Good morning. On today’s agenda:

• ESPN has chosen poorly with Penn, say analysts.

• Affiliate leaders assemble for the week ahead.

• Galaxy Entertainment benefits from Macau’s mass fervor.

• Sports media company Sidelines is the startup focus.

There’s something going wrong around here.

Panic station

ESPN missed the boat on sports betting, suggest media analysts.

Zapped: ESPN owner Disney “missed the big money” in sports-betting licensing and ended up settling for a “surprisingly weak” and “increasingly desperate” partner in Penn Entertainment, according to analysts at media consultancy Lightshed.

• Referring to an interview given to Vanity Fair by Barstool Sports CEO Erika Ayers Badan, the Lightshed team noted she suggested the deal that saw Penn switch out her company for ESPN “came together over two weeks”.

• They also noted that while the $150m-a-year Penn will pay ESPN for the rights of the name, it is unlikely to be wholly incremental as it is set to lose the income from the marketing deals with DraftKings and Caesars.

• Meanwhile, the full brand integration that is part and parcel of the deal could yet trip up ESPN as much as it did Barstool.

• The team cited Ayers Baden, who said what Barstool is about is “so antithetical to what a highly regulated industry wants” that both parties came to the conclusion that it “just was not working”.

👀 Barred-stool Sports: The Vanity Fair article suggested the non-compete in the gambling sector lasts only for the next football season (h/t to Ollie Ring at Esprouts for the headline).

• Recall, just last week, Gambling.com CEO Charles Gillespie insinuated the bar on getting involved with other betting brands might be more long-lasting.

Stock watch: Penn investors haven’t warmed to the deal. After a brief pop in the wake of the announcement, the shares quickly resumed their downward path and are currently down nearly 15% over the past month.

☠️ Switching off: Penn’s shares suffer a bad month

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FS Gaming retreat

The activist investor group has terminated a loan deal with Shay Segev.

Breaking: In a stock exchange filing this morning, FS Gaming has informed 888 that the agreement with Shay Segev, which saw him loan the voting rights for his block of 9m+ shares, had been terminated.

• FS Gaming noted that it remains the holder of 4.5% of the company’s shares.

• Controlling Segev’s voting rights had given it a 6.5% voting wedge.

Recall: FS Gaming teamed up with Segev when it engaged with 888 about the potential of getting former Entain/GVC execs Kenny Alexander and Lee Feldman installed as CEO and chair respectively.

• The bid came to nothing when 888 pulled out of talks after being informed by the UK Gambling Commission that putting the controversial figure of Alexander in charge would likely compromise its UK license.

• Alexander’s former company Entain is currently embroiled in an investigation undertaken on the part of HMRC over its past activities in Turkey. 

• Entain recently said the deferred prosecution agreement with the authorities would cost it £585m.

• Subsequent to breaking off negotiations, 888 has hired Per Widerström.

The week ahead

Preparing the ground for the big guns of affiliateland.

Better off: A clear picture of the positive prospects for the gaming affiliate sector is already evident after suitably upbeat updates in the last week from Gambling.com, GiG and Raketech. It can be expected that market leader Better Collective will hammer home the point when it reports its earnings AMC on Tuesday before it confronts the analysts the next day.

• The company has closed two acquisitions post-period close. First, it snapped up US-focused social media production house Playmaker HQ for up to $54m ($15m upfront).

• Then last week it bought up four Swedish-facing sports media brands from Everysport for €3.7m.

• Analysts at Redeye suggested at the time of the Playmaker deal it would add a further 5% to the FY23 EBITDA forecast of between €105m-€115m.

Also on Tuesday, Catena Media reports and it too will be updating on M&A, albeit in terms of recent disquisitions. The sale of various European and Australian operations to Moneta Communications for €6m continues the process of winding down Catena’s interests in Europe and the rest of the world in favor of a focus wholly on North America.

• In the wake of the divestment news, Catena subsequently said it had initiated a €3.8m-€4.2m cost-reduction program with 90% of the cuts due to be realized by year end.

Earnings+More this week

• On Thursday, our new Quarter In Review issue picks apart some of the most important trends from the recent earnings season. 

Calendar

• Aug 22: Catena Media, Better Collective (e)

• Aug 23: Better Collective (call)

• Aug 29: Rivalry

Earnings in brief

Galaxy Entertainment: Expanding into the Macau opening, Galaxy soft opened a new international convention center and the Galaxy Arena during Q2. Post-close, it has opened up the Raffles at Galaxy Macau all-suite hotel and will open the doors at the 700-room Andaz Macau in September.

