Mar 18: Weekend Edition no.38

FOX Corp. earnings call, Endeavor earnings call, Allwyn lottery win, New Jersey, Michigan and Pennsylvania Feb22, Sector Watch - Gaming +More

Mar 18, 2022

Hello, we’re delighted to announce that we have joined the podcasting community and have launched a weekly podcast that will look at the biggest stories of the past seven days. In our maiden episode WE+M’s Scott Longley returns from the SXSW festival in Austin, Texas, and follows up on Fox Corp CEO Lachlan Murdoch’s comments about FOX Bet, while Jake Pollard looks at whether MGM will renew its bid to acquire Entain. And we’ve got a fiendishly difficult March Madness/Cheltenham quiz that will test your knowledge of US sports and UK and Irish gee-gees to the full.

You want it, you got it, sign up to WE+M

FOX Corp. earnings call

Swings: For FOX there is good news and bad news on sports betting. On the upside, the company's sports programming has benefited from the boom in sports-betting advertising.

Lachlan Murdoch, CEO: “We have already written over 50% more local sports betting revenue at this point of the fiscal year than we did across all (of) fiscal '21.”

Roundabouts: But for all that Murdoch spoke about the “optionality” around sports betting, there are issues around the relationship with Flutter around the FanDuel ownership litigation and the FOX Bet rollout.

Murdoch said the arbitration with Flutter would be concluded by late summer. “And we can't really say much more about that.”
On the latter: “Our only frustration is that we've only been launched in four betting markets or four states, and obviously, we'd like to see that increase significantly as we roll out FOX Bet.”

Mr Brightside: Murdoch was, however, happy with FOX Bet Super 6. “We've been incredibly pleased with our ability to drive our engagement… It has been sort of proven as we continue to execute on that strategy.”

Asked about whether FOX would increase its investment in sports-betting, Murdoch said the company was thinking about “what's the future monetization of that engagement with our viewers and sports fans”.

Licensing: He noted again that FOX was “actively exploring” getting licensed. “Not to operate a book, but actually to potentially sort of maximize the value that we can capture in this space”.

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Portnoy in the spotlight

Stewards enquiry: The Wall Street Journal is reporting that Dave Portnoy, the Barstool controversialist, is under investigation by regulators in Nevada and Indiana in relation to the allegations made against him in a Business Insider article last year. The paper reports Indiana’s gaming commission as saying it is reviewing the matter as part of Barstool owner Penn National’s responsibilities as a licensee.

Diller Killer: Meanwhile, IAC’s Barry Diller has returned his application for suitability as a licensee following the news that he is under investigation by the SEC over insider trading allegations related to share buying ahead of Microsoft’s Activision Blizzard deal earlier this year.

Endeavor earnings call

Anticipation: Ahead of the completion of its OpenBet acquisition, Endeavor’s CEO Ari Emanuel on Wednesday took the opportunity of its Q4 earnings call to discuss where his company sees the opportunities in sports betting.

Ari Emanuel: “With our expected acquisition of OpenBet later this year, we'll look to further expand and evolve our sports-betting offering for rights holders and sports folks while creating a new operating segment for this business.”

Start as you mean to go on: He noted that both IMG Arena, the existing sports data provider, and OpenBet were profitable individually and reiterated that he saw meaningful revenue synergies.

Datapoint: CFO Jason Lublin said IMG Arena had renewed over 200 content deals with sportsbooks over the course of the year.

The wider content conversation: Emanuel pointed to the ”ever-increasing demand” for sports and entertainment content and said Endeavor would be extending “beyond traditional verticals”. That includes everything from podcasts to NFTs and social media posts.

On the roster: Lublin noted multi-year sponsorship deals done over the quarter with Crypto.com and DraftKings and that company has also made its first foray into NFTs, in partnership with Dapper Labs.

Secular trends: Emanuel noted recent broadcast rights deals for the EPL, Apple’s move into MLB and Amazon’s deal for Thursday night football as well as Disney’s prior comments on the Endeavor-owned UFC being a big driver for ESPN’s positive figures.

