Month: February 2024

Revenue in 2023 was only down 1.9% to $2.57bn (£2.02bn/€2.37bn). However, higher costs meant a 17.9% drop in net profit at Playtika.

The results came in a year when Playtika added several assets to its portfolio. In September, Playtika completed its $300.0m acquisition of Innplay Labs. In August, its also closed its purchase of the Youda Games portfolio of content from Azerion.

Earlier in 2023, Playtika was also in the running for Rovio Entertainment, the developer behind the Angry Birds series. It lodged several bids but eventually dropped out of the running. Sega Sammy went on to acquire Rovio in August.

Reflecting on 2023 and looking to the current year, CEO Robert Antokol is looking to new M&A options. Playtika was also evaluating other strategic alternatives for the business, but this has been put on hold due to ongoing uncertainty in Israel and Ukraine.

“In the past year, we’ve honed our focus on efficiency and streamlined our operations, adapting to evolving industry dynamics in mobile gaming,” Antokol said. “Now, with a solid foundation, 2024 marks our shift towards reinvestment – pursuing M&A opportunities with a strategic intent of capital deployment.”

Reduced costs fail to stop net profit decline at Playtika

Taking a closer look at Playtika during 2023, most revenue was generated by third-party platforms. Here, revenue hit $1.93bn, down 4.0% year-on-year. 

The remaining $639.4m of revenue came from direct-to-consumer platforms, an increase of 5.4%. However, this was not enough to overcome the third-party platform decline, meaning total revenue fell.

Turning to costs, spending was lower at $2.07bn, down 3.7% from 2022. Revenue costs was the main outgoing at $718.5m, ahead of sales and marketing at $585.7m. Expenses were lower across all areas in 2023.

Playtika noted an additional $109.5m in interest income, leaving a pre-tax profit of $392.1m, up 8.7%. However, tax costs were higher at $157.1m, compared to $85.5m in the previous year.

When also including foreign currency translation and change in fair value of derivatives, net profit was $238.0m, down from $289.7m in 2022. However, adjusted EBITDA climbed 3.4% to $832.2m for the year.

Net profit drops 68.6% in Q4

Turning the final quarter of the year, revenue in Q4 was up marginally by 1.1% to $637.9m. 

Costs-wise, expenses increased by 3.0% to $517.9m. Net financial income reached $32.6m, leaving a pre-tax profit of $87.4m, a drop of 4.9% from the previous year.

Tax payments again hit Playtika, with the $50.1m paid in Q4 much higher than $4.4m in 2022. As such, after also including other net costs of $3.9m, net profit for the quarter amounted to $33.4m, down 68.6% year-on-year.

The long-awaited release of the Gambling Act white paper in April was the most transformative review of UK gambling in 18 years. It marked a key landmark in how the market will be regulated in the future – with affordability checks a key part of that discussion.

The government has already introduced some measures, such as the establishment of stake limits for online slots. However, other resolutions are also being worked upon as the UK government and the Gambling Commission (GC) looks to ease concerns over gambling harms in the country.

The strongest industry response to these proposals has been towards the potential implementation of affordability checks. They have met fierce opposition from operators and trade bodies.

With parliament set to debate financial checks this week, let’s take a look at how we got here.

White paper’s release

Many of the white paper’s proposals intended to protect vulnerable groups. The GC published research in November revealing one in 40 Britons is a problem gambler.

Lucy Frazer, the secretary of state for the Department of Culture, Media and Sport (DCMS), stated the DCMS would “force” operators to ramp up their affordability checks.

The current proposals would see players who lose £1,000 within 24 hours, or £2,000 over 90 days, face financial checks. Meanwhile, those who have a net loss beyond £125 each month, or £500 per year, will have “passive” checks performed.

Industry hits back at affordability checks

The industry’s response to affordability checks has been very vocal. There is an overriding belief that financial checks will ultimately prove harmful for business.

Andrew Rhodes, GC chief executive, stated affordability checks made up many of the responses in the white paper consultations.

The Gamblers Consumer Forum (GCF) contacted the UK’s regulator of statistics to highlight concerns over figures used by the Commission. Most prominent was the amount of players expected to be impacted by affordability checks.

The GC authored an open letter to Racing Post readers to “clear up misunderstandings” over the affordability check consultations. The Commission accused the Racing Post of publishing “imbalanced stories”.