• Revenue was up over 250% YoY and 23% in advance QoQ at HK$8.66bn ($1.1bn), while adj. EBITDA surged back into profitable territory at HK$2.5bn, again a 23% rise QoQ.

Analyst take: The team at CBRE said Galaxy’s recovery was mass-led and noted company comments that mass drop and win in QTD was running at 120% of 2019 levels. “As the broader Macau recovery continues and various high-value capital improvements come online, we see plenty of earnings growth ahead for Galaxy,” the team said. 

• Noting Galaxy’s “rock solid balance sheet”, CBRE added the company was “well positioned to deliver on its capital projects”.

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Analyst takes

Rank: Peel Hunt analysts noted the potential for the operator of the UK’s largest chain of land-based casinos to benefit from some of the changes being proposed by the government in the Gambling Act Review White Paper, albeit not until next year at the earliest.

• The current financial year has “got off to a promising start”, the team suggested. “With cost inflation abating, there is scope for positive operating leverage to show through even before the upside from regulatory change starts to kick in next year.”

Startup focus – Sidelines

Just Google it: Sidelines is a sports media company founded in 2017 by a bunch of ex-Googlers, including CEO Or Liftshitz, with the goal of providing a service to help consumers “make informed decisions and provide high-quality traffic to sportsbooks and online casinos”.

• “We found that there’s a huge gap between the experience that users expect to get and what the market actually offers,” Liftshitz says.

Funding backgrounder: The company is backed by MoreTech Ventures, NFX and Natural intelligence, and scored a $25m funding round in Feb22.

Time and money: The majority of the team are focused on product and R&D, and work in the areas of real-time odds comparison and live bet tracking among other products. Sidelines has partnered with some of the biggest names in the US market including a recent deal with publishing giant Advance Local. 

• Liftshitz says Sidelines recognizes a “significant gap between the transactional based experience offered by sportsbooks and our focus on delivering a great UX-focused approach”.

• “We aim to establish ourselves as the leading company to fill that medium and create the best sports-betting experiences in the market. 

• The Advance Local deal has seen Sidelines operate the betting sections for two large sites, MLive and PennLive.com, with a Texas-based site in the works. 

• “We are dedicated to improving our B2C solutions including our app, PropShop,” Liftshitz adds. 

• “This app provides users with a decision support tool, live bet tracker and the convenience of having all their bets in one place, helping them stay connected to the action.”

The sign-off: “Our vision is to become the leading US digital sports and iGaming entertainment media group, so our medium- and long-term goals are to continue to develop our great products and create efficient solutions for our partners and users,” says Liftshitz.

Growth company news

Low6, the leading gamification innovator, has partnered with Superbet to deliver Ultimate Squad, a free-to-play fantasy game based around the Premier League and Champions League.

US Integrity has announced a partnership with Novig, a sports-betting exchange that will soon be launching in the Colorado market. 

• Diary note: Novig will be featured in next week’s Startup Focus.

Career paths

Casual gaming provider Skillz is set to relocate its HQ from San Francisco to Las Vegas, according to the Las Vegas Review-Journal. The paper quoted CEO Andrew Paradise as suggesting the 36,000 square foot office space will house up to 250 employees.

Sightline Payments has appointed Omer Sattar as CEO, a change from the previous structure under which he was co-CEO. Sattar will also lead the Payments Innovation division. The press release made no mention of Joe Pappano, who until recently had fulfilled the role of co-CEO with Sattar.

DraftKings’ chief accounting officer Erik Bradbury will leave the company, effective September 8. CFO Jason Park will become the principal accounting officer in addition to his existing role.

Rank has appointed Keith Laslop as a non-executive director. Laslop was previously CFO of Gamesys from 2013 to 2021 and stayed on as a consultant until March.

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Datalines

Pennsylvania: On a same-store basis, retail casino GGR fell 1.7% YoY to $298m, while iCasino rose 35% to $133m and OSB was up 19% to $39.4m.

Newslines

DraftKings is reported to be nearing completion of a 12,000-square-foot sportsbook in Scottsdale, Arizona.

Fanatics Sportsbook and MLB’s Cleveland Guardians opened a sportsbook outside of Progressive Field last week.

Digital Win Technologies and Quick Custom Intelligence have teamed up to provide a next generation data-analytics solution for commercial and tribal casinos adding OSB and iCasino extensions to their land-based operations. 

• The first fruits of the partnership comes with the Grand Royal Wôlinak Casino owned by the Abénakis de Wôlinak Tribe in Quebec, Canada.

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