Seminole Tribe of Florida (with an Assist from Disney) Protects Florida Gambling Monopoly

Seminole

The Walt Disney Company spent $20 million in support of a ballot initiative that would give Florida voters the right to prevent the expansion of casino gambling within the state, a measure designed to protect their tourism interests and the state’s brand as a “family friendly” destination. Amendment 3 of the Florida Constitution passed on Tuesday evening, with more than 70% of the state’s voters backing the law that will require new casino projects to gain the support (60% must vote in favor) of the state-wide voting public prior to breaking ground; few (if any) projects are likely to meet the 60% benchmark. MGM Resorts International (seeks licensure in state), the Miami Dolphins and the Tampa Bay Buccaneers (both NFL teams are hoping to profit on sports betting) were among those that publicly opposed the measure; each of the 3 entities spent $500K on the proposed amendment’s “no” campaign.

Howie Long-Short: Disney (DIS) was invested in the amendment passing for its own selfish reasons, but there’s no bigger beneficiary to the “Voter Control of Gambling” amendment passing than the Seminole Tribe of Florida (spent $16 million on “yes” campaign). The Tribe dominates the Florida gaming landscape, operating in the state under a Federal gaming exemption afforded to Native Americans with little competition; the amendment’s passage ensures the moat remains around their business.

The long and costly battle for gaming company expansion into the state just became infinitely more difficult, but don’t expect casino operators to give up on Florida. Dan Alkins (Chairman of the committee opposing the ballot initiative) said should the measure pass “there’s going to be litigation just continuing on forever.” The state’s size/population, reputation as a tourism destination and abundance of retirees makes it a highly desirable locale for casinos to take up residence.

It’s worth pointing out the irony in the Miami Dolphins opposition of the amendment, while playing their home games at Hard Rock Stadium; a chain owned by the Seminole Tribe and the one that will pay the franchise $250 million over the next 18 years for naming rights.

Speaking of MGM Resorts International (MGM), the company is reportedly exploring a potential merger with Caesar’s Entertainment (CZR) to form a gaming behemoth (think: +/- 50% of all hotel rooms in Las Vegas and Atlantic City). While there’s no offer on the table (and it’s possible regulators could determine a merger would create “undue economic concentration), it’s known that “without a CEO, Caesar’s is in play” and that it’s CZR’s activist investors (own +/- 25%) driving the tie-up talk; a merger would allow the combined companies to eliminate redundant “overhead and marketing” expenditures. Wynn Resorts (WYNN) and the Genting Group (OTC: GEBHY) have also been names as companies that could have interest in a CZR (-25% YTD) take-over. With licenses in 13 states (49 casinos), the company is well positioned to benefit from wide-spread sports betting legalization.

Fan Marino: Howie mentioned Las Vegas and Atlantic City, so it seems like an opportune time to note that Eilers & Krejcik is projecting New Jersey sportsbooks will generate more sports betting revenue than those in the gambling mecca, as soon as 2021 ($442 million vs. $410 million). The boutique research firm (with a focus on the gaming industry) supported their thesis by pointing out NJ gamblers can make “sports betting transactions” on credit card (as opposed to being forced to make a deposit in a casino), that the state’s sportsbooks have created a highly competitive online/mobile market (think: pricing/promotions) and that state’s licensees have had “very high rates of black market recapture.”

Interested in Sports Business? Sign-up for our free daily email newsletter list, here!

NHL Signs 1st Sports Betting Partnership, Caesars and William Hill In-Arena at Prudential Center

NHL

The NHL has signed its first sports betting partnership, a multi-year pact with MGM Resorts International (MGM) that gives the global hospitality and entertainment company access to the “advanced game data” needed to create in-game prop bets on league games; MGM will also gain use of NHL intellectual property (think: logos, consumer data) for use in marketing/promotions. Beginning with the ‘19-’20 season, the NHL will track player positioning and the puck’s movement on the ice; real-time data proprietary to the league, but not exclusive to MGM Resorts. No financial terms were released, but the NHL will not receive a share of sports betting profits or an “integrity fee” as part of the deal.

