After a week in which two major sports betting partnerships between media companies and gaming operators were announced, analysts are speculating that the deals involving FOX Sports and ESPN could be the beginning of a new trend.
Two weeks ago, it was announced that FOX Sports was partnering with the Stars Group to create the Fox Bet sports betting app. Shortly after that, ESPN, owned by the Walt Disney Company, announced it was partnering with Caesars Entertainment to share sports-betting content.
Brian McGill, an analyst with Telsey Advisory Group, predicted in an investor note last week that more media involvement in sports betting is on the way.
“We believe we are likely to see more media companies get involved in sports betting going forward, and it could act as a catalyst for the casino operators that are able to monetize their access to sports betting,” McGill wrote. “We don’t think any of this is priced into the stocks of the regional operators. However, sports betting has now been passed in states with a total population of over 60 million. If Illinois, Michigan, Colorado and Ohio were to pass, it would take the total to over 100 million. FOX estimated that sports betting revenue in the U.S. would equate to $9.6 billion by 2025.”
FOX purchased 5 percent of Stars Group for $236 million, and has the option to purchase up to 50 percent over the next 10 years. Stars Group will provide the front and back-end solution for FOX Bet and can use the access Stars Group has gotten in markets thus far.
“As of now, Stars Group has access through the second skin granted to it through Eldorado Resorts (ERI, Outperform, $58 price target),” wrote McGill. “The important point is that it will have access in markets where there is a second skin because the first Eldorado skin in markets was sold to William Hill.
“This announcement to create FOX Bet was a positive for Eldorado, assuming that FOX Bet will eventually be able to take share in markets. They will also benefit from FOX Bet gaining access in other markets where Eldorado doesn’t have a property at this point.
“From our perspective, the casino operators have the access that is going to need to be used by the media companies and European operators, as more states legalize sports betting,” McGill concluded.
“In our coverage universe, we think the ones that have this access are Penn National Gaming (PENN, Outperform, $32 price target) with the biggest footprint of 40 casinos. PENN alluded to an announcement of a sports betting solution by its July conference call. We also believe it could be material for the size of the company for both Churchill Downs (CHDN, Market Perform, $108 price target) and Full House Resorts (FLL, Outperform, $3.75 price target).”
