Parents pledge BetMGM JV will work – for now
G2E CEO chats – MGM, Entain and Churchill Downs, Entain pull Unikrn B2C, Penn and ESPN analyst takes +More
Good morning. On today’s agenda:
Hornbuckle and Nygaard Andersen just want the best for BetMGM.
MGM Resorts suffered from “corporate terror” in recent cyberattacks.
Churchill Downs’ Carstanjen says TwinSpires is “not for sale”.
Entain pulls the plug on its Unikrn esports B2C venture.
Penn and ESPN promise “deep integration” of OSB and sports editorial.
Sometimes it might seem like it was planned.
Chatterboxes
The CEOs of MGM and Entain were all smiles with regard to BetMGM.
Bringing up baby: Bill Hornbuckle, CEO at MGM Resorts, and his counterpart at Entain, Jette Nygaard Andersen managed to tow the party line about the future of the joint venture BetMGM despite evident unhappiness about its performance as the pair took it in turns to speak with moderator Contessa Brewer on the first day of G2E.
Hornbuckle noted that MGM was unhappy being materially behind the two market leaders FanDuel and DraftKings, saying it was “not lost on us” that the two are ahead.
“We don’t like that,” he added. “We don’t like that at all.”
Meanwhile, in a somewhat content-free chat with Brewer, Nygaard-Andersen also gave a nod to the current industry chatter about the future of the business.
“I get it, joint ventures don’t last forever,” she said, adding at one point that there were “many ways to raise your children”.
Hold that thought: Yesterday’s E+M Deal Talk suggested a resolution to the quandaries surrounding the future of BetMGM would likely be delayed by the recent cyberattack on MGM and the economic backdrop.
Acknowledging the latter as having an impact on any M&A, Hornbuckle said that while the capital markets were “in a better place than they were nine months ago… money is still expensive”.
Brave face: Still, both suggested that the initial reasons for the JV still stood. “The combination is really strong,” said Nygaard Andersen. “We are fully focused, we are very competitive and there is nothing in the structure that makes BetMGM go slower.
“They are very different businesses which makes for a great partnership,” said Hornbuckle. “They are the tech, we are the marketing and the brand.”
“We have some work to do, but we would have taken number three in the market five years ago.”
Going it alone: The most obvious sign of a possible divergent future between the two came with the launch of BetMGM in the UK via MGM’s LeoVegas business and without the involvement of Entain. Hornbuckle said MGM had made no secret of its online aspirations “beyond BetMGM”.
“It is our brand, it is our name,” he reiterated.
He said that it was very much early days with the venture but added that he “liked what has happened in the past three or four weeks”.
For her part, Nygaard Andersen said Entain was “used to competition in the UK”.
“The product in the UK is not based on our tech,” she added. “I don’t see it changing the competitive dynamic there.”
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Threat assessment
Talking about the recent cyberattack that MGM admitted last week would cost it $100m of EBITDA in Q3, Hornbuckle said it was “corporate terrorism” at its finest. “For a couple of weeks for our company it was devastating,” he told the audience.
“But we saw it early, we shut down systems by our own design,” he added. “Then the criminals shut the balance down.”
“For a couple of days, we were completely in the dark.”
Asked whether MGM considered paying a ransom as it was rumored to be the case over at Caesars, Hornbuckle said that “it happened so quickly” that the company was already “in defensive mode” working on fixes within hours.
Pulling up trees: Looking ahead, Hornbuckle noted that fears over the disruption caused ahead of next month’s F1 Grand Prix taking place on the Strip, Hornbucle said the complaints were overblown – including criticism of the uprooting of trees.
“It will be the single largest event Las Vegas has ever seen,” he added. “It is two times the biggest fight we have ever had.”
He also dismissed fears over disruption caused by the potential strike by the Unions for the first time in 30 years.
A picket is set to take place on Thursday on the Strip as part of the dispute with the Culinary Workers and Bartenders Unions over the new five-year contract.
Hornbuckle said he had sympathy with the changed working circumstances since the pandemic for tipped vs non-tipped staff and said MGM wanted to end up in a “rational place” with the negotiations.
Downs and out
The race: Bill Carstanjen, CEO at Churchill Downs was the other CEO to share the stage with Brewer ahead of what will be next May the 150th version of the Kentucky Derby. “It’s a really big deal for us,” he said in anticipation of what he said was the most demand the company had ever seen.
