What do you make of this trend where US companies are buying UK companies?
When you talk about American companies looking to acquire UK operators, it’s essentially that American companies are looking to acquire a few things that tend to be concentrated across the pond. Mainly, that is because the UK still represents the single largest regulated online market in the world. Also, from a longevity perspective, it’s been around for quite some time. It represents technologies and operations; it represents P&L, with an emphasis on the ‘P’ rather than the ‘L.’ I think it also represents the race to scale (one of our main considerations).
From an American company’s perspective, when you look at the success of BetMGM in the market – something we’re trying to replicate with SI SportsBook – one sees coupling proven technology with US flavor, a US-facing brand and so forth. There’s also a pending shift in the investors’ mindset in that they understand scale but they are also more concerned with the path to profitability. I think business plans that are forever loss-making are not well-received at this point. No one is presenting something like that. I think there is a prevailing notion of kicking the can down the road; we can then close the throttle on market and enjoy our scale.
But I think you have to draw a much clearer line between how you are going to achieve that. Buying a Europe-facing or UK-facing company helps you in that regard.
What do operators need to know about the US market to become more appealing?
First and foremost, they need to acknowledge the level of commitment, involvement and investment into the market. When I stood in front of the board and outlined our strategy, our plans and our model, I had to make sure everyone understood that we were in here for the long haul. We’ve been operating in the market since 2013, but since 2018 the rules of the games have changed considerably. You’ve seen your new players venture in. Now you see non-gaming operators, like media companies and consumer-facing retail businesses. And a lot more capital is applied. Everything in the market is naturally driven by cheap capital, so you need to make sure everyone understands the level of commitment and focus.
What’s your overall outlook for the industry in the next three to five years?
The industry is interesting. I’ve just celebrated my 14th year with the company, and every time I look back I get dizzy. It’s not like your traditional IT sector. Its development has been fast and furious like a lot of growth areas. I think only ecommerce moved faster.
I think the direction of travel is regulation. You see more and more markets regulating, and not just in the US. Ontario is coming across, and I expect other Canadian provinces to follow suit. You’re talking about Latin America, as well.
In three to five years, I think the regulatory footprint will be bigger, not just in the US but elsewhere. I think Europe right now, for all practical purposes, is spoken for. America will follow suit. Once Brazil and Argentina finalize their regulation, you’ll have the Latin American anchors on top of Colombia and Mexico.
How about online gaming?
This is where online and digital gaming hits their stride. You’ll see more capital and investment coming through and it will become a blue-chip industry, an investable sector. It already is, but right now it has the hype and buzz associated with high-speed growth. I think you’ll you see stabilization of some of the states around this medium. You’ll see consolidation. There will be fewer players left on the playing field.
I think you already see that today. So, in three years (let’s call it), globally you are looking at eight to 10 uber operators – maybe even fewer – that are able to leverage their respective market strength. In each market, certain operators will rule, but they will all be in all of the markets. At least that will be true for ourselves.
What are some other industry-defining trends?
Some of these companies will venture outside of classic gaming. You already see that today, when these gaming companies label themselves entertainment companies. Our joint venture around ABG with Sports Illustrated is a good example of the beginning of such a process. There will be the connection of sports betting – and gaming generally – into the entertainment funnel. You will come in to consume one thing and then will end up consuming a gaming or sports betting product.
It remains to be seen how diversified it will become. If you move too fast, entertainment is a whole other sector. I thought we had an aggressive sector, but now being close to some of those in entertainment, it’s a tough ocean to swim in. Those of us who have scale and proficiency will do well.