Sep 22: Segev – betting only a piece of DAZN puzzle

SBC Summit Day 1, Playtech H1, US gaming analyst update, California Prop. spend, Inspired analyst update +More

Earnings+More

Sep 22, 2022

Good morning. On today’s agenda:

DAZN CEO says betting is only a part of its sports fan proposition.
Playtech says it continues to navigate stormy waters.
Analysts say evidence is building of US iCasino cannibalization.

Sail on, sailor.

SBC Barcelona Day 1

DAZN CEO says his company doesn’t see itself as a betting operator.

No bet: Despite having recently launched a betting offering in the UK, the CEO of DAZN Shay Segev said betting would only ever be a part of the full DAZN offering. “We don’t want to be bet365 from a product perspective,” he added.

Is that all you can eat? Asked whether DAZN was “all-in” on betting, he said it depended on the perspective.
“We want to develop a business which is to maximize our relationship with the customer,” he said. “If you are a broader business, then a customer that stays 12 months as a subscriber and doesn't bet is still a good customer.”
“The product itself needs to evolve,” he claimed. As it stands, betting products “don’t fit our environment”.
“We are a mass market recreational business,” he added. “We are still experimenting; we don’t want to make $200m in EBITDA quickly. We want to build a long-term sustainable business and we want to scale it globally.”

Setting sights: Segev identified the US as a market that would be particularly open to a more casual betting proposition because it is “much more accepted, much more social”, especially among younger demographics.

Add ons: Similarly, hoping to give their consumers more value is LiveScore, which recently completed a £50m strategic investment from Swiss media group Ringier. Speaking alongside Segev on a panel, CEO Sam Sadi said the company’s sports-betting proposition was about delivering value to its Livescore app consumers.

Delivery: “If we know your preferences and can deliver value, then we know you will deliver us your loyalty,” he said. “But first we have to give you the value.”

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SBC panel highlights

Missing in action: Absent a UK gambling White Paper (see below), the sector still has to deal with the interventions of the UK Gambling Commission and its latest advice of vulnerability – published last week – has been the cause of some consternation.

Rainy days: Sophie Platts, head of safer gambling and external affairs at Entain, noted that under the umbrella term vulnerability were “incredibly wide ranging” definitions.
“If it is too vague,” she warned, then well-intentioned operators will come to differing conclusions.
Questioned on the current status of the White Paper, the head of corporate affairs UK/Global at Kindred Tom Banks said the industry desperately needed clarity.
“Its publication is important to give us all a sense of direction,” he added. “It doesn’t help to not have it.”

Gambling ♥️🇺🇦: Maksim Liashko, CEO of the Ukrainian firm Parimatch Tech, said after the invasion of his country by Russia in February the group decided to pivot to a B2B model, with the challenge being to provide stability. “Our values have changed significantly, maybe even dramatically, and have led us to think about transformation.”

House of fun: Commenting on the social elements that retail betting outlets provide in its home market of Serbia, Darko Zivanov, CEO of MaxBet Group, said the company sells 3 million beers and cups of coffee every year. “That’s our strategy for omnichannel,” he said.

Sunny side of the street: On the same panel, Alexander Martin, CEO of SKS365, said betting shops were still alive while other retail outlets have shut up shop post-lockdown. “On some streets, we’re the only outlets on the street.”

Value for money: Asked whether there was too much data on the market, Eireann Kelly, product director at IMG Arena (part of Endeavor), said rights holders are “in on sports-betting and will continue getting involved with it”.

He noted that UFC and golf odds increasingly are being incorporated into broadcast coverage. “It’s not about data providers asking for more money without giving anything back,” he said.

Heard on the floor

Burns unit: Corporate advisor Oakvale is a name that is very familiar to anyone who follows the sector’s corporate activity, but just how successful has it been? “Look at its accounts at Companies House,” said one source. E+M duly did. Its profits for the year: £25.1m.
HP source: The latest gossip from a lobbying source on the status of the UK government’s gambling White Paper: “It has been junked entirely.”

Playtech H1

Revenue up 73% to €792.3m, adj. EBITDA rises 64% to €203.8m.
B2B Americas up 50%, Europe ex-UK up 39%.
Snaitech adj. EBITDA up 154% to €131.7m, driven by retail reopening in Jun21.

Through restful waters and deep commotion: As previously communicated when Playtech informed the market at the time of TTB’s failed takeover attempt, the company traded well in H1. CEO Mor Weizer, who was on the TTB ticket but has stayed in place with Playtech, said the company had “navigated significant disruption and uncertainty”.

Hard Caliexit: In the Americas, Playtech claims it has made “great strides” with its Parx partnership. However, as was also previously announced, the Caliente/CaliPlay/Tekkorp SPAC deal is “no longer being pursued in the same manner” and “alternative approaches” are being considered for Caliente to enter the US market.

E+M will report on Playtech’s call with analysts in tomorrow’s Weekend Edition.

California Prop spend

The fight for the dueling sports-betting ballot measures is the most expensive in US history.

Record-breaker: With seven weeks to go until the election on Nov. 8, the campaigns for the Prop. 26 and Prop. 27 ballot initiatives have between them at least achieved one thing – they have pulled in a record amount of nearly $400m of funding and counting.

A report from AP notes that much of the advertising for the online sports-betting initiative, Prop 27, barely even mentions sports-betting and instead focuses on what it promises in terms of homelessness and aiding the mentally ill.
Nevertheless, the report quotes Claremont McKenna College political scientist Jack Pitney as saying the confusion of two similar initiatives spells bad news for the chances of either proposition being passed. “When in doubt, people vote ‘no’,” he was quoted as saying.

