The inevitable has arrived. Online sports betting and iGaming consolidation has begun in earnest.
The most recent and perhaps most telling announcements have come from Aristocrat and privately owned Fanatics. The former is buying iGaming and iLottery software company NeoGames for $1.2 billion at a whopping 104 percent premium from the stock price on the day prior to the deal being announced. Fanatics is buying the U.S. operations of Australian sports bettor PointsBet.
The deals represent the usual motivations for consolidation—opportunity by those with deep pockets like Aristocrat and management’s acceptance of the futility of its over-ambition in the case of PointsBet.
Aristocrat continues to build itself into a digital powerhouse both in social games and gambling. Acquisition of NeoGames positions Aristocrat to capitalize on what almost surely will be a huge and lucrative market—the coming of iLottery as a standard offering by American states.
PointsBet’s departure is representative of so many companies that entered the U.S. with grand ambitions, then over-spent and under-produced relative to the size of their investments.
Public attention has turned now to Rush Street Interactive as an acquisition candidate. The company has long boasted of its financial discipline and emphasis on proprietary software and more profitable iGaming over online sports betting. All the while, it has been losing money like all the others. Rush Street still promises to turn EBITDA positive this year and talks about its Latin American expansion as a company builder and the lack of new jurisdictional openings in the U.S. this year as a reason for slower U.S. growth.
All of that may be true, but pinning hopes on Latin America isn’t the way gaming companies historically have built success and the slow-down in U.S. market openings has become the common whine among the money losers. And, of course, when new jurisdictions do open, money will be lost chasing market share. So, you lose if you do and you lose if you don’t, but there’s always next year.
That doesn’t mean Rush Street’s self-touted strengths aren’t real. It just might mean that a deep-pocketed acquirer is better suited to capitalize on them.
The winners, as we’ve said in this space before, are clear: casino-based companies with databases of tens of millions of proven customers like MGM and its BetMGM joint venture with Entain, Caesars and PENN Entertainment, and those with huge market share and brand recognition like DraftKings and Flutter’s FanDuel.
There will also be consolidation in related areas as the same dynamic of building on success and size benefits the likes of Better Collective among affiliates and Evolution among pure iCasino players.
The list of buyout candidates is large – like almost all of them.
Meanwhile, the iGaming companies try to out-news release each other in their scramble to build brand and size, whether that is a games platform like Bragg, those hoping their novel approaches catch on with players like Rivalry or any of the traditional slot machine companies providing games to iGaming operators.
Every company, it seems, from the multibillion-dollar giants to the $50 million microcaps start their announcements describing themselves as “a leading global digital” something or other.
As investors, we’ll stick with the prospective acquirers mentioned above.
