Good morning. The line-up today includes:

• Analysts at LightShed suggest the FOX position in Flutter will be unwound this year.

• Reaction to the $12.7bn sale of Zynga to Take-Two Interactive

• Investors were less enthused by the New York debut than the punters.

• DraftKings analyst update, US sports-betting numbers.

• FuboTV COO steps down, Q421 earnings preview.

LightShed Flutter/FOX prediction

Agree to disagree: Looking ahead to the upcoming arbitration decision between FOX and Flutter over the valuation of FanDuel, analysts at LightShed suggest an amicable outcome will be impossible to achieve and that FOX will turn to other sports-betting options. 

Gonna get along without you now: Recall, FOX took a 5% ownership stake in The Stars Group when Fox Bet was launched - only for Flutter to subsequently snap up TSG and effectively relegate FOX “from owner to affiliate”. Now FOX’s option to buy more of FanDuel is a matter of dispute but whatever the arbitration decision, the LightShed team suggest “the more we think about what has happened over the course of the past couple of years between Fox and Flutter/FanDuel, the less we believe they can be happy partners regardless of the arbitration outcome.”

“Beyond the NFL, Fox Sports has a meaningful presence in college football, Major League Baseball, World Cup, WWE and is launching the USFL in 2022,” say the LightShed team. “In turn, Fox Sports would appear to be a very powerful partner for an array of sports betting companies who are hoping to catch up to industry leader FanDuel.” 

The great unwind: LightShed suggest that on resolution, FOX will look to unwind its ownership stake in Flutter/FanDuel and “explore strategic alternatives with another sports betting company that wants to have a more integrated relationship – a true partnership. “Fox’s non-news assets could be an ideal partner for DraftKings, BetMGM, Fanatics and others,” they suggest.

Done deal: Meanwhile, Flutter announced this morning it has completed the acquisition of Tombola for £402m.

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Zynga sale

Take it as it comes: Take-Two Interactive has bought mobile games specialist Zynga for $12.7bn in a cash-and-shares deal that represented a 60%-plus premium to the prevailing share price. It sees the owner of Zynga Poker, along with a host of other mobile free-to-play games, become part of the same empire as Grand Theft Auto and NBA 2K. EKG noted the combined company would have a TTM of $6.1bn

Go figure: The price is below the levels the loss-making Zynga was trading at early last year as the shares have been hit by fears of the impact Apple’s ad-tracking changes might have on Zynga’s own advertising business. Zynga was formed by Mark Pincus in 2007 and floated in 2011. A ‘go-shop’ provision in the agreement means Zynga now has 45 days to find another buyer willing to pay a higher price. EKG believes there is a “decent possibility” with Activision Blizzard, Electronic Arts, Tencent, AppLovin, Netmarble, or Netflix as possible buyers.

“We believe this transaction underscores the value of proven mobile developers with strong live ops and monetization capabilities,” said the analysts at Macquarie. “This transaction also highlights the strategic value and importance of mobile gaming as an entertainment platform going forward.”

Further reading: Mark Pincus tells his tale.

More New York reaction

Lukewarm reception: Morgan Stanley suggested yesterday the early GeoComply data implied $2bn of handle in January alone and $2bn of GGR in 2022. However, investors appeared less welcoming of the New York opening this past weekend as the share prices of the US-listed operators behind three of the four debut sportsbooks dropped on Monday, 10 Jan. 

The numbers that matter: Worst hit was Rush Street Interactive, the company behind the BetRivers app, which fell nearly 7% on the day, closely followed by DraftKings which slipped over 4%. Caesars suffered less with a less than 2% fall, perhaps because of its broader gaming exposure while in London yesterday, Flutter was also unaffected, down less than 1% on the day. The Nasdaq index was up by just under 0.5% at the close.

More Light: LightShed also turned their attention to the broader sports-betting scene in its ‘22 predictions. Suggesting that there are “too many players in sports-betting”, they say that broader igaming legalization is “too far off” to justify the ”absurd level of competitive marketing spend”.

“The end result is that in 2022, we will also begin to see smaller players fade away or shutter (ie. Fubo Sportsbook, see below), while we could also see middle tier sportsbooks (such as Penn/Barstool) look to combine with one another or with one of the industry leaders (FanDuel/DraftKings/BetMGM),” suggest LightShed. “It feels like the sports betting industry needs to end up with at most 4-5 strong players, maybe even 3-4. The rationalization will start in 2022.”

On social: Just can’t get enough.

Conan O'Brien @ConanOBrien

I haven’t seen an online sports betting ad in almost 7 minutes. Am I dead?

January 9th 2022

1,422 Retweets30,132 Likes

DraftKings analyst update

Downward draft: Looking ahead to DraftKings Q4 numbers, analysts at Deutsche Bank suggest the addition of New York will see revenues guidance for 2022 raised to between $1.7-$1.9bn. However, at same time the DB team have lowered their EBITDA forecasts, suggesting losses at this level will eclipse 2021. This isn’t a temporary disconnect; DB have EBITDA margins at 1k bps lower than the company’s 2021 prediction of 31% at maturity.