Even some supporters of financial risk checks have their concerns. The charity GamCare, for example, expressed its support for their introduction. However, it also highlighted concerns over the proposed threshold level.

It’s worth nothing that, despite industry pressure, new research released last week from GambleAware suggested over half of UK adults support the implementation of affordability checks in gambling.

Jockey Club petition sets up debate

The industry’s battle against affordability checks received a potentially key boost in November. Jockey Club chief executive Nevin Truesdale launched an online petition looking to rally against their introduction.

The Jockey Club stated affordability checks could cost the racing industry £250m over the next five years. The Jockey Club also claimed bettors may have to prove they can afford their hobby if they lose £1.37 per day.

By the end of November, the petition had hit 100,000 signatures. This was enough to ensure parliament would discuss affordability checks. After the topic was deliberated in January, 26 February was set as the date for the parliamentary debate.

GC under fire

Monday’s debate will occur in the face of mounting pressure on the GC. This is after the Commission’s upcoming Gambling Survey for Great Britain (GSGB) was endorsed in an independent review, only for doubt to be cast over the reliability of its statistics.

Professor Patrick Sturgis labelled the GSGB “exemplary in all respects”. However, Sturgis was hesitant to fully throw his support behind the statistical accuracy of the survey. Sturgis said policymakers must “treat them with due caution, being mindful to the fact there is a non-negligible risk” of overstated levels of addiction.

This is far from the first time that observers have criticised the GC’s attitude towards statistical accuracy. David Brown, a UK industry veteran of 50 years, pointed out the GC’s misrepresentation of affordability checks statistics in a 2023 interview with iGB.

Following Sturgis’ review, gambling advisory business Regulus Partners declared there was “little to dispel” the concerns over the GSGB’s potential statistical inaccuracies, stating the “inconvenient truth” had been glossed over.

Melanie Ellis, a vastly experienced gambling regulatory lawyer and partner at Northridge Law, also commented that inaccurate statistics could play a key role in public debate on gambling harms.

“The new official problem gambling rate could be used to justify adjusting these [measures] in the future,” Ellis told iGB. “The GSGB’s statistics will soon become official statistics and inevitably influence the public debate.

“It may be that the results are accurate while previous studies were not, but an around tenfold difference in problem gambling rates at least warrants further research, tests and experimentation to establish the accuracy of the new data before the commission even considers it becoming official statistics.”

Skottling himself has undergone an interesting journey in recent times, appointed Videoslots’ deputy chief executive in March 2021 having previously been the company’s chief operations officer.

As part of his wider set of responsibilities, Skottling is working with chief executive Alexander Stevendahl to manage where the company is headed, aiming to create a culture that fosters growth and opens up new opportunities.

“This includes strategic planning, corporate governance and decision-making at a higher level,” Skottling told iGB. “As deputy CEO, I am involved in setting and implementing the company’s vision, managing key relationships and ensuring that the organisation operates efficiently and effectively while being profitable and compliant.

“We have got a solid template from which the senior management team has now established the culture we have and will strive towards. This will now be rolled out throughout the company.”

Skottling setting lofty targets

So, what exactly are Videoslots’ plans for the future? Well, Skottling sees a fascinating next couple of years for the company, featuring expansion across the globe as well as the introduction of a sportsbook.

There has already been evidence of steps taken towards those objectives. In June last year, Videoslots announced it would launch its online casino offering in Ontario after securing a licence in the Canadian province.

“I envision an exciting and transformative journey for our company over the next five years,” Skottling continued. “Our strategic vision includes expanding into more regulated territories, ensuring compliance and offering our unique gaming experience to a wider audience.

“This expansion aims to strengthen our market presence and elevate the overall gaming experience.”

In terms of how Skottling envisions Videoslots achieving its aims of global expansion, technology and innovation is set to play a key role in the company’s growth strategy.

Part of this will be the development of an application, with the aim being to provide “seamless engagement” across the various new territories that Videoslots expands into.

“To further enhance our ecosystem, we are excited to roll out our new affiliate system, fostering mutually beneficial partnerships and driving engagement across our platforms,” Skottling added.

“Additionally, our focus on innovation extends to the implementation of a new responsive design, optimising user interaction and providing an efficient and enjoyable platform across devices.”

