theScore (CVE:SCR) On Becoming the Leader of Sports Betting

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Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

Score Media and Gaming Inc (theScore) (CVE: SCR) (OTCMKTS: TSCRF) CEO John Levy joins Midas Letter to discuss what’s new with the company, including their all-in play on the sports betting market. TheScore is primarily known for its sports scores and news app, the most popular sports app in Canada with the most engaged audience in North America. Last month, theScore became the first media company to create and launch a mobile sportsbook in the United States, ‘theScore Bet’. Currently accepting bets in New Jersey, this opens up a potentially lucrative new revenue stream for theScore who is actively looking at expanding across the U.S.

Transcript

James West: I’m here now with John Levy, CEO of theScore, trading on the CSE under the symbol SCR. John, welcome back.

John Levy: It’s great to be back. It’s been a while. Seven years, I think.

James West: It has been a long time. It has been exactly that. [laughter] So John, tell me what is new with theScore since we talked, I think it was in 2014, actually.

John Levy: Oh, my God. How long is this interview?

James West: Fifteen minutes? No, 10 minutes.

John Levy: Okay, no, no, no, no. Well, what’s really new is, since that time, and I think, in all seriousness, I think that was when we sort of sold the TV asset to Rogers and were able to become 100 percent mobile operated business, right? And that’s when the app really started to fly and got serious. And, you know, part of the reason we ended up having the confidence of selling the TV asset was the fact that our app was getting sort of a broad base of interest.

We knew we kicked butt in Canada, we were the cool, young sports network, right? But we were getting downloads, six, eight, ten to one coming out of the States, so we really knew we were on to something, and that sort of more authentic approach to sports that we had in the TV network was carrying through into our digital life. So, you know, next time Rogers came along and we got the right valuation, and we were able to hold onto the brand and carve out all the digital assets, we did the deal.

So, what happened in the interim? We continued to grow the digital asset; became the second-most popular sports app in North America, behind ESPN; continued to grow, continued to grow, humongous engagement coming from both, you know, all over.

James West: What does your engagement look like right now?

John Levy: Oh, my gosh, so, you know, we’ve got 4 to 5 million average monthly users on the app; about 65 percent come from the States. People hit our app 100, 120, 130 times a month, which is enormous compared to other apps. We know where they are. You know, you tell us what teams you’re favouring, what leagues you’re favouring, what players you’re favouring. We can see by your behaviour who you are, what you’re doing. And besides that, we’ve always known with that open and authentic approach to sports, even on the TV network, that betting on sports was an integral part of why people love – apropos to what we want to talk about, today – you know, why people love sports.

But it’s only one aspect of why people love sports. You know, you and I will go to a game, we’ll go to a bar, we’ll drink, we’ll bet with one another. Some people bet offshore, some people bet with the old-style bookies, but betting, you know, was really just one part of why people are passionate about sports, right? And that’s how we treated it, even on the TV network. As you recall, we had the ticker with the odds on it; we were the only ones there.

James West: Yeah, exactly.

John Levy: Our guys on-air didn’t wear shirts and ties, they were like guys you go to the bar with. You know, a 14-point spread went over on a field goal that was meaningless to the game, our guys were pulling their friggin hair out, because they probably lost a $50 bet, as compared to ESPN, MSN, and sports would go, “Ooh, that was interesting.” Gaming’s always been a part of what we do.

James West: Yeah. Well, this is why, this is actually why I’m intrigued to talk to you again; actually why I decided to get the guys to reach out to you, because I was like, you know, this is happening. E-sports is happening; online betting is no longer the, like, step off an airplane and get thrown in jail by the FBI proposition it used to be for operators of gambling sites; it’s now legal.

John Levy: Correct. Correct.

James West: And so I thought that this must be a fundamental game-changer for theScore, who, by all accounts, is the one who’s been there since the beginning, and for whom, I would think, that the benefit of this relaxed regulatory environment has got to accrue. So, how are you monetizing that?

