MGM Enters New York Market, Acquires Empire City Casino and Yonkers Raceway

MGM

MGM Resorts International agreed to purchase Empire City Casino and Yonkers Raceway for $850 million, including roughly $245 million in debt that it intends to refinance. Should the state award Empire City a license for live table games by 2023, MGM will pay an additional $50 million for the racino and racetrack. Located just 15 miles from Times Square, Empire City controls roughly 40% of gross gaming revenue in the NYC market and is considered one of just two profitable casinos in the area (Resorts World being the other). The transaction is expected to close in Q1 2019 pending regulatory approval.

Howie Long-Short: CEO Jim Murran can talk all he wants about how this deal enhances the company’s “free cash flow profile”, but MGM did this deal as a means of entering the New York market; they were shut out when the state issued four new gaming licenses about five years ago. MGM will want to cash in on the legalized sports betting craze set to occur, but they’ll need the state legislature to draft new legislation before they can take a sports bet; state law currently authorizes just four upstate casinos to take bets on sporting events. It’s reasonable to suspect that will occur – perhaps as early as this fall.

Adding a sports betting license would be a boon to Empire City Casino, but Alan Woinski (President of Gaming USA Corp.) was more concerned about the amount MGM paid for the property than the status of its sports betting license. Woinski believes it was “a very, very high multiple to pay for a casino that doesn’t have table games.” That’s important piece to consider if you realize that sports betting represents just +/- 2% of all gaming profits generated in Las Vegas. It should be noted that NY law would allow for full-scale casino licensing as early as ’21. MGM shares are up +2% (to $31.89) since the report broke.

Looking for a company that maintains a big presence in the state of New York, but lacks widespread name recognition within the U.S?  Check out Genting Group (OTC: GEBHY). The Malaysian company has been developing, marketing and operating casinos around the world for the last 50+ years. They own Resorts World New York City at Aqueduct Racetrack in Queens, the largest racino in the U.S. Unlike Empire City Casino, Resorts World currently offers table games.

Fun Fact: Yonkers Raceway will be the first horse racing track that MGM has ever owned.

Fan Marino: For the last 46 years, Yonkers Raceway has been owned by the Rooney family. If that last names sounds familiar, it’s because they also happen to own the Pittsburgh Steelers. Art Rooney founded the team in 1933 (as the Pittsburgh Pirates) and won four Super Bowls. His son Dan ran the team from 1988-2017 and won two more. Art Rooney II now maintains control of the franchise.

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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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Regulated Esports Wagering Platform Bringing Live Tournaments to Las Vegas

Unikrn Partners and MGM Resorts International (MGM) have partnered to bring competitive gaming and live esports tournaments to LEVEL UP, the MGM Grand Hotel & Casino’s interactive gaming lounge. Unikrn, a regulated esports wagering platform, will host bi-weekly competitions within the skill-based adult playground; with cash prizes and UnikoinGold tokens to be won. MGM Resorts Executive Director of Interactive Gaming Development Lovell Walker noted that the partnership reflects the company’s “commitment to the future of esports”; an industry projected to hit $2.3 billion in global revenue by 2022.

Howie Long-Short: Unikrn is privately held, with backers like Mark Cuban, but you can invest in Tabcorp Holdings; the Australian wagering, gaming and Keno operator that participated in the company’s June ‘15 $7 million Series A round. Tabcorp trades on the Australian stock exchange under the symbol ASX: TAH. In late October, Unikrn raised an additional $40 million in an ICO to expand its business across the European Union; the largest token sale in video game/esports history.

Fan Marino: You’ll be able to wager on esports competition, but sportsbooks on MGM properties (in Nevada) will not be listing Aces’ (WNBA) games. MGM Resorts International owns the franchise and has pulled the team off the board due to the potential conflict of interest (i.e. fixing games). Did you know the Boston Celtics and Houston Rockets are also off boards in Vegas? Caesers (in NV) no longer takes bets on Celtics games (Gary Loveman) and Golden Nugget properties in Las Vegas and Laughlin, do not offer lines on Rockets games (Tillman Fertitta).