UK “challenging but crucial”

Videoslots’ move into Ontario and Canada marked its seventh gaming licence, following approval in Malta, Sweden, Denmark, Italy, Spain and the UK.

The UK is certainly in the spotlight at the moment, with April 2023’s white paper throwing the future of the market into uncertain waters with the threat of affordability checks and slot stake limits looming.

For Skottling, though, while the UK throws up regulation concerns that aren’t as prevalent in other markets, the region remains a “challenging but crucial” one in the sector for Videoslots.

“The stringent regulatory environment demands constant vigilance, yet we recognise its importance due to substantial market size and revenue potential,” Skottling said.

“We approach challenges as opportunities, committing to transparency, compliance and continuous improvement to positively contribute to the dynamic UK online casino market.”

Culture is key for Videoslots

Skottling believes he has a vital role to play in Videoslots’ objective of providing an “unparalleled gaming experience”, pointing to the company’s history of over a decade as a rarity in what is still such a young industry.

It’s the culture that Skottling has helped to cultivate that he believes will set Videoslots up for future success.

“The collective efforts of our exceptional staff, who bring their skills and dedication to the table, inspire me daily,” Skottling remarked. “Adaptability is key, while long-term strategic vision is essential. Flexibility in execution is equally crucial.

“My approach involves a careful blend of stakeholder engagement, employee involvement, alignment with personal and organisational values, strategic data utilisation and a commitment to ongoing evaluation and adaptation.

“This multifaceted approach aims to create a balanced decision-making framework that considers the interests of all relevant parties, fostering a sustainable and successful business environment.”

Videoslots aiming for “excellence”

The next five years for Videosport marks a crucial juncture in the company’s progression, a journey that Skottling believes will see the company continue to make waves across the world.

It’s an exciting time for the Malta-based operator and Skottling feels what Videoslots has in the pipeline will allow it to fulfil both its short and long-term targets.

“In summary, the next five years for Videoslots will be marked by strategic growth, featuring new brands, enhanced app availability, a cutting-edge affiliate system, a responsive design overhaul, the introduction of a sportsbook and expansion into more regulated territories,” Skottling declared.

“These initiatives collectively reinforce our commitment to delivering excellence in the dynamic landscape of online gaming.”

With a strong organisational culture and technology and innovation plans to boot, Videoslots certainly seems well-placed to deliver on Skottling’s promises.

Effective from September, the measures mark the first time maximum stakes have been introduced for online slots in the UK. The government has hailed the announcement as a “landmark” moment for the regulation of online gambling.  

Stake limits will come into effect from September this year, following secondary legislation. A six-week transition period will be put in place for operators to comply with the general £5 limit. A second six-week period will allow for any necessary technical solutions to ensure operators are fully compliant with the lower stake limit.

The decision to implement the staking limits follows a 10-week consultation period. During this, the government said most respondents agreed with the proposal to put in place new statutory limits for online slots to help reduce the risk of gambling harm. Consultation responses included views from industry, academics, treatment providers and individuals.

White paper impact

The proposal was first put forward as part of the government’s Gambling Act white paper, which was published last April. This included a series of suggestions from the government to transform how gambling is regulated in the UK.

At the time, the Department of Culture, Media and Sport (DCMS) said it wanted to put in place stake limits. It committed to carrying out a consultation on this limit being between £2 and £15 per spin. Today’s news confirms the government will push ahead with limits at the lower end of this scale.

“Although millions of people gamble safely every single day, the evidence shows that there is a significantly higher problem gambling rate for online slot games,” gambling minister Stuart Andrew said.

“We also know that young adults can be more vulnerable when it comes to gambling related harms, which is why we committed to addressing both of these issues in our white paper.

“The growing popularity of online gambling is clear to see, so this announcement will level the playing field with the land-based sector and is the next step in a host of measures being introduced this year that will protect people from gambling harms.”

Why a lower a limit for younger adults?

As for the decision to introduce a lower stake limit for younger adults, the government said this is because this group has the highest average problem gambling score of any group.

Figures from the NHS suggest a problem gambling rate of 8.7% for the 18-24 age group. This covers online gambling on slots, casino or bingo games. This, the government said, is one of the highest rates across gambling activities.

The government also said that players in this age range have lower disposable income. It also notes the impact of ongoing neurological development on risk perception. In addition, it references “common life stage factors” such as managing money for the first time. 

