BREAKING:

According to a report on Bloomberg overnight, DraftKings and ESPN are nearing a “large new partnership”. The news sent DraftKings’ shares flying, up 14% at one point in post-close trading. The report was understandably light on detail but would clearly resolve the issue of what ESPN owner Disney does when it comes to sports-betting. See more below.

No alarms and no surprises.

DraftKings x ESPN

A partnership between the two would resolve any questions about ESPN’s plans in the sports-betting arena.

Welcome to G2E week: In August, Disney CEO Bob Chapek suggested his company had been in talks with a number of parties “for some time now”. It appears those talks involved DraftKings where, it should be remembered, Disney has a 4% stake that came as part of the deal to buy 20th Century Fox in 2019. Fox had led a 2015 investment round when DraftKings was DFS-only.

• A DraftKings spokesperson told Bloomberg the company had “a great, long-standing relationship with ESPN”.

• Chapek said last month ESPN would “need a partner” for sports-betting and that Disney was “never going to be a book”. “That’s never in the cards for the Walt Disney Company,” he told Bloomberg at the time.

• “But at the same time, to be able to partner with a well-respected third party can do that for us.”

• Reports last year suggested Disney was seeking $3bn for an extended deal. Analysts at JMP suggested this deal “wouldn’t be worth that much”.

🚀🚀🚀DraftKings’ post-close trading up 8.5%

Scale it up: JMP said DraftKings “has the scale and the balance sheet” for a potential partnership. They noted that ESPN has 140m subscribers, reaches over 208m people and has ~20m monthly unique visitors.

• They noted that a deal might involve embedded odds displayed across all sporting events similar to the recently announced partnership for Thursday Night Football with Amazon Prime. 

• Additionally, JMP said they could see ESPN offering streaming of live sport through the DraftKings app “or even DraftKings offerings displayed directly on the ESPN app”.

• “Overall, this will increase mindshare for the DKNG product, leading to increased market share, in our view.”

• “We believe this partnership has the components to succeed because of DraftKings’ scale and balance sheet, while retaining players on its platform given the company's superior technology.”

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Catena Media update

The affiliate giant says it “continues to evaluate multiple options” for the business as its strategic review continues.

Stop press: Catena Media said the outcome of its strategic review would be “communicated as soon as the process has been completed”. Recall, the company said in May it was looking at its options for the business, including the potential offloading of its European arm.

• It said today the focus “remains on ensuring that the company is well positioned to fully capture the opportunities on offer in North America”.

• Wait for my man: It expects to update the market “in the near future” but can give no specific date at this point.

888Africa launches

888’s joint venture for Africa has launched a betting offering in four countries across the continent.

Making a move: 888Africa, the JV between 888 and a group of online betting and gaming veterans, has announced the launch of 888bet in Kenya, Tanzania, Mozambique and Zambia via local licenses in each jurisdiction. 888Africa was founded earlier this year and is headed by Chris Coyne, formerly at Stars Group, and Andy Lee, ex-William Hill.

• Coyne said 888Africa had hit its target for entering four territories within six months of being formed. “This is an important milestone,” he added.

• Itai Pazner, CEO at 888, said Africa had significant potential. The press release cited research that said the African gambling market would be worth $5.64bn by 2030, with online set to grow at 8.6% CAGR between now and 2030.

Betsson’s upbeat surprise

Issuing a trading update, Betsson said Q3 revenues would be up to 15.4% ahead YoY at €199m-€201m, while EBIT would be up to 23% ahead at €37.5m-€39m.

Who needs the Netherlands? Betsson beat the rest of the sector to the punch with a surprise trading update late on Thursday that spoke about “high customer activity generally”. In particular, the company pointed to growth over the quarter in Latin America, central and eastern Europe and central Asia.

• The company said the early start of the European soccer season in August (caused by the winter World Cup, which starts next month) was another growth driver.

• Betsson has still to receive a license in the Netherlands a year after it was forced to pull out of the existing gray market.

• Diary date: Betsson’s full Q3 earnings will be published on Oct 26.

California vote trouble

Independent polling suggests Proposition 26 & 27 are both heading for election day defeat.

Never mind the ballots: A poll published by the Berkeley Institute of Governmental Studies suggests both the tribal retail betting proposition and the online position as put forward by the commercial operators are destined to be rejected by the voters in November.