He noted, however, the extent to which the company’s experience in horserace betting had proved to be of little use when it came to its short-lived adventures in OSB.
“We thought the lessons would translate, but they really haven’t,” he added.
“There is an increasingly small number of players investing a lot of money,” he noted. “I wish those companies well but that just wasn’t going to be the journey for our company.”
He did speak about the role now being played by B2B for TwinSpires which currently has content deals with both the market leaders, FanDuel and DraftKings.
“TwinSpires is the little engine that could,” he said. “It is not for sale, it is a big part of who we are and we have never been more optimistic.”
Rage against the machines: The other issue for Churchill Downs – and one that was mentioned by AGA president Bill Miller in his own opening remarks – is the regulated gaming industry’s fight against skill-gaming in states such as Pennsylvania.
“In some states they have gained a foothold, using the legal and legislative system effectively, creating noise and using a handful of different tactics.” he said.
“There is a big fight, we’re in the middle of it. We had success in Kentucky.”
Seen on the floor
Drinking companions: Seen sharing a cocktail at the Palazzo, DraftKings CEO Jason Robins and Hard Rock International's Jim Allen. E+M has the pic to prove it.
Robins will be speaking on the main stage later today alongside Amy Howe, CEO at FanDuel.
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Dead Unikrn
Entain has pulled the plug on its esports B2C venture.
Lights out: The confirmed scaling back of Unikrn’s activity to B2B provision only comes a little over two years after it bought the Unikrn business for £50m. In a statement to the Sharpr newsletter, the company said the move was to “ensure that our business is structured as effectively as possible”.
“Unikrn has developed an industry-leading offer around esports betting and we see significant opportunities to leverage these capabilities through our existing global brands,” the statement continued.
Sharpr noted the move came ahead of two of the biggest events in the esports calendar, the League of Legends World Championship and Dota 2’s The International.
“For Entain to cut the lights off right before esports operators’ biggest month of the year is somewhat of a head-scratcher,” wrote Sharpr’s Cody Luongo.
In E+M’s recent analysis of Entain’s bolt-on acquisitions, we noted that Unikrn was likely one of the M&A “failures”.
It had zero income at the time of the acquisition, announced in August 2021, and it didn’t resurface as a working proposition until Dec22 as an esports-led sportsbook targeted at Brazil and Canada.
Analyst takes
Caesars: After meeting with management at G2E, the team at Wells Fargo noted the company is making similar noises to MGM about being able to avert industrial action. “Union negotiations are progressing and CZR is hopeful that a strike will be averted, with a resolution potentially by month-end,” the team said.
They added that the sportsbook is growing faster than anticipated, particularly in its home state of Nevada which was “still growing and highly profitable” given the tax rate is only 7%.
Penn Entertainment: Wells Fargo also met with Penn and ESPN’s top teams this week ahead of the launch of ESPN Bet in November. They noted the confidence of Penn in what they expect to be a “deep integration”.
“When ESPN chose an OSB partner, it was adamant the product carry the ESPN brand, which it believes will enable more seamless integration between its betting and media product,” the Wells Fargo team wrote.
“Penn/ESPN believe the product will stand out due to the deep media integration, as no other US OSB products have effectively combined sports content and betting.”
OSB in Q4: The team at JMP noted it had been a “tough start to Q4” with hold rates in New York in week 4 of the football season at only 6%. “The negative football weekend carried over into Week 5, with one trader calling it ‘pretty unfavorable’, with a ‘blowout win’ for the 49ers a big loss for books,” they added.
Still, through the first day of the G2E they added that the “message from online companies has been positive” with trends during 3Q favorable vs. expectations.
Newslines
Sportradar has been selected as the official technology and services solution provider by the Taiwan Sports Lottery. It will now form part of the ADATA Technology consortium alongside Taiwan Sports Lottery Company Ltd as the operator and China Trust Bank.
BetMGM has teamed up with Inspired for a “hybrid” live dealer game that integrates virtual CGI, green screen technology and footage of real dealers.
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Calendar
Oct 11-12: G2E, Las Vegas
Oct 16: Gaming In Germany, Berlin
Oct 26: Reputation Matters, London