“That's good for our sports rights assets and our owned assets on a broad basis.”

All you can eat: Asked to elaborate on sports-betting, Emanuel said the opportunity for Endeavor also lay outside the US. He also laid out how the offering could be both a one-stop-shop product or a la carte.

Ari Emanuel: “It doesn't have to be one-service-fits-all. So if certain people just want the data and the feed, they can take that. If they want the player or the content, they can do that.”

Allwyn UK lottery win

It could be you: The UK Gambling Commission has named Allwyn as its preferred applicant to operate the fourth National Lottery license. Current license holder Camelot has been named as the reserve. Allwyn (formerly Sazka) is scheduled to start running the UK lottery in 2024.

The Commission added that it was “satisfied that no application is impacted by sanctions related to the conflict in Ukraine”.

Bitter fruit: Camelot CEO Nigel Railton said he was “incredibly disappointed” by the news and that Camelot would review the Commission’s evaluation “before deciding on our next steps”. Camelot has run the UK lottery since its launch in 1994.

Float on: Allwyn is Europe’s largest lottery operator and recently set up a US base. It is rumored the company is seeking a US listing via a SPAC deal with Cohn Robbins Holdings which would value the business at $9.3bn.

New Jersey February

Buy the dip: Sports-betting handle fell below $1bn for the first time since September to $991m while GGR came in at $30.9m and iGaming hit $130m. Wells Fargo pointed to the 27% MoM drop in handle but said it would be “premature to raise alarm bells” over the potential cannibalization from New York.

Datapoint: Wells Fargo noted the 27% fall was in line with Indiana (-18%) and Iowa (29%).

Michigan and Pennsylvania Feb22

Double down: Of note, Michigan’s sports-betting AGR came in at minus $4.8m while Pennsylvania notched up a net gaming loss of $0.4m. Deutsche Bank noted that promo spend in each state reached record levels over their respective lifespans.

Deutsche Bank: “We continue to be curious, as to the impact of a cooling promotional environment, should it begin, on the handle and GGR growth metrics that the industry has continued to point to.”

No pressure: The team also pointed out that Caesars is yet to launch in either state on its Liberty platform, suggesting there will be more promo spend exerting pressure on the bookmakers in the coming months.

Deutsche Bank: “We would also note that operators which curbed or held promotions relatively firm year over year broadly experienced meaningful handle contraction year over year, while those which expanded promotions drove the marketwide handle growth.”

Michigan Feb22: Handle rose 30% to $424m while GGR was up 130% to $21.6m. However, Wells Fargo noted that sports-betting promo spend rose 31% YoY despite Feb21 being the first full month of operations. iGaming GGR rose 54% to $12.8m.

Pennsylvania Feb22: Sports betting handle was up 17.2% YoY to $597.1 mm and down 4.8% MoM. Betting GGR was down 33.2% YoY and -59% MoM to $22.2m. As mentioned above, net of promotions PA bookmakers recorded losses of $400K for the month. Margins were 3.7% vs. 6.7% in Jan22 and LTD hold of 7.4%. Online casino GGR was up 31.7% YoY to $102.4m, but down 5.4% MoM.

FanDuel and DraftKings accounted for 63% of mobile handle (38.2% and 25.1% respectively). BetMGM was third with 13% and Barstool retained in 4th place with 8.4%, despite dropping 150 bps MoM and 560 bps YoY, said DB.

Sector Watch - Gaming

Deal frenzy: At SXSW gaming was a prominent subject and after the recent spate of activity, including Microsoft’s $68.9bn deal for Activision Blizzard and Take Two’s $11bn Zynga buyout, investment in the sector was a prominent subject for discussion.

David Ortiz, CEO Simwin Sports: “More and more investors are looking to find their way in, plus developers are more quickly able to demonstrate things. And there is so much revenue being generated.”

Shannon Chang, head of operations at games investor Divergent Venture Partners: “There are more unicorns than ever before and you can raise massive rounds without having to go public. And with some of these massive deals, the consolidation is going to really restrict the number of big players in the space.”

