Igaming Focus: Hard Rock soft relaunch, majors dominate, news shorts

November 9, 2023 8:00 AM
  • Jake Pollard, CDC Gaming Reports
November 9, 2023 8:00 AM
  • Jake Pollard, CDC Gaming Reports

Welcome to the latest edition of the Igaming Focus news roundup. These alternate with the in-depth commentaries that will continue on a biweekly basis now supplemented by a conversational breakdown of the week’s igaming news.

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In this week’s issue:

  • Hard Rock’s relaunched sports betting in Florida in anticipation of its broader gambling move on 7 December
  • DraftKings is the leading online gambling firm in the U.S. currently, while for Penn Entertainment the focus is on its ESPN Bet launch set for next week
  • For MGM, fallout from the hacking attacks of September will take center stage, while for Flutter Entertainment a potential US listing will dominate
  • M&A: Better Collective makes its play with Playmaker takeover
  • Data points: weekly hold down but October was a strong month for U.S. sports betting

Hard Rock in soft relaunch move

Live but limited: The Hard Rock group has reopened its sports betting app in Florida after more than two years of legal wranglings, but it will only be available to customers who opened accounts when the app first went live in 2021 for a limited period.

  • The Seminole tribe, which operates the app, will be opening sports betting to in-person registrants on 7 December as part of a gaming expansion that will include roulette and craps.
  • Players wanting to open betting accounts will need to register in-person for a loyalty account and join a waiting list.
  • Breaking: West Flagler files motion with the Florida Supreme Court to “immediately suspend” sports betting laws pending a final ruling in the case.
  • Further reading: No rush – why the Seminole are in no hurry to launch.

Majors dominate results

DraftKings and Penn Entertainment attracted most coverage in the past week, the former in particular as it reported a 57% annual rise in Q3 revenues to $790m and adjusted EBITDA losses of $153m, way down on the $190m-$220m it forecast during the summer.

  • Share lead: To cap off what has been a highly successful few months for the Boston-based group, with 31% it has edged ahead of its great rival FanDuel (30%) when it comes to overall online betting and casino market share, according to Eilers & Kreicjik.
  • For Penn, the focus unsurprisingly is on 14 November, the date it has set for launching its new sportsbook ESPN Bet across 17 states.
  • No riding shotgun: In what could be interpreted as a silent swipe at the doubters, CEO Jay Snowden commented that with ESPN fully committed to the venture, the aim would be to build “market share over time and not have a giant shotgun on day 1 and then you slowly leak market share”.
  • “That’s why our (marketing) approach, how we’re investing in promotional dollars, paid media, how we’re thinking about integrations, that’s all going to continue to build over time,” he added. Penn has set a digital breakeven/profitability timeline of 2025.
  • At group level, Q3 revenues were flat at $1.6bn and adjusted EBITDAR was down nearly 6% to $445m. Digital revenues were up 22.5% to $196m but adjusted EBITDA losses came in at $50m, a $1m increase on last year.
  • ESPN’s Hulu-balloo: It’s also worth noting that ESPN has bought Comcast’s 33% stake in streaming service Hulu for $8.6bn, in the process gaining full ownership of the platform.
  • Observers were quick to comment on it on social media, wondering whether it could enable ESPN to become the first (and only?) broadcaster to successfully roll out a fully integrated single-screen experience for sports bettors.

Hack attack: Moving on to this week, MGM Resorts (later today) and Flutter Entertainment (9 Nov) are set to dominate results news. The markets expect MGM revenues of $2.9bn-$3.05bn and adjusted EBITDA of $1.1bn, but they will also be wanting to see what impact September’s cyber attacks had on the casino group.

  • Recall, in October MGM said it expected to suffer a Q3 EBITDA hit of around $100m as a result of the attacks. It added that the cost would be covered by its insurance.
  • Hell’s kitchen: It also faces uncertainty over potential strikes from its Culinary Union workers.
  • For FanDuel parent Flutter, the Jefferies team said it expects group EBITDA of £1.5bn-£1.79bn in 2023 with US net revenues of £3.6bn-£3.9bn and US EBITDA of £90m-£190m.
  • Listing boost: The analysts said they were bullish on the group thanks to “material EBITDA upside from the growing US market and valuation multiple upside from the potential primary US listing”.
  • “Investor interest is moving on from ‘if the US will be profitable’ (‘firmly on track’), to the trajectory and sizing of profitability, we see £2.2bn EBITDA from the US alone by 2030, driving a 20% group EBITDA CAGR to 2030,” they added.
  • For Caesars, digital revenues were up 1.4% to $215m in Q3 and adjusted EBITDA was positive at $2m, while BetMGM NGR was up 15% (cc) to $458m. The group said 2023 NGR guidance would be at the upper end of $1.8bn-$2bn range, with positive EBITDA set for the second half of the year.

