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DraftKings Swimming Upstream, Jettisons Dead Weight

Apple Launches MLS Season Pass, PointsBet and NBC Try to Make It Work, NASCAR Rights Are in Play

Author

Philip Keidel
February 02, 2023

We hope you did.

In the email today:

1) DraftKings cuts jobs in “reorganization” 👀 

2) Apple launches MLS streaming service 🍎 

3) PointsBet and NBC Universal extend contract 👍️ 

4) NASCAR’s media rights are in play, and Amazon might want in. 🚘️ 

We like the Eagles in the big game, too.

1) “NOT GREAT, BOB!” DRAFTKINGS LAYS OFF 140, COMPLAINS ABOUT NY TAX RATE 😟 

The prevailing wisdom about the legalization of sports gambling in the U.S. used to be that everyone was going to get rich except the gambling public.

But the costs of customer acquisition (free bets, site credits, odds boosts, etc.) create a lot of upfront downside. As a result, sportsbooks have struggled with profitability to date.

How long can a site like DraftKings continue to bombard you with Kevin Hart ads while losing money and operate in a “business as usual mode?” Until yesterday, apparently.

The report from CNBC indicates that 140 DraftKings employees will lose their jobs as “part of a reorganization.”

  • Engineering and talent acquisition are among the company areas affected.

  • Employees in the U.S. will lose jobs, but most of the cuts are happening in the “Europe, Middle East and Africa” regions.

  • DraftKings’ 2022 4Q results will be released on February 16.

  • The cuts represent 3.5% of the company’s workforce.

DraftKings’ stock (predictably) rose by three points yesterday on the news.

Meanwhile, DraftKings CEO Jason Robins (joined by FanDuel president Christian Genetski) whinged to New York lawmakers on Tuesday that the rent is too damn high, i.e., the sportsbooks are paying too much tax revenue to make sufficient profits.

Robert Harding’s story summarizes Robins’ position thus: “While the state’s tax on gross gaming revenue is 51%, the effective tax rate is more than 70%.”

Robins warned the legislators that their revenue projections are “unsustainable” with the tax rate as it is because the sportsbooks will retrench, including what seems like a self-immolating strategy of offering players worse odds.

This is an awful lot of thrashing around from DraftKings.

And if part of the plan is to spend less, hammer players with skewed wagering options and hope for the best, we’re not sure that’s going to work.

2) APPLE MAKES BIG SPLASH WITH LAUNCH OF MAJOR LEAGUE SOCCER STREAMING 🍎 

Apple launched MLS Season Pass, its Major League Soccer subscription service.

  • This is a 10-year deal for $250M per year.

  • Apple now has “exclusive global rights to hundreds (of MLS) matches.

  • MLS significantly restricted its schedule to accommodate Apple’s exclusivity, with the vast majority of matches being played on Saturday nights.

  • Price tags are: $14.99/month ($12.99/month for Apple TV+ subscribers) and $99.99/year ($79.99/year for Apple TV+ subscribers).

Apple is not historically in the business of losing money or looking foolish. There are skeptics, though.

Whether Apple scored a golazo or will get a straight red card is impossible to say today.

But if we had to guess, we’d say that Apple views this as best case a bold play that will work out and worst case a trial run at eventually getting bigger rights deals with the likes of the NFL and the NBA.

This much we know: Apple could lose its whole $2.5B stake here and still be just fine.

3) POINTSBET, NBCU TACK TWO YEARS ONTO DEAL 🤝 

PointsBet, an Australian online sportsbook operator, and NBC Universal recently extended their initial 2020, five-year contract by another two years.

The companies will therefore be affiliated through 2027.

Per Sara Fischer at Axios, “the extension amends the initial deal terms to reduce PointsBet’s annual ad spend commitment with NBCU properties and to shift some of its ad spend obligations to more regional NBCU assets.”

Quick translation: PointsBet needed to trim expenses short-term, and NBCU was willing to let them do so if they committed to another two years.

That’s exactly what happened. “PointsBet will be required to spend roughly $58 million per year…compared to the roughly $90 million per year spend that was required when the initial deal was signed.”

Will this be a life raft for PointsBet or is this just a drowning man with a bucket trying to save a sinking ship?

  • PointsBet stock is down a catastrophic 71.8% in the last year.

  • As of this writing, it is trading at $1.03 per share. 

  • Additionally, this news didn't yield a bounce of any kind.

Fischer noted that the PointsBet strategy “has shifted in recent years to focus more on regions with heavy betting opportunities than scaling very broadly in the U.S.”

Well…the prior strategy wasn’t working at all…so this has to be better? Maybe.

4) NASCAR THE LATEST SPORTS PROPERTY COMING TO A RIGHTS NEGOTIATIONS OPPORTUNITY…PERHAPS INVOLVING AMAZON 🚘️ 

We have reported sort of exhaustively on the rights deals rumored and/or entered into by the NFL, the Premier League and others in recent months.

NASCAR’s contracts with NBC and Fox, which date back to 2013, are up for extension/renegotiation. We note that NBC and Fox are most likely not the only bidders.

The original report on this came from Sports Business Journal’s John Ourand.

So where might Amazon fit here? According to Ourand, “Amazon was named as the ‘most aggressive streamer’ for NASCAR rights.”

This posture would be in line with Amazon’s demonstrated desire to wrap live sports streaming into its asset collection.

It’s doubtful, though, that Amazon will wildly overpay for stock car racing the way it did for Thursday Night Football.

Unsurprisingly, it’s not just the amounts of money NASCAR is looking for here. It’s also how the money will be shared.

  • The current split is 25% to the race teams, 65% to the tracks and 10% to NASCAR. (That doesn’t really look right to us, either.)

  • Team owners are frustrated by relying heavily on team sponsorship money when so much media revenue goes elsewhere.

  • All interested parties have some time to get this sorted. The next contract starts with the 2025 NASCAR season.

By that time, we will all know whether the 40% ratings drop NASCAR sustained in the past decade has been remedied.

JOB LEAD OF THE DAY 💰️

We bring you a lot of entry-level and mid-career types of opportunities in this space. Not today. On this day, we are taking a huge swing for the fences.

Now this is a job. The description, which as you might imagine just goes on forever, says you need “at least 10 years of litigation experience” and a New York Bar card.

With a listed salary range of $200,000-$270,000, this one isn’t going to be handed to just anybody.

But maybe you’re not just anybody!

WHAT ELSE IS GOING ON? 😎

WHAT TO KEEP AN EYE OUT FOR BEFORE THE NEXT SEND 👁️