Month: October 2022

In a trading update, Tabcorp said group revenue for the three months through to the end of September was 18.7% higher than at the same point in FY22. However, it was noted that Q1 of last year was impacted by pandemic-related restrictions on retail locations.

Revenue from its wagering and media business increased 14.2% year-on-year, with digital share rising from 23.9% to 24.7%, following a dip to 24.0% for FY22. Tabcorp said this result was almost entirely delivered on its old app, and that it expects the new app to help increase this share further in Q2 and beyond.

The new app went live in September, towards the end of Q1 and ahead of the Australian Spring Racing Carnival horse racing event. Compared to the six-week period prior to launch, Tabcorp noted a 16% increase in active weekly customers, a 7% increase in the average bet and a 33% increase in reactivations.

Meanwhile, gaming services revenue hiked 91.7% in Q1, though Tabcorp said that this was mainly due to the comparative period in FY22 being impacted by venue closures and fee relief as a result of the pandemic.

Based on the performance of the group in Q1, Tabcorp retained FY23 cost growth guidance of between 3% to 4% on FY22 pro forma. This will primarily be due to expenses related to the launch of its new app, which went live in September.

Tabcorp also retained a capital expenditure forecast of up to Aus$150m for the full year, while depreciation and amortisation is expected to amount to between $250m and $260m.

“Tabcorp is focused on growth, and in particular, growing our share of the digital wagering market,” Tabcorp chairman Bruce Akhurst said. “The hero metric we have adopted to measure our performance in our core wagering business is digital revenue market share. 

“We will be reporting to shareholders regularly on our progress against that measure.

The trading update follows recent M&A activity as Tabcorp seeks to further increase digital market share.

Earlier this month, Tabcorp agreed to acquire a 20% equity interest in social digital wagering platform Dabble Sports for $33.0m. Founded in 2020, Dabble has over 150,000 customers and offers users a socialised betting experience.

In September, Tabcorp also agreed to sell its eBet loyalty and tracking systems business for gaming venues to Venue Digital Technology Pty Ltd, which is led by former Tabcorp and Tatts Group executive Frank Makryllos, in a deal worth $62.0m.

At the same time, Tabcorp’s Max Regulatory Services (MRS) was awarded the new exclusive Tasmanian Monitoring Operator Licence, through which it will monitor all electronic gaming machines (EGMs) in hotels and licensed clubs in the state.

As of 11:00 BST today (26 October) Kambi’s share price was SEK154.15 (€14.10), a drop of 11.7% from yesterday. It hit a low of SEK147.45 earlier in trading before a slight rebound.

The revenue decline was heavily influenced by the migration of DraftKings onto its own platform during Q3 of 2021.

Kambi’s operating expenses came to €25.9m for the quarter, 22.6% higher than in Q3 2021, with staff costs, date supplier costs and other operating expenses all rising.

The total operating expenses caused the earnings before interest, tax, depreciation and amortisation (EBITDA) to sit at €10.7m – a fall of 90.4% year-on-year.

Earnings before interest and tax was €3.8m, a decrease of 73.6% year-on-year.

After finance costs totaling at €388,000, investment income at €20,000, and income tax at €920,000, the total net profit for the quarter was €2.5m. This was down by 78.2% from the third quarter of 2021.

Quarterly woes

Kristian Nylén (pictured), CEO of Kambi, said that the third quarter results were affected by the sporting calendar and the current global economic uncertainties.

“The third quarter is always the most challenging for the sports betting industry
given the quiet sporting calendar and this year was no exception,” said Nylén.

“It was also a quarter marked by growing global economic uncertainty and higher cost of living, trends which show little sign of subsiding any time soon.”

For the first three quarters of the year, revenue was €108.1m, a decrease of 15.1% year-on-year. Operating expenses were €72.0m, a rise of 16.7%, bringing the EBITDA to €36.1m – just under half the €65.8m recorded in the previous year.

Following amortisation and depreciation costs, finance costs and income tax the total net revenue for the first 9 months of the year was €11.3m – a decrease of 71.8%.

New deals

On the earnings call, Nylén commented on the numerous signings Kambi had made in the last few months.

“We have had five signings in the last three months, we’re very happy about that – especially Great Canadian. The pipeline still remains very strong,” he said. “Oaklawn have been a customer of ours through Churchill for quite some time, but now we have a contract with them on our own.”