Better Collective makes the play  

Better Collective has acquired the North and Latin American-focused affiliate publisher  Playmaker Capital for a total consideration of €176m.

Transformers: The Danish affiliate giant described the deal as “transformational” as it will enable it to strengthen “its leading position in North America”. Just as important it expects “to become the market leader in South America with the largest audience across its (Playmaker’s) sports media brands”.

  • Playmaker is based and listed in Toronto and operates brands such as Futbol Sites, Yardbarker and The Nation Network. It said its Q3 revenues were €55m and EBITDA €15m.
  • At €176m the acquisition price represents an EBITDA multiple of 11.7x, which Better Collective expects to bring down to below 5x by 2026. BC will pay 35% of the total, or €61.5m, in cash and the rest in company shares.
  • Over 40s: Playmaker has “a combined monthly audience of more than 200 million visitors from across the Americas”, BC said in its statement, and added that post-integration synergies should bring EBITDA margins in line with its “publishing business of +40%”.
  • BC co-founder & CEO Jesper Søgaard said the acquisition would enable it to “significantly grow our audience and reach a larger segment of generalist sports fans”.

Data points – Primetime hurts hold

Bad week: The Macquarie team estimates that hold levels on pre-match bets were 5% for the week of 30 Oct-5 Nov, which implies NFL hold rates of just 1%, but 9% for all other sports as “primetime favorites hurt sportsbooks”, the analysts said.

  • Hoop rescue: The NBA may come to the sportsbooks’ rescue, with the analysts noting that New York’s overall handle “accelerated to +53% YoY” for the week 23-29 Oct to $527.4m.
  • The rise was “driven by FanDuel (+95% YoY) which likely saw a significant uptick from the start of NBA and its promo for three free months of NBA League Pass with a $5 bet”.
  • Strong month: The Jefferies team said overall October had been another strong month for US sports betting, with an estimated $1.3bn (+22% YoY) bet on the NFL in Week 8 (23-29 Oct), according to data from H2 Gambling Capital, and monthly handle rising 32% YoY to $5.3bn-$5.5bn as gross win increased 48% to c$600m.
  • Macquarie added that Q4 hold in the Big Apple was “trending to 8%, slightly below the long-term hold target”, while handle is up +32% YoY, with FanDuel up 48% and Rush Street Interactive up a whopping 189%.
  • If margins/hold rates were “mostly in line with expectations”, digital segments “easily beat expectations” thanks to strong OSB-iCasino volumes, the analysts added.
  • DraftKings was the main beneficiary of these trends as it reported Q3 hold of 9% thanks to strong baseball parlay, player props and live betting volumes.

Deutsche Bank meanwhile said there had been “a sharp recovery in the online gaming sector” despite further downgrades for Entain. The UK group however pointed “to steadily rising EBITDA margins and a reversion to growth from H2 2024”, the DB team noted.

  • In Italy however, Entain missed out on acquiring SKS365 (owner of the Planetwin brand) with local giant Lottomatica scooping that prize in a €639m deal.
  • DB noted that Entain needs “to scale up” in Italy but is held back by leverage levels that won’t be “coming down until 2025” and it “no longer has the balance sheet to fund” M&A.

News shorts

Arizona is the latest state to have ordered fantasy sports operators to stop offering DFS pick’em contests. Legal Sports Report said the Arizona Department of Gaming had joined the Mississippi Gaming Commission in sending cease and desist letters to DFS brands.

Betting and gaming supplier Every Matrix said net revenues were up 62% to €27.2m and EBITDA shot up 113% to €14m in Q3. The group went live with BetPARX in the US, bet-at-home in Germany and launched the Hungarian national lottery’s online brand TippmixPro during the quarter.

Kentucky’s seven online sportsbooks recorded $310m in betting handle to the end of October since launching on 28 September. Retail handle came in at $15M, having launched on 7 September.

Ten years after: The American Gaming Association produced this handy graphic illustrating the growth of online casino in the U.S. over the past 10 years.