May 16: Gaming feels pressure of recession risk
May 16: Gaming feels pressure of recession riskGaming’s recession risk, the week in shares, iGaming Next day two, startup focus - BroThrow +More.Good morning. On today’s agenda:
Dollars and cents. Click below: Gaming’s recession riskDon’t panic: A note from Deutsche Bank on Friday set out the potential ramifications of a recession on the prospects for the gaming sector. Looking at the history of the last GFC-related downturn between 2007-2010, they point out their thoughts are “not meant to be alarmist”.
Free cash: The DB team note that traditionally EBITDA has been the lens through which gaming business models have been viewed. But they go on to make the case that free cash flow might be a “better tool for analysis”.
Storm warning: The DB team conclude that “even in the event a recession does not take place”, the gaming industry could be faced with “pressure from changes in discretionary spend patterns, relative to 2021 and the last 12-months period, specifically.” **Sponsor's message: Spotlight Sports Group (owned by Exponent Private Equity) is a leading technology, content and media business specialising in sports betting. Its industry-leading Superfeed is used by the biggest betting brands in the world including bet365, Flutter and Entain. The content engine powers on-site engagement by delivering impartial expert betting insight for 20 sports in 70 languages. For more information visit: spotlightsportsgroup.com The week in sharesDead cat: The end of the week saw something of a bounceback sector-wide betting and gaming stocks led naturally by the bellwether DraftKings, which rose nearly 1% on Friday to end the week at $12.61. Caesars was also up over 10% while Penn National managed a near 8% resurgence.
Head and shoulders: What will be worrying investors is the longer-term picture is somewhat dispiriting. As good as indicators as any in this regard is Roundhill Investments’ BETZ ETF which contains within it a broad spread of global betting and gaming stocks.
Further readingThe crypto winter is here. “It’s a matter of time before greater losses materialize due to speculators leaving the space even as faithful crypto enthusiasts hold (or HODL) onto their coins. That means we’re at the start of another crypto winter.” iGaming Next New York day 2Playing the long game: Esports took the spotlight on Friday at the iGaming Next New York event with Seth Schorr, CEO at Fifth Street Gaming making the point that esports is more about future potential than current levels of betting activity.
Money down: Ozric Vondervelden, a gaming industry fraud analyst, told attendees that New Jersey online players have access to $18,575 worth of welcome bonuses if they optimize every current licensed operator's best offer. Tact: BetParx senior vice-president Matt Cullen said his company's strategy to date was a "tactful expansion". The sportsbook and iGaming operator is live in New Jersey, Pennsylvania and Michigan with sports-betting launch plans in five additional states.
Then you go and spoil it all: Laila Mintas, the ex-US CEO at PlayUP - current status TBD pending resolution of a legal dispute - suggested the SEC has burst the bubble on SPACs. “You could raise a lot of money through a SPAC, based on future revenues. But that led to the SEC stepping in and adjusting the regulations.” Act responsibly: WE+M’s Scott Longley chaired a panel on the developments in responsible gambling during which Cait DeBaun, vice president for strategic communications and responsibility at the American Gaming Association, said the onus was on operators to take the lead on the issue.
Reality check: Sen. Joseph Addabbo was keen to promote the idea that igaming regulation was just a matter of time in New York, saying it was a “natural progression and just a question of when”.
Macau tax rumorsMo money: Macau Legislator Chan Chak Mo was quoted in GGRAsia that the betting enclave could cut as much as 5 percentage points from casino operators’ GGR tax if they attract gamblers from outside of Mainland China. The current tax rate is 40%.
Startup focus - BroThrowWho, what, where and when Founder and CEO Brady Sharp is the driving force behind BroThrow, having recently “taken the leap” and left a corporate finance role at Walmart to work on BroThrow full-time. The company is based in Fayetteville, Arkansas and started in April 2019. It launched its first beta test in November that year and soft launched its consumer-facing product in fall 2020. Funding backgrounder: “We raised and publicly disclosed a pre-seed round of $135K in March 2021. We are currently working on raising a $2m seed round,” Sharp says. So what's new? Sharp says he has started lining up pitch meetings and is “working through terms with some of them”. The immediate focus is to close the seed investment round and to start marketing and monetizing the platform.