“We have Ilani, which has a very large casino in Washington – which means we have entered our 19th US state. Thirdly we have Mohegan, which we had a relationship with online. Now we have an on-property deal, with two casinos in Ontario.”

“Ondiss is operating in Argentina – with this agreement, we can expand our reach in the market.”

Nylén also spoke about Kambi’s Bet Builder product, wherein customers can merge combination bets, and revealed that the company is still on track to launch it as a standalone product – part of a general strategy of modularisation – in the first quarter of 2023.

“We have identified Bet Builder as the first product that we’ll have as a modulated offer,” he said. “The plan is the same, we plan on launching this in the market in Q1 2023.”

“We have a full suite of US sports and the five biggest team sports for our Kambi network.”

When the Ontario market opened in April this year, it wasn’t quite brand new ground.

Anyone in the industry could tell you that the grey market in Canada’s largest province had been thriving for quite some time.

Still, bringing the province from grey to white offers certainty and new opportunities for many.

Six months on, we have a sense of the spoils available. Operators – excluding the lottery – brought in a combined CA$267m in the three months ended 30 September.

The biggest challenge in the province, however, may be marketing rules. Operators can offer bonuses, but may not promote them. As Marese O’Hagan writes in our progress report, that’s been difficult, but it hasn’t seriously dampened excitement about the jurisdiction.

And for now, those complying with the rules still need to compete with some unlicensed brands, which continue to do business in Ontario. How will that change going forward, as the province moves out of its transition period? We have a piece from Segev LLP examining that exact question.

Finally, Ontario represents the first Canadian province or territory to open up a licensing system for igaming. Could others follow suit? So far, there’s been little progress in that area, but if Ontario proves to be a success, that could change.

Boyd struck a deal to acquire Pala Interactive, the North America-facing igaming software and services supplier majority owned by the Pala Band of Mission Indians, for $170.0m in March this year.

At the time, Boyd said that the purchase would likely complete by the first quarter of 2023, though this closing date has seemingly been brought forward, with the operator expecting to finalise the deal next month.

Read the full story on iGB North America

Data on engagement with posts related to Safer Gambling Week, which took place on 17 to 23 of October, showed that there had been a 21% increase compared to 2021, when 25 million impressions were recorded.

In addition, the official Safer Gambling Week 2022 website received tens of thousands of visits.

A large number of public figures supported the campaign and promoted safer betting. These included cross-party senior MPs and peers, including gambling minister Damian Collins MP, as well as well-known sporting figures such as former football manager Harry Redknapp.

The success of the event has been accompanied by support from multiple stakeholders across the UK gambling sector, including the BGC, Bacta and the Lotteries Council and Bingo Association.

The aim behind this event is to kick-start a conversation between staff, customers and their loved ones about safer gambling and highlight the tools that are available to help people control their betting behaviours.

BGC chief executive Michael Dugher said, “The campaign has once again raised awareness about safer gambling and showcased increasingly popular safer gambling tools – like timeouts and deposit limits – that only exist in the regulated industry.

“Importantly, we have also once again signposted all the professional help and support services, funded by the industry, that are available to those who need it, ensuring the millions of people who enjoy a regular flutter continue to do so in a safe and responsible environment.

“But the regulated industry’s commitment to safer gambling is not just for one week of the year. It is our mission for every week of the year.

“Millions of people enjoy a bet safely and responsibly, and the falling and low rates of problem gambling suggests that the work we have done at the BGC to promote safer gambling is having an impact.”

Earlier this week, the BGC also called on recently appointed prime minister Rishi Sunak to deliver “sensible” gambling reforms as part of the Gambling Act review.

Issued by the Pennsylvania Gaming Control Board (PGCB), the license will enable Enteractive to engage with players in Pennsylvania on behalf of sportsbook brands that are also licensed in the state.

This will include rolling out its (Re)Activation Cloud platform that allows operators to target selected audience segments such as registered users who have not yet deposited.

Read the full story on iGB North America

As discussed in our January 2022 newsletter, wagering apps have maintained a consistent information architecture for decades, typically structuring their layout by featuring promotions at the top, then providing some high level navigation to the most popular sports and major racing codes.

We have a particular focus on companies that are revolutionising this traditional user interface and the broader user experience. In January, we discussed Voxbet, a voice and text to bet business, which bettors can use directly through Viber, Telegram and other popular messaging services, thus circumventing the need to bet through a bookmaker’s website/app.