Evidence, the government said, also points to a stronger link between gambling related harm and suicide among young adults.

GambleAware welcomes new limits

Responding to the announcement, GambleAware CEO Zoë Osmond said she was pleased with the new limits. GambleAware has long lobbied for such measures to be put in place to better protect UK players.

In particular, Osmond praised the decision to set a lower stake limit for younger adults.

“We welcome the government’s announcement to introduce lower online stake limits for under-25s as an important mechanism to protect young people,” Osmond said. “Our research shows a concerning trend with this age group experiencing an increase in harm arising from gambling and online slots are very high-risk products.

“As we continue our work to tackle this growing public health issue, we will collaborate with the government and others across the gambling harms sector to ensure there are no missed opportunities when it comes to the introduction of robust preventative measures, including new regulations such as these.”

BGC backs stake limits but urges caution over other measures

The Betting and Gaming Council (BGC) also said it welcomes the move. Like GambleAware, the BGC supported plans to reform stake limits for online gambling.

However, BGC CEO Michael Dugher warned this measure, and those mooted in the white paper, will impact industry members.

“We welcome the government’s decision on new stake limits for online slots games,” Dugher said. “They provide enhanced protections for young people.

“It is important to recognise that measures like this come with a cost to our members and impact their customers. Nothing in the white paper should be viewed in isolation, but instead seen as a total package.

“I would urge ministers and the regulator to remain mindful of the overall impact all these changes make for BGC members. We must avoid customers drifting to the unsafe, unregulated black market online if we don’t tread carefully and get the balance of regulation right.”

What next?

The measure is one of many from the white paper that will likely be put in place in some form. Other proposals include a statutory levy for research, prevention and treatment, as well as financial risk checks.

Many of the proposals relate to protecting players from gambling harm. However, the white paper also moots measures to support the land-based gambling industry. 

On this point, the government recognises the UK gambling industry employs thousands of people. It said it does not want to harm the industry’s success.  

“The Gambling Commission and the government continue to listen to concerns from campaigners, the wider public and both the gambling and horse racing industries as part of the consultation process on these checks,” the government said. “The Commission continues to refine its approach on the design to achieve the right balance between protections and freedoms. 

“Responses to the wider white paper measures will be published soon.”

For the six months to 31 December, revenue at Tabcorp was only slightly lower at $1.21bn, down 5.1%. However, increased operating costs and impairment charges in H1 led to the operator posting a heavy loss.

Impairment charges amounted to $852.0m during the period. Some $639.2m relates to the write-down of certain NSW and South Australia and the other $212.8m to goodwill.

In total, impairment charges for the NSW and South Australia wagering assets amounted to $731.9m after tax. Tabcorp says these reflect softness in the Australian wagering market, the impact of higher interest rates on discount rates and higher taxes in NSW.

However, Tabcorp added that these charges do not reflect potential for upside from licence reform in NSW and South Australia, if it were to occur in line with its TAB25 strategy in the two states.

Tax refund and Victoria licence extension

Despite the net loss, there was some positive news for Tabcorp during H1. In September, the operator resolved a tax dispute with the Australian Taxation Office (ATO), with the business set to receive an $83m tax refund.

The case relates to income tax treatment of payments for various licences and authorities. Tabcorp says it paid the disputed amount of tax liabilities and interest in full.

Also in H1, Tabcorp was awarded exclusive rights to wagering and betting in Victoria for the next 20 years. Tabcorp, which has held its current licence since 2012, will pay Victoria’s government over $1.00bn during the next two decades.

There were some regulatory issues for Tabcorp in H1. These included a record $1.0m fine in Victoria over its conduct during a major system outage in 2020.

Tabcorp CEO: transformation “on track”

However, despite this and the net loss, managing director and CEO Adam Rytenskild was upbeat about H1. He said Tabcorp’s transformation is “on track” and steps taken set it up for future growth.

“We continue to focus on the three pillars of our strategy,” Rytenskild said. “Invest in customer and competitiveness to win back the Australian market, level the playing field for fees, taxes and regulation and reshape our cost base for efficiency and growth.

“Total market share and digital market share grew compared to the prior half. This is another positive step having stopped the decline. We are seeing positive signs from targeted investment in product, brand, data, technology and retail as we start to leverage the strength of an extensive integrated wagering and media network throughout the country.

