DraftKings to Become Undisputed US Heavyweight with Purchase of GNOG
Arguably, DraftKings is one of the biggest conundrums in the US online gambling industry. Founded in 2012, it was somewhat of a revolutionary at the time - the firm, along with FanDuel, finding a loophole to be able to offer betting of sorts in the US market.
Combining daily fantasy sports with the ability to place wagers against others with their picks, the two firms soon captured the imaginations of enthusiasts and witnessed an influx of registrations in the years that followed.
When sports betting bills were passed in the respective states that they operated in - New Jersey, especially being one of these, a swift transition began to alter the main service offering, essentially transitioning into a fully-fledged online sportsbook. Daily fantasy sports betting became almost a once-distant afterthought.
Fast forward almost a decade, and DraftKings has seen mixed fortunes. While it can be regarded as being one of the three biggest online sportsbooks (and casinos), in the US, over the last year, the company has endured somewhat of a rollercoaster ride.
Competitor FanDuel, have the luxury of being owned by industry heavyweight Flutter Entertainment, which has brands SkyBet, PaddyPower, Betfair, PokerStars, Tombola, and Italian sportsbook Sisal in its diverse portfolio. It means that it has a major presence in some of the biggest global markets in key niches, though crucially, a balance sheet to support further growth.
Despite this, it didn’t stop privately-owned firm DraftKings from launching an eye-watering ambitious $21 billion bid to acquire UK conglomerate Entain in 2021, which has in excess of 25 different brands under ownership. Before the UK group could respond, After realizing this was untenable, DraftKings withdrew its offer, knowing that the part-ownership of rival sportsbook BetMGM between Entain and MGM Resorts International was likely to create a significant amount of resistance.
The move from DraftKings sent shockwaves through the industry that has been an ocean of motion over the last few years, though most merger and acquisition activity at least made some form of sense, at least strategically.
This, though, was a move that seemed to border on fantastical. Almost being an ego-play - an attempt to bully the rest of the industry in addition to not doing itself any favors as far as self-preservation was concerned, not only did DraftKings almost embarrass itself but also revealed its hand.
Putting the rest of the industry, as well as its competitors on alert, one thing became clear; DraftKings had an eye on expansion and was willing to spend big in order to make this become a reality.
In the background, it appeared that there was almost a loss of confidence - the company’s stock price plummeted, and CEO Jason Robins came in for much criticism while steering the ship through the busiest period of the US sporting calendar.
Tactical Acquisition Crosses Line
After weeks of speculation and a few months of realignment, DraftKings finally identified a target that made sense - especially when considering the potential to grow its presence across the US even more.
A fee of $1.56 billion for the online division of Fertitta Entertainment-owned Golden Nugget - Golden Nugget Online Gaming (GNOG) was enough to secure what in the end, was effectively somewhat of a good deal.
Upon completion of the acquisition, Robins was enthusiastic about the future of DraftKings, commenting: “Acquiring Golden Nugget Online Gaming gives us synergies across our business.“
We anticipate that this acquisition will provide meaningful revenue uplift by utilizing our data-driven marketing capabilities and a dual brand iGaming strategy, gross margin improvement opportunities, and cost savings across external marketing and SG&A.
I am proud to welcome the Golden Nugget Online Gaming team to the DraftKings family.
A coup for DraftKings will see Tilman (Fertitta) join the DraftKings’ board as part of the deal, which means that the firm can benefit from his expertise in growing an online casino brand as big as Golden Nugget has become over the last few years. It will also see GNOG president, Thomas Winter, become president of North America iGaming for DraftKings.
Fertitta revealed: “This will be an alliance unlike any other in the digital sports, entertainment, and online gaming industry.“
Now that the acquisition is completed, I look forward to what the future will bring for our combined company and am confident this relationship will be a huge success.
This will give DratfKings substantial impetus and raise its profile across online casinos in the US. While the brand itself does have an online casino, it is more known, from a marketability perspective, as a sportsbook.
