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Online Ticket Marketplace Vivid Seats Acquires DFS Platform Betcha Sports

James Murphy
by in Gaming Industry on
  • NASDAQ listed ticket exchange Vivid Seats has acquired a DFS platform called Betcha Sports.
  • Betcha Sports was founded in 2018 and is a DFS app with plenty of sports betting type elements.
  • Additional details on the transaction will be discussed on Vivid Seats’ Q4 earnings call scheduled for April 14, 2022.

Another sports related business segment is creating the ‘broad strokes’ of a gaming focused strategy. In this case, we’re talking online ticket marketplace Vivid Seats. Vivid Seats has had a busy year which included listing on the NASDAQ Global Select exchange following a SPAC merger with Horizon Acquisition. You might remember the name ‘Horizon Acquisition’ from earlier this year when an affiliated SPAC (Horizon Acquisition II) entered into an abortive merger deal with sports betting data company Sportradar. Sportradar would eventually go public through a traditional IPO and is now listed on NASDAQ under the symbol SRAD.

Vivid Seats is trying to find a niche in a crowded and competitive market that includes Ticketmaster, Ticket Evolution, TicketNetwork, StubHub and SeatGeek. As you’d imagine, these businesses were hit especially hard by the COVID-19 pandemic and in April 2020 the sales amount the top five in the industry were down 97% year over year. The ticketing business–along with most other components of live sports/entertainment–limped along until early 2021 and are now starting to see a rebound. They made an interesting move earlier today, acquiring mobile DFS platform Betcha Sports for $25 million with a possibility of adjustments of up to $40 million more depending on earnings.

Betcha is part of a developing niche of daily fantasy sports (DFS) platforms that try to approximate sports betting as best they can given their regulatory limitations. There’s definitely plenty of US based players that are still in the sports betting ‘dark ages’ and in theory that’s the target market of platforms like Betcha. On a macro level, the fact that two of the biggest players in the US sports betting industry to date began life as DFS companies–FanDuel and DraftKings–is not lost on investors. Simultaneously, sports betting companies such as Caesars Entertainment and Bally’s Corporation have sought to leverage DFS (along with ‘free to play’ games) for marketing purposes. The value of DFS is that it lets them build a marketing database in states that have yet to launch sports betting. Hard to argue that there’s plenty of overlap between the DFS and sports betting audience.

That being said, I’m still not sold on the market they’re going after. Much of the perceived demand is predicated on the erroneous concept that much of the addressable market is completely clueless about sports betting. There’s definitely *some* players that are looking to bet for the first time when it comes to their state but generally speaking it ignores the not insignificant reality that for the better part of twenty years anyone anywhere in the US that wanted to place a bet has been able to do so thanks to the growth of the online sportsbook industry. In major cities with a strong ‘local bookmaker’ market you can extend that timeline back a number of decades.

Americans have always been able to place bets with or without the imprimatur of government regulators and plenty of them have. More significantly, plenty of them still do–one of the great untold stories of the post PASPA US market is that it has been a boon for offshore sportsbooks and local bookies. Sports betting is all over the media but the sad fact is that with the exception of a few states US players don’t have it any better now than they did ‘back in the day’. This includes the states that haven’t regulated sports betting but also the myriad of jurisdictions that have done a shoddy job at implementing it.

Here’s some background on Betcha specifically and the ‘sports betting-lite DFS’ concept in general:

Betcha has reimagined real-money sports gaming as an immersive entertainment experience. Its next generation Daily Fantasy Sports app, available on iOS and Android, includes simple player props enhanced by social and gamification features driving what it describes as “industry-leading unit economics, broad fan reach and strong network effects”. 

The company’s internally developed tech stack includes a proprietary Player Account Management (PAM) module that integrates into its own DFS platform with robust compliance capabilities all designed for extensibility to sportsbooks and casinos.

No secret that a player prop bet at a sportsbook is basically a daily fantasy sports game in a different format:

The Betcha DFS app offers player props, like will LeBron score more or less than 28.5 points, across traditional sports and eSports, with a social feed of picks, odds boosts for playing alongside friends and weekly leaderboards for cash prizes. 

The app has a hybrid real-money and free-to-play model, with real money action reaching a majority of the US population including big markets like California, Florida and Texas.

Not a lot of concrete data about Betcha’s client base and revenue. When they obtained a new round of funding in July 29, SBC Americas reported this bit of information which doesn’t really explain anything:

According to the firm, it has achieved compelling viral growth with 80% of users joining via word-of-mouth or friend referrals, driving low customer acquisition costs coupled with high engagement from users. 

There’s no way to do an ‘apples to apples’ comparison of Twitter followers to paying clients, revenue, etc. but it does provide some sense of how many people are aware of a brand. Betcha has 730 Twitter followers. It isn’t fair to compare Betcha to the big sportsbook brands so we’ll compare them to PrizePicks which is working the same ‘sports betting lite’ angle. PrizePicks has more than 21,000 Twitter followers:

PrizePicks has been around longer (Betcha was launched in 2018) but ‘viral growth’ is hard to buy when a company has just 730 Twitter followers. That’s 3,300 fewer than *I* have and I couldn’t claim ‘viral growth’ and keep a straight face while doing it.

This notwithstanding, Betcha’s list of early investors is impressive with plenty of sports betting veterans including 888 Sports founder Eyal Shaked and former Don Best Managing Director Benjie Cherniak. Their management team is also first rate (you can read up on them here if you’re so inclined) and it looks as if CEO Hanson Wong, CTO Bret Schlussman and President Jason Shapiro will all remain with the company.

Most importantly, my misgivings about the market niche that Betcha, PrizePicks, etc. are targeting now doesn’t mean that they aren’t good investments or that they can’t pivot into a more viable business model. Hard to assess any of this until Vivid Seats provides more clarity on what they’ve got up their sleeves re: sports betting. If nothing else, they’ve got some resources on hand to build with and they can just keep running Betcha as it has been for now. From the perspective of sports betting’s growth in the US this is another welcome development–the more deep pocketed companies that get into the space and the more sports betting goes ‘mainstream’ the better.

Here’s what Stan Chia, CEO of Vivid Seats, said about the Betcha acquisition:

“The acquisition of Betcha further strengthens our position as a leading marketplace, accelerating our journey into naturally adjacent areas with engaging features that deliver unique experiences for our customers. We have been incredibly impressed with their continued growth and are excited to welcome the Betcha team to Vivid Seats, as we combine their new way to play with our desire for fans everywhere to experience it live. We believe this acquisition can significantly increase our TAM, while allowing for customer acquisition synergies with our high interest fan base. I look forward to leveraging our collective expertise and passion to drive enhanced fan engagement through discovery, loyalty, and content to deliver outstanding customer experiences.”

Hanson Wong, Chief Executive Officer of Betcha Sports, is clearly happy to become part of Vivid Seats:

“Vivid Seats and Betcha share a mutual commitment to helping fans experience the thrill of live events combined with a new and innovative, yet simple way to play. We could not have found a better partner than Stan and the Vivid Seats team, as we introduce a new gaming experience to millions of Vivid Seats customers.”

Although my primary focus is sports betting and ancillary industries, the entire sports business ecosystem is in a period of seismic change. We’re seeing such unprecedented ‘creative destruction’ that it’s difficult to wrap your head around it all. Sports betting has a good chance of being a key element of the new industry paradigm driving viewership, revenues, media coverage, etc. If you’re running a company tangentially involved this business you’re foolish if you don’t consider the changing landscape and the potential significance of sports betting.

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