1 Oct Weekend Edition no.16

Netherlands regulates, Churchill Downs analysts, Sports Capital Symposium review, G2E preview, Endeavor investor presentation, datalines, newslines +More

Oct 01, 2021

Welcome to the latest Weekend Edition, which leads with the Netherlands regulated market launching today and the biggest names in the previously grey market all withdrawing in the space of 24 hours. As we detail in our timeline below, a cascade of news releases emerged yesterday as rumor and speculation flew around social media over who was out and who was remaining in what would now definitely be classified as a black market. Suffice to say, some big names hardly covered themselves in glory. Then we have the news on Churchill Downs’ sale of the Arlington racetrack to the Chicago Bears and a review of what Endeavor said on its OpenBet acquisition call this week. Finally, we have a sector watch on NFTs and the news from Dapper Labs around its deal with the NFL.

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Netherlands shambles

How do you say chaos in Dutch? As of today the Netherlands’ online gaming and betting market is regulated, with 10 operators having received licenses, including bet365, Tombola and Holland Casino. But the advent of a regulated regime was the cause of a flurry of announcements yesterday, and much confusion.

Timeline:

8:39 am - Entain announces Netherlands exit
11 am - Betsson announces Netherlands exit
11:13 am - LeoVegas announces Netherlands exit
12.03 pm - Kambi announces partnership with BetEnt for the Netherlands
1:05 pm - EGR reports that Kindred would continue to operate in the Netherlands
10 pm - Kindred announces ‘temporary’ Netherlands exit

Reverse ferret: It was the stance taken by Kindred (likely the largest operator in the space) that bemused market observers. After a day of speculation and the aforementioned EGR story, the company announced at 10 pm UK time it had taken the decision “to cease any services towards Dutch citizens as of today on a temporary basis.”

Calculating the cost of Nexit: It will take time for the reputational costs to become clear (Kindred can only hope that US regulators were too busy preparing for G2E to notice), but the financial impact is clear. Possibly attempting to underplay that impact, the four exiting companies all expressed the damage to profits in monthly numbers. Hence, Kindred said it would lose £12m in monthly EBITDA, Entain said it would cost £5m and Betsson SEK25m, while LeoVegas said it was worth “low-to-mid single-digit” share of total revenues in “recent quarters.”

Back-of-a-napkin calculations: We’ve rounded this up for you - there are caveats about current run rates here but this at least gives a guide:

Entain ~£60m in EBITDA or c.7.1% of 2020 EBITDA of £843m,
Betsson ~SEK300m in EBIT or c. 27% of 2020 operating income of SEK1.13bn,
Kindred ~£144m in EBITDA or c.52% of group EBITDA for 2020 of £274.2m.

A rocky re-entry: It is doubtful Kindred’s actions yesterday will have done it any favors in the eyes of the regulator, which has so far rejected 19 of the 29 applicants for a license. Speaking at this week’s Gaming in Holland event, KSA chair René Jansen said the body “encountered a substantial number of flaws in the license applications” and urged future license applicants to be “very well prepared”.

Churchill Downs Arlington Racetrack sale to Chicago Bears

CDI to CB: Churchill Downs has sold its Arlington racetrack to the Chicago Bears for $197.2m. The sale of the 326-acre property to the NFL franchise will complete in late 2022-early 2023 and the company will use the funds to buy or invest in a replacement property. Churchill Downs also announced a $1m investment to expand its horse racing machines (HRM) facilities in downtown Louisville.

Twinning assets: Analysts at Wells Fargo were positive about the sale. The company is “ideally positioned to capitalize on the fast-growing and underpenetrated Kentucky gaming market” and its flagship event the Kentucky Derby should also “benefit from pent-up demand”. Interestingly, the Wells Fargo team said that as one of the few racing-focused online operators in the US, TwinSpires was “an underappreciated asset on a standalone basis” and would be a good match for a larger sportsbook or platform specialist.

Arlington Field: For the Chicago Bears the Arlington purchase is part of plans to leave Soldier Field, its home stadium since 1971, and benefit from a modern venue with expanded capacity, entertainment options and an in-stadium sportsbook. According to local media, Bears president Ted Phillips has complained that Soldier Field landlord Chicago Park District has refused “to engage in good faith discussions” about integrating a sports-betting lounge at Soldier Field, which has led the club to pursue other options.

Further reading: A deep dive on the Bears’ plans to bail on Chicago.

Endeavor investor presentation

Open relationship: Presenting their new bauble to investors, Endeavor said of the $1.2bn acquisition of OpenBet from Scientific Games that, in the words of Ari Emanuel, CEO, a “one-of-a-kind global and scaled operation.” The company expects that in combination with its existing IMG Arena data and streaming operation that the combined business units will generate ~$340m this year, with OpenBet generating c.$150m of that and IMG Arena $190m, with the potential for $100m in revenue synergies “at maturity.”

