Hot copy: Stories that caught our eye this week from around the sector
Crypto markets have suffered a particularly tough few weeks, with the price of bitcoin tumbling from over $30,000 on 6 June to little over $20,000 today.
Coinbase CEO Brian Armstrong said in an open letter that the firm’s decision to cut staff was made to ensure the business “stays healthy during this economic downturn,” which he warned could extend beyond the current bear market.
“We appear to be entering a recession after a 10-plus year economic boom,” he said. “A recession could lead to another crypto winter, and could last for an extended period.”
Coinbase itself has not been immune to the effects of the economic downturn, either. The firm’s share price has taken a catastrophic fall over the past six months or so, from a 52-week high of $368.90, to just $51.05 today.
This, CNN said, was the result of investors continuing to sell off crypto, bailing out of risky assets as they expect sharp increases in interest rates to come their way.
Armstrong said in his letter that the firm “grew too quickly,” since listing on the Nasdaq last year, and that “in this case it is now clear to me that we over-hired.”
If the warning signs are anything to go by, crypto investors may want to prepare themselves for a long, cold winter.
Disney taking the Mickey on sports betting
Investment magazine Seeking Alpha published a story on one of the highest-profile non-endemic businesses to have expressed an interest in entering the gaming sector; Disney.
Specifically, the author asked: “Why is its ESPN unit, four years into the legalisation of sports betting, still waffling around with neither its own betting platform, or one launched in partnership with an existing online betting giant?
“Who was fast asleep at the ESPN switch when the Supreme Court ruling opened the doors wide to legal sports betting in May of 2018?”A lack of commentary on the sports betting question in Disney’s latest earnings call was, according to the author, “a message to shareholders by the silence of its leadership.”
The opportunity for driving sports betting revenue from ESPN’s 76 million-strong viewership is too good to have passed up, author Howard Jay Klein argued, especially given its ability to advertise to the audience it has already amassed – in stark contrast to the big US players currently blowing hundreds of millions on costly marketing campaigns.
He then compared ESPN with Barstool Sports to show what an early entry into the betting market could have looked like for Disney.
“Note that Penn National Gaming recognised the value of a sports-crazy audience base by their acquisition of 38% of Barstool Sports for $163m largely due to its reach of 55 million online TV ‘stoolies’,” he said.
“On average, Penn’s promotional and media costs have run lower than the leaders. They have decided not to chase business with excessive dollars but be content to get into black numbers as a priority over empty calorie volume. They have made the right call here.”
Despite Penn’s success, it still remains to be seen whether Disney will get animated again about sports betting.
FanDuel staying out of college
FanDuel made a splash in the Wall Street Journal this week, as the paper published a story on some of the challenges faced by the firm’s chief executive, Amy Howe.
Namely, it explored how she must “satisfy a number of constituents: gamblers and sports fans, sports leagues, government regulators and investors looking for returns.”
Another significant part of Howe’s mission at FanDuel is to operate the business in the most responsible way. As part of that, she was adamant that “we don’t want the FanDuel brand associated with college campuses.”College sports sponsorships have become increasingly common among sports betting firms, which are exploring all possible avenues to help them carve out market share in the sector.
As the WSJ pointed out, though, young people are at higher risk for gambling addiction according to the National Council on Problem Gambling, and attempts to put a firm’s betting brand in front of as many college student eyeballs as possible is therefore more fraught than it may first appear.
According to the piece, FanDuel is also re-evaluating terms used in advertising promotions such as “risk free”, to assess whether they are a responsible way of marketing its products.
“I certainly feel a huge sense of obligation,” Howe said.