Seeking out new businesses for growth, legacy media companies should consider a closer association with online gambling companies. Like buying one.
MoffettNathanson Research believes Disney would do well to buy DraftKings. It already has close associations with the company -- one that involves content, advertising and as the official co-exclusive sportsbook of ESPN along with Caesars Sportsbook.
It shouldn’t be surprising Disney also owns roughly 5% of DraftKings shares, currently valued at $375 million.
Revenue estimates for DraftKings are that the fast-growing online sports gaming site could top $2 billion in revenue this year, a 60% climb versus 2021. All this comes from only 18 of 50 U.S. states now having legal online gaming operations.
Analysts estimate while the company will have a net loss of $1.7 billion this year, projections are that it will be in the positive cash flow arena by 2025.
During the company’s latest earning release, Bob Chapek, CEO of Walt Disney, said online gaming looks to be important to older media companies, given the type of consumers they will need in the future.
“It's driven by the consumer, particularly the younger consumer, that will replenish the sports fans over time. And as we follow the consumer, we necessarily have to seriously consider getting into gambling in a bigger way. And ESPN is a perfect platform for this,” he said.
In addition, whatever legacy media companies want for their future growth, their businesses need to find content that consumers will spend a lot of time with. It needs to be stickier, not fleeting.
So, it isn’t just having live, traditional TV sports programming -- which continues to be important for marketers when it comes to their real-time messaging. That won’t cut it -- especially as sports TV programming costs have no chance to see any moderate price rises in future years.
Media companies need other related businesses, such as online gaming, or selling one-of-a-kind premium digital assets to consumers, in the form of NFTs, non-fungible tokens. Maybe it’s video-game content/access, something Netflix is experimenting with.
All this can be important to the next generation of media users.
And just so you know, it isn't necessarily about throwing out the old and bringing in the new. The perception isn’t that young media consumers are looking to dismiss traditional TV/video content.
That apparently, is just one consideration. What works and what doesn’t? If TV consumers need more sticky, media owners will need to wash their hands — often.