Gambling on U.S. sports betting growth
Gambling has always been about the flypaper. Use glitz to get customers in the door, free drinks to get them in the seats and then loyalty perks to get them to tables with higher minimums.
Why it matters: A version of the flypaper effect is now happening with the gambling industry itself, which is experiencing a major consolidation wave.
- Online content drives people to online sports betting, which then drives them to interactive online gaming, which is higher margin and often partners with physical casinos for co-branding or white-label opportunities. And within all of that is online ad tracking, which lets operators retarget and significantly increase conversion rates.
Driving the news: CNBC yesterday reported that DraftKings had offered to buy Entain, the listed British sports betting firm that owns Ladbrokes and Coral, for $20 billion. Entain later confirmed it had received a takeover offer from DraftKings, but didn't provide additional details.
- A source familiar with the situation says that DraftKings made its offer more than two months ago for just under that $20 billion mark, and that there have not been counterbids.
- This would be DraftKings’ largest acquisition to date, but it’s been active. Just this year it bought the Golden Nugget Online Casino for $1.5 billion in stock, sports betting video content company VSiN for what Axios hears is around $100 million and reportedly is among the suitors for a $3 billion brand licensing deal with ESPN.
- Entain has bankers, harkening back to an earlier $11 billion takeover offer that it rejected from MGM Resorts, with which it has a U.S. online sports betting partnership called BetMGM.
Big picture: Gaming company M&A hit an all-time high in 2021, per CrunchBase, and just last week we saw a massive IPO for SportRadar, a provider of data technology to sports betting companies.
The bottom line: This is about expected growth in U.S. online sports betting, as more states legalize and bettors become more comfortable. That's where both DraftKings and MGM see upside for Entain, which mostly operates in the matured European market. Or, put another way, we're still in the early innings.