A perfect storm
Companies are capitalizing on the convergence of gaming, sports, and media
The gaming industry is at a defining moment, bringing exciting opportunities to many of the industry’s participants.
Betting on sports is on the rise, driven by broad legalization of gaming, a growing acceptance of sports wagering of all types, and the convenience of online and mobile betting apps. This perfect storm is creating massive opportunities for gaming companies, sports leagues and teams, and media companies. The next ten years promises to be filled with immense change, opportunity, and risk in the gaming space.
While at G2E 2021 (Global Gaming Expo), KPMG LLP (“KPMG”), the U.S. member firm of KPMG International, heard and saw the evidence of convergence everywhere. Convergence – and related topics such as technology to support an omnichannel experience and the deals necessary to create a vertical enterprise – was present across G2E’s keynote speeches, education sessions, and trade show booths. Many in the industry are excited about the possibilities of convergence, even without clarity on all the why, how, and who questions yet.
Legalized sports betting: creating winning opportunities
This dynamic convergence market offers big benefits to multiple industry sectors:
- Gaming companies gain access to valuable new customers
- Sports teams gain new revenue-producing licensing, media-rights opportunities, and ways to engage with fans
- Media companies can increase viewer interest, driving advertising growth and new content opportunities.
To fully realize these benefits, the players will need to move both rapidly and strategically to create a well-executed sports-betting ecosystem. The expectation is that this will be accomplished through deals and partnerships to share technology, data, and brand resources.
Convergence has the potential to tie together industries, creating a $135 billion ecosystem across advertising, media rights, gambling, and others1. And the pace is accelerating, with 25 deals through August 2021 alone compared with 18 in all of 2019 and 19 in 20202.
We learned where operators and suppliers stand on these key issues through conversations with clients at G2E, closed-door discussions with gaming leaders and professionals across risk, transactions, and operations, and our role as a panel moderator for Sports Betting and Media Converge: Exploring the Investments of the Future as part of G2E’s education program.
Who are the players?
The core of the convergence we’ve witnessed has centered on three industries – casino gaming, sports (teams and leagues), and media (broadcast). On the periphery, other players include companies from traditional and social/mobile video gaming, eSports, and financial services (namely payments).
At G2E, many painted a vision of a unified and seamless ecosystem across sports, media, and gaming. While there is a view that the “killer app” does not exist yet, companies are securing investments to aggregate a variety of technology products to enhance the gaming experience. They are also forming partnerships to gain valuable customer and market access. The virtues of these near-term investments include the ability to further experiment and innovate around the consumer experience, which has yet to be refined to truly allow an omnichannel experience.
New businesses, new risks
Potential factors that could impede progress are regulation, market perceptions of gambling, and a drying up of available capital in the sector. We heard from some who feared a bubble environment, which implies a messy future as valuations adjust to a more mature industry.
Convergence is just one factor driving immense change in gaming. And change inevitably equals risk, especially when it happens rapidly. Companies are acting fast to add online offerings, often through mergers and acquisitions. Gaming companies are entering new businesses with entirely new customers, products, employees, and systems. This is a recipe for new risks, which must be actively managed. Digital interactions with customers bring new challenges and regulatory requirements around data privacy and security.
Moving fast, but with purpose
As the number of states legalizing sports betting and online gaming increases, we will see more fans crossing over and more players competing for those fans. Sports teams and leagues, gaming companies, and media outlets all stand to gain from this growing opportunity. But they need to pursue the right deals and partnerships to create the mutually beneficial ecosystem that fully realizes the market’s potential.
This deal activity has already begun and will likely accelerate. However, partnership opportunities are limited. Companies grappling with how to best to get into the game will need to move quickly or be closed out. Those that have carefully and thoroughly explored where their organization can most benefit– and move quickly and purposely to capitalize on those opportunities – will be the ones mostly likely to succeed.
Companies participating in this convergence need to ensure they are building in scalable systems and processes along the way. Establishing governance is a key difficulty in any industry when enterprises grow quickly, especially when subject to public company scrutiny and requirements.
How can KPMG help you?
Our teams can assist across the operations, customer advisory, technology, human capital, risk areas, and more. We have advised several companies in transformative convergence transactions, helping them navigate the unique diligence, structuring, and integration challenges of these deals.
Coordinating with the independent member firms of KPMG International in the United States, Europe, Asia, Australia, and Latin America, our professionals can combine a global perspective with in-depth industry knowledge to help companies navigate a fast-changing market.
Let’s stay in touch. Together, we can shape the future of gaming – now.
- KPMG LLP, “Capitalizing on the convergence of sports, media and gaming,” August 2021. As noted in that report, $135b is the aggregate 2020 market size (1) online and land-based sports betting; (2) online casino gaming; (3) sports league and team licensing; (4) broadcast media rights; (5) sports-related television advertising; (6) supporting technology and data/analytics.
- KPMG analysis.