John Levy: So, absolutely, it is a huge game-changer for us. And, you know, over the years, recognizing the fact that a high percentage of everybody who loved the TV network and who loves our app, bets on sports, right? And so A, we always stayed clean. We never wanted to sort of do that offshore thing, or, you know, capitalize on the fact that we knew we had that engaged audience. We always hoped and prayed at some point in time that it would become legitimate and legalized in the US and in Canada, and we should talk about Canada a little bit, too, because I think the winds are changing, and I think within a year, it’s all going to unfold here, positively. So that’s a big, huge plus.

James West: Great.

John Levy: So we basically stayed true to our mantra, and PASPA gets repealed, and then we sit around thinking, okay, so, okay, it’s here. Now, how are we going to utilize this? We’ve wanted this for so long.

So question number one was, do we just take the stupid money that everybody’s going to throw at us to advertise on our network? We know we have the most engaged audience; we know we have huge engagement in the US. We’ve seen the stupid behaviour of some of the people in the DFS world before, where they just try to buy customers at $400, $500, $600 a user; unsustainable business model, in our view, but from a network standpoint, or from an app standpoint, you know, we took a lot of money in the poker days, and even in early DFS days.

James West: I happen to know that it’s now $1000 per user for an active gambler.

John Levy: So one of the things we had to decide is, do we want to do that, or do we want to go all in? And we honestly sat around and said, you know what? For the short-term gain that we would get in terms of revenues – and, you know, our app business is now just about breaking even, and it is breaking even, basically, we’re now investing in the new business – but, you know, it was another one of these déjà vu all over again with, like, the TV network. Lose, lose, lose, make money, boom: it got sold. You know, and the app was basically on that same sort of path.

James West: Sure.

John Levy: But we decided, no. We said, look, it was not fulfilling just to take that short-term win. Plus, if you look at the size of the market, if you look at our user base, if you look at the different way we approach this whole thing, we really have a unique opportunity to take not just a secondary position, but to be the leader in the sports gaming business in North America. And that’s what our goal is to become.

James West: Okay. When you say the sports gaming business, what do you mean, exactly, by that?

John Levy: Sports betting business.

James West: Betting, okay.

John Levy: Now, that may lead to other things. I mean, you know, if you look at most of the betting apps, they also have I-gaming involved, and that’s something that we would be looking at, as well. Does it lead to casino activity?

James West: Sure.

John Levy: You know, the guys who invested in us, Fengate, right, put in $40 million – it was another announcement we made after the Penn National deal, which gives us more breadth in the US. But I mean, these guys just, you know, they’re the majority owners of the Hard Rock Hotel in Vegas.

James West: Sure. Okay, so to what extent will the sports betting component of the sports media enterprise become responsible for what, like, what level of your revenue going forward?

John Levy: We’ll be sitting here a year, two years from now, and it will be dwarfing our media revenue.

James West: Really?

John Levy: Yes. Yeah.

James West: Wow. Okay, so that’s exactly why I thought, this is the time – 

John Levy: Now, I’m not going to tell you, because we don’t guide or anything like that, but this is an all-in play for us. I mean, all the other media companies are sort of dipping their toe in or doing these $100 million deals where I’m giving it to you and then you give it back to me in advertising. We’re all in. We’re the bookie.

James West: Really?

John Levy: Right. In New Jersey, when you make a bet on ScoreBet, you know, we’re taking the – sorry, we’re taking the action.

James West: You’re the house?

John Levy: We’re the house.

James West: And everybody knows, the house always makes money.

John Levy: Well, last night we didn’t. [laughter]

James West: Well, sometimes. But anyway – 

John Levy: But over time.

James West: Right.

John Levy: Over time – 

James West: The house always wins.

