Caesars Entertainment (NASDAQ:CZR) is making a minority equity investment in daily fantasy sports (DFS) provider SuperDraft, Inc. that could eventually lead to the casino giant owning 100 percent of the privately held firm.
Details of the deal, including the exact size of Caesars’ stake in the DFS operator, weren’t disclosed, but a statement issued by the gaming company says it has an “option to increase its stake over time up to 100 percent at pre-determined levels.”
Flutter Entertainment Plc’s (OTC:PDYPY) FanDuel unit and DraftKings (NASDAQ:DKNG) dominate the US DFS landscape, but the market is open to competitors, particularly those that differentiate themselves from the entrenched stalwarts.
Like DraftKings and FanDuel, SuperDraft offers salary cap competitions — games where contestants draft a pool of players and are restricted by mythical salaries. However, the company also offers a champion mode and a multiplier game. In the multiplier concept, there’s no salary limit and the points accrued by real life athletes are boosted by a predetermined multiplier.
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The Caesars/SuperDraft agreement is the second of its kind to hit the wires on Monday. Earlier today, Bally’s Corp. (NYSE:BALY) said it’s acquiring Monkey Knife Fight (MKF), the third-largest DFS company.
The rationale behind these deals is easily explained. First, FanDuel and DraftKings established dominant perches in the US online sports betting market in part by being the top dogs in DFS. Second, acquiring or partnering with a DFS firm gives a traditional gaming operator to gain access to a broader client base and perhaps entry into new markets.
In the case of SuperDraft, the company is operational in 35 states. Caesars envisions the partnership benefiting its burgeoning internet aspirations as well as its land-based business.
SuperDraft will become a piece of Caesars’ single wallet solution, allowing members more options to play both online and in-person, and is expected to be tied to the industry-leading Caesars Rewards program that will permit players to credits redeemable for rewards and experiences online or at one of Caesars casino resorts nationwide,” according to the Flamingo operator.
Caesars plans to feature SuperDraft alongside existing internet brands Caesars Online Casino, World Series of Poker (WSOP) and William Hill when that acquisition closes in the first half of this year.
It’s not immediately clear if the Bally’s and Caesars moves will touch off a spate of similar deals between casino operators and DFS providers. With the former yearning for client data and market access, the synergies are obvious.
Even with MKF and SuperDraft spoken for, FanDuel being part of a larger enterprise and DraftKings being a freestanding company, there remain some mid-sized and smaller DFS outfits that could make for plausible partners for casino operators.
As for Caesars and SuperDraft, that relationship kicks off in earnest on Feb. 7 when the DFS debuts the SuperMillion Big Game contest — its first $1 million competition. As of today, clients will be eligible to win tickets for the big money game across the company’s standard daily paid and free contests.
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