Hold tight: The analysts outline five factors that they believe will test the theory that U.S. operators will “trend’ towards European levels of margin. These include Fed handle taxes, league partnerships and integrity fees, state tax rates, variant state-by-state competitors and market access fees. On top of this, DB expects industry hold in Q4 to be below Q3 levels.

Raise the roof: The team then suggests an equity raise “could come to the forefront” should the expected losses continue into 2023.

US sports-betting analysis

By the numbers: Analysts at EKG have crunched the numbers for November and suggest U.S. sports-betting GGR hit an all-time monthly high of $720.8m, up 123% YoY. They point out the record result was primarily driven by the online channel, which is consistently accounting for 85%+ of national sports-betting GGR.

FuboTV gaming COO steps down, Q4 preview

Mutually agreed decision: Sam Rattner, founder of the online sportsbook Vigtory that was acquired by FuboTV in March 2021, has resigned as COO of the group. Rattner founded Vigtory in 2020 and said the decision to part ways was “mutually agreed”.

Adsense: CEO David Gandler told CNBC “gaming would continue to play an important role in driving the company towards profitability” and it would seek to broaden its sports-betting footprint to other states. The key to driving value would be “getting casual wagering into the fold and that’s something we’re really well positioned given our audience and the number of sports events on the platform,” said Gandler.

Earnings preview: Fubo also yesterday issued earnings guidance for Q4 with revenues expected to rise 105%-109% YoY to $215m-$220m vs. prior guidance of $205-210m. FY revenues are expected to rise ~140% YoY to $622-627m vs. prior guidance of $612-$617m. No numbers were provided for sports-betting; FuboTV has licenses in Iowa and Arizona.

Earnings in brief

EveryMatrix: The sports-betting and online gaming provider said it saw its sportsbook operations record turnover per month in Q4 of over €100m, “almost double” the prior-year period helped by its new Bet Builder product.

Macau update

VIP drop: Analysts at Jefferies said that according to its sources, Macau daily revenue for the first 9 days of January was MOP267m-a-day, slightly higher than Dec21. But VIP play suffered 50% volume declines MoM while mass play was between 10-15% higher. Meanwhile, more Covid infections across China mean widespread travel restrictions ahead of the Chinese new year are likely. Macau and Hong Kong are also tightening up on inbound travel.

Partnerships

FanDuel and the PGA Tour have agreed a three-year extension to their sponsorship partnership, the sportsbook will remain as official betting operator of the PGA Tour title until 2024. PointsBet Canada is now the exclusive sports betting partner of the NHL Alumni Association. Caesars Sportsbook signed former NHL New York Rangers goaltender Henrik Lundqvist as an ambassador.

Draftea funding round

Word in your ear: LatAm-facing DFS startup Draftea has secured $13.2m in a new fundraise led by Kascek and with involvement from Sequoia, Bullpen and Nigel Eccles, formerly of FanDuel. Eccles will also serve as chairman of the board. Draftea’s app is set to launch in Q1.

Datalines 

Illinois Dec21: Casino GGR fell 11.8% vs. Dec19 to $109.8m, annual comparisons were not applicable as the state’s outlets were closed throughout Dec20. Casino GGR for Q421 was up 179.5% YoY, but down 6.8% vs. 2019 to $322.9m. On a same-store basis, Q421 GGR was down 9.3% vs. Q419. GGR for Rivers Casinos, including Churchill Downs’ 61% stake, was down 5% to $43m. Caesars properties recorded combined GGR of $29m, -18.9% vs. 2019's, GGR for Penn National properties was down 22.2% vs. 2019 to $18.4m, Boyd Gaming GGR was down 14.7% to $5.1m.

Missouri Dec21: Casino GGR was up 21.6% YoY and up 11.4% vs. Dec19 to $163m, as December benefited from nine weekend days vs. Dec20 and 19. Combined GGR for Penn National Gaming’s properties was up 37.4% YoY and +4.7% vs. Dec19 to $56.8m. Boyd properties’ combined GGR rose 15.1% YoY and 16.1% vs. Dec19 to  $43.8m, Caesars’ casinos reported combined GGR of $34.8m, a 6.3% rise YoY and +2.5% vs. 2019. 

Maryland Dec21: Retail sports-betting generated $3.1m in GGR off handle of $16.6m in the first month of operations. Mobile operations are expected to launch latest this year.

Newslines

Playing the JKOer: The Eddie Jordan vehicle given an extension last week to formulate its bid for Playtech has received the backing of former PartyGaming founder Vikrant Bhargava, according to the Sunday Times.

More at steak: Steakhouse Peter Luger will open at Caesars Palace in Las Vegas by year-end, the first location for the renowned name outside of New York.

Change of formation: Spotlight Sports Group is to supply content and editorial services to the football magazine FourFourTwo. SSG will integrate its content and odds-driven modules to drive sports betting value from FourFourTwo’s sports content output.

What we’re reading

Time on their hands: EPL stars join the Bored Apes club.

Calendar

• Jan 27: Rank H1

• Apr 12-15: Rearranged dates for ICE

Contact us

• Scott Longley scott@clearconcisemedia.com

• Jake Pollard jake@openmediaservices.com