In its frenetic effort to gain market share in the U.S., Fanatics has cut a deal with outgoing PointsBet. For the relatively cheap price of $150 million, it is buying the American (but not Canadian) operations of PointsBet, which tells you something about how badly PointsBet wants to get out of the Land of the Free. Fanatics beat Penn Entertainment and Bally’s Corp. to the punch, although it’s not clear what Bally’s inchoate sports-betting operation would have gained from yet another acquisition. PointsBet’s reason for quitting the scene is quite simple: It just doesn’t have the moolah to stay the course to profitability, so it’s getting out while it’s behind. Among those taking a bat on their PointsBet investment will be NBC Universal, which backed a loser. If the PointsBet gaming licenses currently valid devolve to Fanatics, the latter will have made a head start toward getting into 12 states by late August. Fanatics claims it has a 10-year business plan but OSB moves fast. It’s already five years old in this country and the market share has ossified around four or five operators.
As Fanatics’ detractors have noted, the company is trying to buy market share outright rather than grow into it. Founder Michael Rubin thinks he can leverage a sportswear brand into a leading position in American OSB, which suggests he’s in for a rude awakening. Currently, the company is live only in one state and is undergoing field trials in another. Buying the PointsBet brand is a double-edged sword: “PointsBet was also known for its poor customer service and the practice of immediately limiting any winners on its sportsbook.” Hopefully, Rubin will discontinue those traditions. In its exit statement, PointsBet whined about “the structurally high cost of operating in a state-by-state regulated environment, the requirement to pay partner fees in most US States and continued competition from well capitalized operators.” Will Rubin soon be singing from the same hymnal?
While we’re on the subject of bad business plans, let’s turn to Vernon Downs, former stomping grounds of shady casino speculator Shawn Scott and convicted felon Hoolae Paoa. It’s now under the far more admirable and ethical control of Jeff Gural but he finds himself with a case of buyer’s remorse as regards the racino taxes he’s paying New York State. Gural has notified the state that the track will close Dec. 31 (and the casino in August) unless he gets a tax cut. Whether this is a bluff or outright blackmail remains to be seen. However, Gural and his fellow casino owners didn’t go into their situation vis-a-vis Albany blindfolded. They wanted those tax rates. They avidly agreed to them. Their cupidity is hardly the government’s fault. The Lege knew a bunch of pigeons when they same them and plucked them for all they’re worth.
Gural got a tax break he wanted several years ago in return for maintaining a certain staffing level. Now, in his arrogance, he wants to run with a post-Covid staff but still get his old tax cut. What nerve. Gural says the $2 million allowance would bring Vernon Downs to the break-even point. We apologize for our harshness but that’s the free market, Jeff. If your product’s losing money it is hardly the responsibility of the taxpayers to bail you out. “Horses are why I got into this business,” said Gural, in which case he should have known the risks he was running. Taking Vernon hostage, he painted an apocalyptic scenario: “The horseman stay there 12 months out of the year, and we have people depending on the stables and everything else. We donate to the Food Bank every year. Closing would wipe out the little town of Vernon. It would be devastating.” Yes, but does that justify corporate welfare?
While on the subject of free market Darwinism, let us look to that corporate dinosaur known as SJM Holdings, where the ghost of cheapskate Stanley Ho has yet to be exorcised. SJM, which failed to innovate with the rest of Macao, is slowly dying. In 1Q23, the company eked out positive cash flow of $4 million, the first time the company has been EBITDA-positive in three years. Still, SJM finished the quarter in the red, with some of the bleeding attributable to fugly new Grand Lisboa Palace, as players inarguably prefer SJM’s downtown casinos instead, shunning the new behemoth. Also hurting the company was sharp decline in that old mainstay, VIP wagering. Daisy Ho painted a smiley face on the situation but there’s no avoiding the fact that clunky Grand Lisboa isn’t pulling its considerable weight.
Gaming companies continue to beat their foreheads on the impasse that is Texas. Even though sports betting made it out of the House of Representatives, it’s going nowhere thanks to Lt. Gov. Dan Patrick (R), the power behind Gov. Greg Abbott‘s throne. He’s refusing to consider sports betting without “overwhelming GOP support” that just isn’t there, setting an impossible bar for solons to clear. Showing his usual pettiness, Patrick dissed the House bill as having been “carried by a Dem majority.” So much for sports betting. Unless Big Gaming finds a way to get Patrick out of office, gambling initiatives are going nowhere in the Lone Star State. (GOP dysfunction similarly doomed a sports betting bill in Missouri. Wait ’til next year.)
Even the Texas House couldn’t move a casino bill off the floor. As lead sponsor state Rep. Charlie Geren (R) told colleagues, “Members, I do know when it’s time to fold ’em.” Nose-counting found casino proponents well short of the 100 votes desired to pass the bill (sports betting got 97, just enough). Although Las Vegas Sands mouthpiece Andy Abboud expressed idiotic optimism over the non-result, it’s another humiliation for Sands in Austin. All Sands horses and all Sands men simply can’t put casinos together in Texas. Maybe Rob Goldstein should give it a couple of years’ rest and let sports betting carry the ball for a while.
Speaking of sports betting … it brought in $97 million to Illinois operators in March on $1.1 billion handle. FanDuel‘s $44 million led the pack, followed by DraftKings‘ $28.5 million and BetRivers‘ $9.5 million. Also-rans were PointsBet ($6.5 million), Caesars Sportsbook ($4 million) and Barstool Sports ($4 million).
No sooner was Station Casinos out of the picture as landlord to the Oakland Athletics than the A’s inked a pact with Culinary Union. (Coincidence much?) The team agreed to allow unionization at its ballpark-to-be. The A’s have also committed to employing union labor to construct their stadium, whenever or wherever it is eventually built. It remains to be seen whether the Culinary deal is portable, as the construction one is.