The numbers on Prop. 26: 👍Yes 31% 👎No 42% 🤔Undecided 27%

The numbers on Prop. 27: 👍Yes 27% 👎No 53% 🤔Undecided 20%

• The Berkeley survey found opposition was broad-based across all demographics, with Prop. 27 doing particularly badly. The only subgroup in favor was the under-30 age-group by 44% to 33%. 

• With Prop. 26, while the opposition is not so stark, there is a marked gender gap with women opposed by a 2 to 1 margin whereas men are more equally divided.

• The survey’s authors suggested exposure to ads is the key determinant behind opposition to both Propositions. Voters who say they have seen ads for each of 26 and 27 are voting ‘No’ by a wide margin (28% to 51%), whereas those who have seen little or no ads are again more evenly divided.

• Playing favorites: The tribes are viewed more positively by the survey respondents with 53% saying they are favorable towards them with 19% unfavorable and 28% with no opinion. Asked about their impressions of commercial operators “like DraftKings and FanDuel” and only 14% were favorable while 48% were unfavorable.

• A spokesperson for Prop. 27 told the LA Times it was telling that the tribal proponents “haven’t spent a dime supporting their own sports-betting proposal”. 

Massachusetts update: The Massachusetts Gaming Commission discussed sports-betting yesterday and decided the launch of OSB in the state would have to wait until after the current football season. 

DraftKings hits stride in August 

Looking at the data from Michigan and Pennsylvania, analysts at Wells Fargo suggest that “for the first time” DraftKings was the most efficient operator.

More bang, less buck: When looking at GGR over handle, share of GGR over promo spend and share of handle vs. promo spend in Michigan and Pennsylvania, the team at Wells Fargo noted that DraftKings has proved to be a “much more efficient” operator in August.

• “This was notable, as this was the first month in the past twelve that DKNG has performed so efficiently,” they suggested, pointing out it may mark a pivot/shift in customer acquisition strategy.

• In PA, DraftKings achieved 25.1% OSB GGR market share vs. 25.1% handle share with promos at 13.7%. In Michigan, it achieved 26% GGR market share on 23% promo spend.

Activist’s LNW/SciPlay call

An activist investor has called for Light & Wonder to resolve its interest in casual games operator SciPlay.

Make your own kind of music: Engine Capital, which owns 5.7% of SciPlay and a small slug of Light & Wonder, wrote an open letter to the LNW board this week calling for a resolution of LNW’s dominating 81% stake in SciPlay by either buying the rest of the shares it doesn’t own or by offloading its entire stake.

• Engine said in its letter that the LNW stake in SciPlay is inefficient and acts as an overhang on the valuation of both.

• A previous attempt at a stock-for-stock transaction was stymied in 2021. Engine’s solution would involve LNW buying the shares it doesn’t own with the cash on the SciPlay balance sheet.

• Should LNW opt not to pursue a takeover, however, Engine suggested the status quo is “not desirable” and the SciPlay board should look for an alternative buyer.

• Analysts at Truist suggested Engine have a point, saying the stub ownership “makes no sense” whether it is core or non-core. 

Caesars’ $3bn debt deal

Beat the spread: CFO Bret Yunker said the deal with Caesars’ 16 banking partners would reduce interest expense at the same time as extending the maturity of the debt to 2028. Analysts at Deutsche Bank said the transaction “further simplifies” the company’s debt structure while providing “modest” interest expense relief.

• Recall, earlier this week the same analysts said that Cesars had significantly more debt subject to floating rates than rival MGM.

Kambi/Barstool migration plans

The long goodbye: Kambi and Penn Entertainment have agreed the terms of their sportsbook divorce set for the last quarter of next year for online, with retail moving on early in 2024. Kambi will receive one-time fees of $12.5m for the early termination of the deal and a further $15m for transition services.

• With Ohio sports betting set to go live in January, the companies will continue to cooperate on new state launches for Barstool during the transition period. 

• In a statement accompanying the news, Kambi CEO Kristian Nylén said large US operators still wish to outsource elements of their backends.

Analysts in brief 

• Flutter: JMP lowered their price target after meeting management though they believe a “spinoff” of FanDuel could be on the cards, which would value the business at $17bn. The trading team told the analysts FanDuel still has a “time advantage” in same-game parlays as the competition is still yet to catch up

• Bally’s Corporation: In an initiation note, the team at Deutsche Bank say that the difficult financing environment makes for a “challenging risk-reward” for Bally. Organic growth prospects and a “scope-transforming” Chicago casino development have to be weighed against an “uphill battle” in iCasino and a “lingering” UK regulatory overhang.

