Good morning. To start the week we have:

• Jefferies cast their eye over the US regional gaming outlook

• IGT takes to the courts with Camelot claim

• Bad news on the markets for the BETZ sports-betting ETF and FuboTV.

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Jefferies regional gaming outlook

Storm warning: Looking at the upcoming results from the US regional gaming operators, Jefferies suggest the key focus will be on any correlation between wider issues in the economy and GGR.

• Citing last week’s earnings from Monarch Casino Resort, they point out that management there noted fuel costs, inflation, supply-chain issues and labor as potential headwinds.   

• Jefferies say their analysis suggests little historical correlation between fuel prices and inflation and GGR, though “nevertheless, we expect this to be a key focus” for this week and beyond.

• “More importantly, we see more relevance in references to labor tightness as a threat to margins and supply chain delays that applies to operators with meaningful capex planned for this year and expect greater clarity from upcoming earnings calls.”

Positive thoughts: Late last week, the AGA issued its latest CEO outlook produced in conjunction with Fitch Ratings. 

• The Current Conditions Index fell back for Q122 to 93.5 (where a value above 100 suggests industry expansion) reflecting a slowing of activity in Q1 vs. the prior quarter.

• But the Future Conditions Index, however, shows a degree of optimism at 101.1.

Worry lines: Supply chain issues were, as suggested by Jefferies, the top concern for gaming executives as 75% of respondents followed by inflation and interest rate concerns (63%) and a shortage of labor (54%). 

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CORRECTION: As was pointed out on social media last week, we erroneously reported the figures for the percentage of handle accrued Simplebet’s micro-betting offering on DraftKings in a report from Morgan Stanley. The percentages given (30% of NCAA football season wagering and 25% of Super Bowl handle) were of total ‘live’ handle rather than overall handle. We apologize for the misreporting.

IGT UK lottery lawsuit

Unlucky for some: It is reported that IGT has launched a claim for damages against UK Gambling Commission over the award of the UK lottery franchise to Allwyn. The supplier to incumbent Camelot has accused the Commission of being in breach and wants the decision overturned.

• What does IGT want? The company is also demanding damages for loss of profit and wasted costs for taking part in Camelot’s bid.

• Recall, Camelot has also taken the Commission to court, saying in court last week that it got the decision “badly wrong”.

• Fair and square: The Commission said at the start of April that “the competition and our evaluation have been carried out fairly and lawfully in accordance with our statutory duties, and we are confident that a court would come to that conclusion”.

MaximBet geolocation fail

Wish you were here: MaximBet has received an $80,000 fine from the Colorado gaming regulators after it emerged that its geolocation procedures for the state went down for 16 days in Dec22.

• MaximBet, part of the Carousel Group, self-reported the outage after an out-of-state bettor told the company’s customer services team they had been able to place a bet from outside the state.

Getting technical: MaximBet attributed the failure to a “technical conflict” between its own fraud detection system and supplier GeoComply’s systems.

Quote of the week

"A surprising number of the apps we’ve tested in the last two or so years are not merely problematic … they are, to put it bluntly, barely functional. In light of this consistently widespread-ish absence of product quality, we increasingly find ourselves asking how serious all but a handful of operators actually are about the U.S. online sports betting opportunity."

Eilers & Krejcik Gaming don’t like what they see in OSB apps.

The shares week

Tumbledown: Last week was a bad week for equities full stop and the gaming sector suffered in line with the wider market. Bumping around at 52-week lows this week were DraftKings (down 14% on the week), RSI (-8%), Kambi (-15%), GAN (-12%) and 888 (-18%).

BETZ off: The struggles have hurt the Roundhill sports-betting ETF (#BETZ) which is down nearly 30% this year. Notably, the ETFs second biggest holding now is Super Group with 4.81% weighting, just behind Penn National with 4.85% weighting and ahea dof Flutter (4.76%), Entain (4.68%) and Kindred (4.68%).

Downstream: But there is always someone worse off and most of the sector can look over events within the streaming sector from a distance. FuboTV, not so much. The streaming/gaming company saw its shares catch something of the Netflix downdraft, falling nearly 18% last week. Late last year, it was trading at around $34; now it is down to less than $5.

The week ahead

Boyd Gaming publishes its Q1 earnings on Tuesday 5pm ET and analysts will be looking for commentary around its recent Pala Interactive acquisition as well as its prognosis for the regional gaming market for 2022. Las Vegas Sands reports on Wednesday, where the holding pattern in Macau will once again be the focus of attention. On Thursday, Scandi-listed Kindred and Betsson will update the markets on their bids to be regulated in the Netherlands.

In the WE+M newsletter this week: Sector Watch on Friday will take a look at the latest developments in streaming. The news from Netflix has dominated the headlines as the much-vaunted FANG stocks lose their N. Meanwhile, Discovery has second thoughts about CNN+ and, of course, DAZN makes a play for diversification into sports betting.

• Provisional newsletter schedule: Wednesday, Thursday morning newsletter, Thursday afternoon podcast, Friday Weekend Edition.

New York data to Apr17 

Four in a row: NY sportsbooks generated $313.2m in handle and $33.2m in GGR for the week ending Apr17. It is the fourth-consecutive week operators recorded more than $300m in stakes and brings the handle total for April to $961.1m and GGR to $61.3m. 

