The relationships between sports publishers and sports betting companies are increasingly common and the outcome for media companies is wildly lucrative in the grand scheme of sponsorship deals.
But in the vast digital advertising landscape, what do sportsbooks get from these investments? The short answer is they are able to quickly acquire new sports bettors in the U.S. as states continually legalize online sports gambling. However, media companies may not want to put their money on sportsbooks staking them over the long run. Sports bettors are becoming media companies in their own right, and the potential for consolidation could eventually take stacks of revenue chips off the table.
“The economics don’t make sense,” said Sam Yardley, the evp of North America at sports marketing agency Two Circles. “There is a bubble forming, and there will be a reckoning at some point.”
How sports bettors have gotten a taste for media game
Working with sportsbooks is becoming big business for media companies, as the bettors see the U.S. market as a jackpot and publishers as having the hot hand to help them acquire customers.
In July, Gannett signed a five-year-long deal with European sportsbook Tipico, which is worth $90 million in fixed cash, plus gives the publisher an ability to earn affiliate revenue on new betting customers it drives to Tipico, according to Michael Reed, CEO and chairman of Gannett. The publisher also has the ability to own up to 4.9% of the betting company based on a variety of performance goals, though he declined to share what those were.
Reed said his team approached Tipico, which was the top sports betting company in Germany, and ultimately chose to pursue that partnership because the sports betting operator told him they saw the U.S. as its “single biggest growth opportunity,” and wanted to seriously invest in growing there.
The requirements for the partnership, Reed said, were that Gannett would be seen as a priority to Tipico and that the sportsbook would compensate the publisher through cash, stock and affiliate commissions. In exchange, Tipico would have branded content reaching 50 million monthly visitors to Gannett’s niche sports brands, including Golf Week and MMA Junkie, as well as access to 250 local sports markets, reaching a national scale. The publishers’ 500 local sports reporters and marketing teams would produce everything from branded columns, video series, blogs, newsletters, promotions and events, he added.
Sports podcast network Blue Wire has similarly been able to bank on sportsbooks’ media interests. In February, WynnBET signed a three-year-long deal with Blue Wire that is worth a $3.5 million investment in the media company in exchange for partial ownership, at least $1 million in advertising revenue and a multimillion-dollar recording studio built at the Wynn Las Vegas that opened in early September, according to Blue Wire’s founder and CEO Kevin Jones.
Other sports betting operators, however, like DraftKings, have taken a broader approach to media partnerships, signing deals left and right with more publishers including WarnerMedia, Vox Media and even individual creators to start producing in-house content.
This multi-year media strategy seems to have been helping DraftKings to acquire customers. The first game in this year’s NFL season saw more than double the bets from last season’s first game placed on its platform, though it would not disclose the total number of bets placed, and had 1.5 million total bets placed on the first game of the season between Tampa Bay Buccaneers and Dallas Cowboys, an amount that took over a month to reach when the company first launched in 2018, according to a company spokesperson.
Regardless of where they are orchestrating their media partnership strategies, these sports gambling companies are spending millions of dollars on what boils down to paid media and branded content.
But why are sports betting companies prioritizing media partnerships for their digital campaigns? Because it can be easier than jumping through the hoops necessary to run ads.
Social media platforms, like Facebook, make the traditional digital advertising process difficult with state-by-state applications and regulations that take time and effort, said Yardley. So when a sports publisher already has a curated following of 1 million sports fans on that platform, it becomes more appealing to create a branded video, for instance, and have them organically circulate it on their page — with the added benefit that it also looks more genuine to the viewer.
Why media companies’ sports betting hot streak could turn cold
In their campaigns with media outlets, sports betting companies are primarily targeting casual bettors, or those interested in betting, but who are not heavy gamblers, Yardley explained. That’s because this demographic of gamblers is likely to download and set up one sportsbook app and use that for the bulk of their online bets going forward.
There is so little differentiation between sportsbooks, at the end of the day that, unless you’re a serious gambler, there is no reason to be placing bets across multiple apps, Yardley said. What it all comes down to is customer inertia and these companies getting the sports betting-curious to place their first bet with them.
This cohort, though, tends to have a low lifetime value, betting $10 to $50 at a time on an irregular cadency, said Yardley. So the cost of acquisition through some of these partnerships simply don’t add up. In five years, Yardley doesn’t believe that there will be 20 sports books operating in the U.S. Instead, there will likely be three to four large sports betting conglomerates that have acquired all of the low- to mid-sized companies that couldn’t compete in the user acquisition race.
Yardley said there are many parallels that can be drawn to the U.K.-based and European sports betting companies, who have had several years’ head start over the U.S. in building these businesses. Over that time, a lot of consolidation has occurred and there are only two major sportsbook companies that have acquired the smaller entities in the space — William Hill and Paddy Power.
Sports betting is the largest revenue stream for Blue Wire since the company was founded in 2018, said Jones. And Reed said that the deal with Tipico has been one of the biggest sponsorship deals Gannett has had in its history as well.
But while publishers like Gannett and Blue Wire are seeing multi-million dollar checks come in from sports books, it stands to reason that once the bubble pops, these deals will decrease in volume and size. So publishers should probably be cautious of viewing this as a long term recurring revenue opportunity.
Taking the house
Another threat to sports publishers’ relationships with sportsbooks is the potential for more sportsbooks to turn into publishers’ competition. After getting a taste of the media market and its role in their marketing strategies, sports bettors like DraftKings and Penn National Gaming are going all-in.
In January 2020, Penn National Gaming bought a 36% stake in Barstool Sports for approximately $163 million cash and convertible preferred stock, according to the company’s announcement. And on Oct. 19 of this year, the sportsbook completed a $2 billion purchase of Canadian sports media company theScore, which had rolled out its own sports betting app in 2019.
DraftKings aims to become a publisher in its own right, according to the company’s CMO Brian Angiolet.
In 2019, DraftKings took its first stab at becoming a content creator by partnering with Vox Media’s SB Nation to create the vertical DraftKings Nation. Then in March 2021, the company acquired sports betting radio and streaming network Vegas Sports Information Network (VSiN) for an undisclosed price, which gets DraftKings’ name on 24/7 sports betting coverage, Angiolet said.
This September, the company even began programming video content on its YouTube channel, which had 121,000 followers at the time of publication, with the help of influencers and content creators, like Gary Vaynerchuck. The entrepreneur and vocal sports fan, who goes by GaryVee, is the host of his new weekly show for DraftKings called “GaryVee’s Die Hard Dialogue” and is tasked with creating more culture content for the sportsbook, rather than hard analysis, Vaynerchuck said.
For sports bettors like DraftKings and Penn National Gaming, becoming a publisher is seen as the smarter bet considering all the competitors taking a seat at the lively U.S. table.
“Owning our own network allows us to cut through the noise of all the paid media being spent today,” said Jon Kaplowitz, head of Penn Interactive in an email to Digiday about the decision to acquire a minority stake in Barstool Sports. “We don’t have to pay a [third-party] media company to get the word out; we are the media company, and we are able to deliver our messages with more focus and authenticity. It’s a huge competitive advantage to own the media company [versus] rent the eyeballs of the media company.”