Entain to spend big on BetMGM despite 2020 losses in excess of $81m
CFO Rob Wood admits losses will “absolutely be greater” in 2021 as chairman Barry Gibson distances Entain from MGM with declaration of independence
You have to spend money to make money. That is clearly the strategy being adopted by Entain as it seeks to drive revenue and bolster market share in the US market via its BetMGM joint venture.
BetMGM – the betting brand formed in partnership with MGM Resorts – now expects to record full-year net gaming revenue (NGR) of around $180m after having upgraded the estimate three times.
Losses for the JV are set to break the £60m ($81m) mark for 2020 after the operator splashed the cash on new state launches, wide-ranging marketing campaigns and acquiring new customers.
This investment has so far has seen the operator achieve a US-wide market share of 12.5%.
During Q4, Entain CFO Rob Wood told analysts to prepare for more substantial losses in 2021.
He said: “We’re expecting significant growth in NGR (for BetMGM), you would imagine comfortably more than doubling. That also will mean a more than doubling of marketing spend and similarly losses, which you can expect to trend in the same direction.
“The losses will absolutely be greater than they were,” he added.
Entain CFO Rob Wood
Wood said “momentum was certainly building” in the US and this was proven last week when Michigan went live with digital gambling before a US Court of Appeals ruled the Wire Act does not include igaming, online poker or online lottery in a major victory for the gambling industry.
One analyst asked whether BetMGM would need to increase capital to keep pace with developments in 2021, or whether initial budget estimates were adequate.
“On increased capital, the pace of states coming online has been greater, the performance has been greater, player values have been better,” said Wood.
“It all points to the fact that additional investment equals greater return. I would suggest there is pressure to increase that investment more so than decrease.”
Outgoing Entain CEO Shay Segev agreed with his colleague, adding: “We are in a great position to inject further cash if we need to. It is very exciting and we are keen to accelerate this journey.”
Elsewhere at Entain, chairman Barry Gibson has come out fighting after US JV partner MGM walked away from a potential takeover after seeing its initial £8.1bn bid rejected by the Entain board.
In comments reported by the Sunday Telegraph, Gibson revealed the offer had already been increased twice behind closed doors, overtures which were also turned down by Entain.
“We’re not disappointed,” said Gibson defiantly. “We can deliver a lot more value for our shareholders over the next one to three years.”
Gibson, who became Entain chairman in February 2020, remains focused on Entain’s own M&A strategy, suggesting the firm had “another couple of quite large deals in development at various stages”.
The former Littlewoods CEO rejected claims the company’s future was inevitably tied to MGM due to the contractual complexities of the BetMGM arrangement.
“Anyone can buy Entain if they come up with the right price,” Gibson told the broadsheet newspaper.
“It is true that if the ownership of Entain were to change, there are certain clauses that would have to be negotiated between the new owner and MGM. [But there is] nothing to stop anyone making a bid for Entain,” he added.