Jun 24: Weekend Edition #52

Fanatics/Tipico rumors, Bally legal threat, Jackpot.com funding news, sector watch - streaming, US gaming update +More

Jun 24, 2022

This was meant to be a quiet week. But with a €340m acquisition, a profit warning, a £1.76bn debt raise, a threatened shareholder legal action (see Bally story below) and rumors surrounding Fanatics (also see below), it is clear the newsflow around the betting and gaming sector is showing no sign of a let-up. Get your summer breaks in now: it will be a very busy second half of the year.

Jumping fences. Click below:

Fanatics/Tipico talks

Tipping the balance: CNBC is reporting that Fanatics is in talks with Tipico over a buyout though the discussions are thought to have hit an impasse over price.

US toehold: The Germany-based Tipico is one of the also-rans in the US with a (very) small footprint in New Jersey and Colorado.
Deutschland Marktführer: The company is the leading sportsbook in its home market. It is part-owned by CVC which acquired a majority stake in 2016. That deal reportedly valued the company at €1.4bn.
This time last year, Tipico was rumored to be in the running for William Hill, a race eventually won by 888.

Rumors: In April Fanatics was previously rumored to have struck a $100m deal with Amelco for the provision of a sports-betting backend but there is as yet no confirmation.

Selling stakes: Wednesday’s Fanatics story was that founder Michael Rubin was selling his 10% stake in Harris Blitzer Sports & Entertainment, the parent company of the Philadelphia 76ers and New Jersey Devils, partly to avoid a conflict of interest over the upcoming BetFanatics.

** Sponsor’s message: Venture capital firm Yolo Investments is home to €551m of equity in more than 70 of the most exciting companies across fintech, gaming and blockchain. It continues to build one of gaming’s most dynamic portfolios as it eyes up seed and A-stage opportunities across the sector. Its dedicated 29-company, €183m AUM gaming fund already houses holdings in fast-growing suppliers and operators, including Kalamba Games, SimWin and ThriveFantasy. Yolo Investments is also on the lookout for LPs as it looks to scale new concepts, including its high roller live casino brand, Bombay Club.

Bally legal threat

See you in court: Bally Corporation’s leading lenders, led by Fidelity Investment, have asked a law firm to represent their interests after the gambling group asked them to consent to a $1bn sale-leaseback of one of its two Rhode Island casinos, sources familiar with the situation have told Bloomberg.

West side story: Bally is seeking to sell at least one of its two Rhode Island properties to help finance the build of the $1.7bn River West casino in downtown Chicago.

Blocking power: As the majority holder of Bally’s $1.9bn senior secured term loan, Fidelity has the power to block any new credit arrangement the group may seek.
Age of consent: Bally needs Fidelity’s consent before it can sell one of the two Rhode Island casinos and has offered the lenders a 50 basis-point fee.
A different bank: When the group announced it had won the bid for the River West casino, CEO Lee Fenton told analysts its “substantial landbank” might be used to fund the build.

Lincoln’s inn: Bally’s Rhode Island casinos are the Twin River Lincoln Casino Resort and Tiverton Casino & Hotel, but the group would only require Fidelity's consent in relation to the sale of the Lincoln casino. It might also consider selling other properties in its portfolio.

Sale proceeds will also be used for debt repayment, share buybacks and further M&A.

US gaming update

Flight club: Macquarie said its Las Vegas survey had noticed an “uptick in hotel searches into Las Vegas in the near term” of +6% MoM in May. This follows a 6% drop in April.

March margins: Caesars recorded margins of 47% in March and with MGM and Wynn in the low 40% region. The analysts expect Q2 margins “to remain healthy, but moderation in the visitation patterns could obviously have a major effect on EBITDA declines”.

Stock take: Penn National, MGM and Caesars got the nod from Macquarie thanks to their geographic reach, ability to generate margins and “exposure to the burgeoning online gaming and sports betting industry”. Lottery companies IGT and NeoGames were also viewed positively.

Peak/trough: “During the GFC, total commercial gaming revenue declined only 8% from peak-to-trough, we see lottery as a stable, defensive business with deep moats that grows at low-to-mid-single digits annually,” Macquarie said.
Media matters: Despite advertising agencies, adtech and media companies saying they see no evidence of a slowdown, Macquarie recommended caution for H2 and 2023.

Resilience: Adtech should continue to grow thanks to “resilience through targeted marketing, secular growth in mobile and connected TV, and low valuation”.

Jackpot.com funding

Hit the jackpot! Online lottery syndicate operator Jackpot.com has closed a $35m series A funding round that was led by some of the biggest names in sports and online gambling, according to CNBC.

Usual suspects: The round was led by the venture capital firm Accomplice, which was co-founded by DraftKings board member Ryan Moore; and Courtside Ventures, an early-stage investor in sports and digital gaming.
It’s that man again: Investors include the Kraft Group, owner of the New England Patriots; the Haslam Sports Group, which owns the Cleveland Browns and Fanatics’ Michael Rubin as well as DraftKings’ Jason Robins and Boston Red Sox president Sam Kennedy among others.