Adding the digital division of Golden Nugget will help to give DraftKings, as an entity, serious credibility in the world of online casino, not forgetting the expertise that senior board members will bring with them.
The company has seen rivals BetMGM clinch the Online Casino of the Year Award at the North American EGR Awards - again, a brand marketed as a sportsbook, which has only been around since 2018. It will, as a result, be keen to make sure that its reputation as an online casino can build and grow, particularly in the US market.
How Does the Acquisition Position DraftKings in the US Market?
In terms of where and how far the firm can go, following this purchase, like everything in the online gambling industry, the potential is virtually limitless, especially when considering the pace at which it is developing, in addition to new markets being regulated. This is certainly true for the US, with more and more states passing legislation to offer online gambling and sports betting to residents.
Providing DraftKings access to Golden Nugget’s five million customers is another benefit of the deal for the firm, with the online casino prominent in a number of states - especially New Jersey and Louisiana.
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What this will do is allow DraftKings, via Golden Nugget Online Gaming, to successfully market the sports betting product that it has on its site in a cross-marketing effort, helping it to potentially increase its share of the market.
This is certainly a view of Robins, who talked up the firm’s ability to cross-market its products to new customers: “We are very good at cross-selling sports customers into iGaming, but our database is mainly male and focused on sports,” the DraftKings CEO said. “GNOG’s database is nearly 50/50 male to female and more of that casino clientele.”
Another major benefit for DraftKings from the deal is that it is anticipated to save in excess of $300 million, with the purchase of GNOG set to bring technology development in-house, with a sophisticated platform and expertise now available to the company. In addition to this, it is expected that DraftKings will benefit considerably from Fertitta-owned companies, Houston Rockets, Landry’s restaurants, and also Golden Nugget land based casinos from a marketing perspective. Especially do not rule out a sponsorship deal with the Rockets NBA side, which can help to attract another segment of customers.
Indeed, Fertitta gave substantial insight into this, highlighting the extent to which the deal can strengthen each brand: “Leveraging Fertitta Entertainment’s broad entertainment offerings and extensive customer database, coupled with DraftKings’ mammoth network, makes this an unbeatable partnership.“
Together, we can offer value to our combined customer base that is unparalleled.
The extent to which this is being talked up by Fertitta will certainly make a lot of industry insiders sit up and take notice, especially those affiliated with DraftKings’ competitors. While GNOG does lack the kind of US market domination that an online casino like Caesars does, it has a huge presence in the New Jersey market, and the DraftKings platform can help to boost the GNOG brand even further in other states.
A deal that indeed represents more tactical sense than that of the company’s attempted purchase of Entain can now be pivotal in helping to make a couple of certain things happen. There is one state that has many in the industry wondering how big an impact that iGaming will continue to have over the next couple of years after posting impressive figures during its first few months of being regulated, and that is New York.
Prior to iGaming being launched in the state, many people from the Big Apple were crossing the border to participate in iGaming, and Golden Nugget would undoubtedly have been one of those operators that were benefiting from this.
Another state that is understood to be key for the US market over the next few years, should a vote be passed in November, is California. Up until now, in accordance with state laws, online operators have had to partner with land-based casinos to gain a license, with DraftKings being one of these - a process that is not always guaranteed to work if both parties cannot come to terms or indeed if the land-based entity has a choice of operators.
Acquiring GNOG, in addition to onboarding senior members to the DraftKings hierarchy, will give the company an edge when it comes to securing licenses in key states - California is certainly going to be one of these. While there currently isn’t a Golden Nugget land-based casino in the state, the company’s status and experience could as well be crucial in helping it potentially secure a real estate license to offer a casino and hotel resort, which could then help DraftKings ultimately gain an eventual license there.
From a psychological perspective, looking at the field of competitors in the US, it could well motivate a firm such as FanDuel to make moves of its own, and with substantial backing from parent company Flutter Entertainment, it could be that DraftKings’ fellow fantasy sports competitor now begins to put plans in place to identify acquisition targets that can help to satisfy a long term strategy.