Affiliates: The Early Winners Of Regulated Wagering?
Published 23rd October 2019
Betting and gaming affiliates in New Jersey have garnered much less coverage than operators and suppliers since the repeal of PASPA in 2018, but there has been widespread activity in that industry sub-sector.
It is too early to speak of winners and losers in such a nascent market. However, it is interesting to watch it pivot from what was a casino-dominated market to one where sports betting is the leading consumer-facing igaming product and is gradually taking over the public space. This is largely due to the fact that sports betting is considered ‘softer’ than casino as a gaming product. It ties itself to regular event schedules, and reams of content are generated around the different sports, attracting millions of readers as well as bettors.
This content plays a key role in the US, but when compared to Europe, the background and context from which it originates is also very different, especially when it comes to statistics, data and performance analysis.
Historically they have been popularised by fantasy sports leagues up and down the country, with baseball, American football or basketball fans dissecting players’ yardage, pass completion rate, average points per game and so on. This information has also been used for many years by US sports journalists, so readers are long used to the concept.
CONTENT IS KING
Bearing this in mind, US affiliate sites such as the Catena Media-owned Legal Sports Report or the Better Collective-owned Sports Handle combine legal and regulatory news with some consumer and affiliate content.
PlayNJ (also part of Catena) has a clear casino focus, while Rotogrinders (acquired by Better Collective as part of its Rical LLC buy-out), is stats and data-heavy. This combination of topics is very different from the standard European affiliate offering. “The US audience is different from what we have worked with before,” Better Collective VP of business development and sales, and US general manager Marc Pedersen says.
“Compared to Europeans, US players have a cultural affinity to fantasy and daily fantasy sports (DFS). Due to the nature of these outlets, and US sports in general, the reliance on sports statistics and data is fundamental to US sports fandom, as it is a key component of fantasy sports. As in any other market, value-creating content is key in the US when it comes to attracting American punters.”
This point is echoed by Michael Daly, US general manager for Catena Media, who says: “What attracts bettors and drives sign-ups is sports betting content delivering information important for the level of experience of the bettor.
“It is a lot of educational information for new bettors and more detailed analysis of bets and operator offers for those who have more understanding of the industry.”Catena Media entered the US market in 2016 via its acquisition of PlayNJ, which gave it a very strong position in the poker and casino affiliate space.
Daly explains that sports betting “adds a second layer” to its New Jersey portfolio. “This comes with even greater growth potential as well as new market forces to adapt to,” he says. “It has been interesting to see how the betting cycles for various sports have developed.
“Leveraging both our experience in European sports affiliation and time spent learning the American betting consumer has seen our US sports business grow in leaps and bounds in the 12 months since New Jersey [launched sports betting].”
If the examples of sites like Legal Sports Report, Sports Handle or Rotogrinders are anything go by, affiliates in the US are likely to take on very different shapes to what we are used to seeing in Europe. The mix of industry and consumer-focused content is one aspect. More broadly, the involvement of major stats and data sites like the Action Network or theScore will also mean major sports publishers with significant databases competing for bettors’ attention. TheScore, for example, has signed a deal with Penn National Gaming and Bet. Works that will see it operate in 11 states.
When it comes to traditional media outlets, it is impossible to ignore the 25-year, $236m investment the Fox media conglomerate made in The Stars Group to create the Fox Bet joint venture. Much like Sky Sports did for SkyBet in the UK, the Fox Sports TV network could turn out to be the biggest super-affiliate in the US igaming space. Mathew Symmonds, founder of the affiliate site WinDrawWin, has been working with Bet365 with a view to developing the bookmaker’s business Stateside. He says New Jersey is still relatively small in terms of revenues but that “most affiliates are positioning themselves, [for the time] when gaming will inevitably become more established”.
CPA OR REV SHARE
The current main concern is whether to agree cost per acquisition (CPA) or revenue share deals with operators, as traffic and activity levels have not reached the stage where revenue share would yield big enough returns.
iGB Affiliate Monitor picked up on this in its analysis of the first quarter of 2019. Of the listed affiliate firms, Better Collective generated 72% of its total revenue from revenue share, compared with 44% at Catena Media. The report notes that Gaming Innovation Group’s media services unit is the only other affiliate to come close, with 57%, though 13% of that total came from sign-ups to GIG’s own brands.
For analysts at Redeye in Stockholm, the quality inherent in revenue-share arrangements means that Better Collective “deserves a higher multiple than any CPA-based business, because of the long tail of “loyal players which continues to generate future revenues.”“There is a clear element of skill in sports betting, making it suitable for interactions and tips sharing between players,” Redeye added. “The sports betting vertical is also more accepted by gambling authorities, and there are several large operators willing to lobby for online sports betting.”
But even if Catena Media is more casino-focused (53% casino and 41% sport), CPA deals are far more common currently in the US. And there is still ample time to develop revenue share deals, while the reset of its earnouts payable on its US assets was a clear sign of the potential that US sports betting offers.
Symmonds adds that his company earns “three to four times more in revenue per player elsewhere in the world than our existing NJ CPA agreements, but for now we’re happy to see how the market evolves.” In the short term, he adds, “those on CPAs may actually do better than those on revenue share as operators struggle to determine player value in such a new market.”
When it comes to US betting operators, the two gorillas in the room are DraftKings and FanDuel. They have transferred their dominance in fantasy sports into the fixed odds betting vertical and have become the leading sportsbooks in New Jersey, thanks largely to brand awareness. Better Collective’s Pedersen says: “DraftKings and FanDuel have contributed to setting the standards. Due to their high-quality products, they have become established and trusted brands, which is key when it comes to player acquisition.”
This point is picked up by Allan Petrilli, previously with Income Access and now vice-president of sales with Intelitics. “I think the brand recognition both have cannot be ignored,” he says. “They spent big over the years to achieve that. That being said, this should help affiliates when promoting their brands, as it is still a very small portion of potential bettors that hold accounts at either.” Petrilli adds that there are many “skilled bettors in the US market, [but] the majority of potential new customers are either completely new to betting, your typical fantasy player, or someone who has only dabbled in wagering. These types of customers need to be treated differently.” What is certainly undeniable is that the regulation of sports betting in the US provides consumers with choice, information and options. “To a degree, bookmakers are becoming commoditised as punters are now able to pick and choose out in the open, and in this regard standing out with your service and marketing becomes crucial,” Pedersen points out.
So even if the New Jersey affiliate space is very different to that in Europe, it may be the ‘traditional’ corporate qualities of service and marketing that determine which affiliates can make a place for themselves on the state’s digital boardwalk.