DraftKings acquires VSiN, New York sports betting controversy, and other notable stories in the sports betting and iGaming space.
Welcome to the latest edition of "Bet On It," where The Fly looks at news and activity in the sports betting and iGaming space.
SECTOR NEWS: Macau's Gaming Inspection and Coordination Bureau reported gross revenue from games of fortune in the region increased 58% to 8.31B patacas in March compared to the same month of last year, the highest monthly total of 2021. This compares to a 135.6% year-over-year increase in February to 7.31B patacas and a 63.7% year-over-year decrease in January to 8.02B patacas. The aggregate gross gaming revenue, or GGR, in the three months to March 31 was up about 8% from the fourth quarter of 2020. Casino companies that do business in Macau like Las Vegas Sands (LVS), MGM Resorts (MGM), Wynn Resorts (WYNN) and Melco Resorts and Entertainment (MLCO) all saw benefits from the increase.
As sports gambling and iGaming become more prevalent across the U.S., deals between operators and content producers have been consistently popping up. Early examples include deals between Sinclair Broadcast (SBGI) and Bally's (BALY) as well as Penn National (PENN) and Barstool Sports. This week, two more similar deals were reached. Firstly, DraftKings (DKNG) announced that it has acquired Vegas Sports Information Network, a multi-platform broadcast and content company delivering sports betting news, analysis, and data to U.S. sports bettors since 2017. VSiN, which operates out of Las Vegas, develops, produces, and distributes up to 18+ hours of live linear sports betting content each day. In addition to its 24/7 stream, VSiN's original content is accessible through multiple video and audio channels including Comcast Xfinity, Sling TV, fuboTV, Rogers' Sportsnet, MSG Networks, NESN, AT&T Pittsburgh, Marquee Sports Network, a dedicated channel on iHeartRadio and TuneIn, as well as terrestrial radio stations throughout the country, and its growing slate of podcasts and betcasts. DraftKings' vision is for Brian Musburger and his leadership team to continue to manage day-to-day operations while maintaining editorial independence. DraftKings intends to fully integrate VSiN's current employee base located in Las Vegas, including its on-air talent, into its 2,600 person global workforce. Secondly, BetMGM (MGM) announced a multi-year deal with Audacy (AUD), formerly Entercom Communications (ETM), designating the sports betting and gaming platform as a preferred sports betting partner of Audacy across its sports broadcast stations, the Audacy and Bet QL apps and digital platforms, and the "BetQL Audio Network." Key partnership details include integrated content across Audacy's broadcast sports stations, customer acquisition opportunities, and talent endorsements across Audacy's wide spectrum of local and national sports betting content.
Scientific Games (SGMS) announced the launch of its lottery retail solutions for instant game purchases in the checkout line with SCiQ InLane technology. Through a recent partnership with the Kentucky Lottery, Kroger (KR) and Blackhawk Network, shoppers at Lexington, Kentucky area Kroger stores are now purchasing scratch games along with other grocery items in "one convenient transaction in the checkout lanes," the company said The long-term initiative with SCiQ InLane is expanding to other Kroger markets. Currently, instant games are a nearly $60B consumer product category in the U.S., with grocery stores representing approximately $11B, or 18.5%, of total instant game retail sales. Additionally, Exacta Systems announced that it signed an agreement with Las Vegas-based gaming equipment supplier Scientific Games to bring game content, featured on Scientific Games' award-winning game cabinets, onto the Exacta Historical Horse Racing, or HHR, system.
