Igaming Focus: Flutter mulls Boyd bid for Penn Entertainment

Thursday, July 11, 2024 1:21 PM
Photo:  Shutterstock
  • Igaming
  • Jake Pollard, CDC Gaming

Hello and welcome to this week’s Igaming Focus newsletter.

On the slate this week:

  • Flutter considers entering Boyd bid for Penn
  • Regulated Alberta online gambling worth $700m from Year 1
  • Gaming stocks positive as Q2 results loom
  • FanDuel and DraftKings to continue pulling away?
  • News shorts: Aristocrat Interactive, White Hat Studios-betPARX, Caesars Sportsbook-Zero Flucs, Instant Win Gaming-Pennsylvania Lottery

Source: Shutterstock

Flutter considers entering Boyd bid for Penn

Joint bid scenario sees U.S. market leader mull over bid for ESPN Bet as Boyd Gaming would take over Penn’s regional estate.  

Double bid: Penn Entertainment’s corporate fate continues to dominate the headlines with news that FanDuel parent company Flutter Entertainment might be teaming up with Boyd Gaming to launch a joint bid for the regional casino and ESPN Bet operator.

  • Shape of things: According to reports, a joint Boyd-Flutter bid would see the former take over Penn’s regional casinos while Flutter would acquire ESPN Bet.
  • Worth a flutter? Boyd reportedly put forward a $9bn bid for Penn in June, but for Eilers& Krejcik, when it comes to the online element of the deal, “the juice is probably not worth the squeeze” for Flutter.
  • Media fail: Should ESPN Bet get taken over by Flutter it would be another sign that tie-ups between mainstream sports media groups and bookmaking is not easy. Numerous broadcasters in the U.S. and Europe have launched online sportsbooks, only to close them down after racking up substantial losses.
  • Flutter owns the leading UK brand Sky Bet, which stands out as the exception to the rule that media and betting do not mix, and some believe it would stand it in good stead should it take over ESPN Bet, while Boyd’s 5% stake in Flutter’s FanDuel could be another factor in enabling the deal to go through.
  • However, while Sky Bet had the benefit of having a major media conglomerate behind it, its rise over the past 10-15 years also coincided with mobile becoming the preeminent channel for betting.
  • Its tone of voice and the way it attracted consumer interest for its ‘request-a-bet’ product by pricing up pre-weekend markets ‘live’ on Twitter on Friday afternoons also helped it build a loyal customer base in the highly competitive UK market.
  • ESPN Bet has found it hard to gain more than 5% market share since launching in November last year. Apart from its immediate post-launch surge to close to 10%, its Q2 2024 share stands at 3% according to Deutsche Bank and is a long way from the +20% target it set itself when it announced the ESPN partnership last summer.

  • Boyd’s new board: CDC Gaming picked up on the possibility of a Boyd approach for Penn a month ago when Boyd appointed the M&A specialist Michael Hartmeier to its board. With his extensive experience in carrying out gambling acquisitions, Hartmeier’s arrival was viewed as a sign that Boyd could be planning a swoop for Penn.
  • Meanwhile Flutter recently appointed ex-Disney executive Christine McCarthy to its board, with industry observers interpreting the move as a potential nod to ESPN parent Disney.
  • Under pressure: Penn is under pressure from activist investors to revive its fortunes, especially in the online sports betting sphere, where it has spent vast amounts on Barstool Sportsbook, theScore Bet in Canada and more recently on ESPN Bet, for minimal returns and market share.

Regulated Alberta online gambling worth $700m from Year 1

Regulatory model would mirror Ontario, widely considered to have been a success.

Replacement maneuver: The Canadian province of Alberta is set to regulate its online gambling market, although timelines are yet to be set. Dale Nally, Alberta’s minister of service, said the jurisdiction would establish a competitive regime to replace the current monopoly enjoyed by the PlayAlberta brand to replicate Ontario’s regulatory model that has seen it legalize online wagering and casino.

  • Alberta is Canada’s fourth largest province with a population of 3.3 million adults. The JMP analyst team estimated the market size at US$709m-$734m in GGR after three years of regulated activity, while initial GGR of US$700m would make Alberta “the eighth-largest jurisdiction in North America”.
  • Based on spend-per-adult and income-per-capita as a percent of income, sports betting GGR would represent c$200m, with online casino making up $514m-$533m of the total.
  • The regulatory framework as outlined by Nally would be similar to Ontario, which reported online sports betting and casino revenues of close to US$2.4bn in 2023.
  • Grey and already very competitive: Noting that five operators “account for 80% to 90% of the U.S. market”, which makes it “more concentrated compared to international gaming jurisdictions”, JMP said that app download data “highlights a more competitive playing field” in Ontario, with Bet365, Flutter and theScore Bet dominating there.
  • Fantasy land: The competitive setting would be replicated in Alberta and with fantasy sports betting already legal, this would imply that “FanDuel and DraftKings are on a more even playing field” and could compete with the likes of Bet365 or Super Group’s Betway.
  • Speaking of Betway, Super Group has announced that it will leave the U.S. sports betting market to focus on its online casino activities in New Jersey and Pennsylvania. The move is not surprising and emulates those of companies like 888, Tipico or Kindred, which have all struggled to build market share. The group did not provide a timeframe for its exit.