HBSE (owner of NJ Devils, Prudential Center and Philadelphia 76ers) announced a pair of sports betting partnerships within the last week. It was first revealed that William Hill (WIMHY) is set to open a sports betting lounge (20+ screens) at Prudential Center (no betting terminals, mobile only); as part of the agreement the Devils will show William Hill odds on the world’s largest, in arena, center-hung digital scoreboard during intermissions. Most recently, HBSE publicized a pact with Caesars Entertainment (CZR) for both the Devils and 76ers. Caesars too will have a premium restaurant and bar (aka lounge) at Prudential Center to introduce fans (premium seat holders have access during Devils games) to their “sports betting experience”; the company will promote their “non-sportsbook elements” in Philadelphia, until sports gambling legislation is passed in the state of PA. The deal includes extensive branding for Caesars at both the Prudential Center and Wells Fargo Center (home of the 76ers).

Howie had the chance to meet with Michael Grodsky (VP of Marketing & PR, William Hill) and Michael Marino (SVP Customer Loyalty & Chief Experience Officer, Caesars Entertainment) to discuss data rights, in-arena sports betting, the sport(s) likely to see the biggest boost from widespread sports gambling and what (if anything) the gaming companies can do to self-regulate themselves so fans aren’t inundated with sports wagering ads during games.

Howie Long-Short: The NHL’s announcement of their first sports betting partnership focused heavily on the data rights MGM will assume rights to. How valuable is proprietary league data?

Marino (Caesars): In the long run, if you have a mobile device in everybody’s hand that is betting sports, then the real-time data becomes more interesting. That’s not the case today. In the United States, it’s still a brick and mortar play and mobile is only relevant in one state (New Jersey). So, for now, I don’t think it’s as big of a deal and that’s really the approach we’ve taken at Caesars; we’ll eventually partner with different legal entities too, it’s just a matter of how. So far, local makes a lot more sense for us than (league-wide) national scale (partnerships) does. 

Howie: While it’ll be new for Devils fans, Las Vegas Golden Knights fans got to place bets from inside the arena during their inaugural season last year. William Hill is a sports betting partner of T-Mobile Arena. How did having the ability to place bets during live NHL games impact business?

Grodsky (William Hill): We saw growth (in Nevada) in ice hockey, last year. The Golden Knights strong start helped as they were making our customers a lot of money, but when looked at the data from T-Mobile Arena (home of Golden Knights), folks weren’t just wagering on the event they were attending; they were betting on games across the league.

Howie: What sport is going to experience the biggest positive impact, in terms of viewership/engagement, from widespread legalized sports betting?

Marino (Caesars): I think the one that will benefit most is golf. Golf is a series of micro events; every hole can be its own unique bet. Inside of the big four sports, baseball fits that same description; it’s perfectly set up for betting on 18 micro games. I don’t think you see that in football, basketball is too fluid. Hockey saw an increase in betting because the town (Las Vegas) supported the team, but nothing changed other than the team showing up.

Howie: There are 3 gaming companies referenced in this story alone and it’s safe to assume more will be partnering with teams/leagues; each will be focused on consumer acquisition. Is there anything Caesars and the rest of the gaming companies can do to regulate themselves so that the fans aren’t inundated with ads during games (see: Labour Party’s proposed ban in U.K.)?

Marino (Caesars): DraftKings and Fanduel really upset the industry because every single TV ad during NFL Games was for those two companies; it just got to the point where people didn’t want to see them anymore. For us, it’s about targeting. If you put your brand in a place like Prudential Center, where the fans attending are more likely to be interested in your product, that will work a lot better than buying a bunch of TV ads. We’ve always been much more targeted marketers. We try to be smart about where we spend our dollars to get a return and we try to put our ads as close to the customer that we want, as possible; as opposed to putting it out there for the masses.

Fan Marino: A study commissioned by the American Gaming Association estimated that a “widely available, legal, regulated” sports betting market could be worth $216 million/year in newfound revenue to NHL franchises. Nielsen Sports projected that the increased viewership and fan engagement associated with sports betting could boost the value of media rights, sponsorships, merchandise and ticket sales +3.5% (worth $151 million), the remaining $65 million was attributed to gaming company expenditures; advertising ($24 million), sponsorships ($35 million) and data rights ($6 million).

