1. NEW LEADERSHIP MIGHT NOT HELP ESPN’S BETTING PLANS

• Outgoing CEO Chapek was on the record as recently as September, saying ESPN was going to get more involved with sports betting, though he specified: “We’re going to need a partner to do that, because we’re never going to be a book, that’s never going to be in the cards for the Walt Disney Company.”
• Of course Disney never actually played a significant hand in the space, missing out on a big exclusive advertising deal like NBC got, for instance.
• As EKG partner emeritus Chris Grove put it this week: “Disney lost out on hundreds of millions, if not billions, in sports-betting dollars thanks to Chapek's strategy.”
• Iger’s return could change all that, though it's still unlikely Disney would go through sports betting licensing—unless ESPN was spun out as a standalone entity. That leaves the big marketing deal as the most likely option.
• ESPN was reportedly close to such a deal with DraftKings in October, that may have looked like the BetMGM/Yahoo agreement, i.e. a so-called ESPN Sportsbook app that redirects to DraftKings.
• However that deal has not yet materialized. And with ESPN reportedly asking for $300mm a year per our channel checking, could DraftKings even afford to do that deal? Especially in light of its recent 3Q22 results and the investor reaction to its apparent inability to reduce costs?
• Bottom line, in the current market, we find it hard to see who would pay up for an exclusive ESPN deal—unless the price drops significantly.
• Postscript: Caesars will be watching closely. The company is currently the co-exclusive sports betting partner of ESPN and keen to get out of the deal, having said recently it wants to cut $200m from its OSB marketing expenses in the next couple of years. If DraftKings (or anyone else) were to take up an exclusive deal with ESPN, Caesars would happily be bought out. 

3. WHY STOP AT A FANDUEL IPO?

• The company was asked at its Capital Markets Day last week about a U.S. listing rather than just spinning out a portion of FanDuel. 
• Shareholder Adam Seesell of Gravity Capital suggested the switch, noting trading volumes on UK exchanges were relatively thin. DraftKings stock for example has around 6x the trading volumes of Flutter, despite being a quarter of the size. 
• Flutter CEO Peter Jackson said the company was asking itself that very question and it was “something we’re working through."
• Why? Jackson said there was a lot more retail engagement in U.S. stocks than in Europe and DraftKings was clearly benefiting from having “a lot of their customers able to trade their stock."
• FanDuel currently has around a 42% GGR share of U.S. OSB, though as we noted in our recent special report, that should dip closer to 30-35% over the medium term as the competition matures.