“We have become a more digital business, underpinned by recent investments in AI, data and new technology platforms. Combined with our TAB brand embedded in over 4,000 venues, we see a significant omnichannel opportunity that we are yet to capitalise on.”

Revenue down in core business segments

Breaking down the H1 figures, Tabcorp reported revenue decline across both its two core businesses.

Wagering and media revenue fell 4.2% year-on-year to $1.12bn, reflecting a decline in the overall wagering market. Retail cash wagering turnover fell 3.8%, with revenue also down 3.8%. As for digital, wagering turnover slipped 3.8% and revenue dropped 4.0%.

Also within this segment, revenue from the Media and International business declined 5.4%. This, Tabcorp said, was driven by the impact of wagering market conditions on turnover-linked digital distribution revenues.

Turning to gaming services, revenue dropped 14.5% to $93.0m. Tabcorp said this reflects the impact of the sale of eBet and Max Performance Solutions. 

However, this was partly offset by the start of a new Tasmanian monitoring licence in July 2023, contracted CPI-linked price increases in the NSW Max Regulatory Services business and an increase in the number of monitored electronic gaming machines.

Rising costs and net loss in H1

Turning to spending, net operating costs in H1 were 16.5% higher at $354.3m. This was in addition to the impairment costs noted by Tabcorp.

That said, the operator was able to make some savings. Taxes, levies, commission and fees were 5.9% lower at $723.6m while depreciation and amortisation expenses fell 2.9% to $119.8m. Tabcorp also noted an additional $25.2m in financial costs.

However, after taking into account all spending, pre-tax loss stood at $856.1m, compared to a $64.1m profit in 2022. Tabcorp did receive $219.3m in tax benefits but discounted $4.9m in net fair value on cash flow hedges taken to equity and exchange differences on translation of foreign operations.

As such, it ended H1 with a $641.7m net loss, in contrast to the previous year’s $53.2m net profit. In addition, EBITDA for the period declined 34.7% to $131.7m.

“Today’s results are solid given market conditions,” Rytenskild said. But more importantly they demonstrate that the company is on track to significantly improve performance over time. 

“The Australian wagering market is healthy. We’re confident it will return to growth and Tabcorp’s position in it will be much stronger when it does.” 

Players in Michigan can now access both the Fanatics Sportsbook and Fanatics Casino. The online casino offering has been embedded in the sportsbook app.

Fanatics Sportsbook replaces the PointsBet brand in Michigan. Existing PointsBet customers’ username, password, account balance, rewards points and responsible gaming settings will automatically be migrated to the Fanatics platform. 

FBG has been phasing out the PointsBet brand across the US following its acquisition of PointsBet US in August 2023. 

Michigan marks the 13th state in which FBG has launched its Fanatics Sportsbook. It is also live in Colorado, Connecticut, Iowa, Kentucky, Maryland, Massachusetts, Ohio, Pennsylvania, Tennessee, Vermont, Virginia and West Virginia. In addition, retail betting venues operate in both Pennsylvania and West Virginia.

Michigan is also only the third state where FBG has rolled out its online casino offering. The Fanatics Casino is also active in Pennsylvania and West Virginia.

FBG is still in the process of phasing out PointsBet in other states. The operator has not put a timescale on when it expects further acquisitions and subsequent launches to complete.

Michigan posts record igaming revenue in January

The launch of the Fanatics brand in Michigan comes as the state this week revealed record monthly igaming figures for January.

Gross igaming revenue was 18.4% up year-on-year at $181.9m (£143.7m/€167.7m), a new record for Michigan. Sports betting gross receipts climbed 40.7% to $47.7m, while handle was also up 21.4% to $577.4m.

Total gross online gambling revenue, covering igaming and sports betting, increased 22.6% year-on-year in January to $229.6m. 

Adjusted gross receipt (AGR), which account for promotional deductions, was $183.0m, up 20.7% year-on-year. Adjusted gross igaming revenue increased by 18.7% to $164.2m and adjusted gross sports betting receipts 5.6% to $18.8m. 

Online gambling growth is in contrast to the decline in the Detroit land-based sector. During January, Detroit’s three casinos recorded $94.4m in monthly revenue, a year-on-year drop of 8.8%. 

