Why Is DraftKings Making An Offer For PointsBet?
It’s been a hot minute since we have had absolute chaos in the US sports betting industry, so I was ready to pull up a chair and pop some corn when this story hit the internet.
PointsBet acknowledged on Monday that DraftKings had made a non-binding offer of $195 million USD. That is causing PointsBet, obviously, to consider that vis a vis the binding $150 million offer on the table from Fanatics that it was (and still is) prepared to accept.
Why would DraftKings want to buy PointsBet?
It’s actually easier to come up with reasons why DraftKings doesn't want to buy PointsBet, so I’ll start there:
The player database: There has to be enough overlap in the two companies’ databases that this is almost immaterial and PointsBet’s marketshare is very small.
The PointsBet brand: It would be shuttered, presumably, if DraftKings is the buyer.
Market access: DraftKings already has all the access it needs.
Sooooo, why does DK want to do this, again? We’re left with a couple of major reasons.
Technology: Yes, DraftKings likes its tech stack but it likely covets Banach Technology, which PointsBet bought in 2021. It likely improves DraftKings product immediately. It’s definitely not worth $195 million, though, as the original price was only $43 million.
Screwing with Fanatics: Usually, I would dismiss the PR from the other party in this scenario. But Fanatics CEO Michael Rubin said this, and it honestly feels spot on (from CNBC): “It’s a move to delay our ability to enter the market. I guess they are more concerned about us than I would have thought.” You might also just make Fanatics pay more.
Let’s look at this: very few companies have any real ability, as we sit here, to disrupt the market in a material way in the next few years. That list is basically Fanatics and Bet365, if the latter decides to get serious. In turn, that means there are few ways (again, in today’s vacuum) for anyone to meaningfully hurt DraftKings’ marketshare.
If you can mute one of those disruptors even for a couple of years, that’s probably valuable. Banach plus thwarting Fanatics doesn’t seem like enough to warrant almost $200 million, but I have doubted DraftKings’ methods at my own peril.
How much would missing out on PointsBet hurt Fanatics?
It definitely slows things down:
The big issue is certainly product. Fanatics has talked up how important product is going to be and how much they are working on this, but the first iteration doesn’t look very exciting to me. It kind of looks like sports betting meets Zork. That might be harsh, but it certainly doesn’t look like a world-beater. PointsBet would clearly accelerate the Fanatics product if the deal closes.
That database of active users that is probably not super useful to DraftKings is at least of some value to Fanatics, as it gets people already betting in the US in the door immediately.
Fanatics talks up market access, and the PointsBet acquisition covers a lot of that quickly. I mean that’s fine, but I can’t imagine it materially slows Fanatics.
In any event, it will be fascinating to see how this all plays out, and it will certainly have repercussions for how the US industry matures.