Doing a runner: Chang noted that blockchain was perhaps the liveliest area right now in terms of a developing trend in gaming. But she warned it was also an area primed for scams.

“It is a really interesting technology to explore but it doesn’t fit every type of game and product. And some of the use cases are like pump-and-dump schemes. Plus there are situations where developers are running off with the money.”

The hustle: Ortiz said the key was to “build a great game first” and then add in the blockchain component, not the other way around. “There's definitely some wild, wild west going on,” he suggested. “We don’t know anyone’s hustle, but at the same time, who you bring in is important.”

Immersion therapy: But Ortiz suggested innovation in the sector would be the key driver as games technology becomes “more immersed in people’s lives every single day”. “We don’t even see what’s coming,” he added.

David Ortiz: “If you look at what’s happening in games, the tools are only going to become even more friendly. People are going to create something. The literacy and the increase in tools, there are going to see so many things happening. Look at the streaming model. No one predicted that.”

New York regulatory update

Downstate upranking: The license fee for one of the downstate casinos in New York could rise to $1bn. It was previously expected to cost around $500m, but according to the state Senate’s budget, the Gaming Commission

“shall determine a licensing fee to be paid by a licensee within thirty days after the award of the license (...); provided however that such licensing fee shall be no less than one billion dollars per license.”
New York’s new fiscal year starts on April 1 and Gov. Kathy Hochul is proposing to make the licenses available this year rather than wait until 2023.

OSB newcomers: Online sportsbooks could also see a new tranche of operators gaining licenses with the Senate planning to increase the number of licensed brands from nine to 16. According to Politico, the New York Assembly is pushing for a total of 14 operators and would require 30% of them to be minority-owned businesses.

iGaming NEXT New York

The iGaming NEXT New York conference will take place on May 12-13 and will bring together the leading OSB/iGaming executives, institutional investors and leaders in the Web3.0 space. The event is supported by the likes of Morgan Stanley, Playtech, Spectrum Gaming and Evolution and is limited to 700 high-level delegates.

To register with a special 10% discount, use the code: 10UNL050

Conference agenda, ticket purchases and registration details: www.igamingnext.com/nyc22

Macau update

Still down: With China reporting nearly 10,000 confirmed and asymptomatic local COVID cases last week around Guangdong, Jilin and Shandong (~80%) and imposing further travel restrictions, Macau daily revenue for the week ending 14 March was down 38% from the first week in March to MOP114m per day.

The team at Jefferies said this matched their “stop-start recovery expectations, but we expect the sector to underperform until the latest China COVID wave passes”. VIP and mass market volume was down 55% and 50% MoM and daily revenues could weaken further.

Newslines

Meet the new boss: Las Vegas-based FSG Digital has announced the launch of JefeBet.com, a Spanish-language sports-betting proposition. FSG Digital is led by co-founders Seth Schorr and Jeffrey Fine and head of strategy Seth Young. The group is also advised by Bettorview president Javier Vargas.

Same as the old boss: Tim Drehkoff will assume his new role as CEO of Rush Street Gaming when co-founder Greg Carlin steps down from his position on May 1. Carling launched RSG in 2004 with one casino property, the company now runs Rush Street Interactive, which operates the online brands BetRivers and PlaySugarHouse as well as third party brands on a B2B basis.

Panda-ing: LeoVegas has been registered as an online betting and gaming operator in Ontario and pending final regulatory approvals will operate its LeoVegas and Royal Panda brands for OSB and icasino. A full list of licensees can be accessed here.

Second half: Ohio’s regulators approved a further set of sports-betting regulations on Wednesday and the state is potentially on course to go live in September to coincide with the start of the new NFL season. Up to 50 mobile sportsbooks and 40 retail books will be allowed.

Jelly on a plate: Everymatrix has acquired an undisclosed stake in UK-based gaming studio startup Jelly Entertainment to strengthen gaming development, the company said.