Mar 28: UK gambling’s cost-of-living crisis

Gambling and the cost of living, March madness update, MGM analyst note, Truist online update, Startup Focus - MetaBet +More

Earnings+More

Mar 28, 2022

Good morning. On today’s agenda:

Survey suggests UK gambling will suffer as cost-of-living rises bite.
Wells Fargo looks at the prospects for MGM Resorts.
Our startup focus looks at sports-betting contextual info provider MetaBet.

Fill her up, Jacko. Click here.

UK gambling cost-of-living poll

Key finding: Half of the UK’s gamblers will spend less on gambling or stop gambling altogether as the cost-of-living crisis continues to bite, according to a survey conducted by YouGov on behalf of the Department of Trust (DoTrust).

32% of respondents said they will spend less on gambling.
18% say they will stop playing entirely in the coming months.
Of those that said they would reduce their gambling spend, 59% said it was due to pressure on their finances.

Making ends meet: Of the respondents who said they gambled, 11% said they were increasingly struggling to cover essential bills, 43% said they were cutting back on essentials and 38% said they were more closely watching what they spend.

What it means for operators: With inflation in the UK at 30–year highs, Charles Cohen, CEO at DoTrust, noted this is translating quickly into an affordability crisis for the gambling sector.

Charles Cohen: “It could hit not just revenues, but also increase the risks to operators and their customers of not knowing what is, and isn’t, affordable gambling for each person.

“This isn’t just a cost-of-living crisis. For the gambling industry and its customers, it is also an affordability crisis.”

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March Madness update

Mad for it: The team at Jefferies suggest that with more upsets than usual, March Madness is likely to be an ”incremental positive” for the sportsbooks. Only one 1st seeded team made it through to the Elite Eight and two 2nd seeded teams.

Bullet dodged: The Jefferies team noted the upsets further decreased the already slim chances of BetMGM having to pay out a $10m grand prize in its free-to-play bracket challenge.

MGM analyst update

How we roll: After meeting with CFO Jonathan Halyard, analysts at Wells Fargo suggested MGM was “yet to see” any demand change due to higher gas and airfare prices. They noted that consumer demand in Q1 had recovered and that recent occupancy trends were better than expected with pricing power strongest at the higher-end properties.

Q2 should see improving convention and international trends, but with the latter not achieving 2019 levels until 2023.
MGM said it is also seeing increasing signs of an omni-channel benefit from BetMGM and “effectively creating a synthetic hub/spoke network with customers in states where MGM has no brick/mortar presence”.

Truist online update

A downer: Sports-betting GGR was down 40% and handle was -17% MoM, but +17% and +51% YoY with ~65% of results reported. Louisiana and Montana were up 116% and 166% but all other states saw sizeable drops in GGR and handle.

NY high: New York accounted for the majority of wagering in its first full month of data at 18% of handle, followed by NJ (15%), NV (12%), PA/IL (9%) and CO/MI (6%). 90% of wagering came from online.

Market share leaders continue to be FanDuel with 20%/34% handle share in Jan/Feb, DraftKings is second with 27%/26%, Caesars third at 19%/15% thanks to its New York activities and BetMGM fourth with 8%/13% during the first two months of 2022. Penn National accounted for 5%/3% share (8%/7% excluding NY).

TAM upped: New York’s $274M of GGR and $3.9bn in handle since launch 10 weeks ago (NJ second with $91M GGR, $2.3bn handle) and profitability will be “very difficult” in the Empire State.

Upping estimates: But NY’s sizeable GGR/handle has led Truist to raise 2022E/2025E TAM of the North American market +9%/+2% to $6.2bn/$14.3bn (from $5.7bn/$14bn).

Subhandle: New Jersey sports betting GGR was “weak” at $31m (-49% MoM and -54% YoY) due to poor hold and high promotional spend. This was partly expected because of New York's OSB launch and concerns around cannibalization, but the Garden State’s $986m handle (+33 YoY) was the first sub-$1bn handle since Aug21.