Interested in Sports Business? Sign-up for our free daily email newsletter list, here!

Mississippi Becomes 4th State to Offer Legalized Sports Betting, William Hill Partners with 11 MS Casinos

Seal of Mississippi

Mississippi became the 4th state (NV, NJ, DE) to offer legalized sports betting on Wednesday August 1st, with the opening of sportsbooks at the Beau Rivage Casino in Biloxi and Gold Strike Casino in Tunica; properties owned by MGM Resorts International. The newly passed legislation allows for sports fans in the state to place bets on individual sporting events at land or water-based “legal gambling establishments” (i.e. casinos). MS sports bettors who wish to place in-game bets will be forced to visit their local casino as mobile betting will be restricted to those on the casino’s physical premises.

Howie Long-Short: Mississippi Rep. Richard Bennett believes legalized gambling will be a boon to the state’s tourism business declaring, “Mississippi welcomes you. We hope you’ll come, wager on sports betting and see what we have to offer in the Hospitality State”; and he just might be on to something. No other state in the deep South offers legalized sports betting and neighboring Alabama is responsible for more illegal college football bets per capita than any state. Wondering how long will this advantage last? According to Dustin Gouker of LegalSportsReport.com, Mississippi’s advantage (see: no competition) is likely to last “at least a year and feasibly longer”; with Louisiana, Tennessee and Kentucky the states most likely to join the party first.

In addition to MGM, Boyd Gaming (BYD) and Caesars Entertainment (CZR) both own gaming properties in MS. Speaking of BYD, just 2 days after the company announced a market access agreement with MGM Resorts International (MGM), BYD revealed it had aligned with FanDuel Group (PDYPY) to run online and mobile sportsbook operations in the U.S. FanDuel technology will power Boyd Gaming branded online and mobile sportsbook operations, while FanDuel Group will leverage BYD’s 15 state licenses (36% of population) to operate FanDuel branded online and mobile sports betting services in those states; the deal extends to MGM properties in states where mobile sports betting is authorized.

Fan MarinoMGM got out of the gate first in MS, but William Hill has made the greatest inroads, announcing partnership agreements with 11 MS casinos (and another West Virginia). WIMHY, which now operates in all 4 states that offer legalized sports betting, has no intentions of slowing down either; in fact, they recently stated their intentions to add gaming partners in 14 more states, Rhode Island being one of them. The company will offer “operational expertise, risk management and trading data” to support IGT, should their bid be selected in the Ocean State; IGT was the only company to submit a bid to provide sports betting within RI.

Interested in Sports Business? Sign-up for our free daily email newsletter list, here!

MGM Resorts, Boyd Gaming Form “Unprecedented” Online Gaming/Sports Betting Partnership

MGM

It was a busy Monday for MGM Resorts International (MGM) as the company confirmed reports of a joint venture with GVC Holdings (as discussed in yesterday’s newsletter) and announced an “unprecedented” online gaming/sports betting partnership with Boyd Gaming (BYD). Combined the two companies will maintain brick and mortar casinos in 15 states, with both being able to offer online and mobile gaming in jurisdictions where either is licensed to operate; GVC technology will power their platforms. The market access agreement with BYD gives MGM the ability to “expand our entertainment options for guests (30 million life Rewards members) beyond their visits to our land-based resorts” (think: sports betting, iGaming, poker); Boyd picks up the “opportunity to potentially an add an online presence in 5 additional states.”

Howie Long-Short: This deal puts MGM and BYD on an even playing field with Penn National Gaming (PENN) and Caesars Entertainment Corp. (CZR), which operate in 15 and 13 states, respectively. Speaking of Caesars, the company announced it would introduce land-based sports betting in both NJ (begins Tues at The Bally’s, Wednesday and Harrah’s) and Mississippi (first to offer in MS) prior to the start of the football season. CZR sportsbooks are powered by Scientific Games (SGMS) technology.

