erizon Communications Inc., which last year bought Yahoo, has been holding talks with consultants and experts to assess the possibility of entering the market for online sports betting, which could become legal in the country in 2018.
The U.S. Supreme Court is expected to issue a decision early this year in a case that challenges the current federal prohibition on sports gambling.
It was revealed that Verizon concluded that entering the business, dominated by casinos, would be a formidable competitive challenge.
The company is trying to transform itself into a more diversified media business with deals like its USD 4.5 B acquisition of Yahoo, and gambling is a tempting potential growth market. The company has the nation’s largest mobile network, with more than 100 million subscribers, and Yahoo has 1.3 billion users. Yahoo’s fantasy sports unit has tens of millions of fans who spend 30 billion minutes a year managing imaginary teams and picking players, often paying fees to participate in guaranteed prize pools.
Instead of trying to build a gambling business internally, Verizon could look at acquiring online sports-betting companies to speed up the process. That’s a strategy it has used in the past to get into a new line of business, such as its acquisition of Intel Corp.’s OnCue video service in 2014.
Verizon also has streaming rights to some National Football League and National Basketball Association games, which opens the door to live betting alongside broadcasts, a popular offering in markets like the U.K. Last week, when Verizon announced an expanded streaming deal with the NBA, Chief Executive Officer Lowell McAdam and NBA Commissioner Adam Silver discussed a USD 25 M joint investment to develop features like quarter-by-quarter fantasy betting. Both Verizon and the NBA see such contests as a way to boost fans’ interest and engagement in live games, even otherwise boring ones.
A fully regulated U.S. gambling market would be worth as much as USD 15.8 B in revenue, according to a study by Eilers & Krejcik Gaming. That could include 44 million customers wagering USD 245 B annually -- about three times bigger than the firm’s estimate of the current black market for sports betting in the U.S.
Among the estimated black-market American betters, more than 90 percent place bets online.
After the Yahoo deal, Verizon created a media division called Oath, which is run by Tim Armstrong. Oath contains Yahoo Fantasy, which for decades has been the most popular online service for season-long fantasy contests. In 2015, Yahoo began offering for-money daily fantasy contests, which many consider a legal proxy for outright betting. It is now a distant third in the daily fantasy sports world, which is dominated by DraftKings Inc. and FanDuel Inc. Those two larger rivals are also likely to consider becoming sports books if the laws change, Bloomberg reported last week.