DraftKings, FanDuel Miss Out on The Athletic

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DraftKings, FanDuel Miss Out on The Athletic

DraftKings (NASDAQ:DKNG) and FanDuel are two of the most obvious rivals in the daily fantasy sports (DFS) and sports wagering industries. Both are missing out on a coveted media asset.

The Athletic
The Athletic
The Athletic co-founders Alex Mather, left, and Adam Hansmann. Their company is being acquired by the New York Times. (Image: Axios)

The New York Times Co. (NYSE:NYT), owner of the eponymous newspaper, is reportedly acquiring The Athletic for $550 million. The Athletic is a subscription-based sports media entity backed by investors including Courtside Ventures, Founders Fund, and Powerhouse Capital. The Information reported the Times deal earlier today.

It’s a blow for DraftKings and FanDuel, both of which were rumored to be suitors for the San Francisco-based sports media entity last year.

It’s not clear if either gaming company made formal offers for The Athletic. However, it is obvious The Times is paying much less than the target was likely initially pursuing. Just a few months ago, it was rumored The Athletic was pursuing a $750 million valuation.

DraftKings, FanDuel Still Have Ample Media Ties

Launched in 2016 by Alex Mather and Adam Hansmann, The Athletic covers sports in 47 North American cities and the UK. A year ago, the company topped the one million subscribers mark, and it’s been rumored to be a takeover target for much of 2021.

While it was never officially revealed that either DraftKings or FanDuel were pursuing The Athletic, the recent spate of media/sports betting relationships indicate it’s likely one or both operators were considering a bid for the media entity. Last year, Macquarie Research forecast more than $30 billion worth of iGaming and sports wagering revenue by 2030, all attributable to operator relationships with media firms.

Last year, Boston-based DraftKings purchased Vegas Sports Information Network (VSiN) and followed that up with a $50 million investment in Meadowlark Media. Meadowlark Media is the owner of Dan Le Batard’s network of shows. The company also attempted to acquire The Action Network, which was purchased by Danish betting analytics provider Better Collective for $240 million.

Last month, FanDuel revealed a deal with the “Pat McAfee Show” reportedly worth $30 million annually.

Times Might Need Athletic

The Times is focusing on digital and subscription-based offerings to stem declines in advertising revenue and print subscriptions. The Athletic helps with those objectives. It’s believed the acquisition will help the buyer reach its goal of 10 million digital subscribers earlier than previously expected.

Shares of the newspaper publisher are off 5.52 percent over the past year, while the S&P 500 is higher by 25.39 percent over the same period.

For DraftKings and FanDuel, both of which operate cost-intensive models with heavy marketing spending, missing out on The Athletic isn’t the worst thing. That’s because the media property is forecasting notch 2021 revenue of $77 million, with a cash burn rate of $35 million. At a time when Wall Street is scrutinizing sportsbook operators’ time lines to profitability, bringing another cash-burning enterprise into the fold might not be the best idea.

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