Good morning. Profitability is a looming issue for the U.S. sports-betting sector, brought to the fore by the evidence of early success in New York and the apparent inability of the market leaders not to lavish bonuses on punters. Yet, as the soon-to-list Super Group demonstrates, profits elsewhere in the global sector are not an issue. It’s a disconnect that the U.S. sector will want to see corrected sooner rather than later, lest an easy victory is handed to the short-sellers in DraftKings.

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Super Group digital fireside chat 

Chase and status: The management of Super Group, the company behind the Betway and Spin online betting and gaming brands in the final stages of completing its merger with the Sports Entertainment Acquisition Corp., took part alongside Eric Grubman from SEAC in a digital fireside chat at yesterday’s 24th Annual Needham Virtual Growth Conference. Talking of what they believe is the company’s uniqueness, they addressed why the company didn’t feel it necessary to compete for market leadership in each territory where it is active.

“This isn’t a spray and pray business,” said CEO Neal Menashe. “We don’t have to be the market leader and chase every single market, it’s about this extra leverage and building successfully on the brand we have.”

Bit by bit: The extra leverage comes from the profits generated across the group. Ahead of the Needham appearance Super Group released a snapshot of 2021 saying it achieved NGR of $1.53bn, up 36% YoY and while it didn’t mention the operating profit figure, it has said previously said H121 EBITDA was $179m. Menashe said that “every bit of incremental revenue, because of our operating leverage, brings cash to the bottom line.”

This is the way: Grubman stressed that “the headlines for 2022” would include M&A. “The gaming industry is kind of shaking out and some strategies are winning and some are evolving,” he said. “That will provide opportunities.” He added that the company “has to figure out what to do with its cash generation” and deploy that in a way that adds value for the shareholders.

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FuboTV digital fireside chat

Three-way mega: Fubo’s path to profitability will revolve around “the intersection of three megatrends,” CEO David Gandler told investors during its own Needham fireside chat yesterday. ”The secular decline of traditional TV and consumers moving to streaming platforms, the shift of advertising dollars to connected devices and, given our positioning with sports, the opportunity for sports wagering,” he said. 

Saturation point: Gandler agreed that the US sports betting market was saturated at the moment, which was why differentiation was so important. With wagering being a “natural extension of our (TV) offering”, cross-selling “will be key to unlocking casual bettors” who want to have a bet as they watch a game. “It’s a very different proposition to looking at loads of lines and prices. We can also gamify the offering and we have a first mover advantage in offering that kind of experience,” he added. 

CPS vs. CPA: In its Q4 preview FuboTV said FY revenues would rise ~140% YoY to $622-627m vs. prior guidance of $612-$617m, but did not provide details on its sports betting numbers in Iowa and Arizona. Gandler also wasn’t asked about the potential impact of COO Sam Rattner’s departure on the group’s OSB plans. He added that OSB customers in those two states placed an average of 9.5 bets since launch and “should be highly accretive when we integrate fully and get TV customers into the sportsbook”.

Gandler added that the group will focus on “leveraging its cost-per-subscriber, rather than try to compete on $500-800 CPAs”, as is the case for many operators currently.  

LVS-Evolution rumors

One careful owner, $$$bns ono: Is Las Vegas Sands “kicking the tires” at Evolution and “sizing up” whether it might make a bid for the live-casino market leader, as rumored by analysts at EKG this week? Sources close to LVS poured cold water on the idea, suggesting Evolution’s market cap of ~$28.6bn would be a stretch even for a cash-rich LVS which itself has a market cap of ~$29.7bn.

Two plus two: The rumors were plausible with LVS having made clear its digital ambitions lie, as WE+M reported, in B2B rather than B2C. But a bid for Evolution would involve sums that inevitably would see shareholders at the closely-held Stockholm-listed firm accepting paper in the merged entity. With LVS’ current focus on Asia, that would mean taking a punt on the future of Macau.

The Big Short: Then there is the timing. Evolution’s share price has been subdued since late last year following a controversial short-selling attack - an attack which on the wilder shores of Gambling Twitter encouraged some somewhat fabulist and legally questionable conspiracy theories. It knocked almost a third off its share price. But Evolution’s nascent positioning in the U.S. shows signs of huge promise and any bid would need to reflect that. (See the news this morning about Evolution launching Lightning Roulette in New Jersey)

Talking point: Evolution’s buyout price might be too rich not just for LVS but for many other potential predators.