Sector watch – crypto

The FT reported this week that Celsius founder Alex Mashinsky withdrew $10m from the crypto lender a matter of weeks before it went bankrupt.

The heat is on: Mashinsky was revealed to have withdrawn the crypto in May, just ahead of the company freezing withdrawals on June 12. The company subsequently filed for bankruptcy in July with a $1.2bn hole in its balance sheet. Mashinsky resigned from Celcius at the end of September.

• Monster mash: A spokesperson for Celsius said Mashinsky withdrew the cash in order to pay off state and federal tax liabilities.

• At its peak last year, Celsius had $25bn of crypto asset deposits from customers who had been attracted by outsized interest rates being offered by the lender.

Enter SBF: Of course, Celsius is now the supposed subject of a bid from Sam Bankman-Fried’s FTX, which has become something of a lender of last resort in the crypto space having previously provided the off ramp for crypto exchange Voyager Digital. 

• In early September, FTX bought a 30% stake in Anthony Scaramucci’s SkyBridge Capital and previously it bought BlockFi.

• Bloomberg reported FTX is in the process of attempting to raise $1bn itself.

FCA 💔FTX: Elsewhere, FTX found itself in hot water with the UK financial regulator, which warned UK consumers not to use the exchange, saying it was not authorized to do so. The FCA previously advised in similar terms against Binance.

• A spokesperson for FTX told the FT they believed the regulator intended to warn consumers about a scam impersonating the exchange because some of the phone numbers the regulator listed had been reported as linked to scams. 

• But they also acknowledged that the website identified by the FCA – ftx.com – is the real website of the company. 

Datalines 

​​France: Overall GGR in H1 rose 7% YoY to €5bn, driven by national lottery FDJ enjoying a 12% rise in GGR to €3.9bn and horseracing pari-mutuel operator PMU recording a 15% rise in GGR to €969m. Online operators’ GGR was down 11% to €1.1bn.

Sweden: Overall GGR rose 4% in Q2 to SEK6.8bn, while OSB and iCasino GGR were up 2.5% to SEK4.2bn. Lottery and slot machine GGR was flat at SEK1.4bn. 

Maryland: September GGR came in at $159.3m, down 3.7% YoY but up 12.0% vs. 2019. MGM National Harbor GGR was $63.8m, down 8.2% YoY but 10.5% above 2019.  

Newslines  

Sightline Payments has announced an investment of $300m to implement cashless gaming at 250,000 slot machines across the US in collaboration with Acres Manufacturing. 

Meanwhile, IGT’s resort Wallet and IGTPay cashless payment systems have gone live at Station Casinos' six Las Vegas properties via the group’s STN Cash app.

Everi has bought the m-commerce platform provider Venuetize, which operates in the sports, entertainment and hospitality industries. Jefferies analysts noted the deal expands Everi’s “opportunity set” beyond gaming.

Spotlight Sports Group will supply sports betting and fantasy sports content as part of a US-focused  partnership with the sports media site Sportskeeda. Spotlight has also launched a new Racing Post app for iOS and Android users in the UK. 

ID verification company Yoti and KYC provider Department of Trust have announced a new partnership enabling operators to complete frictionless affordability, responsible gambling, fraud and identity checks in one click.

PointsBet has reached an agreement with 1/ST Technology for the provision of an online horseracing wagering product.

BetMGM has launched NHL-branded casino games in New Jersey, Ontario, Pennsylvania, and Michigan.

Star Entertainment Group has been found unsuitable to have a gaming license by the authorities in Queensland.

New Jersey-licensed betting exchange Prophet Exchange will launch in Ohio in partnership with the NHL franchise Columbus Blue Jackets as part of the state’s launch of regulated sports betting in January. 

What we’re reading

All the nines: The Philippines lottery rustles up 433 jackpot winners.

Craven: Fulham FC’s latest commercial partner Titan CFDs looks somewhat bogus.

On social

Martin Dowds @MartinDowds1

🎼 Do ya think I’m sexy? 🎼

7:26 PM ∙ Oct 5, 2022

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• Oct 10-13: E+M@G2E

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