Murdoch’s News Corp-Fox reunification gambit comes as a tank for sports betting reviews

By Dawn Chmielewski and Byron Kaye

(Reuters) – Rupert Murdoch’s proposal to recombine News Corp and Fox Corp and cash in on sports betting has yet to convince Wall Street as valuations crumble in the once red-hot gaming market, according to former employees, financial analysts and sports media pundits.

While some former employees see the move as being driven by the 91-year-old Murdoch’s succession planning to cement the power behind his son Lachlan Murdoch, Fox Corp CEO, people familiar with the Murdoch’s mindset say they are exploring the sports betting opportunity mean serious.

“The proposal is 100% based on business considerations,” a spokesman for Rupert Murdoch told Reuters. “Any comment implying that this has anything to do with succession planning is preposterous and coming from sources unaware of the strategy.”

There are other factors motivating the merger, including a drive to achieve greater reach across news, live sports and information, sources said. Lachlan Murdoch didn’t discuss the potential deal on Tuesday’s conference call, but did speak about the value of scale, “especially[in]the next few years when opportunities will arise in the market.”

As recently as August, Lachlan Murdoch described sports betting as “a huge opportunity” for Fox Sports and told Wall Street it would boost viewer loyalty. Combining live game broadcasts with News Corp’s sports coverage would create a more compelling sports package and strengthen the company’s position in sports betting, according to people familiar with the logic of the deal.

But Wall Street’s enthusiasm for sports betting has cooled since early 2021 as investors prioritize profitability over spending to aggressively acquire new customers. Thirty-six US states and the District of Columbia have legalized sports betting, although the pace has slowed.

“What’s special about the sports betting opportunity is that it burst into flames like a house that’s been sanctioned by every state,” said Douglas Arthur, analyst at Huber Research Inc. “But I’m not hearing as much excitement about it right now as I did before nine months. If that’s the rationale (for the merger), then it’s pretty weak.”

Since the beginning of 2022, shares of 11 major publicly traded sportsbooks, including DraftKings Inc and Barstool Sportsbook’s Penn Entertainment Inc, have fallen by an average of 35%, according to data from Refinitiv.

That doesn’t necessarily mean that the pace of legalized sports betting is slowing down. Total wagers are expected to reach $390 billion worldwide this year, according to researcher H2 Gambling Capital. Ryan McConnell, analyst at Kantar Sports, said the market is awash with new entrants and consolidation seems likely.

Losses begin to pile up. Streaming service FuboTV shut down its sports betting service in October, and Churchill Downs announced in February that it would shut down online sports.

“It’s a very competitive market,” said Steve Ruddock, gaming industry analyst. “It’s difficult for companies that aren’t fully invested in it as their core business to compete.”


Since selling their film assets to The Walt Disney Co in 2019, the Murdochs have charted a new course for a slimmed-down Fox based on sports betting. The company soon paid $236 million for a 5% stake in Toronto-based online bookmaker Stars Group, which helped launch Fox Bet and owns the app.

The combination of Fox and News Corp could attract a larger audience to sports betting, potentially increase financial rewards for attracting new players and attract more lucrative sponsorships from sportsbooks eager to promote their apps, a media executive said.

The Murdochs’ early push was slow. Sports betting app Fox Bet is available in four states and only has a 0.2% share of the US market, according to researcher Vixio. A free version called Fox Bet Super 6 has attracted about 6 million users, which Fox hopes to eventually turn into players.

Fox Bet’s growth has stagnated since market-leading FanDuel owner Flutter Entertainment Plc acquired The Stars Group in 2020. The companies were embroiled in a dispute over the price Fox would pay to exercise its option to purchase 18.6% of FanDuel. The matter is subject to arbitration and Lachlan Murdoch advised investors that a decision is imminent.

News Corp previously stumbled upon sports betting. Last month, News’ first direct investment in Australian bookmaker Betr went live ahead of the country’s most-watched horse race, the Melbourne Cup. Within two days, an ad running in the News Corp tabloids sparked a regulatory investigation into whether the ads violated laws banning inducements to gambling. Betr says it is working with the regulator.

Matt Davey, chairman of Las Vegas-based sports betting investment firm Tekkorp Digital Acquisition Corp, which invested in Betr along with News Corp, said News has leveraged its media reach in Australia, where it sells more than half of all newspapers and operates sports betting. heavy cable TV network Foxtel to create a “pretty strong combination” of media and betting.

At least one investor is waiting to be convinced that this approach will work in the United States.

“Fox has a wide-ranging audience, so if you’re looking to launch (sportsbook) in the US, it makes sense that you have this network, distribution and partnership with Fox,” said John Ayoub, portfolio manager at Wilson Asset Management, based in Sydney, which owns the Australian-listed shares of News Corp. “But we’ll probably need a bit more detail.”

(Reporting by Dawn Chmielewski in Los Angeles, Byron Kaye in Sydney, and Noel Randewich in Oakland, California; Editing by Kenneth Li and Matthew Lewis)


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