Hello. Well, this was a busier week than we had anticipated with the news about Aristocrat on Monday, 888’s earnings on Tuesday, Catena Media’s Germany write-off on Wednesday and Las Vegas Sands yesterday. All that and iGamingNEXT which took place in Malta. There the talk was about the large-scale M&A circus and what the outcome might be of ongoing DraftKings/Entain/MGM discussions now they have been granted more time to get their ducks in a row. 

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iGamingNEXT review

The old bull and bush: The event in Malta kicked off with a panel looking at investment trends and in particular the great catalyst of the US. Tim Heath, CEO at Yolo Group, said the market had now entered the FOMO stage, suggesting that those currently working towards deals should “enjoy it while you can”. Similarly, Julian Buhagiar, partner at RB Capital, said he was “worried about what comes around the corner.”

Small print watch: Richard Carter, former CEO at SBTech and now CEO at Bragg Gaming, said the predominance of SPAC deals earlier this year had necessarily meant that “less due diligence” was completed on deals. Note: the DraftKings/SBTech deals was, er, completed via a SPAC merger. “Most analysts don’t look at the 300 pages of IPO documents,” he added. “But now investors are getting a bit pickier.”

Falling and laughing: Consolidation will be the major theme, suggested Carter, who noted that current valuations only be justified if each operator achieved a market share in sports-betting of 30-40%. 

“Some of the smaller players will need to consolidate and you will need more of that,” Carter added. “If you’re sat in the DraftKings boardroom you know all this.”

The great siege: The other subject of discussion in Malta right now is the move made earlier this year by the Financial Action Task Force (FATF) which saw the company grey-listed (set your irony measures to high). The latest news comment from the anti-money-laundering body is that the country has made “good progress” on its action plan to get off the naughty step and this will be welcomed by the online sector. On a CEO panel this week, Michael Daly, CEO at Catena Media which is headquartered in Malta, said it “needs to be resolved soon” if it isn’t to harm the prospects of the island’s online sector.

Eilers & Krejcik app analysis

King for a day: The latest consumer testing report from Eilers & Krejcik suggests that FanDuel has been “dethroned” from the top spot in the rankings of sports-betting apps, edged out by arch-rival DraftKings. It comes after “significant improvements” for DraftKings versus a more static picture for FanDuel. Rush Street’s BetRivers app took third spot after another significant improvement while PointsBet and BetMGM make up the rest of the top five.

Mind the gap: The gap between the best and the rest is, according to the survey, closing after significant improvements to the all-round performances. Also notable, the native US apps are not only gaining on the more European-based products but now overtaking. This is, according to the E&K team, “a departure from previous testing cycles in which European operators were more dominant”.

“We are increasingly finding testers turned off by Eurocentric design considerations and language,” said the Eilers & Krejcik analysts. “Moreover, we’re beginning to see specific expectations emerge in our testers’ comments regarding market structures and layouts; of note, easy availability of prop bets and same-game parlay is now hugely important.”

That’s rich: The E&K team suggested testers were no longer content with a basic but fast offering and suggested that baseline expectations were now “more demanding”. “Markets need to be well-ordered and have depth, with an abundance of prop betting options clearly displayed,” they added. “Apps also need to offer same-game parlays and other, easy-to-use parlay tools, while cash-out is now considered standard for a tier 1 app.”

Macquarie Las Vegas survey

Search party: Hotel search data for September rebounded strongly according to the latest survey undertaken by Macquarie, rebounding 21% MoM and only 4% below record levels set in July. This bodes well both for the upcoming third quarter and, given the one-month lag, the survey generally finds between searches and actual revenues, the last quarter of this year.

“Based on commentary from management teams and our checks, we are expecting the remainder of the year to see solid trends for Las Vegas,” said Macquarie.

Forecast busting: Macquarie predicts that Q321 GGR will grow high-teems QoQ and will be some 30%-plus up on Q319 which is ahead of consensus expectations for MGM, Caesars Entertainment and Wynn Resorts.

Deutsche Bank regional gaming analysis

The Boonies: Meanwhile, Deutsche Bank has assessed the prospects of the regional gaming operators ahead of their Q321 results pointing out that the “considerable” margin expansion enjoyed this year will likely plateau in the third quarter. They then suggest that while they are unsure of the direction of net revenue in 2022, their “bias is to the downside” given the likely growth in competition from other leisure activities as Covid fears and restrictions subside.

Labor exchange: The DB team points out that while they expect promotional activity to remain “curtailed” as long as demand remains at elevated levels, they do expect labor costs to increase as employment levels “migrate higher”.

“While the question of how much margin pressure operators will face in 2022 will linger, the bigger question, in our view, is how investors will respond to compressing margins when they begin to appear,” the Deutsche Bank team said.

