Good morning. On today’s agenda:

• Maryland data suggests BetMGM is putting the pedal down once again.

• MGM Resorts’ cyberattack issues are ‘just a blip’, say analysts.

• Venture funders give warning of potential down rounds to come.

• Startup focus is story-telling DFS operator Units.

Get back to where you once belonged.

Maryland trends

BetMGM appears to have upped its promotional intensity in the opening weeks of the NFL season.

The re-up: BetMGM appears to be putting more money into its promotional efforts at the start of the NFL season, going by the evidence from Maryland in September. Perhaps in an effort to reverse a decline in market share in OSB in Q2 this year, its level of promo spend as a percentage of GGR leapt to 74% or $3m for the month

• This compared with 59% or $8.8m at DraftKings and 42% or $8.4m at FanDuel.

• “FanDuel's marketing efficiency highlights an interesting market share dynamic,” said the team at Jefferies.

• “While FanDuel held 42% share of handle, its lower portion spent on free bets helped drive an outsized 61% share of net win. 

• Still, they suggested the overall promotional environment “generally appears rational”.

• For Maryland, free bet credits across all operators represented 56% of gross win in September, in line with the state's monthly average since legalization in November 2022 of 55%.

Against the tide: The evidence of BetMGM pushing ahead with further promo spend comes even as the early data for September shows it losing further ground. Jefferies said that in the five states that have reported data so far – Maryland, New York, Iowa, Oregon and West Virginia – the GGR split is FanDuel on 44% followed by DraftKings (39%), Caesars (7%) and BetMGM (6%).

• In New York, data for the first five weeks of the NFL season showed FanDuel flat YoY at 41%, DraftKings up 5 ppts to 36% and Caesars and BetMGM down 3 ppts and 2 ppts respectively at 10% and 6%.

• Asked last week on the main stage at G2E in Las Vegas about BetMGM’s declining market share, MGM Resorts CEO William Hornbuckle said it was “always concerning”.

• But he indicated BetMGM was still not spending promo dollars in New York due to the high tax level.

• “In New York, frankly it is our brand that is carrying us there,” he told Contessa Brewer.

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The week ahead

Las Vegas Sands kicks off the Q3 earnings season on Wednesday.

Sands of time: The Asian-focused operator will have another attempt at persuading investors there is a positive message about the future of Macau despite recent share price movements suggesting they are yet to be convinced. The shares are down 23% in the past six months with much of the decline coming in the last two months.

• Recall, a recent analyst note from the team at Deutsche Bank pointed out much of the decline could be attributed to wider China macro concerns.

• But still, “some of the headwinds stem from company-specific concerns,” they added.

• This includes LVS seeing a decline in H123 mass share, down 160bps at 31.6%.

Calendar

• Oct 18: Las Vegas Sands

• Oct 24: Boyd Gaming

• Oct 25: Churchill Downs (e), VICI (e)

• Oct 26: Evolution, Churchill Downs (call), VICI (call), Reputation Matters, London

Earnings in brief

Tabcorp: Defying a “softer trading environment”, the company said in a brief Q124 update that digital wagering turnover rose 1% YoY while group turnover was down 6%. The biggest decline came with gaming services revenue, down 12% due to the sale of eBet and lower contracted EGM numbers.

• CEO Adam Rytenskild said the company continued to be “relentless” in the execution of its TAB25 strategy.

Analyst takes

MGM Resorts: The recent cyberattack shouldn’t have too much of a lingering effect, suggested the team at Jefferies who noted the earnings hit of ~$100m to Q3 EBITDA is insured and the market fundamentals “appear strong”.

• Going forward, meanwhile, the impact in Q4 will be “minimal” and “inconsequential”.

• The team noted MGM is forecasting a “full recovery in operations” driven by the historic F1 race occurring in November and the Super Bowl in Q124.

Online: Coming out of more than 20 meetings last week at G2E, the team at JMP said that in the online space the hot topic was the potential for a changed competitive dynamic with the emergence of Fanatics, ESPN Bet and bet365. The team said they “get the sense” that legacy companies will stick to algos/payback periods and “not chase elevated levels of marketing starting in early November”.

• But with the land-based sector, the team added they were “feeling incrementally more negative”.

• Revenue trends are “facing tough comps” and the team sensed inflation is “impacting the cost structure, mainly wages”. 

UK online: The online segment will rebound in the last quarter of the year after a tough Q3, according to the analysts at Deutsche Bank. The team noted that gross win margin should normalize while the regulatory situation is also now more navigable.

Venture funding

Venture funders at G2E gave warning of potential down rounds to come.

