Igaming Focus: From OSB to online destinations – turning vision into reality By Jake Pollard, CDC Gaming Reports November 22, 2021 at 11:00 am Flutter Entertainment’s buyout of Tombola harks back to simpler igaming times, but for the likes of DraftKings, ESPN or Fanatics, the direction of travel is clear. There was something oddly reassuring about Flutter Entertainment’s acquisition of the online bingo specialist website Tombola for £402m/$540m last week. In an industry dominated by the ‘next big thing’ and with many of the companies that work in it often prone to overselling their products and prospects, Flutter’s buyout of Tombola was a reminder that focusing on a single product, doing it extremely well and with a focus on responsible gambling policies, could pay off handsomely. The deal was somewhat unexpected and analysts’ reactions probably conveyed how many industry observers reacted when first reading the news. General feedback was positive with product diversification a key feature of the deal, but Jefferies also said the EBITDA multiple Flutter paid (10.4x) “looks relatively full for a single product, mainly UK online gaming asset”. Wells Fargo had an interesting read-across of the deal, linking it to the Bally Interactive-Gamesys moves in the U.S. digital space. Noting the UK safer gambling initiatives of Tombola, it was the first major operator to voluntarily introduce deposit and staking limits for its players, the acquisition also provided “valuation support” for the Bally Interactive-Gamesys business, Wells Fargo said, and boded well for the latter. Gamesys focuses on high volume, low-staking customers, thus “putting it at lower risk for UK responsible gaming initiatives to come in 2022,” added the Wells Fargo team. And with Gamesys being a much larger operator than Tombola’s at five times its EBITDA of £38.5m and +30% in margins, Bally Interactive should be able to rely on a steady flow of revenues from its UK activities, barring a major clampdown from the UK authorities when the government’s gambling White Paper is published. New model igaming The connection with the U.S. industry is not obvious, other than the Flutter-Tombola typifying simpler times; when operators provided ‘traditional’ products like digital sports betting, casino and soft gaming options (online bingo) to their customers. But looked at through that prism, the contrast with the current U.S. sports betting-digital environment is actually quite striking. One simply has to look at DraftKings, Bally Interactive with its Bally Sports regional sports network plans, ESPN and the potential $3bn auction that could result in the launch of an ESPN-branded sportsbook, Sports Illustrated and its tie up with 888 Sports or, of course, sports merchandise giant Fanatics and its plans to enter the sports betting space; to see a totally different environment take shape in the U.S. At a stretch, one could even include ex-Formula 1 team owner Eddie Jordan and ex-Scientific Games executive Keith O’Loughlin looking to acquire Playtech as another example of executives who view sports betting as one element of a broad multi-product, mass audience offering that will reach into the everyday lives of consumers. The convergence of media and sports betting is one of the notable outcomes of the expansion of the industry in the U.S. Reading DraftKings CEO Jason Robins’ recent “it’s not about the money” Twitter retort to a comment questioning his company’s performance, it is also possible to make out, however hazily, the longer term vision he has for his company. This is a personal interpretation, but to these eyes Robins wants to turn DraftKings into much more than ‘just’ an online bookmaker. By bringing up Jeff Bezos and Elon Musk, he is saying DraftKings will be a place where people might place a bet, but they will also catch the latest sports news, debate the DFS picks, or buy and trade NFTs and other online products that can be sold at scale; just as they would buy goods on Amazon or drive a Tesla. LEO complex While different, that kind of vision is also apparent when it comes to Fanatics’ plans for online sports betting. The sports merchandise giant might have suffered an early setback by missing out on one of the New York betting licences, but its intentions are clear. It has hired ex-FanDuel CEO Matt King, and ex-Action Network and FanDuel executive Ari Borod and ex-Barstool Sportsbook chief product officer Scot McClintic have also joined to turn the plans into reality. The DraftKing and Fanatics visions of mass market reach — call it the leisure-entertainment-OSB (LEO) complex if you like — enabled at first by sports and betting, would quickly morph into online destinations where consumers would also purchase NFTs, sports merchandise of their NFL teams or tickets for sporting events (as well as for concerts, museums or other leisure activities). Suddenly such visions don’t seem so outlandish when imagined in such a context. And as with DraftKings, FanDuel or the land-based giants like MGM and Caesars, Fanatics can boast of a huge (83 million-strong in this case) database it can target with its sports betting products. Of course, none of this guarantees success, and much will depend on execution, market access or tech (Fanatics is rumored to be in talks with brands Pointsbet, Betsson and Rush Street Interactive) — but the direction of travel is clear. Still, grand designs are just that, and many media and consumer brands have entered the sports betting fray in the past, only to retire injured and licking their expensive wounds. Whether they can turn TV viewers or merchandise buyers into sports bettors might also be harder than they imagine, as Fox Bet is finding it isn’t easy; while for DraftKings, converting large swathes of NFL bettors into NFT buyers might also not be as straightforward or profitable as first imagined. If it doesn’t work out, expect to hear comments like “sometimes it pays to stick to the knitting”, or online bingo, as Flutter might say.