• Prospective buyout of XLMedia’s NA assets provides jolt to the affiliate sector.

• Meanwhile, Catena Media takes an impairment, cuts costs.

• Deutsche Bank cuts Penn forecasts on B&M fears.

• The parlay differential between FanDuel and DraftKings examined. 

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Eras

Shiny toy with a price: The prospective deal announced on Monday for Sportradar to acquire XLMedia’s North American gaming affiliate assets for up to $30m would mark the entry of a significant new player into the sector.

• Should the buyout be consummated, Sportradar will get hold of the Crossing Broad assets, including Sports Betting Dime, Saturday Down South and Crossing Broad itself.

• Charles Gillespie, CEO at Gambling.com, hailed the news of a new competitor entering the affiliate space. “Come on in Sportradar, the waters of the gambling affiliate business are nice and warm,” he posted on X.

Alchemy: Observers noted Sportradar is likely to add any acquired affiliate assets to its existing ad:s marketing services arm. “Leverage is the key here,” said Adam Small, founder of Third Planet Affiliates.

• As a service provider, Sportradar may find it can “extract a lot more money” from existing relationships when it can offer affiliate services.

Putting on the Ritz: Then there is what Sportradar can add to affiliation in terms of data, AI and marketing skills. “Every affiliate should be afraid,” said Chris Russell, founder and CEO at the OneTwenty affiliate business.

• This is echoed by Stuart Simms, CEO at FairPlay Sports Media, who said Sportradar could use its data expertise and tech know-how to revive a site like Saturday Down South’s fortunes, aligning the brand with the “evolving needs of the market.”

Entering the field of play: As one M&A advisor in the space argued, Sportradar is a “completely new buyer” in the world of affiliates, adding it was “interesting that it is bullish on the US when others are not.” Said another corporate advisor, “I like it.”

• “It’s increasingly a game of ‘I have these clients, what else can I sell them?’,” the advisor added. “Big is increasingly better.”

XL to XS: XLMedia had previously disposed of its European and Canadian-facing affiliate assets to Gillespie’s Gambling.com earlier this year for $43m. 

• Now shorn of all its assets, the company, which floated on London’s AIM in 2014, will become a cash shell focused on returning the cash generated from its sales.

Bargain! Kyle Scott Laskowski, the former founder of Crossing Broad, who sold out to XLMedia in 2020, said via LinkedIn that Sportradar was acquiring the sites at a knockdown price compared with the top of the market $75m all-in that he and his partners had negotiated.

• Value destruction: The new price tag, then, of less than half that number “represents a significant discount.”

How did we get here? Crossing Broad was one of the beneficiaries of a “frothy post-Covid period” of affiliate M&A, typified by the rise of one-time market leader Catena Media. But as per the news below, much like XL it is now a shadow of its former self.

Meanwhile, a warning

I forgot that you existed: Former sector leader and now the sick man of the affiliate world, Catena Media yesterday announced a €40m writedown of unspecified sports-betting assets and cost-cutting measures of €2.2m that will result in 29 job losses.

• The company also released preliminary Q3 earnings, which showed revenue falling at least 31% to €10.5m-€11m.

• Adj. EBITDA is set to tumble by up to 68% to €1m-€1.5m.

Hard core: The company said the write down came after a strategic decision to concentrate on a “cluster of core brands.” 

• Manuel Stan, CEO, noted the cost predictions combined with the non-renewal of certain media partnerships reduced revenue for Q3 but had a positive effect on profits. 

• Catena will report its full Q3 earnings on November 7.

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Skeleton key: Sportradar also announced it is enhancing its partnership with the NBA ahead of the new season tip-off last night with next-gen fan engagement tools including skeletal tracking data.

• The NBA offering now includes virtualized live match trackers and 4Sight Streaming as well as the previously announced emBET offering.

Changing rooms: MGM Resorts has announced it will be rebranding the Delano property at its Mandalay Bay resort into a W Hotel via its strategic partnership with Marriott Bonvoy. The makeover will be completed before the end of the year.

IGT is to provide its instant ticket lottery games to Française des Jeux for the French National Lottery. The contract for the games, which runs for three years, was awarded to IGT through a competitive bidding process. IGT currently supplies its primary lottery system to FDJ.

Penn downgrades

Losing the argument: Pressure on the B&M business combined with the poor online performance in September has seen Penn Entertainment suffer an earnings forecast and a target price downgrade on the part of the analysts at Deutsche Bank.

• Storm tossed: The analysts said disruptions and weather issues in the Northeast and South segments of the B&M business will have “furthered the regional malaise.”

• The team’s new Q3 guidance for B&M adj. EBITDA is now $474m, down from $501m, and in line with recent company guidance of between $465m and $475m.

