The month in US sports betting: Texas is toast and fresh platform acquisition rumors swell

Sands sizing up 888?

Per the rumor mill, Las Vegas Sands is said to be mulling whether to acquire online operator 888 Holdings. Details are scant, but a few quick thoughts. First, and as MGM’s failed bid for Entain showed, 888 won’t come cheap. Second, US market access would be a challenge—but not an insurmountable one.

Sands and 888 have very small US footprints, but Sands in particular has the financial wherewithal to play aggressively for market access, and its ability to secure casino licensure in tier-one markets like Texas and New York could prove transformational to the market-access footprint of the combined entity.

Third (and speaking of financial wherewithal), Sands has the war chest to assemble a roster of top-tier online gambling assets—which has us wondering whether a Bally’s-style shopping spree may be in the offing.

New bill in New York forthcoming

Chatter about populous New York legalizing online sports betting as part of this year’s budget is trending up. In recent days, checks that have historically been cautious about New York have struck a much more optimistic tone, suggesting 2021 is odds-on-ish.

We understand that Governor Andrew Cuomo and the legislature remain in discussions over the structure of a potential operating model, and that a new bill from Senator Joe Addabbo is expected later this month. That bill, which checks say is likely to include a materially higher license fee and tax rate than Addabbo’s current bill ($12m and 12%), is apparently being designed to satisfy Cuomo’s desire for maximizing revenue from online sports betting. We’re hearing that Cuomo, as ever, is playing his cards close to the vest, but that he is amenable to compromise with the legislature. Checks expect debate over online sports betting to accelerate in late February/early March ahead of the April 1 budget adoption deadline.

A December to remember for BetMGM

Per publicly available data and our proprietary GGR-by-brand tracking, BetMGM made some pretty major moves in December. In the relatively mature market of New Jersey, for example, BetMGM achieved ~11% online GGR share—an all-time best that is 57% above its trailing 12-month average. Meanwhile, in the newer and more opaque markets of Colorado and Tennessee, we estimate that BetMGM captured between 35% and 40% GGR share—ratios that have thus far been reserved for FanDuel and DraftKings.

We’re talking GGR here—and we’re also talking nascent markets like Colorado and Tennessee—so the usual caveats (promotional spending, volatility, small sample size) all apply. Still, in our view, the results are the latest indicators that BetMGM is ramping up and intends to make good on its promise to catch DraftKings and FanDuel atop the state-by-state online sports betting GGR leader boards.

Texas is toast

Earlier this month, Texas Lieutenant Governor Dan Patrick said something that should surprise approximately no one, which was that sports betting “is not an issue that is going to see the light of day this session.”

A few things. First, Patrick and his immediate superior, Governor Greg Abbott, have long publicly opposed gambling expansion. Second, we’re hearing that there is little to no political will to take up sports betting in the Senate, which Patrick controls (indeed, the coalition of local professional sports and gambling interests backing an industry-friendly draft bill apparently cannot find a Senate sponsor to introduce the bill). Third, what little political oxygen exists for gambling expansion this year is likely to be consumed by a Las Vegas Sands-led lobbying push for land-based casino expansion. For now, therefore, we remain negative on Texas. And short of an unforeseen, upside surprise, we doubt that Texas will become a plausible candidate for online sports betting expansion in 2021.

Fantasy sports assets: Going, going, gone

As the last few weeks in US online sports betting has shown, top-of-funnel assets are particularly hot commodities. Caesars took a minority stake in fantasy operator SuperDraft (and has the option to take up to 100% of the company), while uber-acquisitive Bally’s announced plans to ingest fantasy operator Monkey Knife Fight.

Fantasy, and particularly DFS, assets have been key to the early and outsized success of FanDuel and DraftKings, with DFS providing a database of readily cross-sellable players who have been KYC’d (and, perhaps more importantly, already have money on deposit). While there are a smattering of fantasy-oriented assets still up for grabs, including FastPick, they are unlikely to offer significant, turnkey customer acquisition power due to the relative shallowness of their existing customer databases. Still, given the escalating competition for user acquisition advantage in US online sports betting, we doubt those assets will remain available for much longer.

Daily Fantasy Football lineup research.

What’s next for DAZN?

We’ve heard plenty of speculation about subscription-based sports streamer DAZN and its plans for online sports betting after the streaming giant hired Shay Segev away from Entain in January, just six months into his tenure as CEO. However, channel check chatter suggests the hire was more about Segev’s technology credentials than his gambling bona fides.

Of note, one check suggested the company was much more likely to go down The Athletic route and do a marketing deal with a US sportsbook rather than the FuboTV route and launch an in-house betting product. DAZN was also mentioned as a potential target for the growing number of SPACs springing up.

Eilers & Krejcik Gaming LLC is an independent research and consulting firm with branches in Orange County, California and Las Vegas, Nevada.

The firm’s focus is on product, market, and policy analysis related to the global regulated gambling market. Clients include operators, suppliers, private equity and venture capital firms, institutional investors, and state governments.

To learn more about the firm, visit http://www.ekgamingllc.com.