Gaming sector note

Shine on: Analysts at Truist issued a sector note this week saying the gaming sector has ”lived and even thrived” through the Covid period and suggest its “fundamental resiliency” will shine through this year.

“While land-based comps get tougher and sports betting profitability is a wider focus, it’s hard to not like the relative stability and safety of this battle-tested sector, which we believe has been hit too hard at current valuation levels,” the Truist team write.     

Enough with the losses already: Looking ahead to the prospects for sports betting in the year ahead, analysts at Truist suggest the recent pullback in share prices has "shown a lower tolerance for indefinite losses". They add that the evidence of high promo spends in New York despite the high tax rate means it’s "hard to see any focus on profitability in the near-term". 

The Truist team added that it is "incumbent on the sector to better convince the market that the path to profitability is real".

Buys: Caesars Entertainment “continues to check most boxes for investors,” Boyd Gaming “remains a strong value play,” and Penn National’s valuations “ascribes virtually zero value for both Penn Interactive and Barstool Media” despite their potential for “real value-add”.

PointsBet analyst update

Point to point: Credit Suisse analysts suggested PointsBet will lower its target percentage for market share in each state it enters in the U.S. to 7% from the previous benchmark of 10%, suggesting that the heightened competitive environment means its brand awareness is lower than had been expected. The CS team added that PointsBet’s total U.S. market of 5% hasn’t changed in the last six months and stated that they expect the company to launch in New York later this month.

Related rumor of the day: Another brand is expected to launch in New York with Twitter speculation centering on BetMGM.

Flutter-Sisal acquisition analyst update 

Rational Flutter: Analysts at Jefferies said there is a “solid strategic rationale” for Flutter acquiring Sisal. The  Italian brand gives FanDuel's parent company an important "market-leading position in Italy and further exposure to fast-growing regulated markets". Flutter acquired Sisal in December for $2.6bn and in the process gained a major “omni-channel offering, especially relevant in a market where advertising for online gambling is restricted,” added Jefferies. 

Risk offset: The low multiple “highlights the regulatory risk”, but the diversified geographic footprint and portfolio, which includes potential lottery capability, offset that risk, Jefferies said. The US is also highly promising for the group, with a FanDuel listing on the agenda and "a deal with FOX around strategic alignment and/or arbitration settlement" on FOX Bet that could happen during Q2, added the analysts.

Chart of the week

GOAT: Analysts at EKG noted that FanDuel’s sports-betting GGR in New Jersey in November was the biggest monthly GGR total by a single brand, in any vertical, in any state in the history of online gambling in the U.S. Moreover, it was also more GGR than was generated by entire markets in their best-ever months, including Virginia, Indiana and Colorado.

Playtech NorthStar Gaming deal

Go North: NorthStar Gaming, the Canadian-focused betting and gaming brand, has signed a strategic partnership deal with Playtech ahead of its launch. According to the announcement, NorthStar will gain access to Playtech's IMS (integrated management system) and full gaming and sports-betting backend. Last year, NorthStar said it was preparing to launch a made-in-Ontario betting and gaming operation. The announcement comes at a crucial time for Playtech, providing evidence of North American potential at a delicate point in the current takeover bidding process.

DraftKings’ Oregon launch

All’s well that ends well: DraftKings has finally launched in Oregon six months after the Oregon Lottery announced it was switching from the SBTech platform. The company said the transition would take place on January 18, replacing the current Scorecard app. The original deal between the Oregon Lottery and SBTech was the subject of some controversy, including stories about the revenue share terms the lottery signed up to. DraftKings merger with SBTech clarified the issue somewhat and leaves DraftKings as the only legal book in Oregon.

Playmaker acquisition

Crack for good: Gaming-focused affiliate Playmaker has acquired Mexican-based YouTube channel Cracks Global for $1.7m. According to Playmaker, Cracks is a soccer-focused collection of digital media assets with over 12.6m subscribers globally and with the most followed Spanish-language sports-news channels on YouTube. Among its portfolio is Cracks Mexico and Cracks Colombia, which likely leads to some interesting Google search results.

XPoint funding news

X marks the spot: Geolocation startup XPoint has announced an “investment partnership” with gaming-focused venture firm Bettor Capital for an undisclosed amount of funding. XPoint said in the release it hopes to launch with its first live customer early this year. The company announced its first partnership with fellow startup Sporttrade late last year. Sporttrade will be the subject of an upcoming Startup Focus on WE+M.

