DraftKings and Flutter Entertainment stocks plummeted as the NCAA announced plans to ban prop bets in college sports, citing concerns about the integrity of the game and student athletes' protection. This comes amid a series of scandals and federal scrutiny in the sports betting and online gambling industry, including investigations into betting irregularities involving NBA player Jontay Porter and a federal probe into online gambling VIP programs. Additionally, federal lawmakers are targeting online betting's targeting of big spenders and VIPs, with Sen. Richard Blumenthal urging companies to stop using player data to target customers with gambling problems, and Rep. Paul Tonko working on legislation for federal oversight of online sports betting in legalized states.
Peter Distad has been named CEO of the sports-focused streaming-video joint venture backed by Disney, Fox, and Warner Bros. Discovery, with plans to create a new streaming hub for sports offerings. The venture aims to attract viewers who don't subscribe to traditional TV services and generate revenue for the corporate parents. Distad, with extensive experience in streaming from his time at Apple and Hulu, will lead the venture in Los Angeles, focusing on building a fan-focused product without competing for sports rights or creating original content.
The legalization of sports betting in the US has led to a surge in online gambling, with companies like DraftKings expanding into online casinos and lottery ticket sales. The move into iGaming is driven by the potential for higher revenues and the desire to tap into consumers' entertainment budgets. However, this expansion raises concerns about the potential for increased gambling addiction. As more states consider legalizing iGaming, the cultural shift around gambling in America is becoming more pronounced, with implications for both tax revenue and public health.
Penn Entertainment's ESPN Bet, which launched in November, saw significant success in terms of app downloads but suffered a substantial loss of $333.8 million in the fourth quarter of 2023 due to costs associated with the launch. This exceeded Wall Street's expectations, leading to a more than 15 percent drop in Penn's stock. Despite the losses, the company remains aggressive, aiming for ESPN Bet to break even by 2025 and projecting meaningful cash flow by 2026.
Warner Bros. Discovery, Fox Corp., and Disney are teaming up to launch a new streaming joint venture that will offer a wide range of sports programming from ESPN, TNT, and Fox Sports on a standalone app, set to debut in the fall. The service will include access to linear sports networks, hundreds of hours of content from major sports leagues, and a new brand with independent management. This move reflects the shift of sports to streaming platforms and marks a significant development for the media industry, with each company owning one third of the new outlet and licensing their sports content on a non-exclusive basis.
Flutter, the parent company of FanDuel, has listed on the NYSE as a secondary listing, aiming to challenge DraftKings in the U.S. sports betting market where FanDuel leads in market share. Flutter's move seeks to access deeper capital markets and make itself more accessible to U.S. investors. Analysts believe the listing could be a short-term catalyst for Flutter, with Jefferies estimating a 20% premium to DraftKings' valuation due to FanDuel's sustained market share outperformance. The sports betting industry in the U.S. is estimated to be a $37.5 billion total addressable market.
The publisher of Sports Illustrated, the iconic sports brand, is planning significant layoffs after its license to use the brand's name was revoked by Authentic Brands Group. The layoffs could affect a significant number, possibly all, of the outlet's staff, including NewsGuild workers. The Arena Group, which operates Sports Illustrated, admitted to failing to make a quarterly payment, leading to the revocation of the license. The future of the publication remains uncertain as negotiations with Authentic Brands Group continue.
