Jan 17: New Jersey maintains its high - for now
New Jersey December, NFL ratings, Macau update, Startup Focus, earnings week ahead, the shares week +More
Good morning. Here’s today’s line-up.
The latest numbers from New Jersey were released on Friday.
The ratings for the NFL regular season ratings are in.
Macau breathes a sigh of relief after the Executive Council provides an update.
Startup Focus looks at Rush Sports.
A look ahead to the earnings updates from 888 and BetMGM.
You can get it if you really want. Click below.
New Jersey December
This could be the last time: December’s sports-betting handle of $1.26bn (up 26% YoY but flat sequentially) and the GGR figure of $59m (down 11% YoY and off by 48.6% MoM) could be the last New Jersey figures to be heavily distorted by neighboring New York. With NYC residents, in particular, commonly regarded as contributing ~20% of all NJ wagering, it means there should be some element of drop-off in January now that mobile betting is live back across the Hudson.
“With the January launch of online sports-betting in New York, which may cut down significantly on border-crossing action, we wonder how sustainable (recent totals for handle) are,” said EKG in a flash note on Friday.
A new career in a new town: The caveat, of course, is that the high tax rate in NY might encourage the higher spending customers to continue with their NJ accounts. Gauging the extent of that bridge-and-tunnel data will depend on the likelihood of finding the evidence of absence. Nevertheless, it means the NJ vs. NY data comparison could become a proxy for arguments about state tax rates going forward.
‘Duel jeopardy: FanDuel continued to dominate the sports-betting GGR market share with Wells Fargo estimating it controlled 48.5% followed by DraftKings (19%), BetMGM (12%) and Caesars (7%). EKG said that the launch of NY put FanDuel’s “stranglehold at risk”, suggesting it is one of the most NYC-exposed brands. In this context, it should be noted FanDuel’s retail operation at Meadowlands controls an even more impressive 62% of retail betting.
Game play: What won’t be affected by New York, of course, is the igaming trajectory. GGR rose 34% YoY to $133.2m and a 12.9% sequential rise. BetMGM continued in top position with 28%, DraftKings was next on 20% followed by FanDuel (15%) and Caesars (14%).
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NFL TV ratings
Viewing platform: TV and digital ratings for this year’s NFL regular season were 10% up on last year and represented the best figures since 2015, according to data from Nielsen. The average audience for regular-season games was 17.1m compared to 15.6m in 2020 when games were played in empty stadiums due to the ongoing pandemic. The biggest game of the season on the ratings was the Cowboys against the Raiders on Thanksgiving which averaged 41m viewers.
Incoming: The link between the rise of sports betting and NFL TV viewership will be discussed in a forthcoming article on Wagers.com.
Macau update
The news: Macau’s Executive Council provided a positive update on the concession process, releasing details of the proposed bill which stated as expected:
A maximum of six concessions (removing the sub-concession distinction).
A 13-year renewal period (10 years plus a three-year extension).
No change to the rules on the payments to dividends.
No change to the effective tax rate.
The “modest negatives,” according to Wells Fargo, include a proposal to limit to 30% for any concessionaire and for local ownership to be increased from 10% to 15%.
Precipice averted: Both Wells Fargo and Jefferies said this deals finally with a “major overhang” and Deutsche Bank said it “removes a key element of the bear case”. But Jefferies warned that this didn’t affect the continued crackdown on junkets or the negatives from that move.
“Coupled with uncertainties over timing of border reopening with recent COVID outbreaks in Mainland and Hong Kong, the near-term GGR outlook remains bleak,” the Jefferies team added. “This earnings visibility remains a challenge for us.”
Good times: Nonetheless, investors in Macau-facing stocks were popping the champagne corks - figuratively at least - on the news. Las Vegas Sands enjoyed a 14%-plus share price bounce on Friday while Wynn Resorts was up nearly 9% while in Hong Kong, Galaxy rose almost 3.5% and SJM was up nearly 4%.
Further reading: The relief rally is punchy.
Flutter and Evolution analyst upgrades
Leaps and bounds: Citi took the rare step of moving Flutter directly from sell to buy saying it is “increasingly bullish” on the U.S. sports-betting and igaming opportunity. The analysts also raised Evolution to a buy from neutral. Citi noted that GGR in recent states that have legalized has been above expectations, prompting their forecast for the online gambling market overall of $39bn ($20bn igaming, $19bn sports betting).