Sector watch - tokens

The life aquatic: NFT marketplace Opensea’s $300m Series C raise announced just last week valued the company at a staggering $13.3bn and capped a momentous 12 months for the company. The group raised $23m in Series A in March and then $100m in a Series B round in July, valuing it at $1.5bn. In December it had its best-ever month with more than $3bn worth of Ethereum NFTs trading hands on its platform. 

Bandwagonesque: As previously noted, the valuation has a read-across for DraftKings which launched its own largely sports-focused NFT marketplace last year. CEO Jason Robins has made no secret of his plans to grow that business significantly (expected to contribute $70m this year). But co-founder Matt Kalish was more cautious when talking about it to CNBC ahead of New York’s OSB opening. “There are a lot of companies marketing early plays,” he noted. “I think it is too early and the innovation is really just starting. But it has a tremendous amount of consumer interest and it's an interesting culture.”

Money for old rope: NFTs continue to be the subject of sceptical coverage, however. This week, The Athletic pointed out that high-profile athletes love them currently because they have the funds to pay $31K for tokens of themselves (or are gifted them), but also because huge profits can be made by simply “flipping” them on Opensea. According to The Athletic, their seemingly endless inflation is why some critics “think they are so dangerous when promoted to fans with far less money than the superstars promoting them”. 

Quote of the week: “The Gamestop haters lose again.” Matt Kalish talking about meme stock Gamestop’s own move into offering an NFT platform announced last week.

Further reading - the end of abstract markets: “History warns that the end of extreme abstraction does not augur well for those arriving last to the party.”

Partnerships

MLS team the Colombus Crew has announced a partnership with Tipico. Caesars will become the official sports-betting and igaming partner of Michigan State University athletics, the first deal between a gaming operator and a university in a state where online casino gaming - not just sports betting - is legal.

Datalines

Indiana: GGR was $211.6m for December, up 11.3% versus Dec19 and 39.9% up Dec20. Sequential it was 8.3% increase while for 4Q21 GGR was up 13.6% versus 2019. In sports-betting, GGR was $25.8m, up 6.0% YoY, but down 45.9% MoM. Handle grew 47.9% YoY to $463.0m. Hold in December was 5.6%, down 470 bps from the 10.3% in Nov21 and down 220 bps from the 7.8% in Dec20. In market share terms, FanDuel led with 33.1% ahead DraftKings (28.4%), BetMGM (16.1%), and Caesars (7.3%).

Newslines

Virginia territory: Betway and the SI Sportsbook are set to launch in Virginia in April. They will represent slots eight and nine of the total permitted 12 licensees.

No biggie: Ahead of the completion of the sale to Endeavor, Scientific Games headlined two new hires at OpenBet as spearheading an effort to “reimagine sports-betting”. Florian Diederichsen joins from DAZN as CTO and will be “tasked with evolving” OpenBet’s modular system and “accelerating” the next gen. Meanwhile, Jessica Feil comes from the AGA and will be OpenBet’s VP for regulatory affairs and compliance.

That’s some bookies: A rendering of the BetMGM sportsbook at the Arizona Cardinals stadium announced yesterday.

Crown heights: Blackstone has come back with its fourth proposal for Crown Resorts, this time valuing the stricken Australian casino operator at $6.46bn. This time the bid is being supported by the Crown board should a binding offer be tabled.

Cloud Atlas: Game developer to fintech provider Everi has acquired Australian games developer Atlas Gaming for an undisclosed amount. The acquisition includes certain game development technology, intellectual property and a portfolio of games. Everi said it also provides a “pathway for expansion into international markets”.

On social

Dustin Gouker @DustinGouker

Sportsbook operator comes to realization it has no way to get into the four largest states as things stand now

Dave Portnoy @stoolpresidente

Emergency Press Conference - I Am Here to Save Sports Gambling in Florida https://t.co/2Ne6DQ97D9

January 14th 2022

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What we’re listening to

Be my baby: RIP Ronnie Spector.

Calendar

• Jan 14: New Jersey data

• Jan 24: Endeavor @Jefferies Winter Summit

• Jan 27: Rank H1

Contact us

• Scott Longley scott@clearconcisemedia.com

• Jake Pollard jake@openmediaservices.com