As for BYD, the company reported Q2 earnings on July 26th. Revenues (+2% to $616.8 million) and EBITDA (+8% YoY to $163.4 million) grew across every sector of the business and “companywide operating margins reached record levels.” Shares rose +1.5% on Monday’s news, closing at $35.92

Fan Marino: Everything is turning up Aces for MGM (pun intended), as the Las Vegas WNBA team owned by MGM Resorts International has been awarded the 2019 WNBA All-Star Game.

Interested in Sports Business? Sign-up for our free daily email newsletter list, here!

SportRadar Valued at $2.4 Billion, EQT Sells 35% Stake

SportRadar

Less than 2 months after SCOTUS struck down PASPA allowing for the legalization of single game sports betting on a state-by-state basis, EQT sold its stake (35%) in Sportradar to the Canada Pension Plan Investment Board (CPPIB) and TCV (a P.E. firm), at a $2.4 billion valuation (including debt). Sportradar provides statistics, results, odds suggestions, virtual gaming and risk management services for licensed betting operators around the world; the company also has a sports data component (work with 65 organizations, including NFL and NBA) and has established itself as the authority in the sports betting Integrity Services space (i.e. fraud detection). EQT intends on re-investing an undisclosed portion of the sales proceeds in a small SportRadar stake; SportRadar will not receive any new capital. CPPIB and TCV bought 37% of the company in total, acquiring the remaining 2% of shares from minority investors; the deal is expected to close in Q4.

Howie Long-Short: EQT is a Swedish P.E. group that trades on the NYSE under the symbol EQGP. It was reported that EQGP’s bid won out over rival buyout firms KKR & Co. and Blackstone Group. At $2.4 billion the sale price represents a return of 4+ times, on the $52 million investment EQT Partners made in SportRadar back in July ‘12. Shares rose +1% ($24.00) on Monday’s news.

For informational purposes, the company generated $145 million in ’17 EBITDA (before the cost of sports rights) on $336 million in sales. The NFL, Mark Cuban, Michael Jordan and Ted Leonsis are all invested in the company.

Fan Marino: Height Capital Markets has projected that 16 U.S. states (outside Nevada) will offer single game sports betting before the end of 2019, generating +/- $700 million in “new” gross gaming revenue. If that’s accurate, Penn National Gaming (PENN), Caesars Entertainment (CZR) and Pinnacle Entertainment (PNK) are the gaming companies that will have the largest land-based casino presence within states that offer sports betting next year; with 17, 15 and 11 properties, respectively. Eldorado Resorts (ERI, 10 casinos), Boyd Gaming (BYD, 9 casinos), Tropicana Entertainment (TPCA, 5 casinos) MGM Resorts (MGM, 4 casinos), Churchill Downs (CHDN, 3 casinos), Full House Reports (FLL, 2 casinos), Empire Resorts (NYNY, 2 casinos) and Dover Downs (DDE, 1 casino) all expect to be in business as well.

Interested in Sports Business? Sign-up for our free daily email newsletter list, here!

SCOTUS Strikes Down PASPA in Historic Ruling, Legalized Sports Betting to Spread Nationwide

Scotus

In a historic announcement, the SCOTUS ruled (6-3) to strike down PASPA; the national law preventing individual states (save Nevada) from offering betting on the outcome of a single sporting event. Justice Samuel Alito wrote, “Congress can regulate sports directly, but if it elects not to do so, each state is free to act on its own. Our job is to interpret the law Congress has enacted and decide whether it is consistent with the Constitution. PASPA is not.” The ruling effectively places the decision to authorize sports betting in the hands of the individual states. Several have already passed legislation (NJ + PA, CT, WV & MS), with upwards of 27 others expected to offer wagering on sporting events within 5 years. It’s important to note that federal law prohibits wagering across state lines, so gamblers will have to be physically located in a state that has passed sports betting regulation to legally place a bet on a game; even with online and mobile betting available elsewhere in the country.

