Bet On It: ESPN Bet absorbs GGR, but DraftKings does not forsee immediate impact

Welcome to the latest edition of “Bet On It,” where The Fly looks at news and activity in the sports betting and iGaming space. 

SECTOR NEWS: Boyd Gaming (BYD) promoted four of its senior executives. Effective immediately, Steve Thompson has been promoted to chief administrative officer, after previously serving as executive VP, operations for the Nevada region. Succeeding Thompson is Steve Schutte, who was previously Senior VP, operations for the company’s Las Vegas Locals properties. Also effective immediately, Ted Bogich has been promoted to COO, after previously serving as Executive VP, operations for the company’s Midwest & South region. Succeeding Bogich is Ward Shaw, who previously oversaw company operations in Missouri, Illinois, Indiana and Ohio as senior VP, operations. Thompson has served in numerous senior executive positions with Boyd Gaming since joining the company in 1983. He was named Senior Vice President, Operations for Boyd Gaming’s Nevada region in 2004, and Executive Vice President, Operations in 2016. Schutte has served as Senior VP, Operations for Boyd Gaming since joining the company in 2014, and currently has oversight of the company’s Las Vegas Locals properties. 

FIBA, the world governing body of basketball, has expanded its long-term partnership with Genius Sports (GENI) to deliver its computer vision technology and AI-powered capabilities to Leagues and National Federations around the world from 2025 to 2035. The company said, “This new technology will transform the entire data and video ecosystem of international basketball, providing a unified, connected solution to automate and synchronise the collection of live game statistics and video production with advanced player tracking. Genius Sports’ optical system has been trained to read and understand live game plays and predict outcomes in real-time, turning raw live data and video into valuable, actionable game insights. Also, under the terms of the new agreement, Genius Sports has been selected as FIBA’s Official Data & Video Capture and Production Partner as well as the governing body’s Official Innovation & Technology Services Partner from 2025 for a 10-year term.”

Sportradar (SRAD) and Tennis Data Innovations, or TDI, a specialist joint venture vehicle of ATP and ATP Media, have entered into a multi-year agreement providing the sports technology company with global data and streaming rights for betting, and media data rights, for all ATP Tour and ATP Challenger Tour events. The partnership will focus on driving commercial growth for the sport and enhancing fan engagement opportunities for the downstream market through the development of new betting and media products. Commencing in December 2023, Sportradar’s ATP Service+ purpose-built suite of solutions offers new and dynamic ways for fans and bettors to engage with tennis via next-generation, value-add products and services which utilize previously unavailable deep data. ATP Service+ features include augmented streaming, transforming live streams with immersive 3D animations, expanded in-play betting markets, short-form video highlights for registered users and an extensive range of personalized and targeted betting products, to drive sportsbook performance for Sportradar’s global network of operator clients. Sportradar will also work with TDI to create products for media as well as utilize Sportradar’s OTT solution to stream live match coverage of the ATP Challenger Tour, via ATP’s Challenger TV. Additionally, the creation of a joint Tennis Innovation Lab will address emerging opportunities to support ATP’s vision. Sportradar will supply Integrity Services for all ATP Tour and ATP Challenger Tour events to safeguard competitions against the threat of betting-related match fixing and corruption, including monitoring and addressing integrity threats and risks through due diligence and investigation support.

ESPN BET INFILTRATES: Stifel provided some key points from an investor lunch with DraftKings’ (DKNG) executives, Joe DeCristofaro and Michael Delalio. DraftKings doesn’t foresee an immediate impact from the launch of ESPN Bet. Additionally, they believe there’s potential for this offering to expand the market rather than directly competing with their services. The upcoming parlay features are anticipated drive increased handle mix and expand the hold-rate, which could potentially boost performance. DraftKings’ focus on first-party content and jackpots is seen as a way to differentiate its iCasino product from competitors, potentially providing a unique selling point. The company’s plans for mergers and acquisitions, as well as geographic/adjacency expansions, are perceived to be more modest than previously thought. This suggests a possibility of returning capital to investors. The fundamental outlook for DraftKings is viewed positively., according to the firm. Growth in same-state online sports betting and iCasino remains healthy. and product mix is seen as a driver for net gaming revenue as well as margin improvement, Stifel told investors in a research note. Additionally, the potential for new state legislation in 2024 is promising. Despite the positive outlook, concerns exist regarding the demanding valuation of DraftKings, Stifel contended. The recommendation is to hold the stock, while remaining open to taking advantage of any market pullbacks as opportunities arise, according to the firm.

