DraftKings (NASDAQ:DKNG) reportedly made a run at acquiring Bleacher Report last year, and there are viable reasons why that speculation could reappear over the near-term.
An article by The Information out earlier today indicates the sportsbook operator broached the subject of buying the scuffling sports media brand with then-owner WarnerMedia at some point in 2020. What price Boston-based DraftKings was offering isn’t revealed in the article. But Bleacher Report generated $140 million in sales last year — a 15 percent tumble from 2019, and one widely attributed to the sports shutdown forced by the coronavirus pandemic.
The fate of Bleacher Report, perhaps including talk of DraftKings reentering the mix, could be the source of renewed near-term speculation. Last week, AT&T (NYSE:T) announced it’s merging the WarnerMedia business with Discovery (NASDAQ:DISCA). Discovery’s Group Nine Media also reportedly expressed an interest in the sports media property, but with a $43 billion merger now at play, divesting of assets may be necessary.
Why DraftKings Rumor May Have Life
There are good reasons why DraftKings could be at the center of Bleacher Report talk, should that chatter resurface.
Put simply, the gaming company is mentioned in an array of acquisition rumors because it’s widely believed the operator wants to diversify its revenue stream beyond daily fantasy sports (DFS) and sports wagering. Moreover, DraftKings is proving to be active on the media front. The company recently purchased Vegas Sports Information Network (VSiN), inked a $50 million agreement with Meadowlark Media, and was reportedly a player for The Action Network before losing out to a Danish rival.
It’s clear DraftKings is prioritizing media assets, and with no debt and over $1 billion in cash, it has the resources to go shopping.
Last October, the operator notched an agreement to become the exclusive DFS and sportsbook provider across select Turner Sports and Bleacher Report properties. Turner Sports is the primary sports asset held by WarnerMedia.
Practical Idea for DraftKings
Acquiring a brand with visibility such as Bleacher Report could soften the blow of missing out on The Action Network for DraftKings.
More importantly, it would give the gaming company an asset that directly rivals Barstool Sports. Penn National Gaming (NASDAQ:PENN) owns 36 percent of that popular sports media property, and can eventually own the entire enterprise outright for $450 million.
Penn derives significant advantages from that arrangement, because the association with Barstool makes it possible for the operator to gain sports betting market share without high marketing and customer acquisition costs.
Conversely, DraftKings isn’t yet profitable due in large part to marketing spending — something Wall Street is mentioning with regards to the recently sagging stock. That could be a sign DraftKings will continue mulling media deals in an effort to reduce customer acquisition costs.
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