An investor tasked with composing a list of the media industry’s most prolific identities would be hard pressed not to include Robert Sillerman.
Billionaire Robert "Bob" Sillerman is one of the most successful entrepreneurs and CEOs in the media, broadcasting and technology space, and his various ventures have generated high-level returns for both private and public investors for the past three decades. One of his latest ventures just announced a major development and, in doing so, has positioned itself to capture many multiples of its current revenues over the next few years. Here is what the development involves and how it affects the company in question – DraftDay Fantasy Sports Inc. (NASDAQ:DDAY).
First, however, for those not familiar with Sillerman, here is a quick look at his track record. His career started with the buying and selling of a host of radio stations during the 1970s and 1980s – a venture that concluded with the sale of radio assets to broadcasting giant Westinghouse for $727 million in 1989. After this sale, he built a 71-station radio company called Capstar Communications, which he sold, in 1998, for $2.1 billion. Out of a couple of remaining assets from the Capstar sale, Sillerman formed what was to become the biggest producer of live entertainment in the world – SFX Entertainment (SFXEQ). In 2000, he sold SFX to U.S. mass media company Clear Channel (now iHeartMedia Inc. [OTCMKTS:IHRT]) for $4.4 billion.
The transaction cemented his reputation in the live media and broadcasting space, but he was only just getting started. Subsequent to SFX, he formed and led CKX Inc., now known as CORE Media Group. The company acquired a host of high profile assets, including the Elvis Presley estate at Graceland, before he sold it to Apollo Management for $512 million in 2011. The latter now owns CORE as part of a 50:50 split with Twenty-First Century Fox Inc. (NASDAQ:FOX).
More recently, and getting to the focus of the announcement this piece intends to address, Sillerman formed Viggle, an application-based technology designed to incentivize the watching of television and movies with rewards.
Through Viggle, Sillerman is also known for owning and operating leading fantasy sports platform DraftDay Fantasy Sports, which the former acquired in September last year. In December, Viggle announced it would be rebranding as DraftDay and would change its ticker. This rebranding is now complete, and what used to be Viggle now trades on the NASDAQ as DraftDay Fantasy Sports.
This brings us to the latest update. On April 29, DraftDay announced it had entered into a binding term sheet that will see it acquire Rant, the company behind the global sports entertainment website rantsports.com. Through one of DraftDay’s existing assets, Wetpaint, which operates entertainment website wetpaint.com, the company will acquire Rant’s full network of sites, giving it access to one of the Internet’s leading networks of content publishers.
So DraftDay has picked up a network of entertainment sites – why is this a big deal? The answer lies in the disparity between DraftDay’s current market capitalization and the potential value of the network to advertisers.
With content sites such as those in question, the primary revenue driver is advertising. The sites sell display and native (media based) advertising space to companies looking to promote their goods and services, and users who come to the site to consume the content it creates are served the ads. In the display advertising space, it’s possible to track the efficacy of campaigns with a high level of accuracy. Companies such as Quantcast aggregate the swathes of data available on the efficacy of various campaigns and produce reports detailing the most effective websites through which to advertise.
In one such report, Quantcast recently listed rantsports.com as the No. 1 for target digital ad buying for the 2015 holiday season. The site also delivers up to 11 monthly visits per user – an industry metric that measures how many times a particular user returns to a site every 30 days. This puts it ahead of BuzzFeed and Vox in some months. For those not familiar with these latter two sites, it produces entertainment-related content similar to that of Rant and is the leader in the space. Last year, Vox raised $200 million in a capital raise that saw it valued at more than $1 billion. A similar raise saw BuzzFeed pick up $50 million in a deal that valued it at $850 million. These are sites that ranked below rantsports.com in the Quantcast report and that Rant’s network is outperforming across a number of key metrics – including the returning visitor metric already mentioned. All this, and the market only values DraftDay as a complete entity at a little over $10 million.
Therein lies the opportunity. It looks as though Sillerman has picked up on the chance to acquire a hugely underrated asset in Rant. His goal, the bringing of DraftDay’s (by way of Rant’s) market valuation more in line with that of its competitor peers. With an investment in DraftDay, therefore, it’s possible to gain exposure to this pending revaluation.
Of course, all this doesn’t even take into consideration the DraftDay platform, and its potential for growth going forward. The fantasy sports space in the U.S. generates up to $70 billion annually in the U.S. in tangible and intangible activity, with $15 billion total annual expenditures in playing capital, and is set to double in size across the coming decade. Its media properties aside, DraftDay is one of the fastest-growing platforms in the space and looks set to expand in line with the wider industry.
All said, the move to acquire Rant and its network is a game changer for DraftDay. As markets recognize the potential value of the Rant network, and its implications for DraftDay’s income-generating capabilities going forward, the latter’s market capitalization should shift to reflect this recognition. Whether Sillerman can turn DraftDay into his next billion-dollar project remains to be seen, but that he can turn it into something valued at more than $10 million looks as close to a certainty as we get in the markets.