System of a down: As the likelihood of down rounds in the growth company space has markedly increased in recent months, so companies will be facing an unplanned and welcome dilemma, according to venture capital experts speaking at G2E last week.

• Lloyd Danzig, managing partner at sector specialist investors Sharp Alpha, said the problem with a down round, in part, was that it was something a founder “can’t Google or find a podcast” to guide them.

• “The investor psychology is interesting,” he added. 

• “There are many companies today trying to raise money at a $25m valuation and in a vacuum they might agree to it. But when it is known it was previously valued at $100m, then it is more problematic.”

Upstairs, downstairs: In some ways, he suggested, this thinking is “not rational”. “You should look at what stake you are buying,” he said. “But the investor psychology is that people just don't want to invest in down rounds.”

• “So it is why we would advise not raising at the very highest valuation,” he added. 

• “In 2021, when money was flowing that message fell on deaf ears. But now companies are having trouble because of the optics of a down round.”

Magic roundabout: The sentiment about down rounds was echoed by Chris Grove who said during the EKG Briefing at the start of the week that the market was “not seeing anything that resembles up rounds”. 

• “I see a lot of extensions of existing rounds, rounds that were ostensibly closed, [and] magically reopened on the same terms,” he added.

• “And usually, again, you're seeing a valuation that's similar to, or at, the last valuation.

• “Investors have decided they want to refocus or no longer believe in the company or whatever the case may be.”

Cap in hand: He added that what he was seeing was companies that were going back to their existing investors and getting knocked back with either a limited or no involvement from the current cpa table. Plus, rounds are “taking much longer than expected”. 

• “So we're seeing startups that were expecting to be able to raise in a month, two months, three months having to extend across multiple quarters,” he added.

• He said that “broadly” he hadn't seen any material improvement” in the funding environment compared to this time last year.

• “If anything, we've seen a degradation of circumstances.”

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Startup focus – Units

Building unit: The New York-based fantasy sports innovator Units was founded in January this year by CEO Torey Korsunsky who has a background in sports, media and business development via working with CAA, WSC Sports and Monitor Deloitte.

Funding backgrounder: The company closed a pre-Seed round in Q2 of this year raising  money from notable angels and operators in the sport, media and gaming nexus including the aforementioned CAA and WSC Sports as well as Hard Rock Digital, DAZN and more.   

Tellin’ stories: The big idea is that current fantasy offerings are missing out on a “massive segment of sports fans” and that they can be reached via “captivating, unique and timely human interest stories”.

• “Units is the bridge between human stories and gaming,” says Korsunsky. “We deliver original content with fun and simple real-money gaming contests for the everyday fan.”

• “While conventional fantasy platforms and sportsbooks can make a first-time user experience dizzying, Units expands the universe of users by making fantasy play accessible to all fans through easily consumable storylines and formats,” he adds.

And a head full of ideas: Korsunsky suggests that the betting and gaming sector understands that the real-money gaming experience is “overwhelming for casual fans”. Moreover, Korsunsky suggests an allied issue is that most real-money gaming platforms “don’t help fans understand why they should care about a particular game or pay attention to a specific player”.

• “Given how curated our selection of stories is, we want to help local fans understand what is unique about a specific game or player they are supporting or opposing – giving them the context to be involved in the culture and conversation around sports.”

See me go through changes: The company launched in mid-September in 19 states alongside Washington DC and is intent on getting fans comfortable with reading a “quick hit” of content about their favorite players, and choosing a side — and doing so with regularity. 

• “Our ambition is to become the Wordle of Daily Fantasy Sports – a quick and easy daily habit for everyday fans,” Korsunsky says. 

• “Once we have hit that milestone, then we’ll turn our attention to optimizing revenue, but probably still won’t be thinking about an exit strategy.”

Career paths

Per Widerström has formally been appointed to the board at 888 and begins his tenure as CEO with immediate effect.

Accel Entertainment has appointed Mark Phelan as president of US Gaming. He currently serves as chief revenue office for Accel and will remain an active member of the executive team.

Spectrum Gaming Group has said that executive vice president Joseph Weinert is joining its management committee and will coordinate strategic alliances with subject-matter experts from around the world.

Svenska Spel said CEO Patrik Hofbauer will step down early next year. He has been with the company since 2018.

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Newslines

iGaming Ontario said Q223 revenue of C$540m, up 105% over Q222, with iCasino accounting for 75% of the total and OSB the majority of the balance. Poker was only 3% of revenue.

Attendance at this year’s G2E at The Venetian Expo in Las Vegas surpassed last year’s total, bringing in 25,000 people.

EBET was suspended from trading on the Nasdaq after not achieving compliance with the minimum bid price and total market value.

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