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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