The debate on sports betting in America has taken many turns. If you live in Las Vegas, you can walk down to the sports book at MGM and wager on just about any game you like. But if you live in Wyoming, you would need to call your local illegal bookie. It has never really made much sense for bettors when sport enthusiasts could walk into any London betting house and make a wager, but now, through an iconic American company, nearly anyone can easily (and legally) wager on the outcome of a sporting event.
Walt Disney Co. ($DIS) purchased a 20% stake in a fantasy sports website called DraftKings, which allows you to bet on individual players having a successful day, and then collect money based on the result. This is the first step in full sports betting across the board on MLB, NFL, NHL and NCAA sports. Sports commissioners like Adam Silver of the NBA and the NHL’s Gary Bettman have known this was coming, and will no doubt be looking to capture some portion of the revenue stream.
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Disney is making a $250-million bet on DraftKings, a Boston-based fantasy sports start-up that lets users play with real money at stake on a per-game basis, according to the report. It was also stated that in return for the investment, DraftKings has agreed to spend more than $500 million on advertising with ESPN, Disney's 24-hour sports network. Disney's investment would raise DraftKing's value to about $900 million.
The key element here is the advertising on the ESPN division within Disney, which is one of the most profitable divisions within the company. A $250 cash inflow to Draftkings is a good bet for the Mouse House, as it solidifies its relationship with a growing advertising partner.
Many see the fantasy sports betting world exploding for companies like Yahoo! Inc. ($YHOO) as it relates to their huge hold on fantasy sports, which has an estimated $70 billion in revenue potential according to Bill Goff at Forbes.” My primary interest is on the value of time spent on fantasy football activities, which swamp the direct revenues and expenditures. The FSTA estimates that the average fantasy gamer spends three hours per week managing team(s), translating to 1.2 billion hours for 23 million players over a 17 week season.
Of course, all of these numbers are a bit sketchy, since they don’t always account for factors like time spent on drafts, along with off-season reading and discussion. In all, combining these estimates with a $24 per hour average wage in the US yields a time value of $29 billion per year. Using average income figures from the FSTA for players deconstructed to an hourly wage of $46 increases the estimate up to $55 billion. Added to actual expenditures and ad revenues, the industry amounts to anywhere from $40 something-billion to over $70 billion per year in tangible and intangible activity.”
Most traders I know have been playing fantasy sports since the 1970’s, when stats were spit out in spooled printers and everything was done by hand. Now, larger websites dominate everything from NASCAR to hockey and golf, and I see sports gambling as the inevitable follow up. Now, the question for behemoths like the NFL is how to capitalize on the US-based sports bet.
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