Score Media puts money on sports betting
With single-game sports betting about to go legit in Canada, the troika of Draftkings Inc., Fanduel Inc. and William Hill Plc that dominates the U. S. betting business is preparing to pounce.
But an entrepreneurial father- son team has something their would- be rivals don’t: a legion of fans that have made their mobile app, thescore, among the most popular sports apps in North America. Shares of Toronto- based Score Media and Gaming Inc. surged after Canada unveiled legislation in November to legalize single-event sports betting, like multiple U.S. states. The stock ended the year up 111 per cent.
The difference is they’re going to have to come aft er us, we don’t have to go aft er them. Because of our brand, because customers know us here, it really takes on a different dimension than the efforts we have in the St ates. — john levy, score media ceo
Now, chief executive John Levy and his son, chief operating officer Benjie Levy, are making plans to replicate their sports betting service — thescore Bet, already active in Colorado, Indiana and New Jersey — in their home country.
Thescore is among the most actively used free sports apps in Canada, ranking No. 1 in the Google Play store as of Wednesday, according to traffic- tracking firm Similarweb. The company says it has about four million daily active users, with more than 1.4 million in Ontario alone.
The company has its roots in television with a cable channel that was also called The Score and showed a range of highlights and events beyond hockey. Segments such as Cabbie on the Street were a hit, with TV personality Cabral Richards interviewing sports stars including the late Kobe Bryant.
But the network perpetually trailed the two established Canadian sports networks and the elder Levy, now 67, opted to bet the future on digital assets. He sold the TV licence and related assets in 2012 to Rogers Communications Inc., operator of the rival Sportsnet network, for $ 167 million, a deal that allowed Score Media to spin out its website and app into the current publicly traded company.
Advertising has been Score Media’s main source of revenue. Underscoring the difficulties of maintaining a profitable ad business, Score Media has posted losses every year since the TV spinoff.
Sports betting is now legal in 20 U. S. states and the District of Columbia, with 14 of those accounting for US$ 13 billion in 2019 wagers, according to Bloomberg Intelligence.
In Canada, aside from horse racing in some provinces, legal betting is limited to parlay wagers through provincial platforms.
So Canadian bettors spend an estimated $ 10 billion per year on single-event betting through illegal bookies and a further $ 4 billion on international betting websites, according to Justice Minister David Lametti.
Canadian officials are attracted to sports wagering as an untapped source of tax revenue.
In the U. S., online gaming the sports gambling generated almost US$160 million in tax revenue in 2019, according to the American Gaming Association.
“Assuming full legalization in Canada, we think
this could be a US$ 4 billion revenue opportunity,” Credit Suisse analysts wrote in a Nov. 30 note about DraftKings Inc., referring to industry revenue. The legalization bill has yet to pass in Parliament, which is slated to resume later this month. It requires two more readings before moving on to the Senate.
Irek Kusmierczyk, a Liberal member of Parliament representing Windsor-tecumseh, said he was optimistic about the legislation’s prospects. “We’re hopeful that we can actually move this process along quickly,” he said. Opposition could always balk, but “it does feel as though there’s support among all three parties,” he said.
Re p r e s e n t at i v e s of Fanduel and William Hill declined to comment. Draftkings also declined to comment, though its CEO Jason Robins said on the company’s third- quarter conference call he’s “very hopeful that we’ll be able to add both sports betting and igaming in Ontario” sometime in 2021.
Wagering volume on thescore Bet rose 500 per cent in September compared with a year earlier, “with that momentum continuing into October,” Levy said in the company’s latest quarterly update.
Betting platforms take a cut of each wager and collect fees from leagues that run tournaments on them. For Score Media, the financial benefits have been small so far.
But analysts are looking for revenue to double to $41 million in the fiscal year ending Aug. 31.
Darren Chervitz, a portfolio manager at New Yorkbased Jacob Asset Management, which filings show is the 11th- largest holder of Score Media shares, says thescore’s brand recognition gives it the best shot at succeeding as a sportsbook platform in Canada.
Chervitz said that while larger players in the betting business will surely challenge thescore Bet,
he’s been impressed by how the company has integrated betting into its fan app. “They’ve done a great job at building this little company,” he said.
“Fundamentally, the difference is they’re going to have to come after us, we don’t have to go after them,” John Levy said of his rivals. “Because of our brand, because customers know us here, it really takes on a different dimension than the efforts we have in the States.”
Those rivals, however, are much better capitalized than Score Media. Draftkings, for instance, has a market value of more than US$ 19 billion after its shares soared more than 300 per cent last year. Score Media’s market value is about US$604 million.
Penn National Gaming Inc., another industry giant, took an equity stake worth US$ 7.5 million in Score Media in 2019. Under the deal, Penn would have the option to increase its stake in lieu of future market access fees. Penn, which has a market cap of over US$ 14 billion, is known for its minority stake in Dave Portnoy’s Barstool Sports.
To Chervitz, one end game for Score Media would be a takeover by a larger competitor. He began buying shares after the U. S. Supreme Court ruled betting would be allowed on a state- by- state basis, though he trimmed some of that position after Canada’s announcement in November.
Any takeover would be up to the CEO. John Levy owns 100 per cent of a special class of voting shares that give him control of the board and a veto over any deal.
“We’re not building this as a shiny new object just to hold it out there to say, come and get me,” Levy said.
As a matter of good governance, he said, Score Media would look at any offers, “but the bottom line is, that’s not what we’re building and we’re building to be the best damn sports media company in the betting space.”