Mind the gap: CFO Jason Lublin said the direct peer group for the new business unit would be Sportradar and Genius Sports, though the presentation depicted a wider group including the unlisted Stats Perform as well as Kambi, GAN and DraftKings/SBTech. Incidentally, perhaps, if anyone is looking at where there might be bolt-on acquisitions or even mergers among this group, this handy table from the presentation deck shows where the gaps in the various offerings lie.

Who is Endeavor? The latest Wagers.com feature available on our LinkedIn page is from Scott Longley and it takes a look at the OpenBet deal and suggests the sector will get even more interesting with the high-profile Ari Emanuel now knee-deep in it. Click here.

Quote of the week

What would Kenny do? A source with a good working knowledge of Kenny Alexander was asked by E+M what his response would have been to the approach from DraftKings. “He’d have told them to f… off.”

Playtech updates

Gopher gets it: Playtech has agreed the disposal of its financial division Finalto to Gopher Investments for $250m in cash. Recall, Gopher had previously railed against Playtech agreeing on a deal for a lower sum of ‘up to $210m’ agreed with another consortium. Analysts at Peel Hunt said the sale “should achieve an important simplification of Playtech and release material capital to be returned to shareholders.”

Multi-play: Playtech also announced a multi-state agreement with Kindred Group’s Unibet Interactive division for the US. The deal will see Unibet use Playtech’s casino software for its New Jersey operations, with further state launches scheduled in the coming months.

Sector watch - NFTs

Magical thinking: Fresh from a new $250m funding round that values the company at $7.6bn, Dapper Labs, the company behind the NBA Top Shot NFTs, has announced a partnership with the NFL and the players’ association which will enable fans to collect ‘digital moments’ of the best plays of the season. "From the Hail Murray to the Minneapolis Miracle, magic happens in NFL stadiums,” said a prone-to-hyperbole Roham Gharegozlou, CEO of Dapper Labs.

Purrfection: Speaking during the SportTechie conference on Wednesday, Gharegozlou predicted the NFL NFTs “will end up being one of the most exciting sports products ever built.” Noting that c. 85% of all Top Shot transactions were via credit cards, Gharegozlou said Top Shot “just makes the onboarding onto the blockchain really simple.” Top Shot, he added, was “much more straightforward” than Dapper Labs’ Crypto Kitties product.

“Blockchain and NFTs are as game-changing as the website,” said Gharegozlou. “It puts the power back into the hands of the brands. It's all about connecting the fan to whoever or whatever they are a fan of.”

No panacea: On another panel, Scott Kaufman-Brown, SVP of fantasy and gaming at the NBA, said the convergence of sports, media and betting was uncharted territory but was set to continue, because “betting is seen as a measure of engagement” that will be encouraged by all stakeholders. Sara Slane of Slane Advisory said she was nervous about sports betting being presented as “a panacea to everything”. It might help address some of the drop-off in sports content consumption, “but it won’t solve everything,” she said. In addition,

operators are currently picking “the low hanging fruit, people who were already bettors” and the challenge will be attracting new players with “something new, subtle and engaging.”

Magic roundabout: Gharegozlou also gave a nod to rival Sorare, the Paris-based fantasy sports and digital collectibles’ startup that early last week secured $680m in a new funding round led by Softbank that values the firm at $4.3bn. Sorare matches a fantasy sports game with the potential to earn or buy tradable digital football cards. “The magic is really at the intersection of NFT collectibles and fantasy football,” CEO Nicolas Julia told the FT. “The two together brings something that is truly new.”

Japan gaming update

IR PR: MGM announced that with joint-venture partner ORIX it has been selected as the Osaka region’s integrated resort partner. Details of the $10bn development were also unveiled. “We will work closely with prefectural/city municipal governments to deliver an iconic, uniquely Japanese destination warranting Osaka's selection as home to one of Japan's first integrated resorts,” said CEO Bill Hornbuckle. The next step will see the submission of an Area Development Plan to Japan's central government during the Oct21 to Apr22 application period.

Sitting on their laurels: Rival Caesars Entertainment also announced some Japanese news this week saying it will participate in the Clairvest Need Ventures consortium hoping to develop an integrated resort in Wakayama. Caesars joins the consortium with no financial commitment at this stage. “We believe our experience blends perfectly with CNV's and look forward to creating something special with them for the Kansai region,” said CEO Tom Reeg.

Datalines - August

Colorado: Betting handle was up 16.8% MoM to $211.9m, GGR was down 3% to $15.2m and operators recorded margins of 7.2%. MLB was the sport most bet on at 32.8% of all Colorado bets and parlays accounted for 29.2% and 7.6% margins of the bets placed during the month. German group Tipico launched its Colorado offering during August and has opened a new tech hub in Denver. MaximBet and Sports Illustrated Sportsbook also launched in Colorado in the past month.