The provider completed its transformation programme in August 2023, which led to some staff being let go. At the time, Scout said this would allow it to become a leaner business and more efficient in delivering services to B2B partners.

The programme, which launched in March 2022 under former CEO Andreas Ternström, already showed signs of working in Q3. Net loss was lower in the quarter after costs were reduced.

With the initiative complete, Jönsson said this places Scout in a better position to achieve profitability in the longer term.

“We are continuing our path to become a profitable company and to create shareholder value,” Jönsson said. “We have achieved many things but we are still working and executing on more efficiencies and continued sharp focus and engagement in the organisation.

“Also, we continue to see interest from new partners and increased focus from existing partners which give us a positive view on 2024, with regards to B2B. During the past year we have also adjusted our B2C operation and developed that offering further to prepare for a year with both Euro 2024 and Copa America in June and July.

“I want to thank all partners, shareholders and employees of the group for all the support and belief in us.”

B2B growth offsets B2C decline in 2023

Total revenue in the 12 months to 31 December 2023 was SEK31.0m (£2.4m/€2.8m/$3.0m), which translated to a rise of 21.1% year-on-year.

The past year was a tale of two businesses for Scout. While the provider saw B2B revenue rocket by 80.7% to SEK25.3m, B2C revenue declined 50.9% to SEK5.7m.

However, Scout maintains that B2C operations have the potential to generate profitable growth under controlled measures. Scout added that it is starting this process in Q1 of 2024.

Lower costs mean reduced net loss for Scout

Turning to expenses and total operating costs during 2023 were 42.4% lower at SEK56.5m. Furthermore, Scout declared SEK25.9m in financial income, meaning pre-tax loss improved from SEK64.4m in 2022 to SEK41.1m.

As Scout did not pay tax in 2023, this meant net loss for the year also stood at SEK64.4m, compared to the previous year’s SEK64.4m.

In addition, Scout noted that EBITDA for 2023 improved from negative SEK55.6m to a loss of SEK25.4m.

Financial expenses hit bottom line in Q4

As for the final quarter of the year, revenue increased 8.8% to SEK8.7m. B2B revenue was up 47.1% to SEK7.5m but B2C revenue declined 58.6% to SEK1.2m.

Operating costs were almost halved from SEK23.1m to SEK12.3m but Scout noted SEK1.4m in additional financial expenses. This left a pre-tax loss of SEK5.0m, wider than SEK4.3m in 2022.

With no tax paid in Q4, net loss also hit SEK5.0m, compared to SEK4.3m in the previous year. However, adjusted EBITDA loss improved from SEK15.1m to SEK3.6m during the quarter.

For most of us, it is hard to fathom the mathematical capability possessed by a small number of people. It is even more impressive when these individuals can combine several rare skills together with business acumen to develop a highly profitable enterprise.

We believe that professional betting is one of the most difficult fields in the world. The three keys to winning at betting are: making correct bet selections; betting at an attractive price; correctly staking – knowing how much to wager on each selection.

 Successful professional betting requires a combination of incredibly challenging skills:

Knowing a sport back to front – every player statistic, every last-minute change, every location and playing surface (e.g. clay/grass/hard tennis courts, Emirates Stadium vs Etihad Stadium)Complex modelling of the many 100s of various factors that determine a player or team’s likelihood of winning and consequently, their true odds compared to the odds offered by bookmakers (e.g. time since last match, social media activity, injury statistics, travel time to a match, age, weather and why the market has got it wrong)Running a betting business (e.g. managing bet placement, bet settlement risk, accessing rebates, intellectual property theft risk, bet theft/leakage of bets risk)

We believe that there are fewer than 50 betting syndicates globally that are able to win more than a million dollars per annum through betting, and a handful that win around a billion dollars.

Waterhouse VC owns a stake in one of these syndicates, which focuses primarily on tennis. The syndicate’s advantage is challenging to duplicate because of the extensive proprietary historical data that it possesses, and the sophisticated factors integrated into its models.

In addition to Waterhouse VC’s stake in Project Tennis, the fund is exploring further opportunities in professional betting.​ These opportunities are incredibly hard to find and evaluate without specific domain expertise.

Paid to play

One reason that there are so few successful professional racing betting syndicates is that existing large racing syndicates benefit from receiving rebates on their bets. This is regardless of the result, effectively increasing their edge and making it even harder for emerging syndicates to compete.