Howie Long-Short: A fall ’17 study by Eilers & Krejcik estimated that if sports betting were to be legalized on a nationwide basis, it would generate $7.1 billion annually in new revenue at casinos & racetracks. That figure grows to $16 billion per year, when you count the revenue generated from gaming websites and mobile apps; so, it’s easy to understand the enthusiasm surrounding the announcement. Interestingly, English bookmakers William Hill (WIMHY, +14.39% to $17.73) and Paddy Power Betfair (PDYPY, +12.56% to $55.20) were Monday’s biggest winners; though, Scientific Games Corp. (SGMS, +11.15%), Stars Group, Inc. (TSG, +8.97%), Caesars Entertainment Corporation (CZR, +5.46%), Churchill Downs, Inc. (CHDN, +4.87%), Penn National Gaming (PENN, +4.68%), Boyd Gaming (BYD, +3.06%), Pinnacle Entertainment (PNK, +1.88%) and MGM Resorts International (MGM, +1.64%) all finished up on the day as well.

We’re not surprised that William Hill (WIMHY) had the biggest pop among the companies listed above, as we told you on April 24th that no European gaming company was better positioned to capitalize on legalized sports betting, in the United States, than they are. Back in ’13, the company bought the rights to run the sportsbook (and split profits 50/50) at Monmouth Park (NJ), if ever permitted by law, for $1 million; a remarkably shrewd investment considering the minimal capital investment required and the potential payoff they’ll now realize (+/-$750 million/year in sports betting revenue). The company has since announced plans to add a 2nd $5 million sportsbook on the premises. WIMHY will be the first sports book in NJ to accept bets, with Monmouth Park expecting to open its doors within 2 weeks; though residents in Mississippi, Delaware and West Virginia can all expect to be able to place bets at their local casinos by the first Sunday of the NFL season.

Fan Marino: MLB put out a statement saying the decision would have “profound effects” on the sport, but no one is more bullish on legalized sports betting than Dallas Mavericks owner Mark Cuban. Cuban believes that “everybody who owns a top-four professional sports team just basically saw the value of their team double at least.”

I asked SportsHandle.com Editor-in-Chief Brett Smiley for his thoughts on Cuban’s remarks?

Brett: Cuban’s guesstimate strikes me as a bit of an exaggeration, but there’s wide recognition amongst the leagues and owners that legal sports betting will increase ratings, increase revenue and create more opportunities. Sports bettors are more engaged and for longer periods of time. There will be other opportunities to sell data, partnerships, sponsorships and so forth.

It sounds like an exaggeration to me too, but if $300 billion were to be wagered annually and the leagues got their 1% “integrity fee” on a nationwide level (highly unlikely); they would be splitting $3 billion annually. Divvy up that newfound revenue between +/- 120 pro sports franchises and you’re adding $25 million in profit to each team’s bottom line. The Mavericks only generated $21 million in operating income last season. Sure, that’s a bunch of “ifs”, but once you add in all the other revenue streams that Brett referenced, Cuban may not end up being too far off.

Interested in Sports Business? Sports Finance? Sign-up for our free daily email newsletter list, here!

FanDuel Confirms Plans to “Get into Sports Betting”, Verizon Flying Under Radar

FanDuel

FanDuel CEO Matt King confirmed in an interview with Fortune that should SCOTUS strike down PAPSA, the company would “get into sports betting.” The announcement comes just two weeks after the NBA said it would look to divest equity interest in the DFS operator and 2 months after news broke that the company was in “advanced talks” to partake a reverse merger. It was suspected at the time, that the company would use a capital infusion to position itself to capitalize on legalized sports betting. No updates have been released as it relates to negotiations.

Howie Long-Short: We told you on April 23rd, that the NBA divesting its interest in FanDuel was the latest sign of the company’s intention to pursue legalized sports betting. The NBA has been outspoken about its desire for an “integrity fee”; they can’t sell an increased role in regulation and serve as the book, with an interest in winners/losers.

While not too late (a decision may not occur until the end of June), FanDuel has some catching up to do. As we’ve noted over the last several months, rival DraftKings has been aggressively positioning itself (increased staff by 75%, hired Head of Sportsbook, seeking casino partners) for a similar pivot; and DRAFT, owned by Paddy Power Betfair (PDYPY), is also expected to chase a share of the U.S. sports gambling market. Those 3 new entrants will face strong competition from established gaming operators like William Hill (WIMHY), Caesars Entertainment (CZR), MGM Resorts International (MGM), Penn National (PENN), Boyd Gaming (BYD), etc.