Las Vegas Strip and locals: Strip GGR for August was up 20.2% vs. 2019 and on a QTD basis is up 33.6% to $625.7m. Strip slot revenue was up 38.3% to $358.4m, with hold up ~79 bps to 8.6% vs. LTM average of 8.2%. Table revenue excluding baccarat was up 7.5% to $176.1m. Excluding poker, overall table revenue was up 1.5% to $259.4m. Locals, Reno and downtown casinos enjoyed a GGR rise of 41.2% to $250m vs. 2019, with Q3 tracking up 26.1% vs. 2019, according to Deutsche Bank. Slot revenue increased 48.7% to $218.3m and hold was up ~190 bps, table revenue was up 4.8% to $31.8m but with drop up 11.4%, hold contracted ~80 bps.

Startup newslines

Take a chance on me: Live sports prediction challenge start-up Chancer has announced it has been invited onto Sportradar’s Acceleradar program. The product, launched by Jason George, Justin Kennedy and BrianMacSweeney, allows any creator or fan community to create a bespoke live sport prediction challenge. The company, based in New Zealand, has a series of small-scale experiments with fans in New Zealand and Australia, and more recently in the US. George was involved in setting up Telescope, the fan engagement solution sold to Bally’s Corporation in August while MacSweeney was previously at DraftKings and Genius Sports.

Sharp elbows: Speaking of the Acceleradar program, Sportradar along with Sharp Alpha Advisors, are offering a year’s access and $25,000 in cash to the winner of sports-betting pitch competition being held next week at G2E. Among the finalists are HedgePay, SharpRank, Tallysight, Bettor Fantasy, and Juice Reel.

Blank generation: SeventySix Capital out of Philadelphia has announced the closing of its second sports technology startups fund to. New investors on board include Pittsburgh Pirates owner Robert Nutting and AMBSE Ventures, the investment arm of Atlanta Falcons owner Arthur Blank. The fund is expected to raise at least $50 million and will invest in startups across areas such as sports betting, esports and analytics. SeventySix Capital is currently invested in startups such as immersive video company C360, esports organizer Nerd Street and basketball analytics company ShotTracker. Previous SeventySix investments include VSiN, sold to DraftKings.

Newslines

My props bring all the boys to the yard: Sports IQ has been announced as the exclusive US sports player props provider to Sporting Solutions. This includes both pre-game and in-play betting options across all NFL, NBA, MLB and NHL games. Sporting Solutions recently announced deals in Canada with the Ontario Lottery and Gaming Corporation (OLG) and Alberta Gaming, Liquor and Cannabis Commission (AGLC). Omer Dor, CEO at Sports IQ, said it was “particularly exciting for us to be able to support operators in our very own backyard here in Canada.”

4 real: Gaming Realms has announced a new distribution deal with 4theplayer to integrate its content on the Gaming Realms platform. Analysts at Peel Hunt noted that this was a first for Gaming Realms, and will see the best-performing 4theplayer games built directly into the offering and then distributed to its U.S. partners with the first game integrated in November.

NIL by mouth: Colorado-licensed sportsbook MaximBet is offering a Name, Image and Likeness (NIL) deal to every female student athlete at Division I, II and III colleges and universities in the state. The group will offer cash payments and merchandise to the athletes, who will be required to feature the brand on their personal social media channels. Those with the highest engagement levels will receive bonus payments. NIL and similar deals became possible earlier this year when a Supreme Court ruling allowed NCAA student athletes to accept endorsements.

High kicking: Las Vegas-based table games developer Galaxy Gaming released a ‘major milestones’ update, unveiling a new baccarat product and a new suite of high-action games for land-based casinos. The company also said that in the last 12 months over 1bn of wagers had been placed on its games and that momentum was picking up with its online offering, Specifically, it said that 2% of all U.S. igaming GGR is generated via its titles.

Secret squirrel: Global gaming and media company HeadsUp Entertainment says it is working on the acquisition of a “major European based Gaming Software Development Company specializing in creating platforms for the lottery, online casino, charity fundraising and sports-betting sectors.” It said it has signed a letter of intent and that a preliminary asset purchase agreement had been agreed. HeadsUp said the target acquisition “operates under two entities based in Europe”.

What we’re reading

Hail Mary: The worst official data mandate provisions in the world.

Bohemian Rhapsody: Wanna buy a castle? NFT edition. “This will kick off with a one-day, invitation-only conference called Non-Fungible Castle. It costs €400 to attend - payable in crypto, of course - and will explore themes around NFTs, such as whether the whole craze is a scam. Titles of scheduled panel discussions include ‘NFTs: Nothing F**king There?’ and ‘What Are You Really Buying?’”