to shill for parlays? That feels like a tough brand fit. So maybe the play is buying the sports gambling company and then spinning ESPN and the sports gambling company off as a standalone entity? I feel like no matter the logistics, ESPN is going to end up all in on gambling eventually. In the meantime, don't overlook Rush Street Interactive as a potential player here. They make a ton of sense for ESPN. 3. FanDuel buys Fox or vice versa. Right now, Fox and FanDuel are involved in a nasty battle over what the value of Fox's purchase option of FanDuel is. Rather than have a multi-billion dollar high stakes legal battle that is dragging into next year, why wouldn't one company end the dispute and acquire the other? Fox, more so than any sports media company, saw the value of sports gambling before anyone else. CEO Lachlan Murdoch launched FoxBet early in the gambling gold rush and after FanDuel acquired The Stars Group, Fox's initial partner in the space, Fox and FanDuel became partners. Now the debate is about the value of that partnership. Why wouldn't FanDuel want to roll all of the Fox Sports assets -- the channels, the games, the websites, the content -- all under the FanDuel umbrella and cement its lead in the sports gambling space by acquiring one of the pre-eminent sports media brands in the world? Especially one that it's already directly connected to in an ownership relationship. You could spin FanDuel and Fox Sports off into a new company, arguably the pre-eminent sports company in the world. The moment FanDuel and Fox Sports officially paired up, every other gambling company would rush to the altar with other media companies, all in an effort to cement their market shares. 4. Comcast buys a sports gambling company and brings it in-house. PointsBet make a great deal of sense for Comcast, given all its sports holdings and the fact that NBC and PointsBets already have a sports gambling partnership. The Olympics disappointed in terms of ratings this past year. What's one way to help to defray the disappointing ratings decline in sports? Get your viewers to bet in real time on sports you own the rights to in a gambling company you also own. Plus, one major advantage the television and cable companies have over the streaming companies is latency. Anyone who has streamed a sporting event knows cable wires bring signals way faster than streaming does. You can't live wager on streaming games because you're too far behind. PointsBet to Comcast makes a ton of sense. In the event CBS is not acquired by Amazon, it would make a lot of sense for CBS to acquire a sports gambling company as well. 5. The NFL, NBA, NHL or MLB owners buy their own sports gambling companies. Instead of selling rights to individual sports gambling companies, what if the league owners decided to have only one official partner that they all jointly owned? Can you imagine how valuable the exclusive rights to the NFL, for instance, would be worth to a sports gambling company? You already have been willing to invest in your own TV network, well imagine the impact that pooling your billions together could represent to own a sports gambling company in the future? Think of it this way, what if the NFL, years ago, had bought its own broadcast TV network and given that network exclusive rights to all its games? And then what if the NFL owners had foreseen the coming rise of cable and started their own cable network back in 1979 or 1980 instead of selling their games to ESPN? Can you imagine how much of a business coup that would have been? Well, that’s where sports gambling is right now. Rather than allow the sports gambling companies to build the biggest sports companies in the world by allowing people to bet on your games — and taking pennies on the dollar as a result — why not own the dollars yourselves? Sure, you might make a little bit less money in the short term, but in the long term all of your franchise in the NFL, for instance, would own 1/32nd of the sports gambling value of the largest sports gambling company in the world. ... There you have it, my five big sports gambling ideas that I'll be writing about in more detail in the weeks ahead. Disclaimer: I own stock in virtually all of the gambling and media companies mentioned in this article because I believe in the long term future of the entire sports gambling industry, not just one or two companies.