Racing syndicates receive rebates from pari-mutuel/tote betting in exchange for providing liquidity. To qualify for these rebates, syndicates must wager substantial amounts of money.

For instance, US totes typically extend rebates solely to those who bet over $5 million annually, according to Sports Trading Network. The cumulative effect of their rebate advantage has resulted in substantial profits for the largest syndicates.

Greed is not good

Human behaviour is one of the key contributors to financial cycles as investors swing between fear and greed. Human behaviour allows trading firms to profit from the emotionally driven decisions of retail investors.

Such a dynamic also exists in betting. Here, professional betting syndicates can profit from retail gamblers through exchanges like Betfair and Matchbook. Succumbing to fear and greed rather than solely making analysis-driven decisions is a major pitfall for investors and bettors alike.

Numerous cognitive biases (for example, the ‘illusion of control’) make successful investing and betting incredibly challenging.

Even professional fund managers who possess all necessary technical resources and employ the world’s brightest analysts generally deliver performance below the market to their investors. Over the past decade, 85.6% of active funds have generated lower performance than the S&P500. Underperformance rates exceed 80% across developed markets.

Warren Buffett, often named the world’s best investor, won a million dollar bet that the market would outperform active management.

Greedily flipping coins

Several experiments have looked into how people think about money and make financial decisions.

In one experiment from 2013 by Victor Haghani and Richard Dewey, people played a game where they flipped a virtual coin. They were told the coin had a 60% chance of landing on heads. Each person got $25 to start and could bet however they wanted. After 30 minutes of flipping the coin – time for about 300 flips – they received the final payout. This was limited to $250.

Haghani and Dewey calculated that 95% of people were expected to reach the $250 payout limit. But in the end, 33% of people lost money, and only 21% got to $250. In total, 67% of people even tried their luck at least once betting on tails. This was despite being told that tails only had a 40% chance of landing. This is an example of the illusion of control.

Kelly Criterion

The principles guiding success in the coin-flipping experiment can be applied to both professional betting and investing. A simple application of the Kelly Criterion (K%) would have effectively maximised the payout from the coin-flipping activity. The Kelly Criterion aids investors and bettors in optimising portfolio or bankroll diversification. It determines the ideal allocation of funds to each individual investment or bet.

Applying the Kelly Criterion to the above coin-flipping experiment results in betting 20% of your money each time. For example, starting with $25, you’d bet $5 first. If you win, you’d then bet $6 of the $30 you have. If you lose, you’d then bet $4 of the $20 you have left and so on.

Another example is presented above, with a bet that has a 51% chance of winning. If you bet too cautiously (e.g. 2% of your money each time – refer to the green/second best performing line), you’ll do okay but not great. If you bet too much (e.g. 15% of your money each time – refer to the brown/second worst performing line), you’ll end up losing everything.

This illustrates how crucial position sizing is in both betting and investing. Small changes in how much you bet determine whether you succeed or lose everything.

While it is very difficult operationally and cognitively to win at betting, there are several groups that do so successfully.

For the 12 months to 31 December 2023, Vici posted $3.61bn in total revenue. This was comfortably higher than the $2.60bn reported in the previous financial year.

As to how Vici achieved this level of growth, much of it was put down to M&A in 2023. In total, Vici committed to a $1.10bn spend on real estate acquisition during the year.

Highlights include the acquisition of eight gaming assets in Canada with Century Casinos for an aggregate cost of $363.3m. It also spent $432.9m acquiring 38 bowling entertainment centres in a sale-leaseback transaction with Bowlero, In addition it purchased a leasehold interest of Chelsea Piers in New York City for $342.9m.

CEO Edward Pitoniak said the deals not only helped Vici’s performance in 2023 but will also support future growth plans.

“In 2023, Vici successfully deployed capital every single month of the year despite volatility across commercial real estate and in the capital markets,” Pitoniak said. “This year, our $1.80bn of capital commitments with best-in-class operators across gaming and other experiential sectors came with several Vici milestones. 

“We consummated our first international real estate acquisitions of gaming properties in Canada. We also grew financing partnerships in Saint Lucia and the UK, made our first real estate acquisition in the family entertainment sector and significantly expanded our partnerships with Canyon Ranch and Cabot.”