DEBATE AROUND NEW YORK SPORTS BETTING: Earlier this week, Deutsche Bank analyst Carlo Santarelli told investors in a research note that comments from New York politicians to media outlets appear "far more pessimistic" than those of several weeks ago around the prospects of legalizing sports betting in this legislative session. The analyst sees "too many variant agendas" and "too little time" to get them sorted out in this budget session. As such, Santarelli thinks New York mobile legalization "appears to be kicking the can for another time." Credit Suisse analyst Benjamin Chaiken, on the other hand, said that while investor sentiment shifted negative earlier this week, he expects New York online sports betting will make it into the budget, and likely be some hybrid of what Governor Cuomo originally wanted and what legislators wanted. The analyst's sense from news reports and industry contacts is that both sides may land in a scenario where there still is a competitive bid but also a minimum number of licenses. New York's budget could miss the April 1 deadline, with discussions persisting into the weekend, so we may not have an exact answer until early next week, said the analyst. For the commercial casinos, DraftKings has the first license at Del Lago, FanDuel (PDYPY) has the first license at Tioga downs, BetRivers has the first license with Rivers, Bet365 has the first skin with Resorts World Catskills and Barstool has the second license with Rivers, he points out. Chaiken says it is hard to imagine a $500M license fee for each of the three downstate casinos would come without a sports betting license.
Legal Sports Report's Matthew Waters reported that the three sides at the negotiating table are still puling for their version of mobile New York sports betting. Assemblyman Gary Pretlow told LSR on Wednesday he thinks New York sports betting will expand to mobile. However, he noted Governor Andrew Cuomo might be the only one pleased with the outcome. “I’m thinking we’re going to have some form of sports betting but I don’t think it’s going to be what anybody wants,” Pretlow said. “He’s modeling it after New Hampshire. New Hampshire is not a successful program but he thinks the state can make all of this tax money and that’s what he’s sticking to.” Pretlow reportedly has intentions for a review after one year that says if the model is not working, it can change to what the legislature wanted.
Loop Capital analyst Daniel Adam kept his Buy rating and $105 price target on DraftKings following a selloff on the media report that the future of online sports betting in New York is "hanging by a thread", stating that he would be a buyer of the stock going into the state's budget deadline as the market is now discounting the adverse scenario. The analyst contends that State Senator who made the comments may have been "playing politics" amid a negotiation, and there is still hope for online sports betting in NY in the current budget session. Adam adds that the secular tailwinds that favor legalization across an increasing number of states should benefit online gaming operators, particularly the market leaders like DraftKings.
WHERE STATES STAND AT END OF MARCH: Truist analyst Barry Jones noted that early March weekly gross gaming revenue data trended very positively. He told investors with the worst of COVID closures/restrictions in the rearview as vaccine distribution ramps, operators will look towards warmer weather as a sign of better things to come. In his legislation update, Jones said gaming remains a difficult lift for Texas, and the legislature is only on step one of the two-step process as the voters still need to approve anything that is first approved through legislation. According to the analyst, land-based gaming looks more likely in 2023 than in 2021. The Chicago market is also supposed to be hyper competitive, said Jones. MGM Resorts, Wynn Resorts, Hard Rock and Rush Street (RSI) have all shown interest in the market. However, the Illinois licenses that were approved in 2019 have experienced delays. In Virginia, the city has removed proposals of Wind Creek, Golden Nugget (GNOG), and the Pamunkey Tribe from consideration. Bally’s, Cordish and Urban One (UONE) have the three remaining proposals. While there are few details regarding why these three were removed from consideration, other proposals face opposition from locally elected officials and constituents, Jones told investors. Lastly, Bills in Alabama and Nebraska have come under serious opposition and the timetable for legal sports betting in any variety remains unclear.
PUBLICLY TRADED COMPANIES IN THE SPACE INCLUDE: Accel Entertainment (ACEL), Bally's (BALY), Boyd Gaming (BYD), Caesars (CZR), Churchill Downs (CHDN), DraftKings (DKNG), Flutter Entertainment (PDYPY), Gan Limited (GAN), Las Vegas Sands (LVS), MGM Resorts (MGM), Penn National (PENN), Rush Street Interactive (RSI), Scientific Games (SGMS), Score Media (SCR), William Hill (WIMHY) and Wynn Resorts (WYNN).