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August 1, 2023

Editor Note: Welcome to August!

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Affiliate Co. Better Collective Buys $54mm Digital Content Machine, Platform Playmaker HQ

Better Collective (STO: BETCO) recently acquired Playmaker HQ in a deal worth up to $54 million. The terms included a $15 million up-front payment.

BETCO owns and operates sport communities and digital media platforms, including Action Network, that deliver sports content, data insights, and educational betting tools to fans around the globe. It plans to engage Playmaker HQ’s broad audience of younger sports fans, and drive affiliate revenue.

Playmaker HQ has more than 20 million social followers across Instagram, TikTok, Twitter, Snapchat, and YouTube (up from seven million in ’20).

Better Collective also expects to be able to leverage Playmaker HQ’s social expertise, content production capabilities, and existing brand partnerships to grow the overall business.

“Playmaker HQ, through [its] relationships with non-endemic [advertisers], can help us further monetize our web properties,” Marc Pedersen (CEO, Better Collective USA) said.

Playmaker HQ must generate more than $75 million in accumulating revenues, and more than $25 million in accumulating operational earnings, over the next three years to receive the full earn-out.

Playmaker HQ CEO Brandon Harris describes his company as a "content machine and media platform that leverages video creation and distribution to power events and experiences.”

A collective of athletes, creators, and influencers churn out over 2,000 pieces of content each month for ~50 brands or shows living across social platforms. The company’s programming reaches over 500 million users each month.

Playmaker HQ has largely flown under the radar of the mainstream media due to its approach to fundraising. The efficient business bootstrapped its way to an exit. It only raised $562,500 prior to the sale. Professional poker stars Phil Hellmuth and Jeff Gross were among the early investors.

Wave Sports & Entertainment, Team Whistle, and Bleacher Report are the closest comps to Playmaker HQ. None are exact replicas. Playmaker HQ has a talent management division that differentiates it from the other media companies.

That arm of the business “allows us to create content in certain ways, to get access to certain people, and [to] get more favorable economics to do events and other things,” Harris said.

It also helps Playmaker HQ to diversify revenue streams.

While the bulk of Playmaker HQ revenues are tied to video views on the platform (i.e. sponsorships), talent management, events, sports betting sponsorships, and e-commerce all contribute to the profitable business.

Playmaker HQ did not have to pursue a liquidity event. But Harris saw an opportunity to build from a position of strength moving forward, with the help of a strategic partner, and took it.

“Better Collective has a lot of resources, relationships, and know-how that we don’t,” he said. “We have no website presence, they have best-in-class website presence and expertise. They [also] have a lot of relationships in sports betting that will help us to run [the business] better. Together we’re a lot stronger and it’s better for just about every person in the company to have more stability.”

Historically speaking, Better Collective has focused on delivering content to and monetizing the core sports bettor through an affiliate revenue model.

Our U.S. users are “very experienced bettors who know what they’re doing. They are quite far down the user journey,” Pedersen said.

The group believes it can grow its presence amongst more casual fans, which will in turn allow the company to drive more affiliate and sponsorship revenues.

“There are still a lot of users out there who engage with sports, bet on sports, but are not necessarily engaged with our existing brands,” Pedersen said. “By expanding [our] reach, in terms of engaging more [of those] sports fans, [BETCO can] drive more of them to our platforms where our expertise in audience monetization can come into [play].”

That is where Playmaker HQ and its more entertainment focused approach figure to fit in.

“Playmaker has shown an ability to grow and retain an audience on those platforms,” Pedersen said. “Snapchat and Instagram specifically are interesting channels for us.”

Better Collective hopes to be able to drive a portion of Playmaker HQ's audience to its own properties, and ultimately to the sportsbooks.

BETCO plans to retain all of Playmaker HQ’s properties and branding. Each of the channels/shows maintains different audience demographics.

“Shows that cover mansions or luxury items attract a different audience than shows about hip hop or baseball,” Harris said. The company's “goal is to make sure we’re covering each key [adjacent] pocket of the sports world.”

Broadly speaking, the Playmaker HQ audience consists of a younger demographic (think: 23-30) than Better Collective’s legacy audience. And with its following on social media channels, it is possible for brands to target specific age groups.

It’s not clear how the group plans to convert casual sports fans/fans of short-form video into consumers of written sports betting content. Pedersen declined to cite specifics, but underlined that the business case for the acquisition was made with the ambition of growing audiences and subsequently advertising revenues.

However, the BETCO executive acknowledged it would only happen if the company “improves the user experience and what the user is looking for [on platforms like Action Network]; making it easier for them to engage with the content and offering.”

FWIW, affiliate fees are among Playmaker HQ's five largest revenue streams.

Better Collective does not necessarily need to convert Playmaker HQ users into consumers of sports betting related content for the purchase to net out. There are other ways for the parent co. to squeeze value from its newest acquisition.

Playmaker HQ may be able to open the door to new partnership opportunities. BETCO has historically focused its attention on sports betting related brands.

Better Collective will also pick up social and video content production know-how that will be useful. The company, which found success with localized owned and operated web properties, now feels compelled to simultaneously publish content on the platforms where younger fans spend their time.

“It’s a way to engage them where they actually live and have their day-to-day interactions on the internet,” Pedersen said.

And there should be opportunities to grow Playmaker HQ's business overseas, specifically in Europe and Latin America.

Better Collective will need to meaningfully grow revenues and EBITDA over the next three years for Playmaker HQ to see the full earn out. But Harris expects the company to hit most, if not all, the benchmarks.

If it does, the deal will end up looking like a win for both sides.

$54 million would represent a 3-4x multiple on ’24 EBITDA (assuming Playmaker hits the targets), comparable to the 29 other acquisitions BETCO has made to date, and a nice pay day for Harris, his co-founder David Woodley and their seed investors.