While it’s still early, initial state gross gaming revenue, or GGR, reports for ESPN Bet appear promising, according to Macquarie. November data from Iowa, Maryland and Indiana indicate that ESPN Bet has increased its GGR share, reaching double digits. However, during periods with heavy promotional activities, the hold rates have notably risen. In terms of handle share, the firms estimations suggest that ESPN Bet expanded its share by approximately 500 basis points from the prior range of around 1-2%. From the perspective of the Total addressable market, the average handle in these three states witnessed a 16% month-over-month growth. In contrast, in New York, a state where ESPN Bet is not operational, the growth was only 5%. These insights consider data from just half of the month and are derived from more established and competitive states. We intend to keep a close watch on incoming data, but the initial signs appear positive. Additionally, the firm calculated a football market hold of 13%.for the week of December 4 through 10.

NEW ENTRANT IN NORTH CAROLINA: Fanatics has finalized its market access partnership for online sports betting in North Carolina, Pat Evans of Legal Sports Report noted. A spokesperson from Fanatics verified on Friday to LSR that the operator has teamed up with the NHL’s Carolina Hurricanes specifically for online sports betting in North Carolina. With operator applications set to be submitted by December 27, the anticipated launch is scheduled for March, as regulators have ruled out a debut before the Super Bowl. The collaboration becomes essential for Fanatics following a legislative change in September concerning sports betting laws as this alteration mandates that sportsbooks must establish a written agreement with a professional sports organization within the state to gain market access.

ADDITIONAL ANALYST COMMENTARY: Susquehanna initiated coverage of Melco Resorts & Entertainment (MLCO), Wynn Resorts and Las Vegas Sands (LVS) all with a Positive rating. The firm’s price targets for the stocks were $15, $109 and $59 respectively.  The firm initiated the Macau-focused casino stocks with a bullish industry outlook. The consensus re-opening pace in Macau “leaves notable room for upward revisions given such low investor sentiment magnified by negative Chinese macro data,” the analyst told investors in a research note. The firm sees Chinese gaming demand outstripping macro headwinds and believes visitation is likely to adjust higher as transportation infrastructure bottlenecks clear. Susquehanna believes the stocks will move together on the pace of Macau’s re-opening.

Barclays downgraded Boyd Gaming to Equal Weight from Overweight with a price target of $66, down from $71. The analyst expects travel and leisure demand to prove relatively resilient overall, but with pockets of varying weakness as consumers become more discerning with their budgets. The firm favor industries with attractive value propositions to the consumer and companies with unique growth catalysts or self-help. The rating change is part of Barclays’ 2024 gaming, lodging and leisure outlook. In its industry note, Barclays raised its price target on Penn Entertainment (PENN) and lowered its price target on Wynn Resorts (WYNN), MGM Resorts (MGM) and Las Vegas Sands (LVS). 

JPMorgan lowered the firm’s price target on Entain to 1,280 GBp from 1,450 GBp and kept an Overweight rating on the shares. Additionally, the firm raised its price target on Flutter Entertainment to 16,300 GBp from 15,700 GBp and keeps a Neutral rating on the shares.

TD Cowen lowered the firm’s price target on Caesars (CZR)  to $63 from $76 and reiterated an Outperform rating on the shares. The firm is decreasing its FY24 and FY25 estimates to account for a softer macro backdrop that could affect Las Vegas more than Regional casinos and lowers its Q4 adjusted EBITDAR estimates to reflect higher employee costs coming out of the labor strike in Las Vegas. While its target falls on lower estimates and a lower multiple, the firm remains confident in Caesars’ fundamentals, the analyst added.

PUBLICLY TRADED COMPANIES IN THE SPACE INCLUDE: Accel Entertainment (ACEL), Bally’s (BALY), Boyd Gaming (BYD), Caesars (CZR), Churchill Downs (CHDN), DraftKings (DKNG), Flutter Entertainment (PDYPY), Gambling.com (GAMB), Gan Limited (GAN), Genius Sports (GENI), Las Vegas Sands (LVS), MGM Resorts (MGM), Penn Entertainment (PENN), Rush Street Interactive (RSI), Super Group (SGHC) and Wynn Resorts (WYNN).