Rupert Murdoch’s proposal to recombine News Corp and Fox Corp and capitalize on sports activities betting has but to persuade Wall Street because the valuations within the as soon as red-hot playing market crumble, based on former staff, monetary analysts and sports activities media consultants.

While some former staff see the transfer as pushed by the 91-year-old Murdoch’s succession planning to consolidate energy behind his son Lachlan Murdoch, CEO of Fox Corp, individuals aware of the Murdochs’ considering say they’re severe in regards to the sports activities betting alternative. “The proposal is 100% based on business rationale,” a spokesman for Rupert Murdoch instructed Reuters. “Any commentary that implies it has to do with succession planning is absurd and comes from sources with no knowledge of the strategy.”

There are different elements motivating the merger together with a bid to attain larger scale in information, dwell sports activities and data, sources mentioned. Lachlan Murdoch didn’t focus on the potential deal on Tuesday’s earnings name, however talked up the worth of scale, “particularly (in) the next couple of years, when opportunities in the marketplace will emerge.” As lately as August, Lachlan Murdoch described sports activities betting as “a huge opportunity” for Fox Sports, telling Wall Street it could gasoline viewer engagement. Combining dwell sport broadcasts with News Corp’s sports activities protection would create a extra compelling sports activities package deal, and strengthen the corporate’s hand with regards to sports activities betting, based on individuals aware of the deal’s logic.

But Wall Street’s enthusiasm for sports activities betting has cooled since early 2021, as buyers prioritize profitability over spending aggressively to amass new prospects. Thirty-six U.S. states and the District of Columbia have legalized sports activities betting, although the tempo has slowed. “The thing about the sports betting opportunity is it started off like a house on fire, with all the states approving it,” mentioned Huber Research Inc analyst Douglas Arthur. “But I’m not hearing as much excitement about it right now as I did nine months ago. If that’s the rationale (for the merger), it’s a pretty weak one.”

Since the start of 2022, the stock prices of 11 major publicly traded sports betting companies, including DraftKings Inc and Barstool Sportsbook’s Penn Entertainment Inc , have tumbled by an average of 35%, according to Refinitiv data. That does not necessarily mean the pace of legalized sports betting is slowing. Total wagers are expected to reach $390 billion globally this year, according to researcher H2 Gambling Capital. Kantar Sports analyst Ryan McConnell said the market is flooded with new entrants and consolidation appears likely.

Casualties are starting to build up. Streaming service FuboTV shuttered its sports betting service in October, and Churchill Downs announced in February that it would abandon online sports. “It’s a extremely aggressive market,” said gaming industry analyst Steve Ruddock. “It’s tough for corporations that are not absolutely invested in that as their major enterprise to compete.”

SLOW START Since selling their movie assets to the Walt Disney Co in 2019, the Murdochs laid a new course for a slimmed-down Fox, based on sports betting. The company soon paid $236 million for a 5% stake in Toronto online bookmaker the Stars Group which helped launch Fox Bet and owns the app.

Combining Fox with News Corp could bring a larger audience to sports betting, potentially increasing the financial rewards for attracting new gamblers and gaining more lucrative sponsorships from sportsbooks eager to promote their apps, said one media executive. The Murdochs’ early foray has been slow-going. The sports betting app Fox Bet is available in four states, with just 0.2% share of the U.S. market, according to researcher Vixio. A free version called Fox Bet Super 6 has attracted some 6 million users whom Fox hopes to eventually convert to gamblers.

The growth of Fox Bet has stagnated since market-leading FanDuel’s owner, Flutter Entertainment Plc, acquired Stars Group in 2020. The companies have been locked in a dispute over the price Fox would pay to exercise its option to buy 18.6% of FanDuel. The matter is the subject of an arbitration case and Lachlan Murdoch told investors a decision is expected imminently. News Corp has previously stumbled in sports betting. Last month, News’ first direct investment in Australian bookmaking, Betr, went live ahead of the country’s most-watched horse race, the Melbourne Cup. Within two days, an ad that ran in News Corp’s tabloid newspapers triggered a regulator inquiry into whether the ads breached laws prohibiting inducement to gamble. Betr says it is cooperating with the regulator.

Matt Davey, chairman of Las Vegas sports betting investment firm Tekkorp Digital Acquisition Corp, which co-invested with News Corp in Betr, mentioned News had seized on its media reach in Australia, where it sells more than half of all newspapers and runs sports-heavy cable TV channel Foxtel, to create a “fairly highly effective mixture” of media and betting. At least one investor is waiting to be convinced that approach will work in the United States.

“Fox has acquired a far-reaching viewers so it does make sense, if you are going to launch (sports activities betting) into the U.S., that you’ve got that Fox community, distribution and partnership,” said John Ayoub, a portfolio manager at Sydney-based Wilson Asset Management, which owns News Corp’s Australian-listed shares. “But we’ll in all probability want a bit of bit extra element.”

(This story has not been edited by Devdiscourse employees and is auto-generated from a syndicated feed.)