• Tier 2 & 3 will be the next to face hard choices, says Yaniv Sherman.

• In +More: FanDuel moves into DC, IGT set to report.

• Wynn Resorts CEO weighs into cannibalization debate.

• Startup focus is LA-based gamification operator Locker.

From the very beginning to the end, I’m not a hostage to regret.

Hindsight is a wonderful thing, says Sherman

Objects in the rear-view mirror: One of the key architects of 888’s US strategy and decision to partner switch Sports Illustrated for a SI-branded sportsbook and iCasino operation said criticisms of the deal aired since it was nixed last week are based on “20/20 highsight“ vision.

After the goldrush: Yaniv Sherman, who worked in various roles at 888 including as head of the US until July 2022, told E+M that Sports Illustrated was one of a short list of brands that he believed “could [have been] interesting and help 888 carve out a niche” in the OSB and iCasino space in the US.

• He noted the deal came at the same time that a number of other high-profile deals were signed including Penn/Barstool and PointsBet, some of which Sherman said, “we had a shot at.”

• “Between 2018 and 2021 there was a gold-rush mania to try and get a podium position next to FanDuel and DraftKings using these types of deals,” he added.

Farm out: Sherman, who made his original defense of 888’s action last week on LinkedIn, added the company was “clear we couldn’t bet the farm” on whichever deal it plumped for versus others for whom the US was either the “main or only” growth market. Instead, 888 “had to be smarter, focused and selective.” 

• “That was also the case with market access deals, which were, back then, a major cost factor in any OSB/iGaming operation,” he added,

There must be some way out of here: Sherman noted there were now “very few” non-US operators left in the US market. Notably, following 888’s announcement last week, Super Group also said it was reviewing its US presence, while previously Kindred announced it was exiting North America.

• He added the “next wave” of companies likely to be “pushed to make strategic decisions”  would be the Tier 2 and 3 US operators. 

• “It’s almost impossible” to compete in single-product OSB states with the DraftKings/FanDuel duopoly unless operators “have an angle [like Fanatics or Hard Rock] and very deep pockets at a time when debt is still very expensive.”

Bleeding, obviously: Analysts at Peel Hunt made the point last week that it was “clear” the SI Sportsbook had “no plausible route to profitability.” They team added that the $50m break fee (paid in two $25m installments) “cauterized the wound.” 

• 888 “would probably have exited the US B2C business earlier if it had not been for the long-term SI contract,” the team added.

Careers+More: The decision to put the US B2C operation under strategic review is the first public move by what is essentially a wholly new top team at 888. As Peel Hunt noted last week, a large number of recent appointments has “clearly established a completely new team.” Alongside the still relatively new CEO Per Widerström and CFO Sean Wilkins, the company has added:

• Chief product officer Ian Gallagher, previously Flutter UK & Ireland.

• Chief growth officer Jeffrey Haas, ex-PokerStars and DraftKings.

• Chief commercial officer Mark Kemp, who joined just last week from DAZN Bet.

• New CTO Rik Barker, ex-Flutter.

The analysts noted while the new team cannot “wish away the challenges,” the quality of the top team is about “re-establishing credibility.” An exit from the US – either via a sale or (more likely) closure of the business – will be just one part of the jigsaw.

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+More

FanDuel will replace Gambet as the sole sportsbook provider in Washington DC. According to iGB, a letter from the city’s authorities said Intralot has selected FanDuel as the “new subcontractor.”

• As part of the change, Intralot will pay DC a $5m fee and assume operating costs of online sports betting while FanDuel handles payment processing, promotions and marketing. 

• No timeline for the switch has been reported.

The week ahead

IGT will be answering more questions from analysts with regard to its recently announced split/merger of its gaming and online provision business with Everi when it reports its Q4 earnings on Tuesday.

Careers+More

Mohegan Gaming & Entertainment has hired Citi’s head of gaming and lodging investment, Ari Glazer, as its news CFO, according to Bloomberg. Current CFO Carol Anderson said previously she would be stepping down at the end of this month.

Rod Street will step down as CEO of Great British Racing at the end of April after 12 years in the post.

Earnings in brief

FL Entertainment, owner of Betclic, said Q4 betting and gaming revenue rose 19% to €278m while FY23 revenue was also up 19% to €996m. The unit’s FY23 adj. EBITDA was up 23% to €252m.

Cannibalization debate

Fuel to the fire: The debate over whether iCasino cannibalizes existing B&M gaming markets is “reductive” and ignores many of the broader implications, and a focus only on TAM and tax risks ignores some of the implications, says the CEO of Wynn Resorts. 

Oh, you're so naïve, yet so: Stating he is neutral on the topic. Craig Billings nevertheless said in a LinkedIn post that, whichever side of the debate protagonists sit, assuming a uniform impact across all regional casinos is “pretty naïve.”

