Why DraftKings and FanDuel Have Leverage in Negotiations with NFL, Genius

Update: The NFL announced deals with FanDuel and DraftKings on Thursday morning.

With Genius Sports’ stock sliding and taking the NFL’s investment along with it, the league is trying to parlay the company’s data capabilities into higher-priced sports betting partnerships.

In order to be designated as an official sponsor, the NFL mandates, a sportsbook must also subscribe to Genius’ data feed. That costs money, of course, and operators are increasingly mindful of return on investment. 

Leverage at the negotiating table has tilted in the sportsbooks’ favor.

Fanatics is currently the NFL’s only official sportsbook, announcing the new partnership last week. Until the sports betting category was reset at the conclusion of last season, three brands had that status – DraftKings, FanDuel and Caesars. Caesars, which pulled back on its national ad spend years ago, was not interested in renewing.

DraftKings and FanDuel, which together handle over 80% of the betting action in the US, want to stay in the official fold. While sports marketing insiders believe deals will eventually be signed, they anticipate the terms will fall short of the NFL’s asking price.

The three deals the NFL signed in 2021 were reportedly worth just under $1 billion over the full five-year term.

“I’m not saying [the price of the sponsorship is] gonna go down, but I think the year-over-year escalator that NFL or Genius is looking for, I just don’t think they have the leverage to have it continue,” Eric Foote, founder & CEO at VIG Partners, told Gambling Insider. 

“Will they go down or be flat?,” pondered Foote, who is involved in sportsbooks’ and prediction markets’ sponsorship negotiations with the league. “Flat would probably be my best guess.”

Squeezing the Genius Juice

With a nearly 8.7% stake, the NFL is the largest shareholder in Genius Sports, whose stock is trading around $7.60 at the time of this publication, down from the $21-22 range when the NFL’s equity relationship with the company began in 2021. It’s down over 40% from a year ago.

No wonder the league wraps marketing rights with Genius’ services, which, in addition to data, include live streaming of games.

“The NFL and Genius are doing everything they can to leverage that relationship and the official rights that they have to increase prices and to generate more money to the bottom line,” added Foote, formerly Chief Strategy Officer at PointsBet, “but the cost associated with data and live streaming for bookmakers is a significant number when it comes down to your P&L and your ROI, on what to spend and what not to spend.”

To sportsbooks, the value of both components – data and streaming – is a bit dubious.

“There are ways to go about getting data and not have to go through Genius, to go to the official partner,” Foote said. “You can still run your business pretty effectively by not having one of those official deals.”

Genius’ streaming product, which integrates users’ betting and viewing experiences, may not be quite as valuable to sportsbooks as the company believes.

“Genius is really bullish on that product,” said Sports Business Journal’s Bill King, the first to report Fanatics’ NFL deal. “But how much do people want to watch the game on their mobile device rather than watch the game on their 55-inch TV? You’re charging an awful lot of money to make that ‘this is the reason you should get our data.’ That’s what the sportsbooks would say.”

Sports Betting Market Leaders Have the Leverage

The sport betting environment has shifted significantly since the NFL signed its just-completed sportsbook sponsorship deals five years ago. Expansion of legal betting has plateaued, giving operators less incentive to spend extravagantly on marketing and customer acquisition. Most of the customers, after all, have been acquired. 

Plus, competition has thinned, with multiple operators folding up shop, unable to gain market share on, yep, DraftKings and FanDuel. Four other brands agreed to Genius deals and became NFL “approved sportsbook operators” in 2021. Of those, Fox Bet, WynnBET and PointsBet are no longer in business; only BetMGM remains.

For the two market dominators, this means not only less competition for customers, but also for league rights.

“I just don’t think there’s a lot of sportsbooks lined up at the table to pay the fees that the NFL is looking for, what Genius is looking for,” Foote said. “Five years ago, the league had the leverage, and I think DraftKings, FanDuel, specifically those two, will wait it out. They’ll wait it out until they find the deal that fits what their budgets will allow for.”

Deals Are ‘Imminent’ 

NFL data deals with Genius, SBJ’s King understands, are not priced the same operator to operator. The larger a sportsbook’s handle, the more expensive the license. The price DraftKings and FanDuel are being asked to pay, in other words, is higher than Fanatics’ bill.

“It’s been a bit easier for Fanatics on the data than it would be for FanDuel and DraftKings,” King explained. “That said, I just think it’s a matter of them getting to a price.”

Foote agrees that the pair of sports betting giants will maintain their official NFL status. Negotiations, as they often do, will go down to the wire.

“This comes down, bottom line, to data and streaming costs through Genius. It’s the same song and dance year after year,” he said.

“The deals get done. Kickoff is the leverage point. I would say the deals get done by the first or second week of the season at the latest. I think they’re imminent. Discussions are ongoing.”