John Levy: When you have the right people pricing it, and we do, because with BetWorks, the company we partner with in Nevada, you know, they do our risk and trading, and you know, the guys doing it for us has only been doing it for 25 years in Vegas – and that was a whole, if we could sit here and talk about the multitude of decisions that we had to make in terms of, once we decided that we wanted to be the book, okay, we had to be the best.

Okay? Number one, we’ve got the best app. So our ScoreBet just can’t be another betting exchange like all the other guys; it has to be phenomenal. So we took like six, eight months and actually built a native, new app called theScoreBet, as compared to just, this is beyond you and me, but technical, just an HTML wrap where, you know, you sort of got into the business and then worried about how good it was later on. No; we wanted to build right from scratch. That allowed us to do two things.

Number one, have a great app. But number two – and the real differentiator between us and everybody else, gets back to our history: sports betting is just a part of the passion about sports. So in our world, on theScore media app, there’s all these crossovers to our ScoreBet. It’s kind of like Facebook and Facebook Messenger. When you’re in theScore family, when you’re in theScore brand and you’re getting all your data and all your information and all the stuff that we’ve been working at for the last seven years, and doing very, very well, and you get the inclination to bet, you don’t have to go anywhere else. You won’t go to a third party app.

James West: Right.

John Levy: You’ll be doing it inside theScore. Now, theScoreBet is a separate app; it has to be, for regulation standpoints. But from a user standpoint, the interface will be completely seamless, and if you look at the other betting apps, what are they trying to do? They’re trying to layer content and data into their, you know, into their transactional app, because that’s all it is. You go and make a bet on Bet365, you get a little bit of data, but that’s it. They want to try and keep people there, so how do they do it? They start trying to infuse content and data.

We’ve been doing that for seven years. So our whole way of thinking is completely opposite: we’re bringing sports betting, where it’s legal, and only where it’s legal, basically inside theScore brand and inside the app. So we think a couple things: number one, from a stickiness standpoint, remember we were talking about the engagement? This will only enhance the engagement. And equally important, remember we talked earlier about the guys spending stupid amounts of money to buy users? That’s not in our game plan. 

Yeah, are we going to advertise? Yes. Are we running commercials in New Jersey today? Yeah. But are we going to be spending like drunken sailors? No. What we’re going to do is, we’re going to go and make it available to the users inside of our Score brand, and give them no reason to go anywhere else.

James West: All right, John, that’s a great update. We’re going to leave it there for now.

John Levy: Sorry. [laughter]

James West: No, that’s great! I’m going to come back to you sooner rather than later, because this is a dynamic space, and I don’t know if you noticed, but – 

John Levy: One last thing, one last thing: we are the only media company that’s the book in North America.

James West: Okay, well, great! We just launched an e-sports and betting portal on our site, because we’re not looking to cover e-sports and betting; the space is full with too much competition.

John Levy: Right, right.

James West: But we’re looking to cover the companies that are in that space from the standpoint of investors, so we will be talking to you.

John Levy: We should come back, because, you know, I’m sitting here gushing about our betting business, and I could also be gushing about our e-sports business. You know, over the course of the last year, you know, it’s blown up in a positive way.

James West: Okay, great. Well, I’m going to talk to you more about that later, but for now, thanks for joining me.

John Levy: Thanks very much. My pleasure. 

Midas Letter is provided as a source of information only, and is in no way to be construed as investment advice. James West, the author and publisher of the Midas Letter, is not authorized to provide investor advice, and provides this information only to readers who are interested in knowing what he is investing in and how he reaches such decisions.

Investing in emerging public companies involves a high degree of risk and investors in such companies could lose all their money. Always consult a duly accredited investment professional in your jurisdiction prior to making any investment decision.

Midas Letter occasionally accepts fees for advertising and sponsorship from public companies featured on this site. James West and/or Midas Letter may also receive compensation from companies affiliated with companies featured on this site. James West and/or Midas Letter also invests in companies on this site and so readers should view all information on this site as biased.

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