10 Sep: Weekend Edition, no.13

Catena Media buys i15 Media, Caesars and 888 analyst reaction, Arizona sports-betting launch, MGM Resorts International conference Q&A, U.S. gaming outlook, sector watch - crypto +More.

Sep 10, 2021

Good morning and welcome to the latest Weekend Edition. It has been a busy week, despite little by way of actual earnings announcements. But with M&A dominating the headlines, it is appropriate that we lead with the latest buyout affecting the sector as Catena Media announces a further bolstering of its US claims, snapping up i15 Media. Then we have the latest on the launch in Arizona, more on Caesars’ sale of William Hill to 888 and commentary from the MGM CFO on its plans for BetMGM.

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BREAKING M&A: Catena buys i15 Media

On tick: Catena Media has moved once more to bolster its US presence via the acquisition of the online betting and casino sites of i15 Media for $45m, with $12.5m paid on closing and the rest - including $12.5m of new Catena shares - paid in instalments. Among the portfolio of more than 100 sites is bonus.com and gamblingonline.com. i15 was founded by Kendall Saville, previously co-founder of the PlayUSA assets which established Catena Media in the U.S. in 2017. He will now consult for Catena “for the next few years,” according to Catena Media CEO Michael Daly. The purchased assets made $8m in revenue in the year to the end of July. Catena noted its North American operations grew 121% in H1 and now account for 49% of total revenues of €71.1m.

Arizona sports-betting launch

Raising Arizona: DraftKings announced it had gone live in Arizona, thus joining BetMGM, FanDuel, Caesars Sportsbook alongside Barstool Sportsbook, Betway, Fubo, Betfred and more going live in the Grand Canyon state to mark the start of the new NFL season yesterday evening. As previously trailed PointsBet, BlueBet and MaximBet have missed out on AZ licences, while two tribes, the Navajo Nation and the Tohono O’odham Nation, are still to announce sportsbook partners.

Retail therapy: With the biggest brands having partnered with professional sports teams to obtain licences, many of them have built or are building in-venue retail sportsbooks. DraftKings is the official betting partner of the PGA and as part of the agreement is assessing locations for a “premium 19th hole” retail sportsbook at the TPC Scottsdale golf course. No timeline has been set yet.

Late hurdle: The state had to overcome a late legal challenge from the Yavapai-Prescott Indian Tribe, which wanted the betting regulations declared unconstitutional because they allow gambling outside tribal lands. Maricopa County Superior Court Judge James Smith rejected the challenge and said the original compacts between tribes and the state “regulated the types of gambling allowed at tribal casinos, not other kinds of betting”. However, the tribes’ complaint that there were too few licenses available “may be worth exploring as the lawsuit proceeds,” he said.

Caesars Jul/Aug prelims and 888/William Hill reaction

Boys of summer: In announcing the sale of the William Hill international business to 888, Caesars also released some preliminary numbers for trading across its business in July and August. Total same-store revenues at the high end will be $1.89bn, up 5.4% on the same two months in 2019. Las Vegas contributed up to $684m while regional operations were worth up to $1.05bn. Managed and corporate chipped in $50m at the high end and digital operations were worth up to $59m, almost double 2019. Same-store adjusted EBITDA at the high end of estimates at $56m will be 48.5% ahead of 2019.

Cutting the cake: Following the sale of the William Hill operations, Caesars will receive c$1.2bn in cash from the total $3bn sale price. Analysts at Jefferies said the price achieved was higher than its previous estimates, with the cash expected to fund Caesars’ digital ambitions. Caesars said at the time of its Q2s that it would be putting c$1bn towards marketing the relaunched Caesars Sportsbook app and the analysts noted the group now has the cash to execute.

E+M note: An added benefit to 888 perhaps is that the money spent on acquiring William Hill will now go towards tying up its European competitors in a marketing bun fight in the U.S.

Lustre please: Analysts at Jefferies were positive on the impact of the deal for 888, despite an apparent lack of enthusiasm from investors: the 888 share price fell yesterday. “We see strategic merit from diversification by both product and geography; cross-sell scope between igaming and sports,” they said. The only downside is that, with its now enhanced exposure to the UK (c. 40% of UK online), the deal timetable “straddles” the timeframe for the outcome of the UK online gambling regulatory review. However, Jefferies argued that

“any downside potential from the UK regulatory review is significantly cushioned by the over 80% pro forma earnings enhancement from the deal. Whatever the outcome of the UK regulatory review, we see 888 as now better positioned.”

MGM Resorts International conference Q&A

She goes to another school, you wouldn’t know her: Speaking as part of the Bank of America gaming and lodging online conference, MGM’s CFO Jonathan Halkyard appeared to pour cold water on the idea that it would be going back in to bid for Entain any time spoon. Noting that he joined the firm at around the time of the previous bid earlier this year, (“I can claim some deniability around this”), he said the JV on BetMGM was “built to last.”

