The NFL is set to finalize agreements with leading sportsbooks FanDuel and DraftKings, although the terms may not meet the league's initial expectations.
On Thursday morning, the NFL confirmed these partnerships, coinciding with a decline in Genius Sports' stock, which has affected the league's investment in the company. The NFL aims to leverage Genius' data capabilities to secure more lucrative sports betting partnerships.
To gain official sponsorship status, sportsbooks are required to subscribe to Genius’ data feed, which comes at a cost that operators are increasingly scrutinizing for return on investment.
The balance of power in negotiations has shifted towards the sportsbooks. Currently, Fanatics is the NFL's sole official sportsbook, having announced their partnership last week. Previously, three brands held this status until the sports betting category was reset at the end of last season: DraftKings, FanDuel, and Caesars. Caesars opted not to renew its contract after reducing its national advertising budget.
DraftKings and FanDuel, which manage over 80% of the U.S. betting market, are eager to maintain their official status. While industry insiders believe agreements will eventually be reached, they expect that the terms will not align with the NFL's original asking price.
The three sponsorship agreements signed by the NFL in 2021 were valued at nearly $1 billion over five years.
Eric Foote, CEO of VIG Partners, commented, “I’m not suggesting that the sponsorship price will decrease, but the year-over-year increases that the NFL or Genius is aiming for may not be feasible.” He speculated that the prices might remain stable rather than increase.
The NFL holds a significant 8.7% stake in Genius Sports, whose shares are currently trading around $7.60, a steep drop from the $21-22 range when their partnership began in 2021. This represents a decline of over 40% from the previous year.
As a result, the NFL is keen to bundle marketing rights with Genius' offerings, which include not only data but also live game streaming.
“The NFL and Genius are working hard to maximize their relationship and the official rights to boost prices and enhance profitability,” Foote explained, noting the substantial costs associated with data and streaming for sportsbooks.
However, the perceived value of these services is under scrutiny among sportsbooks. Foote noted, “There are alternative ways to obtain data without going through Genius, allowing sportsbooks to operate effectively without official deals.”
Furthermore, Genius’ streaming service, which aims to enhance user engagement through integrated betting and viewing, may not hold the value that Genius anticipates. Bill King from Sports Business Journal remarked, “Genius is optimistic about this product, but many viewers prefer watching games on larger screens rather than mobile devices.”
The landscape of sports betting has evolved significantly since the NFL's last sponsorship agreements. The growth of legal betting has leveled off, reducing the urgency for operators to invest heavily in marketing and customer acquisition, especially as most potential customers have already been reached. Additionally, competition has diminished as several operators have exited the market.