Bet On It: Sportradar and Genius Sports both accused of infringing on patents

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 RECAP: In 2019, Disney (DIS) told an analyst the company did not foresee the company involved in gambling in any way, but now, four years later, the company is betting the house on sports gambling, Robbie Whelan, Katherine Sayre and Jessica Toonkel of The Wall Street Journal reported. Back in August, Disney entered a 10-year deal with Penn Entertainment (PENN) to bring gambling to ESPN sports network. Gambling under the same roof as Disney has bothered some executives and employees, with one large investor even warning it might have to sell some of its stake in the company. On the other hand, ESPN President Jimmy Pitaro and CEO Bob Iger believe the chance to engage a younger male audience, and the money that comes with it, was too good to pass up.

Elys Game Technology (ELYS) introduced its new U.S.-focused online and mobile sportsbook brand, www.SportBet.com. The dedicated Elys America platform will offer U.S.-based customers an innovative and immersive way to engage with and bet on their favorite sports with unique features developed to cater to American betting styles. The company’s new mobile brand builds upon its successful partnerships with U.S. regulated sportsbooks and casinos and represents another evolution in its business. Subject to regulatory approvals, the company expects to expand its online sports betting footprint into multiple U.S. jurisdictions under direct licensing and through market access partnerships in Q4. The company has previously announced new sportsbook operations in New Jersey and Washington D.C., quickly becoming a recognized international name in regulated gaming within Europe with new operations in Canada and the US.

SportsCastr, d/b/a Panda Interactive, announced that it has filed two separate complaints for infringement on its “foundational interactive streaming technology patents.” The complaints were filed in U.S. District Court for the Eastern District of Texas against Sportradar (SRAD) and Genius Sports Limited (GENI), two companies that “provide much of the technological infrastructure to sports-betting and related interactive video industries.” Panda Interactive’s CEO Kevin April said: “PANDA developed its pioneering technology long before online sports betting was even legal in the US. Sportradar and Genius Sports are infringing on our patents and capitalizing on our groundbreaking work.”

Elys also announced the expansion of its footprint in Washington, D.C. with the addition of a third sportsbook location, Grand Central Sportsbook on H Street. The new location builds on the success of both the Grand Central Restaurant and Sportsbook and the Cloakroom Gentlemen’s Club Over Under Sportsbook Lounge, which have been operating successfully in the nation’s capital. “The small business model presents a compelling opportunity as it offers customers convenient access to betting on their favorite sports while enjoying a night out at their local social establishment,” said Michele Ciavarella, executive chairman of Elys Game Technology, Corp. “We are buoyed by industry trends in the United States and believe that as more states adopt this model, we can rapidly expand our customer base with minimal upfront costs.”

Sportradar has been selected as the official technology and services solution provider by the Taiwan Sports Lottery, following an international tender process. Based on the breadth of services included, the structure and longevity of the agreement, Sportradar is set to impact the sports betting experience in Taiwan as part of the consortium that will operate the Taiwan Sports Lottery from 2024 through 2033. The company said that being appointed as part of the consortium formed by Adata Technology as the license holder, Taiwan Sports Lottery Company as the operator and China Trust Bank, further strengthens Sportradar’s industry position in the Asia Pacific region. The consortium was awarded the third Sports Lottery License issued by the Taiwan Government’s Sports Administration in December 2022. Orako, the company’s end-to-end sportsbook and player account management solution, will be fully implemented across more than 2,600 retail outlets in Taiwan as well as across web and mobile channels as it is designed to scale for omnichannel use. Sportradar’s technology will power the Lottery with ORAKO Sports Betting and Player Management platform, Managed Trading Services, Pre-match and Live data and odds, Audiovisual streaming, Marketing services and other Sportradar Orako solution integrated services. The solution includes the delivery of the required equipment at retail stores including customized lottery terminals and printers, and digital multimedia displays to provide live sports and betting information. As part of the agreement, Sportradar also established a local team in Taipei to provide operational support and expertise alongside TSLC’s team members on the ground.

Accel Entertainment (ACEL) announced that Mark Phelan, chief revenue officer, has been appointed to the newly created position of president, U.S. gaming, effective October 6. In this capacity, Phelan will be responsible for setting and guiding Accel’s growth strategy, including leading the execution of expansion and diversification initiatives. Phelan will continue to oversee Accel’s business development as well as the company’s M&A strategy. He will remain an active member of the executive team and continue to report directly to Accel’s president and CEO Andy Rubenstein.

SCOTUS GETS INVOLVED: The Supreme Court has put a temporary hold on a lower court ruling that permitted a $2.5B gambling deal between the state and the Seminole Tribe of Florida, Gary Fineout of Politico reported. Chief Justice John Roberts, who oversees emergency requests from the federal appeals court in Washington, D.C., on Thursday issued an administrative stay in the case while the full court considers a request for a long-term stay that was made last week by lawyers representing Florida casino operators. The decision doesn’t indicate which way the Supreme Court will rule, but it reportedly means that the Seminole Tribe will not resume sports betting anytime soon. In his order, Roberts gave lawyers for the Department of Interior until October 18 to respond to the request for the longer stay.

ANALYST COMMENTARY: Jefferies hosted 23 investor meetings at G2E Las Vegas on with the focus on operating updates and integration of digital, notably online sports betting, or OSB, with GE&T suppliers and casino operators. In short, the firm noted progress in product investment to compete in OSB and slots offerings, while casino operators manage costs against a wide range of demand levels. Jefferies favors integrated digital/land-based Caesars (CZR), Flutter Entertainment (PDYPY), and Light & Wonder (LNW). The firm told investors that the product strength, notably across channels, is driving market share as well as that conditions are positive for margins and focus operators on int’l growth in LatAm and other markets. FanDuel conveys a strategic clarity and momentum that befits its US market share leadership in conjunction with the resources of Flutter. Caesars conveys better than expected outcomes from the launch of its new iGaming app and progress toward earnings levels. Focus is also high on Penn and Fanatics as new entrants, which Jefferies views as minimally impactful near term.

