How betting companies defined the year in sports business

Yahoo Finance Video

December 18, 2020 at 2:11 PM

Yahoo Finance's Dan Roberts joins Alexis Christoforous to discuss the momentous year for sports betting, as DraftKings and FanDuel race to sign betting partnerships with individual pro teams.

Video Transcript

ALEXIS CHRISTOFOROUS: And Tesla may be up about 700% year to date, but DraftKings stock is no slouch either. It is up more than 200% this year, after its merger with a SPAC back in April. And Yahoo Finance's Dan Roberts joins us for a look at what 2021 might bring for the company. And Dan, not just DraftKings, but all the companies in this space, of course, including FanDuel.

DAN ROBERTS: Yeah, I mean, Alexis, it's DraftKings, it's FanDuel, it's MGM, which jumped in when Tennessee legalized sports betting by cutting a deal with the Titans. I mean, other than the pandemic, which, obviously, really monopolized the conversation, I think the betting company progress has been the story in sports in 2020. These companies have been kind of in a race to sign team specific deals.

And every deal looks a little bit different. I mean, DraftKings and FanDuel, which, let's remember, originally tried to merge a few years back because the companies look and behave so similarly, the kibosh was put on that by regulators, and now they've gone different paths. As you mentioned, DraftKings went public via SPAC, and FanDuel actually sold to an Irish company, Paddy Power Betfair. Its parent company is now called Flutter.

But those two names in particular are now kind of going head to head with these team deals. Some of the deals are to be the official DFS, Daily Fantasy Sports, partner of a team. Some are to be the official betting partner. Some of them involve casino deals. Some of them involve launching a physical sportsbook operation. Some of them are deals just to launch a sportsbook app, mobile betting in states that have legalized mobile betting. Some of them are exclusive. Some of them allow for both. For example, the Detroit Pistons have deals with FanDuel and with DraftKings.

But my point here, you're seeing this really ramp up because it's following the pace of state by state legalization. And of course, also, amid the pandemic, when live sports return, suddenly, the DraftKings and FanDuel TV ads were back, which, in many ways, it felt like 2015 all over again. So I think this will continue to be a big story. I think it was a little under discussed this year because the pandemic really crowded in and dominated our conversation when we talked about every business and industry.

ALEXIS CHRISTOFOROUS: Yeah, I think you're right, but I mean, I know you follow this space closely. Are there companies that you think are better positioned than others in the new year to take advantage of this newfound legalization? I guess, it's still ongoing. But who do you think is best positioned?

DAN ROBERTS: Well, look, I think if you talk about brand recognition, DraftKings and FanDuel really are the top there. At least, everyone knows the big casino names, but they don't associate those with this mobile betting cascade. You know, that has kind of been a DraftKings and FanDuel thing, although as I mentioned, MGM is in.

Another name that has kind of come out of nowhere within the last year and a half is Penn Gaming. You know, it's based in Pennsylvania. Obviously, you look at its name and its stock ticker, Penn. And Penn Gaming came in and bought a majority stake in Barstool Sports, the sports media site. And that involved launching a mobile sports betting operation in the state of Pennsylvania. And that is done very well. So they're kind of only in one state, but in terms of brand recognition, people know Penn because of its association with Barstool.

I think a more interesting kind of topic to discuss in 2021 might be, how will these companies start to differentiate themselves from each other? Because as I mentioned, what they're doing is so similar. I think one big way will be content. The next thing that's going to happen is these betting companies want to get more into content. That's why Penn Gaming bought Barstool Sports. DraftKings has a TV network. It has its own blog. All of them want to be both. They want to be betting operators, and they also want to be digital content sites.

ALEXIS CHRISTOFOROUS: Content is king. Dan Roberts, thank you.

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