Recall: Prop. 27 is the online option and is backed by the commercial operators, notably FanDuel, DraftKings and BetMGM, while Prop. 26 offers retail-only betting and is backed by most of the tribes.

The AP report suggests the Yes on 26, No on 27 campaign has raised $108m from more than two-dozen tribes, including the Pechanga Band of Indians (with $25m) and the Federated Indians of Graton Rancheria ($30m).
Another anti-27 committee backed by the San Manuel Band of Mission Indians has raised a further $91m.
The Yes on 27 committee, meanwhile, has raised $169m in loans and donations, while a committee put together by the card clubs, which is opposed to Prop. 26, has amassed a further $41m.

Gaming analyst update

iCasino has proved a success in three key markets but cannibalization is now evident, suggest analysts.

Good news/bad news: Looking at Michigan (see Datalines below), New Jersey and Pennsylvania, the team at Deutsche Bank suggests that while iCasino is proving to be a “very good business, at scale and with very good margins” there is now evidence that it has a negative effect on bricks-and-mortar operations.

Contractions: The team suggests that bricks-and-mortar GGR in states not facing iCasino competition have experienced 13% growth in YTD22 vs. 20bps of contraction in the big three iCasino states.
Meat on the bones: Taking the 13% figure and applying it across MI, PA and NJ bricks-and-mortar casinos, DB suggests Michigan has missed out on $253m in the eight months, NJ $181m and PA $228m.

Expansions: While iCasino expansion can be seen to have an expansionary effect on the total market, it doesn't distribute itself evenly. Specifically, they suggest the outcomes for MGM, Penn and Caesars across the iCasino states differ significantly.

MGM: The DB team calculates the shortfall suffered by MGM’s B&M operations in MI, NJ and PA would have been $168m in the YTD, but this is “more than offset” by its iCasino performance across the three states.

In the YTD, DB estimates BetMGM generated $830m in iCasino GGR or $662m more than the B&M shortfall.
Caesars: Using the same formula for Caesars, the DB team estimates it lost out on $61m in B&M GGR in NJ and PA.
In comparison, in the YTD the team estimates Caesars iCasino generated $196m in GGR or ~$136m more than the shortfall.
Penn: Unlike its rivals, Penn faces a much worse outcome. In B&M terms, it missed out on ~$86m in GGR. But in iCasino it only generated ~$82m or $4m less.

Earnings in brief

EBET: The company said it had made “significant progress” in reducing net losses to $3.8m and increasing adj. EBITDA to breakeven in the two months to August. The company noted that in the prior quarter net losses came in at $9m and adj. EBITDA was a negative $4m. The company said the measures undertaken included focusing on revenue-generating wagering products, eliminating non-material contracts and a general reduction of operating costs.

Analysts in brief

Inspired Entertainment: Truist said Inspired was seeing some FX impact from UK/Europe but with positive trends heading into Q3. On M&A, the group said its main goals would be to accelerate online growth and expand into North America, but did not provide further detail on its recently failed bid for PlayAGS.

However, Truist said one of the reasons it did not proceed may have been an inability to meet management’s return thresholds while remaining sub-4x leverage and “without sizable equity dilution”.

Datalines

Michigan: Evidence of cannibalization of land-based gaming revenues in iCasino states continues to build after Michigan said bricks-and-mortar GGR fell 6.9% YoY, down 12.8% on Aug19. Deutsche Bank analysts noted that in the neighboring gaming states of Indiana, Ohio, Iowa and Missouri the YoY comparison for August was up between 6.5% and 19.2%.

In comparison, iCasino in August continued its consistent run with GGR up 34.7% YoY to $130.9m, a 3.4% sequential improvement.
As can be seen, BetMGM continued to lead the way with 37.7% (but down 25bps MoM), followed by the combined DraftKings/Golden Nugget on 20.3%.

🚙 BetMGM continues to lead the way in Michigan’s iCasino market

Betway UKGC fine

The UK Gambling Commission has fined Betway £408,915 for marketing its website on the children’s pages of West Ham United Football Club’s website.

Betway is West Ham’s shirt sponsor and the Commission found that between Apr20 and Nov21 its logo appeared on the page and included a link to the group’s betting website.

Learn from it: Leanne Oxley, Gambling Commission director of enforcement, said: “There is no suggestion that the operator was deliberately targeting children (and) note the remedial actions since taken by the licensee, but advise all operators to learn from this case.”

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Newslines

BetMGM and NBC have announced a new partnership that will see odds and betting content integrated across all NBC platforms for the 2022 NFL season. BetMGM will be featured on FNIA, which NBC claims is the most-watched studio show in sports, in a variety of content including a weekly segment hosted by former NFL quarterback Chris Simms and sports-betting and fantasy pioneer Matthew Berry.

Xtreme sport: Player acquisition and retention platform Xtremepush has announced a partnership with leading platform provider GiG.

Got my mojo working: Former startup focus subject Mojo has launched a sports trading app in New Jersey. Mojo uses tracking to reflect changes in the value of players by focusing on team outlooks and player statistics that become available as the season unfolds.

Kambi will supply its sportsbook platform to the Ilani casino in Washington State. Ilani is backed by the Cowlitz Tribe and Salishan-Mohegan tribal groups.

Sleeps with the fishes: Elys Game Technology will supply its land-based sports-betting platform and services to Rod ‘N’ Reel Resort in Chesapeake Beach, Maryland, which has a license from the Maryland Lottery and Gaming Control Agency.

What we’re reading

Stretch Armstrong: Inside the world of leg lengthening in Las Vegas: “All the height gain obviously comes from your legs, so your proportions can look a little weird, especially when you’re naked.”

SPACing it in: SPAC King Chamath Palihapitiya is shutting two SPACs after failing to find companies to invest in.