• Of the nearly 1,000 commercial and tribal casinos in the US, perhaps 100-150 can “actually avail themselves of the oft-touted benefits” of an omni-channel strategy, he said..

• Meanwhile, the record of large B&M operators competing against digital natives is “mixed.” 

• If they push for legalization, “they better be pretty confident that they can compete.”

• That means either growing both land-based and digital or at least offsetting any land-based EBITDA losses with digital gains.

Labor pains: The impact on labor is also somewhat overlooked, Billings argued. B&M gaming employs ~5x as many people per million dollars of revenue vs online gaming. If casinos start losing market share of total TAM, Billings said it will inevitably lead to job cuts.

• “Don’t expect the unions, particularly in blue states, to just sit back and let online casino happen,”  he added.

• “They’re going to act preemptively. And, like it or not, in many states legislators listen to unions.” 

Push it real good: Billings’ last point touched on the risk of regulatory pushback and specifically what happens when TAM expansion “pushes up against societal acceptance.” 

• “Whether right or wrong, perception or reality, when casino gaming starts reaching every corner of society [including in people’s pockets], there is a reaction.”

The 30,000-ft view: Billings added that if the debate about the impact of iCasino is to be had then “let’s look at all the implications and not just the headlines of TAM and taxes.”

• “For me, it is absolutely affecting my thought process with respect to where and how we at Wynn will deploy capital in the US.” 

By the numbers

Ohio: While January was a good month in most states led by strong margin growth, Ohio was the anomaly with both handle and GGR down YoY by 27% and 46% respectively. But as Jefferies pointed out, the decline was down to a tough comp from the launch month in January 2023.

• However, as the team suggested, while this presents a headwind to headline annual growth for January, the underlying trends in Ohio “remain encouraging.”

• For instance, January’s total represented a 31% MoM increase while NGR MoM growth of 48%.

Mix and match: Jefferies noted the promo environment in Ohio through January “appears to broadly mirror” that of other states but they pointed out the small MoM uptick of 9% masked very different outcomes across operators.

• ESPN Bet cut back significantly, down 77% MoM or 4% of handle to $2.5m from $29m.

• By way of contrast, FanDuel once again appears to have “leaned in” with promo spend bucking the trend and more than doubling MoM.

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Markets+More

DoubleDown Interactive: Shares in the largely social casino games provider leapt over 20% on Friday, pushing the price to a new 12-month high. As previously reported, DoubleDown’s social casino arm made a “surprising” return to growth in Q4 while its RMG unit SuprNation made its debut contribution.

🥳 At the double: social casino provider up nearly 72% in the last 12 months

Startup focus – Locker 

Who, what, where and when: Based in LA, Locker was co-founded in early 2023 by college friends Noah Bernstein and Hugh Roberts. 

• “Inspired by the virality and success of products like HQ Trivia and Kahoot, we came up with the idea of marrying trivia and gamification concepts with elements of the more traditional in-play betting mechanics you see in the market today,” says Bernstein.

Funding backgrounder: An initial angel-led seed round enabled Locker to build its MVP and go to market. It is currently in the process of closing an oversubscribed Series A round. 

The locker room: Bernstein sees a “significant opportunity” to build on the momentum in the online gaming space by “bringing new and younger demographics into the fold.” Locker believes the betting and DFS products currently dominating the market “present a high barrier to entry for most casual sports fans, particularly younger generations.”

•  By simplifying and gamifying the in-play betting experience while layering in social components, “we’re confident our contests have the potential to appeal to much more of a mass-market audience,” he says.

• The response so far has been “super encouraging,” he adds. 

Star man: Locker launched its F2P product in early December, which coincided with its app going live in the App Store. It has also partnered with recently retired NFL star DeSean Jackson, who hosted three Locker contests on his Twitch channel.

• “Our North Star goal is to make Locker synonymous with the game-watching experience,” says Bernstein. The company is “interested in capturing everyone from the fans on their couch taking in a Monday Night Football game, to friends meeting up to catch their favorite team together in a social setting, to more seasoned bettors.”

• “We want to become part of the routine and ritual of watching games.”

What success will look like: Bernstein says success will be determined by continuing to “establish its product market-fit, acquiring and, critically, retaining users on our platform”. The company already boasts thousands of users while averaging hundreds of players on its contests.

• “If we can maintain that trajectory, we’re confident success will follow,” he says.

Growth company news

Lagos, Nigeria-based iCasino studio Shacks Evolution Studios has announced a strategic partnership with BetStarters.

Content provider Jogo Global has signed a deal with ITV Studios, gaining access to huge entertainment brands including The Voice and Hell’s Kitchen.

Calendar

• Mar 12: IGT

• Mar 14: MGM Resorts, Penn at the JP Morgan Conference

• Mar 20: Sportradar

• Mar 26: Flutter, Bragg Gaming

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