Good afternoon. The newsletter today is kicked off by the news from yesterday about Florida and the striking down by the US District of Columbia of the compact between the Seminole and the state allowing for sports-betting. Genius Sports has announced its third-quarter numbers as has Elys Technology and there is the feedback from Deutsche Bank’s recent Miami conference.

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Florida sports-betting nixed by courts

Ain’t no sunshine: Late yesterday a judge in the US District of Columbia nullified the compact between the Seminole and the state of Florida and put the future of sports-betting in the state into doubt. The 25-page judgment from Judge Dabney L. Friedrich puts a stop to Hard Rock’s mobile offering in the state and also calls into question other elements of the deal struck with Gov. Ron DeSantis related to land-based gaming.

“Although the Compact ‘deem[s]’ all sports betting to occur at the location of the Tribe’s ‘sports book[s]’ and supporting servers... this Court cannot accept that fiction,’’ Friedrich wrote. “When a federal statute authorizes an activity only at specific locations, parties may not evade that limitation by ‘deeming’ their activity to occur where it, as a factual matter, does not.”

Back where we started: The ball is now firmly in the court of the state and the Seminole with Friedrich ordering the state “to reinstate the Tribe’s prior gaming compact, which took effect in 2010″ and suggested that the governor and Tribe “may agree to a new compact, with the Secretary’s approval, that allows online gaming solely on Indian lands. 

“Alternatively, Florida citizens may authorize across their State through a citizens’ initiative,” Friedrich wrote.

Do you believe in magic? The judgment is a victory for the Magic City Casino and Bonita Springs Poker Room card rooms that challenged the terms of the compact as well as the No Casinos lobby group. Both the state and the tribe are likely to appeal the decision but timelines on that are highly uncertain. Recall, DraftKings and FanDuel have a ballot measure lined up for the midterm elections next November.

Further reading: Miami Herald, Tampa Bay Times, LegalSportsReport.com, USBets.com

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Genius Sports Q3s

The top line

• Revenues rise 70% to $69.1m but adjusted EBITDA falls into loss-making territory at minus $392k while net losses climb to $70m.

• The group revises its FY21 figures to EBITDA breakeven on slightly upgraded revenues of between $257m-262m from $255-260m.

Jumping frog: Mark Locke, CEO, suggested Genius Sports’ long-term aim was to achieve 5% of global GGR, suggesting the company “wanted a slice” of every sports transaction, up to and including, apparently, hotdog sales. In terms of the digital sports advertising market, Genius estimates the TAM in that area to be worth $60bn and its long-term aim is to grab up to 1% of the market. As it stands, the company trumpeted it has commitments from clients for programmatic spend of $125m, though what slice it receives of that total was not disclosed.

Net loss: Asked about rival Sportradar bagging the right to the NBA, CCO Jack Davison said Genius Sports “couldn’t square the circle” around that deal versus its own deal with the NFL. “Clearly the NBA is important,” he added, before suggesting it made up an “extremely limited” element of Genius Sports’ revenues. However it did not break down the costs of the NFL deal other than to say it expected it to be break-even in 2021.

Locke added: “It’s very difficult to break out the ROI of the NFL (deal) because of the way we add services on a much broader basis: NFL but also other data and rights, odds services and marketing. It’s the combination of all those things that is the basis on which the deals are being done.

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Elys Technology Q3s

The top line  

• Betting handle up 13.9% YoY to $163.7m, GGR down 9.3% to $10.3m, sports margins at 14.8%. Total group revenue was down 17.2% to $8m.

• YTD handle was up 77% to $626.9m with GGR up 47.2% to $42.6m, 

Ocean Colour Scene: Following the launch of its sportsbook at the Grand Central bar in D.C. chairman Michele Ciavarella said the technology had proved itself while the launch of the Elys-powered sportsbook at the Ocean Casino in Atlantic City in March 2022 will provide a fuller picture of what the tech stack can do, he added. “If we had put all the bells and whistles (at Grand Central), that would've muddied the waters. You don't know if your technology is actually working, because you have so many options and features for bettors. So we needed to be very plain vanilla.” 

Big soup: The acquisition of the USBookmaking brand means Elys has the know-how to develop and go after more clients, Ciavarella said. “One of the missing ingredients of this big soup was the talent to be able to trade US markets and we now have that. The onboarding of a trading team was significant for our expansion in the US and Canada.” 