Revenue up across the board at Vici

Breaking down the 2023 figures, most revenue at Vici came from sales-type leases. Here, revenue amounted to $1.98bn, an increase of 35.3% from the previous year.

Revenue from lease financing receivables, loans and securities also climbed by 46.0% to $1.52bn. Golf revenue edged up 9.6% to $39.0m and other revenue was 23.0% higher at $73.3m.

As for expenses, operating costs were slashed by 72.2% to $990.0m. This was mainly due to a much lower change in allowance for credit losses. In 2023, this allowance was $102.8m, whereas for the previous year, it stood at $834.5m.

Net other costs reached $788.4m, leaving a pre-tax profit of $2.55bn, up 123.7%. Vici also received $6.1m in tax benefits but discounted $41.1m in income from non-controlling assets.

As such, net profit attributable to Vici reached $2.51bn, an increase of 124.9%. In addition, adjusted EBITDA jumped 31.4% to $2.91bn.

Similar story in Q4

Looking to the final quarter of 2023, the results made for similar reading, with total revenue increasing by 21.0% to $931.9m.

Sales-type leases revenue jumped 31.0% to $506.2m while lease financing receivables, loans and securities revenue was up 4.0% to $369.8m. A further $10.6m in revenue came from golf, up 5.0%, while other revenue climbed 2.8% to $18.3m.

Costs-wise, operating expenses were more than offset by change in allowance for credit losses. As such, operating costs were actually positive at $15.2m

Vici noted $197.2m in finance costs, leaving a pre-tax profit of $70.0, up 22.0%. The group received $9.8m in tax benefits and discounted $12.0m in income from non-controlling assets.

This resulted in a Q4 net profit of $747.8m, an increase of 23.8%. Adjusted EBITDA was also 14.7% higher at $749.6m for the quarter. 

Last month, the North Carolina State Lottery Commission approved 11 March as the go-live date for online sports betting in the state. But players can register much sooner for accounts – from 1 March – and also fund them.

This didn’t come out of nowhere. When North Carolina’s governor, Roy Cooper, signed House Bill 347 into law on 14 June last year, he also gave the thumbs-up to a timeline for implementation. The bill mandated that North Carolina must publish sports betting regulations before 8 January 2024, and operators in the state must accept wagers before 14 June 2024.

Recent speculation abounded after North Carolina’s Commission set a deadline of 26 January for hopeful operators to submit their internal controls.

What are the latest updates?

This week brought two major updates as the state gears up for 11 March. On Wednesday, the Commission issued two full sports wagering supplier licences and seven additional provisional licences.

GeoComply and SBTech received the two full supplier licences. Combined with the seven provisional licences issued on 9 February, this brings the total to two full licences and 14 provisional licences issued by the Commission.

Provisional licences last for 180 days.

Also on Wednesday, the Commission approved a voluntary self-exclusion programme for North Carolina residents. It forms part of the NC Problem Gambling Programme, which offers gambling harm prevention, education and services. House Bill 347 stipulated that an additional $2m per year would be allocated to the programme in order to expand it.

Players can submit a voluntary self-exclusion enrollment form on the Commission’s website. Players can choose to self-exclude for one year, three years, five years or for their lifetime. Following this, players will be unable to place bets online, in a retail sportsbook or place bets on horses. Any winnings that may occur will be surrendered.

In addition, North Carolina law now mandates operators to implement a number of gambling harm prevention rules. These include delivering responsible gambling training to employees and ensuring advertising does not target those under the age of 21.

The next steps for operators

Naturally, operators are clamouring to enter the state. Caesars Entertainment will be a heavy-hitter – in January it expanded its relationship with the Eastern Band of Cherokee Indians in order to launch mobile sports betting in North Carolina.

DraftKings, BetMGM and ESPN Bet have also secured market access. Fanatics Betting and Gaming entered a partnership agreement with the NHL’s Carolina Hurricanes ahead of the launch, while Underdog has partnered with McConnell Golf.

According to Legal Sports Report, on Wednesday the Commission confirmed that it was working with eight operators to have them licensed before the go-live date. In addition to the above, Bet365 and FanDuel are also on the list.

Much is happening behind the scenes to ensure North Carolina’s sports betting market hits the ground running. Mark your calendars – 11 March will certainly be a go-live date to remember.