Pyrrhic: In the interactive business, Penn recently reduced its own loss guidance to $90m-$100m for Q3, which as DB noted is better than its own forecasts. However, the team said the favorable revision is “entirely related to a reduction in expenses.”

• As DB pointed out, the performance for both OSB and iCasino in the September data was poor.

• Via state data, the team estimated OSB share in Q3 of 2.8% across all states, including those where Penn is not active. For iCasino, the same metric is 2.4%.

Hold that thought

B-less: The second poor week in a row for the bookmakers means NFL hold was down to around 4% this week compared to a long-term average of 9%, according to the analysts at Macquarie. The team estimated a total hold across the market of 6%.

• JMP analysts also noted the “less than ideal” NFL game outcomes, suggesting the Baltimore Ravens win was the last leg of many parlays, “resulting in a terrible weekend for books.” 

• The team indicated books doing well in parlays – i.e. FanDuel and DraftKings – would see “downside pressure” on Q4 estimates.

• But it is still early in the quarter, the Dodgers/Yankees World Series will be good for volume and expanded College playoffs also remains a positive.

Venture capital firm Yolo Investments manages in excess of €500m in capital across 100 exciting fintech, gaming and blockchain companies. The Yolo Investments' Gaming fund, regulated by the Guernsey Financial Services Commission, has taken positions in fast-growth suppliers and operators, including Dabble and Enteractive. Yolo Investments (yolo.io) wants to hear from readers of this newsletter. Get in touch with your pitch, or for a chat about innovative products which can plug into our investment ecosystem.

Gap analysis

Bridge of sighs: The question of whether the gap between the hold rates of the top two US OSB operators can be closed is the subject of discussion within a wider sector note from the analysts at Morgan Stanley.

• The team noted that since the beginning of 2023, in states where operator data is tracked, FanDuel with 11.5% has held a 2.5% advantage in gross win rate over DraftKings (9%).

• Now, they noted that in terms of forecasts Flutter is predicting “a path” to 15-16% structural hold while DraftKings has set a more modest target of ~10%.

Using the data from Illinois as a proxy, the team added that the gross win gap is now largely down to win rate on parlays and a combination of the number of legs on average and the customer mix.

• At least as far as Illinois goes, it added it was able to reduce the gap on the percentage of handle coming via parlays in 2022 and 2023 but that this has reversed in the YTD.

• This “raises a key question” around why mix and/or win rates have not improved “given product enhancements such as progressive parlay.”

Earnings in brief

Crown Resorts: The Blackstone-owned Australian casino operator saw revenues come in flat for the year to June at A$2.8bn ($1.9bn) but the company managed to pare back its losses to A$165m, a 17% improvement on the year previously.

• As noted earlier this week, as part of its debt reduction efforts, Crown sold the One Queensbridge development site for A$85m. 

Venture playground

Startup focus – Loserball

Who are you? Founded by Jonathan Gruber, the Silver Spring, Maryland-based company boasts Rick Wolf of Full Moon Sports and Ed Moed of Hot Paper Lantern as its key advisors. Strategic partnerships include Fantasy Alarm and Bettor Sports Network, while Rolling Insights provides the live data.

What’s the big idea? “Loserball roots for fumbles over field goals and penalties over points,” says Gruber. ”It's like opposite day for dedicated and casual sports fantasy football fans.”

• Players can sign up for a public league and win prizes or create their own league with family and friends. 

• “Just pick three teams a week and root for it all to go wrong on the field,” enthuses Gruber.

• “It's fun, free and easy to play, and is like nothing else out there.” 

Funding backgrounder: The company has raised ~$230k to date and is looking for $900k to take it through to the end of next year, when it plans to add DFS-style games with cash prizes. 

Growth company news

Microbetting provider nVenue has reached an agreement with OpenBet to distribute its live micro markets to betting operators in the US and worldwide via an integration through OpenBet’s trading system.

Betinvest has announced a strategic partnership with iGameMedia involving the distribution of Betinvest’s esports, fast sports and AI-driven offerings.

What we’re reading 1: How Huddle elevates NBA betting with advanced player props and SGP products.

What we’re reading 2: ParlayBay on why the future of the industry lies in hyper-customization.

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Events calendar

Event highlight: The 2024 Gaming in Germany Conference, which is being held on Tuesday, November 5, 2024 at the five-star Hotel Adlon Kempinski in Berlin, has announced a raft of new speakers. These include Christian Heins, director iGaming at Tipico; Stanisław Szostak, CEO of Astral Forest; Britt Boeskov, non-executive director at Mindway AI; and Annika Lindberg, psychologist and trustee at Gordon Moody. 

• Oct 29-31: SBC Summit Latin America, Miami

• Nov 5: Gaming in Germany, Berlin

• Nov 11-14: Sigma Europe, Malta

• Dec 2-4: Thai Entertainment Complex Summit, Bangkok

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