Unikrn Partners with MGM Resorts International to Host Esports Tournaments in LEVEL UP at MGM Grand Las Vegas

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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).

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MGM Announces Plans to Open New Jersey’s 1st On-Site Sportsbook at the Borgata Casino

The Supreme Court is going to hear arguments on December 4th surrounding New Jersey’s right to legalize sports gambling and there seems to be a foregone conclusion that the SCOTUS will rule in the state’s favor before the end of June 2018. MGM Resorts International (MGM) seems particularly confident, announcing its intention to become the first casino in the state with an on-site sportsbook. At last week’s Sports Betting USA Conference, Jay Hood, the company’s VP of Race and Sports, said development has begun on a $7 million sportsbook at the Borgata hotel and casino in Atlantic City. But ESPN gaming writer David Purdham isn’t convinced we’re going to see legalized gambling in 2018, placing odds on the high court siding with New Jersey at -$110 (or just 53.5%).

Howie Long-Short: Experts have estimated a legalized sports gambling industry could be worth $150 billion, but Monmouth Park owner Dennis Drazen believes that number to be as high as $400 billion. Either way, Drazen (and William Hill) is prepared to cash in once the Professional and Amateur Sports Protection Act of ‘92 is repealed. Back in ’11, when NJ voters approved sports betting legislation, Drazen partnered with William Hill (OTC: WIMHY) on a sportsbook at Monmouth Park. That property, which was turned in to a sports bar, is currently being converted back to its intended use. Drazin said the Monmouth Park sportsbook could open within weeks of a SCOTUS decision.

Fan Marino: Give DraftKings credit for being creative in finding ways to engage fans. The company recently partnered with MSG Networks (MSGN) on a live fantasy show that ran parallel to a Knicks game broadcast and as of Q1 2018, will be airing select Euroleague games within their mobile app; enabling fans to flip between their fantasy contest and a live game broadcast. Unfortunately for those invested in daily fantasy, legalized gambling is set to put the industry out of business. In-game betting is going to replace it.

A Borgata Sportsbook, An NBA Pivot And What Else We Learned From A Week Of Sports Betting Conferences

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MGM, Professional Sports Leagues Backing Esports Development Studio

Former WME-IMG executive Tobias Sherman, backed by seed funding from MGM Resorts International (MGM), has launched Foundry IV; a studio that intends on developing games with “esports prioritized at the earliest DNA.” That philosophy differs from industry norms, which tends to see publishers use competition as a method of marketing their games. Sherman, who previously lead the esports department at WME-IMG and helped to co-found the ELeague, will act as the company’s CEO. Foundry IV is raising a Series A round, with professional sports leagues said to be invested.

Howie Long-Short: Take-Two Interactive (TTWO) reported Q2 revenue figures that beat market estimates ($577 million to $511.3 million) and the company raised full-year adjusted revenue forecasts (from $1.65 billion to $1.93 billion), as sales have been strong for both NBA2K ’18 and Grand Theft Auto 5. TTWO also reported a 31% YOY increase (to $303 million) in digitally delivered net revenue and said that it expects to record net bookings in fiscal ‘19. Shares rose 10.58% following Wednesday’s news.

Fan Marino: Activision Blizzard’s (ATVI) Call of Duty: WWII generated $500M in sales over its first 3 days on the market; while setting a day 1 record for full-game downloads on PS4. The new game sold twice as many copies as last year’s Call of Duty: Infinite Warfare did during the first weekend; which would seem to indicate that gamers are not yet tired of the 15-year old franchise. That’s good news for esports franchise owners. I’ve had difficulty envisioning scenarios in which games could remain popular over an extended period. Perhaps my concerns are overblown.

Former WME|IMG executive Tobias Sherman creates game studio Foundry IV

Editor Note: The summary for this story was co-written by our friends at The Water Coolest. Check out TheWaterCoolest.com for the latest market news and professional advice.