Gaming stocks positive as Q2 results loom

JMP says headwinds are particular to sector and evident across international markets. 

Regulatory impacts: As Q2 results season approaches, the JMP team said ongoing market sentiment towards the U.S. online gambling sector “should not be viewed negatively, but rather as typical factors associated with online gaming”, with stock performance in 2024 highlighting “a sector that is outperforming consumer discretionary” at +8% on average.

  • Operational efficiencies (aka budget and spending cuts) dominated 2023 for most operators but led to upside results, while 2024 is demonstrating headwinds such as “regulatory oversight, consumer protection, and bad sporting outcomes [as] key drivers of underperformance, with investors assessing the volatile nature of these events and how to navigate online gaming”.
  • JMP said it remained “constructive on the sector and investors should be looking for companies with scale and resources in the U.S.” as these factors were international, “as highlighted with the UK White Paper, the ban on credit cards for payment in Australia, or an attempt to ban online slots in the Netherlands”.

 FanDuel and DraftKings to continue pulling away?

Igaming investor Chris Grove underlines importance of product quality as smaller U.S. operators likely to compete with each other rather than take on FanDuel or DraftKings. 

Keep pulling away: The U.S. online sports betting market will be worth close to $20bn by the end of 2026 and FanDuel and DraftKings will consolidate their market share leads as they already represent 75% of the market and regularly “trade” share, Chris Grove, co-founder of Acies Investments and partner at Eilers & Krejcik Gaming, told delegates at the recent EGR North America briefing.

  • The situation is compounded by BetMGM and Caesars seeing their shares declining materially in recent times, while newer entrants “may find better growth opportunities by targeting players from other small operators” rather than taking on the two market leaders, he added.

Parlay-vous: Parlays are key betting products for all sportsbooks, but not all are equal, with market leader FanDuel generating nearly twice the hold levels of brands like ESPN Bet and BetMGM. Grove said “pricing technology, broader sports roster, UX/UI, integration of parlay offerings into broader promotional strategy, and overrepresentation of casual players in the customer mix” were some key factors in how parlays influenced operators’ revenues.

Good average: Grove said another key metric was average revenue per monthly unique payer (ARPMUP) as reflected by smaller, but highly focused operator Rush Street Interactive, while FanDuel’s and DraftKings’ “greater mix of casino players vs. sports bettors, a stronger sportsbook product (e.g., better parlay product), a stronger CRM system, and better VIP management” were all helping them drive those key metrics.

Source: Shutterstock

Caitlin Clark boosts number of bets on WNBA games by 380%

Clark fever: Online customer retention specialist Optimove has revealed that WNBA star player Caitlin Clark’s team the Indiana Fever saw an average increase of +380% in bets compared to baseline games.

  • Optimove analyzed more than 15 million bets placed on 43 WNBA games and found that the Indiana Fever saw an average betting increase of 380% compared to the baseline game, Seattle Storm vs. Washington Mystics.
  • The highest increase in bets was 544% for the Connecticut Sun vs. Indiana Fever game, while games without Caitlin Clark still experienced a 162% increase over the baseline, “highlighting Caitlin Clark’s significant influence on betting behavior”, said Optimove.
  • The company added that the Women’s March Madness tournament showed a 620% increase in bets over baseline game and that WNBA games played since revealed that “individual players can significantly influence the betting landscape”.

News shorts

Aristocrat has launched its Aristocrat Interactive brand, which connects the digital gaming and betting operations of Anaxi, NeoGames, Aspire Global, BtoBet and Pariplay under one brand. The new division will launch its new website on 1 September.

  • Ilottery will be headed by Chris Shaban, content and aggregation will be led by Adrian Baile, gaming systems will be led by Neil Crossan, sports betting by Dima Reiderman and white-label activities will be led by Jonathan Chilton.

White Hat Studios’ casino content has gone live with betPARX in Pennsylvania and will launch its content with betPARX across Michigan and New Jersey over the coming months.

Caesars Sportsbook has acquired the Australian sports betting technology provider Zero Flucs. The group was already providing Caesars with services to enhance its parlay offering.

Instant Win Gaming has launched its instant win product suite eFastPlay with the Pennsylvania Lottery and said the state was the first to launch those types of games which are branded as “EZ eInstants.”