Last week, iGB reported that International Game Technology had made the decision to sunset its electronic tables game division in 2027 as it looks to narrow its focus on “core business priorities and long-term growth objectives”.
The move is the latest example of a big industry player scaling back after years of diversification and expansion, and may be the latest indication that this is now an era of consolidation and a return to core businesses.
IGT was acquired, merged with Everi Holdings and taken private by Apollo Global Management in a $6.3 billion transaction that closed last year. The first big change from the deal was the spin-off of IGT’s former lottery division into a separate company, Brightstar Lottery. Now, the closure of its ETG division is the latest sign that IGT’s remit is narrowing, not growing.
This transformation is very similar to one of IGT’s chief competitors, Light & Wonder. L&W, formerly Scientific Games, divested its lottery and sports betting divisions in 2021. Like IGT, L&W has since returned its focus primarily to games and systems, and its shares are up 30% in the last five years.
In a statement released after the completion of L&W’s sports betting divestiture in 2022, CEO Matt Wilson lauded his new “streamlined organization”, and added that his team now had “a singular focus on building great games fully cross-platform”.
Casino operators leaving digital
This movement towards consolidation has been prominent among casino operators as well, especially with regard to online offerings. In previous years, the rush toward “omnichannel” was fast and furious, mostly in the aftermath of the PASPA decision in 2018. But some big names have left omnichannel efforts behind, or significantly curtailed them.
One example is Wynn Resorts, which shuttered its WynnBet online brand in 2023. Instead of doubling down on digital investment, the company did the opposite, and has since dedicated its efforts toward developing its UAE resort and seeking new land-based opportunities. In a statement announcing the WynnBet wind-down, CFO Julie Cameron-Doe said the operator was displeased at the “outsized marketing spend” needed for online user acquisition and decided there were “higher and better uses of capital deployment” for shareholders.
Another high-profile operator to pull back from digital expansion was Las Vegas Sands, which is notable but not surprising given its past history. LVS founder Sheldon Adelson was a staunch opponent of digital gambling during his lifetime, but his company nonetheless explored opportunities through its Sands Digital Services division after his death.
That exploration ended last October, when Sands nixed the effort altogether. In a letter to staff reported by the Las Vegas Review-Journal, Sands CEO Patrick Dumont said that “further pursuit of this business was no longer aligned with the company’s core long-term objectives”.
Finally, Penn Entertainment has been through the wringer for its digital ambitions, and is now enjoying the benefits of a scaled-down approach. The company paid a total of $2.5 billion for its online sports betting deals with ESPN and Barstool Sports, neither of which worked out. Penn now focuses its online efforts solely on its theScore brand, and its shares are up more than 40% this year in response.
Same could happen with MGM, Caesars
Notably, two of the casino operators with the most diverse offerings — MGM and Caesars — could both have new ownership by year’s end. Caesars was acquired and taken private this summer in a $17.6 billion deal by billionaire entertainment mogul Tilman Fertitta, and the MGM board is currently weighing an $18 billion takeover proposal from its largest shareholder, fellow entertainment mogul Barry Diller.
In the case of Caesars, its digital business has long been the subject of spin-off rumours even prior to the acquisition, especially as its growth continues to outpace the operator’s Las Vegas and regional divisions. Neither Caesars nor Fertitta have commented publicly on the deal beyond its confirmation, and the first two Fertitta executives to appear before Nevada regulators gave no insight this month as to whether the company plans to retain the digital business or consolidate it to align Caesars with Fertitta’s existing Golden Nugget holdings.
MGM, meanwhile, has invested heavily into its digital ventures, both internally and through its BetMGM joint venture with Entain. Its offer from Diller is also just that, and is not binding. That said, the 84-year-old Diller has made it clear that MGM’s physical assets are what intrigues him, not the digital parts.
“We began investing in MGM nearly six years ago because we believed it represented a rare kind of business: one with real world assets that AI cannot easily replicate or disintermediate and exceptional digital growth opportunities. That conviction has only strengthened over time,” Diller said in a statement announcing the offer. “We continue to believe the market materially undervalues the power and durability of MGM’s assets. We believe MGM’s management team is superb, and that there is a compelling opportunity to support MGM’s next phase of growth and help unlock its full value.”
Bookmakers’ expansion could be risky
Conversely, as suppliers and casino operators appear to be leaning toward consolidation, many online sports betting companies seem to be doing the opposite in their pursuit of prediction markets. While the two sectors are similar to the end user, the back-end processes and resources needed to operate each are vastly different. Sports betting has been treated as a gambling product, whereas predictions are seen as financial products with different obligations and operating costs.
Nearly all of the major OSB companies have expanded into the predictions space in some form. DraftKings and FanDuel have been the most active — the former purchased Railbird exchange and also launched its own exchange, DKeX, while the latter has a deal with CME Group to operate FanDuel Predicts. Other examples of sports-turned-prediction operators include Fanatics, Underdog and PrizePicks.
This diversification is not without risk, or cost. Several OSB operators are currently offering both state-licensed sports betting and iGaming as well as federally licensed prediction products, but that might not be feasible in future years. Many of the leading online gambling states are actively suing prediction operators for offering sports contracts, and the matter is expected to reach the Supreme Court in the coming years. Depending on that outcome, OSBs’ expansion to predictions might be stopped cold by court decisions rather than business decisions.
In terms of investment, DraftKings has indicated its prediction-related costs could climb to $300 million this year, and FanDuel has given similar projections. That’s a big bet, especially when considering that FanDuel (Flutter) and DraftKings shares are down 51% and 31% this year, respectively.
Jess Marquez
Jess has covered the global gaming industry since 2022. A native of Reno, Nevada, he’d like to note that it’s Ne-va-da, not Ne-VAH-da.
Original article: https://igamingbusiness.com/strategy/gaming-industry-consolidation/
