Action Network to Be Sold as Sports-Betting Deals Surge

Last week, DraftKings Inc., a digital entertainment and gaming company, purchased rights to a popular podcast by former ESPN host Dan Le Batard for $50 million. Also in April, gambling company Bally’s Corp. announced a $2.7 billion merger with online-gaming company Gamesys Group PLC.

Several factors have set the table for deal making. Sports betting is being legalized across the U.S., creating markets in many states. At the same time, access to many of these markets is restricted, with many states limiting betting licenses to a relatively small number of holders. That has created an incentive for sports books to grow quickly and signal to licensers that they are worthy of recognition.

“This is just the start,” said Chris Grove, a gambling-industry analyst at research firm Eilers & Krejcik Gaming. “This is not the middle, this is nowhere near the end.” He said that deal making will continue as the U.S. market matures. Some acquisitions will likely be made by special-purpose acquisition companies, or SPACs, Mr. Grove said.

Sports betting generated U.S. revenue of $1.5 billion in 2020, according to a report from Eilers & Krejcik Gaming, and is on track to generate $5.8 billion by 2023. If all 50 states legalize the practice, the total market size could eventually grow to $19 billion, the report said.

Companies such as Action Network and Better Collective are paid affiliate fees by sports books for referring bettors to their products. By teaming up, Action Network and Better Collective are planning to increase the total volume of bettors they refer to gambling operators. Action Network and Better Collective offer subscribers data, analytical tools, articles and podcasts to help them make more informed bets.

In an interview, Action Network Chief Executive Patrick Keane said digital-media companies have been challenged over the past decade largely because of pressures on their advertising businesses. But the rise of sports betting has provided opportunities for companies with multiple revenue streams, including subscriptions, affiliate fees, advertising and consumer goods, he said.

“I’ve been in the advertising business for two decades, and there’s a reason why I’m not in it anymore,” said Mr. Keane, who oversaw ad-sales businesses at Google and CBS.

Mr. Keane will remain CEO of Action Network, which will gradually be integrated into Better Collective’s global business, said Better Collective CEO Jesper Søgaard. Better Collective’s existing U.S. businesses include daily fantasy-sports website RotoGrinders and betting-tips platform VegasInsider.

The sports-betting market in the U.S. is growing much more quickly than Europe’s, where the market is more saturated with customers and growing relatively slowly, Mr. Søgaard said. Action Network will jump-start Better Collective’s U.S. operations, which are targeting $100 million of revenue in 2022, he said. Better Collective said it generated more than $18 million in profit globally in 2020.

“This is a market that’s going to be massive,” Mr. Søgaard said. “We expect that eventually, it’s going to surpass the European sports-betting market.”

The sale of Action Network means a payday for its controlling shareholder, the media-and-technology firm Chernin Group. Action Network was formed in 2017 by the merger of three sports-betting and fantasy-sports websites: Sports Insights, SportsAction and FantasyLabs. The company has raised $20 million to date and generated about $15 million in revenue in 2020, primarily through subscriptions and affiliate revenue. Action Network wasn’t profitable last year, according to a person familiar with the company’s finances.

There was a competitive auction for Action Network, reflecting the high level of interest in media properties focused on sports betting, according to a person familiar with the matter. DraftKings, FanDuel Inc. and private-equity firms were all suitors for Action Network, which tapped investment bank Moelis & Co. to run a sales process, the person said.

Representatives for DraftKings and FanDuel declined to comment.

The sports-betting frenzy has extended to traditional television as well. Last year, Sinclair Broadcast Group Inc. sold the naming rights for regional sports networks to casino operator Bally’s in a 10-year, $88 million deal.

Write to Benjamin Mullin at [email protected]