“They are our exclusive online sports-betting and gaming venture so we don’t give any notion at all to any efforts outside BetMGM,” Halkyard said. “ We’re all about bringing the resources of our company to that venture. We’re all in with that venture and fortunately it’s performing very well. If you asked (any MGM staff members) who owns BetMGM, they would say MGM.”

Investing countrywide: After lauding the tidying up of MGM’s “far too complex” corporate structure, and noting then circa $11bn+ in liquidity post the buy, sale and leaseback of CityCenter and the offloading of its MGP stake, Halkyard said the “number one investment” was the company’s existing physical properties, the second priority being the funding of BetMGM’s ambitions. In terms of M&A, he also signaled the company would be looking at regional property purchases. “I think we have a great opportunity to increase our regional distribution points.”

U.S. gaming outlook

High-water: Halkyard also said the outlook on the Strip was positive, though he noted that the current elevated levels of custom in the summer were likely to moderate. “I’m in the camp that some of those behaviors will return to a more normalised level over time. But as things normalise, earnings will grow because we don't yet have an optimal customer mix for profitability.” This was backed up by the analysts at Macquarie, who said that regionally July was likely a “high-water mark” given seasonality and the discontinuation of governement stimulus programs.

Pile of debris: Backing up this idea, Jefferies said the latest footfall data suggested a marked decline between July and August with foot traffic on the Strip down 24% MoM. Compared to Aug19, footfall was also down by 22%. Regionally, Jefferies noted the impact of Hurricane Ida on the southeast markets, with casino foot traffic in New Orleans down 90% in the last few days of August and into the first week of September.

Sector watch - crypto and sport

Different ball game: The NFL may have welcomed sports-betting sponsorships with open arms, but it appears to be more wary of an embrace of cryptocurrency trading, at least according to a report in the Athletic last week which suggested they have been told not to allow sponsorships for now.

“Clubs are prohibited from selling, or otherwise allowing within club controlled media, advertisements for specific cryptocurrencies, initial coin offerings, other cryptocurrency sales or any other media category as it relates to blockchain, digital asset or as blockchain company, except as outlined in this policy.”

Take the money: The advice on sponsorships comes despite already apparent enthusiasm from the cryptocurrency trading platforms to lavish money on sponsoring sports. A recent edition of the HuddleUp newsletter noted that crypto exchange FTX recently signed a $135m agreement to become the naming-rights sponsor for the Miami Heat’s arena as well as a further $210m naming-rights deal with esports organization TSM. Meanwhile, fellow crypto-exchange Crypto.com stumped up $175m to become the UFC’s first official crypto-platform partner and has also signed a five-year deal with Formula One reportedly worth more than $100m.

Super Bowl already: A report this week from Bloomberg noted that crypto exchanges are among new sponsor categories able to bid for advertising spots around NBC’s Super Bowl coverage next year. NBC, which is selling the slots at $6.5m per spot, said it is virtually sold out for the February 13 game. Whether any of that ad inventory has been snapped up by any sports-betting operators is, of course, yet to be seen. Given the recent newsflow around crypto (the crypto moves in El Salvador and the spat between Coinbase and the SEC being only this week’s headlines), the alacrity of NBC taking the crypto ad dollars is perhaps only slightly surprising.

National Football Token: At the same time as putting a pause on crypto sponsorship, the NFL is also reportedly discouraging teams from going down the NFT route, at least just yet, while the league develops its own strategy in that direction. This will likely involve a deal along the same lines as the NBA which runs its NBA Top Shot NFT-based platform on a league basis.

Datalines

Illinois July sports betting: Handle was down 23% MoM to $369m in July, hold was 10.2% and revenue, including land-based retail, was $37.6m, down 21% MoM. Mobile betting accounted for 95% of July GGR and the top four for both handle and revenue were FanDuel, DraftKings, BetRivers and PointsBet.

Newslines

Raising cash: VICI Properties has embarked on a share price offering via the sale of 100m shares priced at $29.50. Half the money raised will go in par towards funding the purchase of the Venetian assets from Las Vegas Sands. Separately, LVS subsidiary Sands China has raised $1.95bn in new senior debt.

A natural: Betway has selected Sports IQ to power its player props markets across all pre-game and in-play US sports. Paul Adkins, marketing and operations director at Betway, said Sports IQ was “natural choice when we were looking for a new supplier in this field.” Sports IQ as now partnered with IGT< Bally/Bet.Works and Betclic.

Unofficial signing: Genius Sports will provide its full suite of US and international sports content to power Penn National Gaming’s online sportsbook Barstool Sportsbook. Genius will supply its full range of official league data, fan engagement and advertising tools to power Barstool’s “ecosystem connecting sports, betting and media.” Neither Barstool Sportsbook nor parent company Penn National are one of the seven official NFL betting partners.