Social betting

Another way that bookmakers can appeal to a younger, digital-native generation of bettors is by promoting the social aspect of betting.

Bettors have always discussed their top picks with their friends, but this was not previously embedded within bookmakers’ apps. By bringing together social media and wagering, bookmakers hope to improve customer retention and lifetime value.

Social betting also plays into the growth of influencers, with respected bettors able to build large followers who can copy their bet. On social betting sites, the number of copy bets are comparable to Facebook/Instagram/Twitter ‘likes’. Betting influencers can gain particularly high followings if they are successful with multi bets (known as parlay bets in the USA), which have a large payout if won.

In May 2021, Sportsbet launched their ‘Bet With Mates’ product, which allows bettors to pool their bets into one group and invite friends to share in the bet. Previously, the organiser of a group bet had to manually calculate each participant’s buy-in and bet on behalf of the group. Through ‘Bet With Mates’, activity and performance can now be tracked on each group’s homepage, with the ability to use emoji reactions to create an immersive social betting experience.

In September in Australia, total wagering app downloads numbered 272,000 (Taylor Collison). Social betting apps fall under the category of ‘Other’ and have increased from 0% market share of wagering app downloads to 10% in just over a year.

Furthermore, within the ‘Other’ category, Dabble’s market share is dominant at 76%. Dabble CEO, Tom Rundle, describes Dabble as a “social media app for people who like to bet … rather than being a betting app with a social (function)” (The Weekend Australian).

Dabbling in Dabble

In October, Dabble secured a AU$33 million investment from Tabcorp, a 20% stake which values the company at AU$165 million. ​We’ve been following Dabble for a while now and highly respect one of their early investors, Yolo Investments, another venture capital fund with whom we regularly co-invest.

Dabble’s valuation is now around double that of Bluebet (ASX:BBT) and a third of Pointsbet (ASX:PBH). Dabble already records annual revenue of AU$47 million, with 150,000 users (80% aged from 18-35) signed up in under 18 months, according to The Weekend Australian.

When a user opens the Dabble app, they immediately see an activity feed reminiscent of Instagram, with the most popular shared bets and commentary front and centre. The user can follow prominent bettors such as ‘GorrillaBetz’, who has over 50,000 followers. There are also a multitude of celebrity bettors on the platform, such as retired rugby league player Robbie Farah who also has more than 50,000 followers. Recently, 88 people copied one of Farah’s multi bets with odds of 27.82.

“We see some of them as content creators, the same way as Twitter or moreso YouTube or TikTok,” Dabble CEO Tom Rundle told The Weekend Australian. “Once someone creates a lot of content and they are very influential we have a closer relationship with them and sometimes we might pay them to maintain their activity.

“We didn’t create them, they have come to us, built their own profiles just like an Instagram influencer would.”

US dilemma

As discussed in our last newsletter and prior newsletters, US operators are generally spending heavily to gain market share. In 2021, FanDuel spent US$775 million on marketing and DraftKings spent US$929 million. However, many US operators have now recognised that the cost to acquire a customer is far too high relative to their lifetime value and that traditional marketing efforts are consequently unsustainable. In order to address this issue, there are two main levers that an operator can pull:

1) Altering the allocation of marketing budget to ultimately reduce the cost to acquire a customer. This could encompass innovative non-traditional methods, such as influencer marketing.

2) Innovating products to improve customer lifetime value. This could include the introduction of social betting.

We believe that social betting represents a significant opportunity to improve customer lifetime value, which is a critical issue for operators in the nascent US market.

All the best,

Tom

Disclaimer and important notes

Please note the above information in relation to Dabble, Bluebet Holdings Ltd, Pointsbet Holdings Ltd, Tabcorp Holdings Ltd, Flutter Entertainment Plc, and DraftKings Inc is based on publicly available information in relation to the company and should not be considered nor construed as financial product advice. Waterhouse VC has a position in Flutter Entertainment Plc. The information provided in this document is general information only and does not constitute investment or other advice. Readers should consult and rely on professional investment advice specific to their individual circumstances.

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AGA CEO Miller joins Brendan Bussmann and Brandt Iden to look back on this year’s Global Gaming Expo. 

American Gaming Association, G2E and illegal gambling

Miller discusses this year’s Global Gaming Expo After almost 25,000 descended on the Sands Convention Centre earlier in October. He also talks about US gaming industry’s post-Covid recovery, and the threat of the illegal market. 