Fan Marino: There’s another potential new entrant to the sports betting space, well positioned and flying quietly below the radar; Verizon Communications (VZ). The company owns Yahoo! (AABA) and its popular season-long fantasy sports business (they also have DFS, though less users than DraftKings and FanDuel) and like those companies (and Draft), could convert tens of millions of players into gamblers. VZ also owns both NFL and NBA streaming rights, giving them the ability to broadcast games and offer in-game betting within the same application; a significant advantage over the competition.

Interested in Sports Business? Sports Finance? Sign-up for our free daily email newsletter list, here!

Reverse Merger Could Take FanDuel Public

FanDuel

FanDuel, Inc. may be going public, but it won’t be through an IPO. The DFS company is in “advanced talks” with Platinum Eagle Acquisition Corp. (EAGLU) to partake in a reverse merger; an expedient and cost effective way for a private company to trade on a public exchange. No details have been released relating to the equity percentage EAGLU would acquire or the valuation FanDuel holds; though, the company calculated its fully diluted value to be $1.2 billion in 2017. One can speculate FanFuel will use the capital infusion to position itself to capitalize on legalized sports betting; the company owns an extensive database of DFS players that it could convert into mainstream sports gamblers.

Howie Long-Short: EAGLU is a special purpose acquisition company, formed by well-respected media execs Jeff Sagansky (Sony, CBS, Scripps Networks Board Member) and Harry Sloan (MGM, SBS Broadcasting, Lionsgate Board Member). The publicly traded company launched in January, having raised $325 million to acquire another business (or businesses). As for FanDuel, they’ve raised +/-$435 million to date; but, none since April ’16. A reverse merger is another way for the company to raise the capital it needs.

Fan Marino: FanDuel won’t be the only DFS company to enter the sports betting space. DraftKings announced last week that it had hired a “Head of Sportsbook”, and DRAFT, owned by Paddy Power Betfair (PDYPY), is also expected to chase a share of the U.S. sports gambling market. Of course, all 3 will have strong competition from established gaming operators like of William Hill (WIMHY), Caesars Entertainment (CZR), MGM Resorts International (MGM), Penn National (PENN), Boyd Gaming (BYD) etc.

Interested in Sports? Sports Business? Sports Finance? Sign-up for our free daily email newsletter list, here!

Consolidation Trending in Gaming Industry

Consolidation is trending in the global gaming industry. In the U.K., tighter regulations that could result in dramatic revenue declines for gaming and sportsbook operators are driving the movement. Both Paddy Power Betfair (PDYPY) and William Hill (WIMHY) are exploring potential mergers with CrownBet; though no deal is imminent. In North America, fierce competition between regional companies has crippled profitability growth; as a result, operators are considering potential mergers. Penn National Gaming (PENN) is in discussions with Pinnacle Entertainment (PNK), to form an entity that would control 45 gaming properties within 12 states and Canada; it would not own any real estate on the Las Vegas Strip.

Howie Long-Short: PENN and PNK and are ostensibly already partners; Gaming and Leisure Properties (GLPI), a REIT owned by PENN, owns most of the land where PNK operates its casinos. Creating a larger “network” of casinos would in theory keep regional players from competing properties, but that seems like wishful thinking to me. Legalized sports gambling is a potential $150 billion market. The big players (MGM, CZR) are coming to town armed with megaresorts; how can smaller operators without the resources compete? I should point out that the Australian entertainment group Crown Resorts, owns a 62% stake in CrownBet (OTC: CWLDY).

Fan Marino: After Michael Flynn agreed to cooperate in the Russia investigation, odds of President Trump’s impeachment soared. Betfair was quoted saying, “Trump has hit his shortest price yet to leave office before the end of his term”; the company has impeachment currently sitting at 4/6 (59% probability). Paddy has the odds at 4/7 (63% probability); the company’s Head of Trump Betting (yes, that’s a title) said that prior to news of Flynn’s cooperation, odds sat at 11/10 (47% probability).

For the balance of today’s newsletter, sign-up here!