Good morning. On today’s agenda:

• Fox Corp. and Flutter pull the plug on Fox Bet

• A familiar duopoly strengthens its hand in iCasino.

• Caesars, MGM and DraftKings all feature in the week ahead.

• Lottomatica says M&A is central to its prospects.

• Startup focus looks at betting exchange STX’s Ontario launch.

I should have forgotten you long ago.

Fox Bet closure

Fox Corp. and Flutter have announced the winding down of Fox Bet.

Let’s call the whole thing off: Fox Bet will be shuttered over the course of the next month, with Fox retaining the brand name and the rights to the Super 6 promotion. Flutter will inherit Fox Bet’s database and market access agreements, according to a Bloomberg story on Friday. 

• Fox Bet was launched in 2019 as a JV between Fox and The Stars Group, which subsequently merged with Flutter, but it struggled to gain more than a toehold in the US OSB and iCasino space.

• The latest data from Michigan for July, for instance, showed effectively zero GGR for OSB and $2.8m of iCasino GGR.

• Similarly in Pennsylvania, OSB was at $200k while iCasino GGR was $3.5m or 2.6% market share.

• New Jersey fared slightly better with $2.6m of GGR in OSB and $2.5m in iCasino, giving it a combined 2.4% market share, according to Wells Fargo.

You can go your own way: The move marks the formal operational break between the two companies following the arbitration tribunal decision last November. That decided the price for Fox’s option to acquire 18.6% of FanDuel should be based on a valuation of $20bn.

• Flutter has subsequently announced plans to seek a joint listing in the US, with the likelihood of that leading to a full listing over time.

• Analysts have expressed skepticism that Fox would be willing to endure the licensing process that owning a chunk of FanDuel would entail.

• Fox has held talks with other operators regarding marketing arrangements for its networks, the report suggested.

Analyst takes: The team at JMP indicated the termination will be “welcome given the financial impact” to Flutter. They noted that in 2022 Fox Bet and PokerStars generated 3% of its revenue in the US but drove 30% of the EBITDA loss for the US unit. 

• “Flutter’s resources, including trading teams and risk managers, can now focus on the FanDuel business, and the majority of the negative cash flow will dissipate,” they added.

• Jefferies said they had “anticipated a more encompassing arrangement”, with Fox still potentially pointing its media assets in the direction of FanDuel.

What we’re reading: “Probably more than any other business in the FTSE, we understand the concept of liquidity.” Flutter’s CEO interviewed by Bloomberg.

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Strip head fake

June’s 1% YoY Strip decline to $727m was due entirely to a switch in baccarat luck factor.

Knights are golden: Excluding a very tough hold comparable on baccarat, the Strip enjoyed a 5.7% YoY increase helped by a 3.9% increase in slot win. The team at CBRE noted that for slots and mass market table win it was the highest June on record.

• The team said they attribute some of the strength to the success enjoyed during the month by the Golden Knights in the Stanley Cup.

• Visitation was also up for the month by 3.5%, though convention attendance declined by 2.9% due to event timings.

• In the heat of the moment: While the Strip remains buoyant, Downtown declined by over 10% as did the LV Locals market.

• “The record heat in the month likely kept some more recreational customers at home, a trend that could persist into July and August,” the CBRE team noted.

US iCasino examined

The familiar duopoly dominates US online, but this time in iCasino.

The old one-two: FanDuel and DraftKings are on their way to joint dominance of the iCasino market in the same way that they tower over the OSB landscape, according to analysts. Comparing YTD market shares, the team at EKG suggested the combined FanDuel and DraftKings market share stands at 46% vs. 33% for the same period in 2021.

• Data compiled by Deutsche Bank, meanwhile, shows DraftKings iCasino share hit 25.7% in Q2 while FanDuel’s was at 18.6%, giving them a combined 44.3%.

Golden shot in the arm: As EKG noted, DraftKings’ rise – from under 20% in Q122 – can in part be ascribed to the augmenting of its share via the Golden Nugget acquisition, which completed in May last year. But EKG added that the launch in Connecticut back in Oct21 had also played a part.

• The team also noted that DraftKings is one of only two iCasino brands in the state (alongside FanDuel) and was “very aggressive” early on with its bonusing.

For every winner: Claims abound over who is the iCasino market leader and as EKG pointed out BetMGM is defending share well. DB said it has fallen back to 23.5% in Q223 from 26.9% in Q222 and Q322. 

• This is despite BetMGM’s ongoing bonusing spend cutbacks.

• More clearly losing out to the top end is the group of 35 brands in the others bucket, which EKG showed has seen market share drop significantly from over 35% to 24% since 2021.

🍰 What a carve up!

The week ahead

Caesars heads a blockbuster earnings schedule.

Laurels drive: As part of its iCasino analysis, EKG noted that Caesars – which reports on Tuesday – could see some market share gains from the launch of its new standalone online casino app, which went live in mid-July in Michigan, Pennsylvania, West Virginia, Ontario and soon in New Jersey.

• The team at CBRE suggested the app should serve as a much better acquisition tool than the sportsbook for Caesars 65m+ brick-and-mortar database.

• Analysts will be looking for more from the company on hitting its target of $500m of digital EBITDA by 2025.

• Meanwhile, with the prospect of Caesars paying down more debt rising up the agenda, Wells Fargo said it’s on the verge of becoming a “free cash flow machine”.