Morgan Stanley said that trends in domestic Gaming have now started to stabilize, with Q3 trends plus or minus single-digit year-over-year, whereas Macau remains in recovery led purely by premium mass, and OSB/iGaming momentum has held with promotions. The firm told investors that U.S. sports betting/iGaming revenues maintained momentum seen over the past several quarters as industry hold remains strong, promo environment remains rational and handle has been flattish quarter-over-quarter for states that have reported September. As far as DraftKings (DKNG), Morgan Stanley expects a “big beat, characteristically conservative guidance” for Q4 and FY24: The firm believes Q3 will be a “solid quarter: for DraftKings relative to guidance and consensus expectations.

Benchmark noted New York OSB Skins posted a total handle of $468.8M in week the week of October 1 though October 7, up 9% sequentially and up 45% year-over-year, marking the biggest single week handle since the beginning of 2023. Despite the weekly handle record, event outcomes this week led to a lower hold percentage and weekly gross gaming revenue, or GGR. Total GGR in week 38 was $26.8M, down 25% sequentially, but up 50% year-over-year, as all sportsbooks except FanDuel incurred sequential GGR declines and two reporting negative GGR. New York OSB skins continue to keep pace in breaking the records set in 2022, with year-to-date handle currently up 9% and year-to-date GGR currently up 24% through week 38 of 2023. FanDuel, DraftKings, Caesars, and BetMGM (MGM) continued their reign over the markets in The Empire State, combining for 94% of weekly handle and essentially 100% of the weekly GGR in week 38, according to Benchmark.

Benchmark reported statewide handle for the week was $468.8M, up 9% sequentially and up 45% year-over-year, while statewide GGR was $26.8M, down 25% sequentially and up 50% year-over-year. DraftKings retained the top market share position for the third week in a row, posting a weekly total of $196.1M, up 11% sequentially and up 76% year-over-year, equivalent to 42% market share, up 1%-point week-over-week. FanDuel followed, posting weekly handle of $176.8M, up 10% sequentially and up 38% year-over-year, equivalent to 38% market share, flat week-over-week Caesars was the third largest OSB skin by handle share this week, posting total handle of $42.6M, down 2% sequentially but up 6% year-over-year, equivalent to 9% market share, down 1%-point week-over-week.

Early signs remain encouraging for the bookmakers, with high engagement and betting activity. Kentucky appears to have started strong in its first week of legalization, while New York registered a record week for betting handle, albeit with weak margins, Jefferies told investors n a research note. Gambling Capital estimates that $923M was bet on the NFL across Week Four, up 35% ahead of last season. This takes estimated handle across the season to date to $3.77B up 40% versus last season. Across Kentucky’s opening weekend, GeoComply recorded over 10M geolocation checks from over 325k accounts in Kentucky. Within the state’s first 24 hours of legalization, GeoComply had recorded more than 2M checks. For context, this is more than twice the number of checks recorded in similar-sized Louisiana’s first day of regulation in January 2022.

Barclays analyst James Rowland Clark lowered the firm’s price target on Entain (GMVHF) to 1,460 GBp from 1,520 GBp and keeps an Overweight rating on the shares.

Capital One initiated coverage of several companies on Thursday. The companies, their ratings and price targets are as follows:

• Penn Entertainment with an Equalweight rating and $25 price target
• MGM Resorts with an Overweight rating and $50 price target
• Churchill Downs (CHDN) with an Overweight rating and $144 price target
• Caesars with an Equalweight rating and $51 price target

Cantor Fitzgerald initiated coverage of Genius Sports with an Overweight rating and $8 price target. Genius is one of the most important technology providers in the sports ecosystem, the analyst told investors in a research note. The firm thinks the market is underappreciating Genius’ revenue opportunity with the NFL, the potential profitability of this relationship, its media technology opportunity, given Genius’ unique position as it sits among sports leagues, sportsbooks, and sports fans, and the potential for Genius to win more sports right deals with new leagues as they come up for renewal with competing firms. Any concern about the relationship with the NFL is unwarranted, Cantor argues, and the firm thinks Genius will deliver “robust” growth in the coming years.

Stifel raised the firm’s price target on Caesars to $80 from $74 and maintained a Buy rating on the shares. The firm’s estimates are being raised by about 1% per year and its price target is now based on its 2025 sum-of-the-parts valuation as it has moved from 2024 to 2025, the analyst explained. The firm, which continue to see upside to long-term estimates and a path to about $5B in EBITDA, believes the recent selloff in shares around the cyber-attacks has “created an overly compelling entry point,” the analyst added.

Benchmark initiated coverage of Flutter Entertainment with a Buy rating and 15,500 GBp price target. The scaled operator in the “promising and expanding global online gaming market” is “optimally situated for sustained growth” given its online reach, unique brand portfolio, and “top-tier sports and gaming expertise,” the analyst told investors. The company is currently listed on the London Stock Exchange, but aims for a U.S. listing by late 2023 or early 2024, which “should greatly expand U.S. institutional ownership,” the analyst added.

Macquarie kept an Outperform rating and $60 price target on MGM Resorts. The company’s estimated $100M in losses related to cyberattack disruptions was in-line to slightly higher than expectation, even though the impact to Q4 should be lower judging by the management’s positive occupancy forecasts, the analyst noted. The firm adds that MGM “came out okay” following the disruption, even though it will likely lose some share to Caesar’s, Wynn Resorts (WYNN), and Golden Entertainment (GDEN) in Q3 and likely in Q4.

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).