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Kevin Harvick’s Investment Portfolio, DANICA Premiers Tonight

Kevin Harvick won the Monster Energy (MNST) NASCAR Cup Series race at Texas Motors Speedway last weekend, which gives him a spot in the “Championship Four”; the 4 remaining drivers who will race for the title at Homestead-Miami Speedway on November 19th. JWS got the exclusive opportunity to sit down Kevin to discuss his investment portfolio, sponsorship partners and sports marketing agency.

JWS: How important is it to you to have sponsors that you would invest in?

Kevin Harvick: The companies that you believe in and invest in, are the companies that you want on your car. I can tell you Exxon Mobil (XOM) is in my portfolio.

JWS: How have you managed to maintain long-term partnerships with several of your sponsors?    

Kevin Harvick: We’ve been fortunate through the years to develop what we have with the Busch Brand (BUD), Jimmy John’s, who’s been with us since 2009 and Textron (TXT), who started with us back in 2007. We’ve kind of found the niche with each of those companies in terms of what they like to do, how they like to entertain and where they like go.

JWS: Does having KHI Management (his sports marketing agency) help in terms of signing NASCAR sponsorship deals?

Kevin Harvick: The thing that makes us unique and different is that we have a sports agency that represents 2 PGA golfers, Donald Cerrone (UFC) and Harrison Burton (motocross). We’ve tried to make ourselves more diverse so that when we are trying to cut a deal for a NASCAR sponsorship, we have a family of assets that we can blend in; golf tournaments, UFC fights, etc.

JWS: How closely do you follow the market?

Kevin Harvick: I wake up with Maria (Bartiromo). I like to understand what is happening in the world. I spend a lot of time paying attention to it because I’m intrigued by it.  

Howie Long-Short: Metro-Goldwyn-Mayer (MGM) acquired Epix, buying out Viacom (VIAB) and Lionsgate (LGF.A) back in April for $1.031 billion. The company has underperformed over the last 6 months (+2.8% compared with industry-wide growth of 15.6%), and analysts are projecting Q3 earnings ($.33/share) that would be a 43% YOY decline. The company will report later today.

Fan Marino: If you enjoy sports documentaries, check out DANICA; premiering this evening at 8p EST on Epix (or for free at epix.com). The film, directed by broadcasting pioneer Hannah Storm, focus on Danica Patrick; the most successful woman in the history of professional motorsports. It’s a rare, candid look at Danica as a competitor eagerly preparing for her next race; a woman confidently considering when she wants to start a family; and a budding mogul carefully considering thinking about her next steps.

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MGM RESORTS PURCHASES WNBA’S STARS WITH PLANS TO MOVE FRANCHISE TO LAS VEGAS

MGM Resorts International (MGM) has purchased the San Antonio Stars of the WNBA and has announced intentions to relocate the franchise to Las Vegas for the start of the 2018 season. The Stars, who become the 3rd pro sports franchise to announce relocation to Sin City since ’16, will play its home games at the MGM owned 12,000 seat Mandalay Bay Events Center. NBA legend Bill Laimbeer has been named the team’s head coach and president of basketball operations.

Howie Long-Short: With acquisition of the Stars, MGM becomes is the 2nd gaming company to purchase a WNBA team; Mohegan Sun owns the Connecticut Sun. While news of the acquisition isn’t going to move the MGM share price, the move makes sense as the Stars will fill open dates at a MGM venue. The Stars are the first professional sports franchise under a MGM umbrella that includes the T-Mobile Arena; home to the Las Vegas Golden Knights. MGM is treating the Stars as a trial run for an NBA team, as they would like to land a co-anchor tenant for their arena.

Fan Marino: Speaking of gambling, for the 2nd time in 3 weeks MNF finished with a wild backdoor cover. With the Titans up 7, the ball on their own 27 and just a minute to play; a single first down would have won the game and made those who bet the Colts +7.5 winners. However, on 3rd and 5, Derrick Henry broke free for a 73-yard TD to ice the game and reward those who placed their money on the Titans. Had Henry simply gone down after picking up the first down, the Titans still would have won the game but the team would have failed to cover 7.5 points.

MGM Resorts revealed as buyer of WNBA franchise for Las Vegas