Gaming Realms analyst update

Sling yer ‘ook: Analysts at Peel Hunt believe the upcoming trading statement from Gaming Realms will show the growth trend from H121 continuing and they bare n ow forecasting CAGR of 21% between 2021-25. This will be underpinned by geographic expansion, new licensees and new games to be added to its successful Slingo offering. Notably, the analysts suggest North American expansion will be significant given the platform of an estimated 3.5% share of the New Jersey market.

What we’re promoting

Reputation Matters: Tickets are selling fast for the UK Gambling’s Future At Stake event which takes place on Tuesday 2 November at the Ironmongers’ Hall in the City of London. The event will consist of panels discussing the sector’s positioning as it enters a crucial phase of the Gambling Act review process. The event is headlined by John O’Reilly, Rank chief executive, who will provide the keynote. For ticket information, visit the Eventbrite page.

Startup shoutouts

Compliable: The money that last weekend’s edition spoke about that was there to be lavished on startups working in and around the betting and gaming sector is already being out to work. Bettor Capital, which said earlier this month it had closed a $50m fundraise is this week putting money to work. Specifically, it has pumped $3.6m of seed capital into compliance software provider Compliable. This comes after the company received $1.7m in funding in May in a round led by Chicago-based venture capital outfit KB Partners. Compliable has also appointed Carlo Sottosanti, Bettor Capital advisor and former general counsel to Penn National, to the board. Compliable CEO Chris Oltyan said that with the new money in place, the company was positioned to “grow exponentially” in the year ahead.

Yolo/Arsenal Innovation Lab: Arsenal FC and Yolo Group have teamed up to launch an innovation initiative that will see startup founders go through a seven-week ‘virtual’ sprint which also offers direct access to the club’s movers and shakers in their business and commercial departments. On offer is a £250,000 discretionary investment to further develop ideas post-program. Among the decision-makers is the aforementioned Tim Heath and Peter Silverstone, CCO at Arsenal.

Share Wagers.com Earnings+More

Earnings roundup

Lottery winner: Lottery.com has said its 80% acquisition of the Mexico-focused affiliate sites JuegaLotto and Aganar was the main reason behind Q321 revenues rising more than 135% QoQ to $22-$24m. January-September revenues are expected to range between $36.8m-$38.8m ($38.7m-$40.7m pro forma). Lottery.com’s parent company AutoLotto Inc entered into a definitive agreement with a SPAC called Trident in February, its filing with the Securities and Exchange Commission was declared effective on October 15. 

Datalines 

Louisiana: GGR was down 12.9% vs. Sept19 and up 2.2% MoM/+26.7% YoY to $159.7m. Hurricane Ida led to casino closures in the state, affecting outlets’ GGR with some of the remaining closed into the second week of the month. A smoking ban has been introduced since August in some resorts, Deutsche Bank said it was likely to have an impact in future months. 

Newslines 

Leeds, Leeds, Leeds: Flutter Entertainment has opened a new £15m technology and innovation hub in Leeds, UK, that will bring together Flutter’s UK, Ireland and international divisions. The new building will host Sky Betting and Gaming’s (SBG) skills academy, which will provide early-career opportunities and a Kickstart scheme for those from disadvantaged backgrounds. 

Pick’Em Down Under: Tabcorp has extended its betting partnerships with the NBA in Australia and will present the Australian version of the NBA’s free-play prediction game NBA Pick’Em. Tabcorp and the NBA started their partnership in 2019 when US basketball games began to broadcast on Tabcorp’s Sky Channel throughout retail and entertainment venues in the country.  

No problem: The NFL has partnered with the National Council on Problem Gambling to launch a $6.2m campaign to raise public awareness of problem gambling and encourage consumers to inform themselves about responsible gambling. The project will run over the next three years and is the largest grant ever received by the NCPG and nearly doubles its annual budget. 

On social

Wet t-shirt competition

Joe Pompliano @JoePompliano

All 20,000-plus fans that attend the Miami Heat season opener tonight will receive a t-shirt with a QR code, giving them access to an NFT via the FTX platform when scanned. Crypto exchange FTX is paying $135 million over 19 years (~$7M/year) for naming rights to the Miami arena.

October 21st 2021

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What we’re reading

Donald Trump does a SPAC: Matt Levine on Bloomberg.

Pick a fight: China vs. the NBA.

• 25 Oct: Gaming in Germany conference

• 27 Oct: Kindred Q3

• 28 Oct: Churchill Downs Q2, VICI Properties Q3, PointsBet Q1

• 29 Oct: Global Leisure Partners Q3

• 2 Nov: Reputation Matters

Contact us

• Scott Longley scott@clearconcisemedia.com

• Jake Pollard jake@openmediaservices.com