Buffalo Wild Wings Exploring Sportsbook Operation

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Gaming Today has reported that Buffalo Wild Wings is exploring legalized sports betting “opportunities”, including the launch of a private sportsbook operation that would book bets at B-Dubs nationwide. As “the largest sports bar in America”, with 1200+ locations in all 50 states, the casual dining chain believes it’s “uniquely positioned (think: massive loyalty club, large TV/radio ad budget) to leverage sports gaming to enhance the restaurant experience.”

Howie Long-Short: PlayUSA indicated that Buffalo Wild Wings’ is looking to book sports bets themselves, as opposed to partnering with an established gaming provider as DraftKings and FanDuel have done. I’m confident in saying that isn’t going to happen. Most states are going to require BWW partner with an existing casino, track or lottery to offer sports betting and as Dustin Gouker (Legal Sports Report) told us, “I’m not sure BWW is ready to go through the rigors (time and money) associated with regulated gaming, in the remaining states, if it is not through a 3rd party.” For what it’s worth, Buffalo Wild Wings has acknowledged that sports betting opportunities could include “potential partners.”

Of course, if BWW aligns with a licensed sports betting partner, it could help put a stop to the company’s “years-long sales slump”. Sports betting would likely attract new clientele (customer traffic has declined) and grow alcohol sales (which have slumped), the company’s most profitable segment.

Buffalo Wild Wings is owned by the P.E. firm Roark Capital, which acquired the wings and beer chain for $2.9 billion in February. BWW isn’t their first foray into the dining space, the company also owns Arby’s.

You can’t play BWW, but there’s another company dabbling with the idea of offering sports betting within bars and taverns. Lattner Entertainment Group (owned by Boyd Gaming) has placed gaming machines within 200 Illinois watering holes. While sports gambling is not yet legal in the state, it’s easy to envision those bars/taverns becoming “offshoots” of Boyd Gaming (BYD) sportsbooks.

Fan Marino: Speaking of DraftKings, the company has begun running advertising spots (starring Charles Barkley) to promote their mobile app in the state of NJ. How big of a head start do they have on the rest of NJ’s licensees? Well, consider that no other NJ sportsbook has even launched their app yet! Simply, the difference between start-up culture and the old guard; one takes risks, the other is reactionary.

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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.

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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.

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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.

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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.

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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.

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Casino Consolidation Continues, Penn National Gaming and Boyd Gaming Scale Up

U.S. casino operator Penn National Gaming, Inc. (PENN) has agreed to acquire Pinnacle Entertainment, Inc. (PNK) for $2.8 billion, with the deal expected to close by the end of 2018. PENN will own 78% of the combined entity (41 properties, 53,500 slots, 1,300 tables and 8,300 hotel rooms), with PNK owning the balance. PENN and PNK were ostensibly already partners; in 2013, PENN spun off Gaming and Leisure Properties (GLPI), a REIT that owns much of the land PNK operates its casinos on. As an adjunct to the PENN/PNK deal, Boyd Gaming (BYD) agreed to buy 4 PNK properties, from PENN, for $575 million. In a separate transaction, Boyd Gaming announced it has acquired Valley Forge Casino Resort for $280.5 million; the company’s first asset in PA; the 2nd largest commercial gaming state in the nation.

Howie Long-ShortPNK shareholders will receive cash and PENN stock worth $32.47/share; or 48.5% premium to PNK shares at the close on October 4, the day prior to the first reports of merger talks. PENN shares hit a 52-week high on Wednesday, closing at $30.90. It’s been a busy year for local casino operator mergers. Earlier this year, Eldorado Resorts (ERI) bought Isles of Capri Casinos Inc. for $1.7 billion and GLPI bought the Bally’s Casino Tunica and Resorts Casino Tunica (properties in Mississippi) for $82.6 million.

Fan Marino: High rollers, like the guy who bet (and won) $880K on Mayweather to beat McGregor, will be pleased to learn that the revised tax code “largely preserves the ability for our customers who itemize to net their gambling income” – The American Gambling Association. Here’s a fun gambling story, some guy won $37,600 on a $47 10-team NFL parlay last Sunday.

Penn National Gaming strikes $2.8B deal to buy competitor

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