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The US Sports Betting Market Is Heating Up After Fox Plays its Strategic Hand

Photo of Tim Mulligan
by Tim Mulligan

Fox Corporation – the successor company to 21st Century Fox – has made its first decisive move since completing the $71 billion sale of 21stCentury Fox’s non-news and sports network assets in March. On May 8th, Fox announced its intention to acquire 4.99% of Stars Group Inc, a Canadian gaming company which is currently listed on the Nasdaq. Stars Group is the owner of the world’s largest online poker site, Poker Stars and Sky Betting and Gaming, which it acquired in April 2018 for $4.7 billion.

The $236 million which Fox will pay for its initial stake in the leading global gambling tech company is the first tangible evidence of Fox’s decision to move into the rapidly evolving US sports betting landscape. Under the terms of the deal, Fox has the right to acquire up to 50% of Stars Group’s US business within the next ten years. Commenting on the deal closing, Fox Sports CEO Eric Shanks stated sports betting/online gaming would be worth $9 billion in revenues by 2025 after accounting for wagers, sponsorship and advertising. Owning 50% of the US business of the global leader in online gambling would enable Fox to take a significant chunk of that revenue.

Why Fox is betting on Stars Group

The most attractive asset in the Stars Group portfolio for Fox is its subsidiary, Sky Betting & Gaming. Sky Betting is a UK-based digital-only betting company, originally founded by UK pay-TV giant Sky and then majority owned by private equity company CVC Partners after it acquired 80% of the company for £600 million ($882 million at 2015 market rates). It has built up the largest online user base in the UK through a combination of its tech and the brand equity associated with its former parent company Sky. Fox is hoping to replicate the success of this brand equity/platform play to give it a commanding position in the US sports betting landscape. As part of last week’s deal, it was announced that it is granting Stars Group an exclusive license to use certain Fox Sports trademarks for up to 25 years, subject to Stars Group spending an undisclosed amount advertising each year on Fox Sports outlets. Fox’s own research claims that US consumers are 27% more predisposed to betting on a Fox branded platform, further underlining the importance for the media player to replicate the UK success of Sky Betting & Gaming.

The US sports betting opportunity

Stars Group CEO Rafi Ashkenazi, commenting on last week’s deal, stated that Fox is “looking at betting as an additional pillar to their strategy…What would be better than to have a media company with an aligned strategy?” The pillar became real last year when the US Supreme Court ruled in favour of allowing US states to decide individually on whether or not to permit sports betting. Suddenly a new Fox was in pole position to leverage its dominance of domestic sports coverage; 88% of its top-rating TV shows were sports-based in 2018, according to Eric Shank at Fox Corp Investor day presentation on May 9th.

A key rationale for the 21st Century Fox acquisition sell-offs was for Fox to refocus on where it had a competitive edge against the streaming disruptors – specifically news (Fox News is the most profitable US cable news network) and sports (Fox has the broadcasting rights for all the leading US sports, including the next Superbowl in 2020.) The rapidly opening sports-betting landscape allows Fox to leverage its assets to gain dominance in the new market opportunity through in-game betting, and to build a complimentary digital revenue stream through a standalone platform partnership with Stars Group.

Fox Corp has just laid down its table stakes in a market which could have profound implications for live broadcast and the evolution of digital engagement in the US.

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