Read his interview, published earlier this week, with iGB for more from the AGA.

Maryland sports betting

This episode also features Maryland, where lawmakers have taken a step towards launching mobile sports betting after a fraught process. There’s a wager on the line between our hosts on this one, just to up the stakes further.

Brendan also discusses the state of play for Macau casinos, where recovery his hindered by China’s zero Covid policy. 

And there’s even more intrigue around Brazil sports betting with the presidential run-off closing in.

Remember, the World Series of Politics is also available through Apple Podcasts!

Much of this revenue – SEK490m – came from Svenska Spel’s sport and casino segment, which competes in the licensed sector and is the arm of the business that critics have said should be sold. This was 6.8% less than in Q3 2021.

Yesterday, Swedish trade association Branscheforenigen för Onlinespel (BOS) reiterated calls from Sweden’s Moderate Party – which recently came into government – for Svenska Spel to be broken up. The trade body argued that it was not fair that the government regulated the gambling sector while also participating as an operator.

Its Tur lottery segment generated the most revenue by far, at SEK1.18bn. This was a rise of 2.5%, due to the continued popularity of the cross-border Eurojackpot game.

Meanwhile, revenue at the Casino Cosmopol and Vegas land-based segment was SEK279m, a fall of 4.4%. Casino Cosmopol made up SEK148 of this, while Vegas slot hall revenue was SEK131m.

In terms of revenue from different channels, online revenue was up to SEK979m, a rise of 5.0%. Revenue from lottery sales agents fell to SEK688m from SEK735m. The remainder of gaming revenue was from Vegas and Casino Cosmopol venues.

After additional revenue of SEK64m, gambling tax at SEK376m and direct costs at SEK236m, the gross profit for the quarter was SEK1.40bn – a rise of 1.2%. Following operating costs at SEK737m, and an activated work payment at SEK10m, the earnings before interest, tax, depreciation and amortisation (EBITDA) came to SEK681m.

Interest and taxes brought the total net profit for the period to SEK544m, which was SEK8m less than Q3 of 2021.

The year so far

For the first nine months, revenue was SEK5.85bn – a decrease of 0.9%. The report attributed this downfall to new deposit limits and that fact that lottery sales are also down from last year.

The report is referencing the new deposit restrictions put in place for teenagers at the beginning of 2022, which it found to reduce problem gambling for 18 and 19 year-olds by two thirds. Nationally, Sweden introduced a controversial deposit cap of SEK5,000 per week in June 2020, which was extended a number of times – but this ended in November 2021.

Again, Tur leads the way in revenue, making up SEK3.51bn of the total. The sports and casino segment generated SEK1.53bn, while the Casino Cosmopol and Vegas segment made up SEK805m.

According to the latest gambling participation and prevalence survey from the Gambling Commission, the overall problem gambling rate was 0.3%, the same as it had been in September 2021. During earlier updates this year, the total had reached 0.2%, though this change was not statistically significant.

The problem gambling rate among young people – those aged between 16 and 24 – was 1.4%, compared to just 0.4% a year earlier. However, given a sample size of 293, this change was also not statistically significant.

The portion of people experiencing moderate harm was 1.1%, having been 0.7% a year earlier. Meanwhile, 1.8% of people experienced low-level harm, compared to 1.9%.

This meant the overall harm level was 3.2%, compared to 2.9% in the September 2021 edition.

The overall rate of harm for the 16-24 age group was 6.7%, compared to 4.9% in the September 2021 edition. 

While the problem gambling rate for males was 0.4%, for females it was 0.1%.

Overall participation in gambling was 44.1%, rebounding from 42.0% a year earlier.

Much of the growth appeared to be due to the National Lottery, where the proportion of respondents who had played rose from 26.5% to 28.7%. On the other hand, the portion of respondents who had played non-lottery games was stable at 28.4%.

There was also a statistically significant growth in online gambling in general, driven by online slots, where the percentage of people who had played rose from 3.4% to 4.6%.

Elsewhere, there were also statistically significant increases in the use of in-person slot machines, gaming machines at bookmakers such as FOBTs and bingo.

However, there was a decrease in sports betting, from 5.6% to 4.5%.

The portion of people who gambled more regularly also increased after a sharp drop in previous surveys. In total, 26.6% of people had gambled in the four weeks prior to the survey, up from 23.9%, but still well below the 34.9% from 2019.