Deutsche Bank conference recap

Strip teasers: Participants at Deutsche Bank’s recent gaming conference in Miami noted that the prospects of a resurgence in group business in Las Vegas will come at an opportune time given that the recent leisure strength and casino customer spend levels will be difficult to maintain. But there is a difference of opinion over the sustainability of recent margin gains with some participants believing the return of pre-pandemic staffing levels and the normalization of spending are “likely to curb margins”.

Asset Strip: The Deutsche Bank team suggested there is a “positive tailwind” for the upcoming sales of Strip assets from MGM and Caesars.

“We believe a relatively deep buyer pool remains, given the levels of interest in the recent transactions and the handful of operators who remain interested in getting into or expanding their presence on the Strip,” the Deutsche Bank team noted.

Love the sound of breaking glass: Optimism about the pace of igaming opportunities was muted, the Deutsche Bank team noted. While some remained aggressive on their forecasts for new states, other operators took what DB suggested was a “more prudent approach” of believing there would be a “handful” of opportunities in the next few years.

“We believe support for more legalization is tethered to views around responsible gaming, concerns around cannibalization, and state budget needs, as gaming remains, in the words of one CEO, a ‘break glass in case of an emergency’ lever to pull for states when budget issues arise,” the Deutsche bank team wrote.

Holding back the tears: Another subject of much discussion was the recent hold percentages witnessed in the reporting states with the analysts suggesting the recent hold levels of between 5-7% were on the low side compared with the historical average in Europe. This improves, however, with the addition of same-game parlays which can move margins back up to between 8-10%, depending on parlay mix.

Datalines 

Atlantic City: Q3 operating profits more than doubled to $310m vs. $151m Q320 and up 30% on 2019. By the numbers, the Borgata led with $57.2m in operating profits, Tropicana was second with $48m, Hard Rock third with $46m, Harrahs was fourth with ~$44m and Ocean Casino & Resort fifth with $37m. Golden Nugget Online Gaming led the online-only operators, with just over $9m of operating profits, Caesars Interactive was second at nearly $5m and Resorts Digital third at $3.8m.

Tennessee: October handle was up 46% to a record $375.3m, revenue was slightly down MoM to $23.3m, the state collected $3.4m in taxes. State regulators also approved the conditional launch of the peer-to-peer platform Wagr. The new operator however was unable to get the full amount of insurance it needed to launch its full product suite. It will launch conditionally for 90 days and will have to abide with the following rules: $500 max for each wager, $10,000 maximum monthly for each player, only point spread bets to be offered, total amount staked on Wagr must be less than its insurance coverage of $5m.

Wagers feature 

Inflation worries: WE+M has dived into the promo numbers and with Deutsche Bank running the different scenarios as to how freebets really impact operators, it’s clear the focus on this topic will continue for some time. 

Newlines

In the money: Churchill Downs has announced the sale of 116 acres of land around the Calder Casino in Florida for $291m. Together with the sale of Arlinton racetrack to the Chicago Bears, it means the company has ~$488m of excess liquidity with which to fund its casino project at Terre Haute and its historical racing machine expansion in Louisville, according to analysts at Macquarie.

Buyback better: Accel Entertainment’s board has approved a share repurchase program of up to $200m. CEO Andy Rubenstein gave the usual soundbites about maximizing shareholder value and confidence in the balance sheet.

What we’re reading

At the races: ITV seeks coverage renewal.

SPACs are back, kinda.

Eruption! Beware volcano bonds. “Hyperbitcoinization, volcano-powered Bitcoin mining, HODLers, it is the good stuff. People are apparently calling this a ‘Volcano Bond’ and who am I to resist.”

Bonkers: The plan to give Mars a magnetic shield.

What we’re writing

From OSB to online leisure destinations - turning visions into reality, by Jake Pollard.

On social

So bets still on in Florida then…

Wagers @WagersUSA

From last night: A judge's ruling has invalidated a sweeping gaming compact between the Florida government and the state's Seminole Tribe, denying the right to legal sports betting. However, the tribe's Hard Rock Sportsbook app was still accepting bets as of Tuesday morning.

November 23rd 2021

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Calendar

• 24 Nov: Rivalry

• 26 Nov: Thanksgiving Weekend Edition - Golden Alarm Clock Q3 awards

• 1 & 2 Dec: WE+M@SBC Summit North America

Contact us

• Scott Longley scott@clearconcisemedia.com

• Jake Pollard jake@openmediaservices.com