Top rankings were as follows: 

• FanDuel: $131.8m handle, $22m GGR

• DraftKings: $72.1m handle, $5.8m GGR

• Caesars: $49.9m handle, $3.4m GGR

• BetMGM: $31m handle, $1.1m GGR. 

51/49: Total handle since launch on Jan8 to the end of March came to $4.8bn with GGR at $320.8m. Taxed at 51%, operators generated net revenues of $157.2m during the period.

Startup investor focus - Benjie Cherniak

Investor backgrounder: Benjie Cherniak, principal at Avenue H Capital, was CEO of betting odds and data supplier Don Best until it was sold to Scientific Games in 2018, remaining with the firm until 2020. Through his extensive network he then began advising, investing and working with entrepreneurs “to whom I felt an affinity and alignment of vision”. 

“I formed Avenue H Capital shortly thereafter, but I hesitate to call it a fund as this is really myself investing my time and some capital to support high potential startups in our space.”

Capital levels: Cherniak says he typically invests alongside “other angel investors in support of a VC lead, my investments are relatively small and typically come alongside an advisory component”.  

• “This is such a collaborative industry and I’m a big believer that there is strength in numbers.  You can never have enough experienced people with a vested interest adding value to a project and assisting the founding team.”

• Finding a great founder is “critical” for any investor. “For me, it is also about fit and compatibility. I try to align with those who view the industry through a similar lens as myself and who I genuinely like spending time with as I aim to take a hands-on approach to most companies I get involved with.”

Exits: Cherniak-backed social and gamification sports app Betcha was sold to Vivid Seats for $25m in Dec21. Betting Hero was acquired by American Affiliate (WE+M’s parent company) as part of the FansUnite deal in Nov21 for an undisclosed amount. 

Current involvements: Parleh Media, Panda Interactive, Kero Sports, Prizeout, Sports Info Solutions, GridRival, Verdict MMA, Betswap, BigBrain, JockMKT, Lucra, Phenix Realtime Solutions, Playentertainment, Snapodds, OneComply, Ultimate Odds, FSG Digital. 

Investment focus: For Cherniak, key criteria for investment on either the B2B or B2C side of the industry, are: 

• “What problem is a B2B company solving? How is it assisting an operator or client get to where they want to go, and what obstacles will they need to overcome to help that customer get there?“ 

• On the B2C side “what differentiates this entity from its competitors? Whether it is a fantasy startup, sportsbook, or real-money game I am looking at differentiation as well as of course the user experience.” 

Funding and M&A outlook: The current downturn in the public markets means “start-up founders need to be clear about their game plan, patient and fiscally prudent so as to ensure a lengthy runway,”

• Raising capital: “It is harder to raise capital today than it was six months ago, and buyers have less capital to throw at acquisitions”. 

• Green grass: “However, we are still in early innings so despite the current bumps in the road there is plenty of green grass ahead for everyone to grow. 

• Emerging consumer: Plus Cherniak says there is an “emerging group of igaming consumers” and it is the next wave of entrepreneurs who will be best suited to address the “thought process, needs, and emerging habits of those future customers in our space.”

Newslines

PS exchange: PokerStars will be launching a new peer-to-peer online betting exchange to be branded PokerStars Exchange and aimed at international markets. The exchange will share liquidity with fellow Flutter brand Betfair.

Poker scams: Poker pro Martin Zamani has accused Bryn Kenney, one of the world's top-earning tournament players, of real-time assistance and multi-accounting. Two other high-stakes players, Ali Imsirovic and Jake Schindler, were also accused of using RTA by fellow high-stakes player Alex Foxen. The allegations could bring more challenges to online poker and/or liquidity sharing regulations in the US.

Serrano headline: FanDuel has announced an exclusive sports-betting partnership with boxing champion Amanda Serrano. Serrano is set to fight Katie Taylor at Madison Square Garden on Apr30 in what will be the first women’s bout to headline a Madison Square Garden card.

What we’re reading

CMS Law wrestle with the issue of a regulator for English football.

• “In the current climate with a cost-of-living crisis and rising inflation, there is unlikely to be much appetite on the part of taxpayers to fund another regulatory body with public money, especially a regulator which would be responsible for overseeing what is perceived to be one of the most valuable and lucrative industries in the country.”

Clunk, click: “When the Fed pushes the brakes, someone goes through the windshield.” 

Cooling-off period: A report predicts the return of value to SPAC investing.

• “The window for new IPOs is mostly closed and developments in geopolitics, inflation and interest rates have completely altered investors' appetite for the types of companies that were hot offerings last year.”

Don’t make me hangry: A pop-up NFT-based Bored Ape burger joint in Long Beach.

Take me to your leader: UK to “lead the way” on crypto regulation

On social

One for lip-reading experts.

Jeff Skversky @JeffSkversky

🔥 Kyle Schwarber goes nuts and goes off on Angel Hernandez The Phillies OF thrown out quickly expressing his frustration with balls and strikes with an awful strike zone all night

April 25th 2022

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Calendar

• Apr 26: Boyd Gaming

• Apr 27: Kambi, Las Vegas Sands, Churchill Downs (earnings)

• Apr 28: Betsson, Kindred, Churchill Downs (call), GLP (earnings)

• Apr 29: PointsBet, GLP (call)

Contact us

• Scott Longley scott@clearconcisemedia.com

• Jake Pollard jake@openmediaservices.com