🎰 Action Network Sells For $240 Million

Friends,

On May 14, 2018, the United States Supreme Court ruled PASPA unconstitutional and paved the way for states to self-regulate retail and online sports betting.

Now, as more states legalize sports betting across the US and competition between operators continues to heat up, we’ve seen a flood of M&A and licensing-based media content partnerships over the last 12-18 months.

Here are just two examples:

• Penn National Gaming acquired Barstool Sports last year through a multi-year deal that valued the sports media company at $450 million.

• Along with a $100 million acquisition of VSiN, DraftKings spent $50 million last week on the right to exclusively distribute Dan Le Batard’s podcast for the next 3 years.

Put simply, as states across the country continue to limit betting licenses to a small subset of holders, sportsbooks have been incentivized to spend money, capturing size and scale as quickly as possible. But as the market has matured, it’s not just operators getting involved in the consolidation game.

Denmark-based Better Collective, which offers premium subscriptions through data, analytical tools, and media content to help you make smarter bets, has agreed to acquire rival Action Network for $240 million.

Unlike sportsbooks, which make profits by taking bets on your behalf, companies such as Action Network and Better Collective have two main revenue sources.

1. They sell premium subscriptions that enhance your overall betting experience through news, insights, betting tools, data, analysis, and odds.

2. They refer incoming customers to sportsbooks and are paid affiliate fees in return.

After The Chernin Group acquired & combined three businesses in the sports betting and daily fantasy world in 2017 — SportsAction, Sports Insights, and FantasyLabs — Action Network officially launched just months before PASPA was repealed.

With early success & customer adoption, Action Network announced a $17.5 million Series B financing round less than two years later. Investors included Fertitta Capital, The Chernin Group, Philadelphia 76ers owner David Blitzer, The Chicago Cubs, and former Twitter COO Anthony Noto.

As for the current financials, here’s a quick overview:

• Action Network has raised $20 million to date and generated about $15 million in revenue last year but did not turn a profit.

• Better Collective said they are “targeting” $100 million of revenue in 2022 and generated more than $18 million in profit last year.

In my opinion, there has never been a better time to own, operate, or sell a sports gambling-related property. The US sports betting market currently generates about $1.5 billion in annual revenue, but according to a report from Eilers & Krejcik Gaming, if all 50 states were to legalize, the market could eventually generate about $19 billion in annual revenue.

As companies within the sports betting space continue to compete for cheaper customer acquisition costs through owned media content, the price of acquiring these companies has drastically increased.

For example, when Barstool Sports was acquired by Penn National Gaming at a $450 million valuation last year, estimates suggest they were doing between $90 million to $100 million in annual revenue. That represents a ~5x revenue multiple.

Following a competitive bidding process between companies like DraftKings, Fanduel, and multiple private-equity firms, Action Network was just acquired for $240 million by Betters Collective. Based on a reported $15 million in revenue last year, that’s a 16x revenue multiple.

Sure, they are different businesses and were acquired by companies competing in separate arenas. Still, you get the point; the battle for sports betting properties to gain size and scale has placed an acquisition premium on media content.

Congrats to The Chernin Group, who were investors in both Barstool Sports and Action Network. It’s awesome to see their investment thesis from years prior continue to pay off.

As for Action Network, it’ll be fun to see how they use the additional capital and resources that Betters Collective provides to continue to innovate with the sports betting space.

Have a great day, and we’ll talk tomorrow.

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