Target market: The group will target states where online lottery ticket sales are allowed and said it could operate in jurisdictions such as New York, Texas and Ohio.

Sector watch - sports streaming

I don’t like cricket: The Indian Premier League cricket tournament is only 14 years old but its latest deal for broadcasting and streaming rights places it at the very top table. The deal for the years 2023-27 were sold for $6.2bn with Disney paying half for the TV rights.

I love it: The remaining $3.1bn being laid out for the streaming rights by new entrant Viacom18, a JV between Reliance Industries, Paramount Global and James Murdoch and Uday Shankar.
Disnae cut it: The question, as discussed in the FT, is over whether the new streaming service will be able toi make money on its investment. The paper points out that the average customers for Disney’s streaming service - which previously held the IPL streaming rights - is 76¢ in India compared to $8 in the US.

Bring on the major leagues: Equally as significant was another deal announced last week with Apple’s capture of the rights to Major League Soccer (MLS) for the next 10 seasons for $2.5bn. The $250m a year busts through the previous dela between ESPN, Fox and Univision which was worth $90m a year.

Right on Cue: In a press release, Apple’s senior vice president of services said that “for the first time in the history of sports, fans will be able to access everything from a major professional sports league in one place”.

Further reading: what does the MLS deal mean for the upcoming NBA negotiations?

Finger on the buzzer: Sportico has reported that New York-based sports streaming startup Buzzer has laid off 20% of its workforce or ~15 people. In a statement, CEO Bo Han said that bearing in mind the current economic backdrop, the move was to avoid a cash crunch later on.

Funding: Buzzer is reportedly eyeing for a $20mn fresh funding, after their last Series A funding that had happened last year.
Notify me: Buzzer is a mobile platform that sends real-time, personalized notifications to help fans watch their favorite teams live.

Picks and shovels: In further streaming news, tech provider Deltatre has been bought by Bain Capital and Italian asset manager Nextalia SGR agreed to buy sports tech provider Deltatre from Bain Capital for between $700m-$900m.

OTT: Deltatre offers over-the-top streaming solutions enabling D2C content distribution as well as data, graphics and live broadcast solutions. Deltatre’s clients include UEFA, NFL, MLB and MLS.

Macau update

Border control: Analysts at Credit Suisse have revised down their estimates for Macau after the Chinese authorities placed additional restrictions on cross-border gambling from mainland players.

Getting me down: CS said Macau GGR would reach just 80% of 2019 levels by 2024 compared with its previous estimate of 98%. Relaxation of border restrictions will not happen before Q123 at the earliest.
Rally: “Historically, a gaming cycle rally normally lasts for 1.5 years on average,” the analysts added.
On Tuesday 330 tourists entered Macau on Tuesday, a 99.7% on the 2019 daily average caused by the latest COVID-19 outbreak in the city.

Extension work: Macau regulators have officially confirmed the extension of the six casino license holders’ concessions until 31 December. The news was first announced in March. The companies concerned are SJM, Wynn, Galaxy Entertainment, Sands China, Melco and MGM China.

Regulatory roundup

Kansas Gov. Laura Kelly approved a sports-betting bill on Monday. Operators will hope to launch online and retail sportsbooks in time for the new NFL season. Currently, Kansas tribal interests are not included in the new regulations, but they are in discussions with legislators to amend their gaming compacts. North Carolina will not regulate sports-betting this year after the state House rejected key measures linked to gambling on professional sports and out-of-state horse racing by 51 to 50 votes. Virginia’s OSB operators will not be able to exclude bonuses and promotions from their tax obligations after the state amended its regulations to ban them from doing so.

Crypto notes

Shorting bitcoin: Proshares offers an ETF to bet against the digital token.

Newslines

Better Collective will provide betting and gaming content to The Philadelphia Inquirer as part of the latest media partnership announced by the Danish affiliate group.

Caesars’ horse-racing app Racebook is now live in Oregon and Montana. The launch follows those in Ohio, Florida and Indiana. The group also unveiled its retail sportsbook adjacent to the Arizona Diamondbacks’ Chase Field.

BetMGM has launched a private live-dealer studio in Michigan in partnership with live casino market leader Evolution.

Mybet and Tipwin have joined Mernov as license holders allowed to operate online slots in Germany. Both groups were issued their licenses this week.

The Ontario Lottery and Gaming Corporation’s Proline sportsbook is now the official betting partner of the NBA in Canada. OLG already runs similar partnerships with the MLB, NFL and NHL.

What we’re reading

Sadio Mane: The most generous man in football.

I can see for miles: The James Webb countdown to July 12 begins.

What we’re saying

Podcast summer break: We’ll be taking a break in July and returning in early August. Due to a technical hiccup we’re unable to provide the links to this week’s episode on the WE+M Spotify and Apple podcast pages, please accept our apologies.