The longer pitch: For Sharp, betting startups fall into one of four categories. The first and “ostensibly most popular one” is the exchange model, merging the stock-market trading and sports-betting experiences. The second is social, gamified experiences, the third is the mashup of fantasy and sports-betting with the last being the utilization of crypto and/or blockchain tech.
Big four: Brady says there is “so much room to grow” outside the orbits of the ‘big four’ market leaders with “differentiated” player experiences. “As I learned at Walmart, a small number times a big number is still a big number.”
Earnings in briefKonami said revenues rose 9.9% to JPY299.5m while pre-tax profit rose 1115 to JPY75.2m as the company said it was “starting to see signs of recovery” from the pandemic, although current macro uncertainties clouded the picture. The bulk of revenue comes from digital entertainment which rose 5.3% to JPY204.2m while gaming and systems revenue rose54% to JPY16.6m. Revenues for Chinese lottery services provider AGTech were up 52% to HK$35.2m, operating losses were down 72% YoY to US$1.6m. The group said going forward it would benefit from exclusive contracts with Alibaba Group and Ant Group. The week aheadAffiliate week: The major gaming affiliate providers take center stage this week with both Catena Media and Better Collective reporting on Wednesday. The latter will be asked about the recent reports of a £500m+ deal for Spotlight Sports Group. Also up this week is Sportradar.
Regulatory roundup
PartnershipsCaesars Sportsbook has been named the official sports-betting partner of the Indy 500 and the Indianapolis Motor Speedway. The partnership was launched this past weekend in time for Saturday’s GMR Grand Prix and includes the opening of an exclusive betting lounge. Chelsea Football Club have agreed a shirt-sleeve sponsorship deal with the cryptocurrency firm WhaleFin believed to be worth £20m a season. WhaleFin is owned by the Singapore-based digital assets company Amber Group. NewslinesPiraten material: Germany has handed its first slot license to a company called Mernov which runs the Jackpot Piraten and Bing Bong brands. Mernov runs on the Alteatec platform. Strive for payments: Paysafe and player account management (PAM) provider Strive Gaming have announced a North America-focused partnership that will see Paysafe integrate its deposit and payment methods into the Strive platform and offer players the ability to use its Skrill, Paysafecash and paysafecard eCash solutions. What we’re readingSoap opera: The Musky Twitter saga takes another turn. Matt Levine: “Elon Musk has made it very clear that the rule of law simply does not apply to him, and this has worked well for him. If he wants to ignore the merger agreement that he signed, he will.” Life on Mars: The story of the ex-SS officer who was recruited by NASA after World War II and wrote the Marsprojekt, a novel about life as imagined on Mars. The planet’s inhabitants are governed by a council of 10 wise men and its super-wise leader. You’ll never guess his name… Meanwhile, Sam Bankman-Fried, CEO of FTX, buys a 7.6% stake in Robinhood. All in: Americans punt $125bn legally since the fall of PASPA. On socialDear Terra Community… Calendar
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Weekend Edition #46
Friday, May 13, 2022
iGaming Next day one, BetMGM analyst reaction, NeoGames analyst call, sector watch - payments +More
May 12: BetMGM: California ‘could be worth up to $3bn’
Thursday, May 12, 2022
BetMGM investor day, Genius Sports Q1, Betclic SPAC news, NeoGames Q1 +More
May 11: Wynn eyes Mass. movement
Thursday, May 12, 2022
Wynn Resorts Q1, Light & Wonder Q1, Inspired Entertainment Q1, SciPlay Q1, Raketech Q1
Wagers.com Earning+More podcast #8
Thursday, May 12, 2022
Watch now (45 min) | California, DraftKings, Massachusetts, Bally Corp, Missouri, Penn National
May 10: Circa gains Illinois access via Full House
Tuesday, May 10, 2022
IGT Q1, Full House Resorts Q1, Gaming Innovation Group Q1, fanDuel analyst update +More
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