Is Wynn Resorts Shopping Its US Online Sports Betting Business?
The US sports betting industry went from retail sportsbooks in one state to more than 30 legal markets across the country in just a few years. This May will mark the fourth anniversary of the landmark US Supreme Court decision that gave individual states to right to govern and regulate sports betting within their borders.
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This decision also gave rise to a proliferation of new sportsbook operators. Offshore books basically had the online US sports betting market to themselves. That all changed in 2018 with popular daily fantasy sports sites, FanDuel and DraftKings shifting gears with their mobile sportsbook apps.
The Las Vegas casino gaming industry was quick to get involved led by MGM Resorts International’s BetMGM mobile sports betting app. This was followed by market entries representing Caesars Entertainment and Wynn Resorts.
The highly competitive nature of the US sports betting industry is bound to drive consolidation in the coming years. According to certain prominent media sources, Wynn Interactive could become one of the first casualties to be spun off by its parent company.
Wynn Resorts had high expectations for WynnBET as the prominent sports betting brand for Wynn Interactive. However, the cost of doing business against the big three of FanDuel, DraftKings and BetMGM is apparently taking its toll.
Last year, Wynn formed a partnership with a special purpose acquisition company (SPAC) Austerlitz Acquisition Corp. The goal was to go public behind a sports betting and iGaming valuation of $3.2 billion. That plan was scrapped in November or 2021 when the SPAC decided to back out.
Wynn Interactive CEO Craig Billings added the following comments as part of an official company statement at that time:
“In light of elevated marketing and promotional spend in the sports betting industry, we are pivoting our user acquisition efforts to a more targeted ROI-focused strategy. In doing so, we expect the capital intensity of the business to decline meaningfully beginning in the first quarter of 2022.”
As the month of January draws to a close, that strategy may now involve the sale of Wynn Interactive at a deeply discounted price of $500 million. When the SPAC plan first dissolved, Morgan Stanley valued this part of the company at $700 million.
Wynn Resorts has also backed off its spending on WynnBET brand in light of the current “unfavorable economics” in the US sports betting industry. Outgoing CEO Matt Maddox added the following insight during a third quarter earnings conference call last year:
“The market is really not sustainable right now. Competitors are spending too much to get customers. The economics are just not something that we’re going to participate in the short term.”
Another key factor that could be driving this stance in 2022 is the recent launch of legal online sports betting in the state of New York. The first four US online sportsbooks to go live earlier in January were FanDuel, DraftKings, Caesars Sportsbook and BetRivers. Since that point, BetMGM has joined that list.
Wynn Interactive has also been approved to enter the mobile New York sports betting industry. Faced with a staggering 51% tax rate on sports betting revenue, this is another strong deterrent to a profitable return on investment.
Given the state’s potential to become one of the biggest online sports betting markets in the US, the competitive environment among the biggest players will be downright brutal.
As an approved operator in New York, WynnBET now becomes the carrot for a few operators that were not on that original list. Possible suitors for Wynn Interactive as a gateway to the state include Penn National Gaming’s Barstool Sportsbook and Fanatics as a relatively new entry in the marketplace.
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