The Murdoch family has profited big time from the gambling industry over the years and they are doing it again with Dublin-based Flutter Entertainment, which last week bought an additional 37% stake in US fantasy sports outfit FanDuel for a whopping US$4.2 billion.
The deal was partly funded by a $1.8 billion Flutter share placement which the Murdoch-controlled Fox Corp was happy to back once again.
The Flutter announcement included this 16-page presentation, plus this approving quote from Fox Corp CEO Lachlan Murdoch:
We are delighted to participate in this capital raising. Maintaining our ownership stake in Flutter signifies our long-term commitment to Flutter, and ongoing confidence in management’s ability to execute against the fast growing US [sports gambling] opportunity. FOX’s audiences have proven to be highly engaged with free to play and wagering content, and we are excited to offer them access to products from Flutter’s market leading stable of US brands.
Flutter is fast becoming a global behemoth. Through its NT-licensed Sportsbet brand, it is now Australia’s biggest online gambling company with an estimated market share of 52% after including the recently merged BetEasy business. It is forecast to extract around $2 billion of the $25 billion that Australian gamblers are expected to lose in 2020-21 and has been making a fortune during COVID-19, particularly because the racing industry was nationally exempt for the shutdowns.
Fox Corp is already one of the 10 largest shareholders in Flutter with a 2.6% stake worth more than $1 billion — although its bigger exposure is the 50-50 Fox Bet joint venture with Flutter in the US market, which sees sports viewers deluged with gambling options.
Investors loved Flutter’s FanDuel deal, as the market capitalisation of the world’s biggest online gambling company soared 6.5% to US$33.3 billion (A$45 billion) on Friday night, after taking into account the $1.8 billion placement. The placement was priced at around US$188 and the stock finished at US$198.50 on Friday night.
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As The Financial Times points out, Fox Corp has a 10-year option to buy 18% of FanDuel, albeit at 2021 market prices. FanDuel is now believed to be worth close to $30 billion given that smaller fantasy sports rival DraftKings has a market capitalisation of US$19.3 billion.
In 2017, the year before US sports gambling was legalised, FanDuel and DraftKings attempted to merge to stem their losses, but were blocked by US regulators.
Flutter, then known as Paddy Power Betfair, pounced on FanDuel within weeks of the May 2018 US Supreme Court decision, securing a 58% stake by merging its existing $612 million worth of US assets with FanDuel and injecting a further US$158 million. It has now shelled out US$4.2 billion lifting its FanDuel stake to 95%.
These two fantasy sports businesses are now seen as the fastest way to access gamblers as deregulation sweeps across America and cash-strapped states look for new revenue streams after their budgets were ravaged by COVID-19 shutdowns.
Rupert Murdoch used to be against gambling, partly on the grounds that it took dollars away from consumers who might buy his media products.
But then he saw the profit potential of linking gambling with sports broadcasting and in 2005 successfully lobbied Tony Blair to deregulate gambling rules in the UK.
As Crikey has noted before, the Murdochs then built up Sky Betting & Gaming which ended up delivering clear profits of about $2 billion to the broader Murdoch interests (via Sky PLC) when that business was sold to Canada’s The Stars Group for US$4.7 billion in 2018.
Having tasted success in the UK, Fox Corp subsequently created the 50-50 Fox Bet joint venture in the US with The Stars Group once the US Supreme Court legalised sports gambling in May 2018.
Fox Corp took a 5% stake in Stars for US$236 million as part of the Fox Bet joint venture which then became a 2.6% stake in Flutter once those two businesses merged earlier this year. The original 3.23 million Flutter shares which Fox Corp inherited through the merger are now worth around US$650 million but Fox Corp has subsequently supported two further placements by Flutter this year as it dives further into the gambling business.
Like denying climate change, backing Trump and tolerating industrial-scale phone hacking, there are few ethical barriers which stand in the way of the Murdoch modus operandi. They seem to have no problems whatsoever profiting from the toxic gambling industry.