Stock struggle: Interactive stocks have struggled amid an uncertain macro environment as operators continue to make their cases for long term profitability.

Promo percentage: The Super Bowl led to heightened promo spend levels throughout PA, MI, CT & AZ (although the latter has not yet reported).

“Concerning” PA: As a percentage of GGR, PA promotional spend was 45%/107% in Jan/Feb22 (vs. 34%/56% YoY), coming in much higher than expected in February and leading to -$450K losses at $22.6m of promos on $22.2m GGR, “a concerning figure for a mature market,” Truist said.

Truist on surprisingly high promo spend: “We expected the increase, though not necessarily to this extent given investor sentiment around promo spend has soured.”

On social

Up to the gills: Genius Sports and DraftKings’ stock-based compensation problem.

Sean @jiggycapital

Top 25 worst offenders of Stock Based Compensation as % Gross Profit $GENI $DKNG $XM $HCP all >100%

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

Startup Focus - Metabet

Who, what, where, when: The company was founded by Benn Gurton and Mark Phillip in 2019, with operations split between their home bases in Brooklyn, New York, and Austin, Texas. MetaBet works as a matchmaker between media properties and sportsbooks, maximizing conversions.

Funding backgrounder: MetaBet hasn't taken on any outside funding.

So what's new? MetaBet has hosted March Madness Bracket, with odds, TV listings, and live scores performed well, Phillip says. The next product release is focused on using “sticky, interactive tiles” to convert fans that are new to sports betting.

The longer pitch: “We’re excited about the position we’re in and even more excited about what’s to come,” says Phillip who suggests that having a broad sweep of customers across operators, media properties and performance marketers means MetaBet has the “luxury of understanding everyone’s pain points”.

“Vision into the cross-industry overlap of those pain points is the cheat code for our aggressive roadmap.”

Phillip points out that operators to date have “understandably” focused their marketing and UX on the portion of the market that already understands sports betting.

“But with all of the major players fighting for the same slice of the pie, they’re lighting promo dollars on fire.”

He adds that MetaBet will be launching a suite of products this Summer that “engage and educate casual fans” about sports betting “without them even realizing, and we expect them to be the best performing products in our customer-centric arsenal”.

“Our Semantic Analysis lets customers tackle integration with just two lines of code. From there, we can scan a page, understand the topics being discussed, and automatically display the tiles and markets that complement the content best.”

Metabet’s tech “gives us an advantage over our competitors, not just in our product and coverage breadth, but in the ease of integration”, says Phillip. “We have yet to lose a single customer to a competitor – the plan is to extend our lead and lap the field.”

The week ahead

UK-listed gaming affiliate XLMedia will publish its full-year results tomorrow, Tuesday. At the half-year, revenues rose 16% to $32.3m while adj. EBITDA was up 29% to $6.6m. Guidance for the FY was $65m-$70m.
Sportradar will report its Q4 earnings on Wednesday. Jefferies analysts say they expect management to discuss business exposure to hold volatility and capital strategy including potential for M&As.

The shares week

GAN staged something of a recovery following the publication of its Q4 earnings last week when it dropped over 20% on the day before staging something of a comeback in subsequent trading to end the week down 6.1%.

Newslines

Seventh heaven: Kindred’s Unibet brand has received a license in Ontario, making it the seventh North American jurisdiction in which it has launched.

Taco Duel: FanDuel will launch skill-based games in 32 states through its partnership with skill-games developer Game Taco.

Ontario on its own: GGPoker and WSOP will launch a co-branded online poker site in Ontario, with Canadian poker pro Daniel Negreanu as its brand ambassador.

Lightshow: Scientific Games, aka Light & Wonder, has received its supplier license from the Alcohol and Gaming Commission of Ontario (AGCO) and will be live in the province on April 4 with its Open Gaming content aggregation platform.

Pre-emptive bets: South Dakota’s Gaming Commission has fined the Gold Dust Hotel and Casino, Mustang Sally's and tech supplier Internet Sports International $3,000 each for taking unauthorized bets on the NCAA tournament.