Startup Focus - Rush Sports
Who, what, where, when: Rush Sports (the company has since renamed as Kero Sports) is a San Francisco-based developer of in-game social-betting products with a strong gamification slant. The company, founded in 2019, produces binary in-game betting products and makes the experience social because “this is the only way casual fans can bet and enjoy watching the game” at the same time.
Funding backgrounder: Investors include Lloyd Danzig’s Sharp Alpha Fund, Scott Secord of Cardinal Sports Capital, ex-Don Best CEO and serial investor Benjie Cherniak and Michael Bucella of Block Tower Capital.
So what’s new? The company is aiming to launch a real-money gaming version of its platform in Q2 to coincide with the NBA and NHL playoffs.
The longer pitch: For CEO and founder Tomash Devenishek next-gen sports fans are already moving away from traditional sports-betting products and “unlike European fans who were raised with betting, US fans grew up using Instagram and Tik-Tok as their sources of entertainment”.
“That form factor is incredibly powerful because the only skill required is to scroll up,” Devenishek adds. “So the industry and its products will need to borrow a lot from digital entertainment forms that proved successful, mainly algorithmic curation.”
The week ahead
Earnings diary: The team at Peel Hunt has forecast “a sharp decline” in Q4 revenue for 888 (reporting on Tuesday) down 25% YoY to $191m against a “remarkably strong” prior-year benefiting from lockdowns and healthy sports margins. Recall, 888’s Q3 revenues rose 7% to $229.9m, impacted by issues in Germany and the Netherlands. 888 is not expected to provide an update on trading at William Hill until it completes the £500m cash raise needed to fund the deal. BetMGM (reporting on Wednesday) is launching in New York later today, Monday. At the time of parent company MGM’s Q3 results, it reiterated BetMGM’s revenues for the year of $800m-plus.
The shares week
Draft ail: Macau-related stock may have enjoyed a relief rally late last week but the key sports-betting stocks were less fortunate. DraftKings was down over 11% on the week, driving the company’s market value to below $10bn for the first time in the company’s listed life. Also still struggling is Penn National which despite a slight rally late on Friday still finished the week nearly 5.5% down.
Losing the point: Enjoying a relatively positive week was Australian-listed PointsBet which managed a 2%+ rise. But this is unlikely to assuage the worries of investors who have seen the share price decline by 53% over the past year. Recall, Credit Suisse said last week the company was likely to lower its long-term target for U.S. market share from 10% to 7%.
What investors are talking about: The team at Jefferies pointed out that digital betting and gaming stocks are off 5.1% YTD and 17.7% LTM, a performance in the latter instance that includes a 21.5% gain from Entain.
“Investors remain focused on the narrative shift, which is driven by concerns over increased risk of operators achieving profitability,” the Jefferies team added. “Although we note that the estimates for the scale and timing of the market have not changed, the risk profile for growth in technology in the market has become more conservative.”
Monday’s chart
Mobile gaming, the future of entertainment. From a Skillz presentation.
Sponsorships
Caesars Sportsbook has become an official sports-betting partner to the Buffalo Bills. This is the New York state team’s second deal this month after it announced a similar deal with FanDuel.
Newslines
Dial M for Murr: Churchill Downs has appointed Ben Murr as president of TwinSpires and its online gaming operation. Murr was previously president of Churchill Downs’ United Tote.
Wu are you: Cryptocurrency exchange FTX - which had an M&A run-in with PlayUp recently - has announced a venture capital arm that will look at investing in crypto, NFT and gaming-related startups. The $2bn fund will be run by Amy Wu, who joins from Lightspeed Venture Partners.
Prize and shine: Fantasy sports startup PrizePicks onboarded more than 300,000 new members last year, paying more than $130m in winnings and growing gaming handle 10-fold. The company also announced three new hires: Chris Stango is the new VP of product, Josh Kirschner is VP of legal and government affairs, and Josh Slaff joins as VP of compliance and fraud.
What we’re reading
“The web3 narrative feels like a Ted-X talk given to a survivalist group.” Scott Gallloway, No Mercy/No Malice.
Zoom on the range: A venture capitalist cowboy in Wyoming.
Pay up pal: PayPal sued over seizure of fantasy money.
‘The SPAC boom was a failure.’
On social
Too little, too late: A response to a tweet from DraftKings’ Matt Kalish, shilling for ballot signatures in Florida.
Calendar
Jan 18: 888 FY21 trading update
Jan 19: BetMGM FY21 update
Jan 24: Endeavor @Jefferies Winter Summit
Jan 27: Rank H1
Contact us
Scott Longley scott@clearconcisemedia.com
Jake Pollard jake@openmediaservices.com