Mark my words: MGM follows on Wednesday and, as per last week’s analysis of BetMGM’s update, questions are certain to be asked about whether the company has any plans to resolve the issue of the JV. 

• Recall, back in February, CEO Bill Honrbuckle ruled out any attempt to buy Entain.

• But that hasn’t stopped the speculation, with Jefferies analysts saying that many noted the supplementary “for now”.

• The main catalyst for MGM remains Vegas. Wells Fargo suggested its recent “move upmarket” will lead to further outperformance with the luxury and group/international visitation trends in its favor.

Quantum leap: Expectations later in the week are that DraftKings will also proclaim profitability in Q2. The current FY guidance is for FY losses of $290m-$340m and the company is likely to provide a further upgrade given recent market share gains.

• Also reporting this week: Rush Street, Bally’s and Red Rock.

Calendar

• Jul 31: Golden Entertainment

• Aug 1: Caesars Entertainment, IGT

• Aug 2: MGM Resorts, Rush Street

• Aug 3: Bally’s, Red Rock, DraftKings (e), Accel, AGS

• Aug 4: DraftKings (c)

Lottomatica call recall

Bolt-ons and more transformative M&A deals are on the agenda.

Bolts-ons from the blue: CEO Guglielmo Angelozzi said the Italian betting and gaming market leader was working on a “mix” of potential M&A bolt-on deals. “This continues to be a very fragmented market,” he added. “Bolt-ons are easier.”

• Asked about the company’s ambition in terms of bigger deals, he said the company remained committed to its three legs of growth via bolt-ons, organic and larger M&A deals.

• “I want to be very clear,” he said about the last element. “It’s part of our strategy and we continue to look at every interesting asset out there.”

Upping the ante: The company’s increased guidance for the year was largely due to the success Lottomatica was having with its online arm. It noted that in both sports betting and iCasino it was increasing its online share, up to 19% and 20.5% respectively.

REIT review

VICI talks wellness while GLP points to gaming REIT differentiators.

Holistic: The evolution of VICI away from a 100% focus on gaming and into other business areas was highlighted by management conducting the Q2 earnings call from the Canyon Ranch Lenox, “in the beautiful Berkshires in Massachusetts”, as CEO Ed Pitoniak put it, one of new partner Canyon Ranch’s portfolio of wellness resorts.

• Still, COO John Payne said VICI “continues to be impressed” with its gaming tenants and was intent on completing more gaming-related deals.

• “We continue to travel the world studying gaming assets,” he added, before noting later in the call that prospects closer to home could entice in both the Downtown and Las Vegas locals market.

• But Pitoniak noted VICI was not a buyer at any price. “We absolutely do recognize the value of quality,” he said. “We can’t accept a dilutive yield in the name of quality.” 

Weathercock: Gaming REITs appear to be weathering the current rate environment better than other areas of commercial real estate. Matthew Demchyk, CIO at Gaming & Leisure Properties pointed to GLP’s “differentiators”. “We're different by design compared to banks, private equity or other public REITs,” he added.

• CEO Peter Carlino noted the major effect of the credit environment was that the pace of M&A “really, really slowed down”.

• Talking of design, there were also questions on the call about how GLP, Bally’s and the A’s planned to fit a 30,000-seat stadium on the 9 acres allotted on the old Tropicana plot. 

• “I was surprised, myself, that they could do it so efficiently,” Carlino commented.

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Startup focus – STX

E+M revisits an exchange business first featured in July last year as it reaches a milestone launch.

Take a trip: “I knew it would be hard, but the journey blew my expectations out of the water,” says STX founder Justin Deutsch of the three-year journey from inception to launch in Ontario. 

• The betting exchange finally got the go-ahead for its debut last week having met with regulatory requirements that insisted upon using third parties when STX had its own in-house capability.

• “We were held back in certain situations by legacy requirements,” Deutsch adds.

• “But we are now in a great position to succeed and have a solid relationship with our regulators, which is crucial for innovation.”

• “I hope more US states take notice and open the doors to new frameworks that can bring incremental value to the industry.”

At your service: Eschewing bonuses and promos, Deutsch says he hopes STX will reach a new demographic among the North American gaming audience but says liquidity is crucial. “We plan to achieve that by offering the best white-glove customer experience alongside strong educational materials.” 

• He suggests the operating environment for STX is “quite different” to that of Sporttrade and Prophet Exchange in New jersey. “I am pulling for both to succeed, but don’t believe their success or failure will be indicative of our future,” he adds.

• Deutsch says the focus will remain on Ontario for a while yet with the daunting prospect of more state-by-state dealings likely to “play a huge role in prudent decision-making”.

• “Unlike most of the operators in our space, we refrained from buying up market access in states where we didn’t have a clear path to success,” he adds. 

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Career paths

MGM Resorts has appointed Daniel Yang as chief customer and innovation officer. Yang previously worked for Aristocrat Leisure as chief strategy officer.

Flutter CFO Paul Edgecliffe will resign from his role as non-executive director of Schroders to focus on his position at Flutter. Meanwhile, the company has appointed Kevin Harrington as PokerStars CEO. He is currently chief commercial officer of FLTR.

Novomatic Africa has adjusted its management structure following the departure of Sonya Nikolova to take on a new strategic role in global sales at the company’s headquarters in Austria. Muriel Loftie-Eaton will now serve as MD.

Newslines

A ~20% fall in the Evolution share price since mid-June has caused the board to decide not to proceed with its 2023-26 incentive program, saying it is “no longer in line with its intended conditions”.

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