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A daily podcast delving into the biggest stories of the day throughout the sports betting and igaming sector.
speaker-0 (00:00.024)
Certainly in the eyes of Entain, but MGM is being very faithful.
speaker-1 (00:09.358)
Entain CEO Stella David has once again warned UK Chancellor John Healy not to hike Machines Games Duty this month as the operator's retail revenue remained stagnant over the last 12 months. It came as Entain reported its Q3 numbers, revealing that it would hit the lower end of its E-bit DAR target for the year. So, how did Entain perform in the last quarter and what does it tell us about the state of the industry?
Welcome back to iGaming Daily, supported by Optimove, the creator of positionless marketing and the number one player engagement solution for sports betting and iGaming operators. I'm Charlie Horner and today to discuss Entained's performance I'm joined by iGaming Expert Senior Journalist Connor Porter and SBC News' Patrick Killeen. Connor, thanks for joining me today. How are you doing?
speaker-0 (00:55.66)
Not too bad, Charlie, not too bad. Glad that Premier League football's back rather than all this international stuff. But yeah, I would like my Forest to get to winning ways. Although with these entained numbers, you know, it's looking positive when it comes to favourable sports results for the fans. So hopefully it's favourable for me as a Forest fan in the near future.
speaker-1 (01:16.686)
Fantastic. Patrick, how are you?
speaker-2 (01:18.454)
Yeah, I'm good. I'm kind of the opposite to Connor. I would like the football season to end already, being an old athletic fan. But yeah, back on for two days in a row. So good to do it in person as well.
speaker-1 (01:29.624)
Very good. yeah, it's it's nice. Always nice to do this in person. Look, we're here to discuss Entain and its its Q three numbers because we we've been reporting on that this morning. Patrick, how about we we start with you? could you give us a rundown of of the numbers? I know we don't get specific revenue figures, but we do get a little bit of a glimpse of how Entain has performed. What did it tell the markets today? Yeah.
speaker-2 (01:53.602)
So net group net game in revenue up two percent with online kind of offsetting a little bit of a a slight decrease in retail, online up three percent, retail down two percent. once again we've seen that the UK and Ireland is a massive driver of this. they've been that I think Antane said that it would have been five percent overall growth if it weren't for the betting ban in Brazil or the circumstances that have occurred during the
reported quarter in Brazil. so online in UK and Ireland up fourteen percent, retail up slightly as well, which is kind of against the grain a little bit at the moment. but obviously what we've not got from this is the the impact on bottom lines, the actual numbers in the impact on bottom lines. So, you know, in half one we we we established that Entertain had been hit by a substantial tax fee. so
It looks good on the surface. They're looking to hit the they've affirmed that they're going to hit the lower end of expected EBITDA for the year, but we don't really we can't gauge too much from today's announcement barring the fact that UK and Ireland is is a major driver of growth at the moment.
speaker-1 (03:07.074)
Yeah, absolutely. Let let's talk about that because as you say, they're fourteen percent the the UK and Ireland online revenue jumped, which is a a significant increase. But it wasn't just in the UK and Ireland either. It was double digit growth in New Zealand, Spain and Canada, which is which is quite impressive. Connor, do you think it's a case of all smiles on the on the online front for NTN? And if not, what what else can we read into those numbers?
speaker-0 (03:32.118)
It's a bit of a, think I might be in the minority here, but I think it's a bit of a mixed bag because sure, like the numbers look great, but there's like underlying issues as to why those numbers might be what they are. So like, for example, in the UK and Ireland at the moment with their online revenue, we've recently had the remote gaming duty, remote gaming duty increase coming in April. And now we've got ourselves a full quarter of that duty in place. And sure enough that the UK market, as we know, has been changing.
throughout the past couple of years with considerable exits on the online market when it comes to operators being present there and managing those expectations. in essence, the 14 % could be a mixture of, yeah, they've improved their product and more customers have come in to use their offerings. But also it could be a fact that
they are able to capture a bigger market share because there's less operators in the market. So that might be one of the reasons why growth has occurred in the UK. In New Zealand, course, online casino regulation is currently going through. They've recently just finished the auction process there. Entain was able to acquire the right to apply for three of the licenses in that market. And as that market continues to change,
it will impact how New Zealand goes moving forward. But from the looks of things, it looks as though New Zealand is going to be a priority for Entain as we go from 26 into 27. And they'll to probably capitalize on that further with more investment when it comes to the online casino launch in July next year. Spain, cross-operated deposit limits in the testing phase most recently. So yeah, these numbers at the moment.
could look promising, but are they going to change in the future given the new deposit rules that come in play and how is that going to affect player volumes and things like that? And then in Canada as well. Yeah, it's had a great growth, but also, as you'll know, Alberta launched in the past year compared to last year's numbers. there's a lot of swings around about, to say yes and nos to as to why growth may have occurred, but overall, yeah, it's kind of positive that there is growth, but...
speaker-0 (05:48.044)
Yeah, it's about dissecting this to how much is that down to offerings and how much is that down to, you know, market share gains and new markets opening up as well.
speaker-1 (05:56.364)
Really interesting point that actually about the the UK market be being able to take some of that market share from from smaller operators that might be be closing down. that's something that we'll definitely continue to monitor as as we dissect through these these Q threes from different various different operators. Patrick, you you sort you sort of alluded to it to it earlier. despite the the online growth, things are slightly stagnant on on the retail front. There's a little bit that I think one percent
increase in in in the UK and Ireland but but two percent down across the board can you start to see why Entain is is particularly eager to to stop John Healy from increasing machines game duty later this month?
speaker-2 (06:40.27)
Yeah. Yeah. I mean, incidentally, yesterday the BGC members wrote a like co authored a letter to government asking again lobbying against a potential increase in machine games duty and also asking for a pause on the increase in general betting duty which is due to come in in April, which was obviously announced in the last budget. Now, entertain
I think Michael Snape, the chief financial officer, referenced it in the investor call kind of immediately after the results were announced, saying that the potential increase in machine games duty threatens the viability of many of our shops with significant consequences to jobs, local communities, the UK High Street, as well as the racing industry more widely. So Entain as the the brand with the the biggest presence on the UK High Street is obviously going to suffer should.
machine games duty be increased. But again, the we we've kind of talked about the lobbying being a bit contradictory to positivity displayed by NTN leadership in terms of okay, you know, our high street estate could be massively affected by this, which is true, but we're gonna increase our market share. You know, we can find positives off the back of tax rises. And it kinda it comes across as it's a little bit not cohesive in terms of the lobbying.
When you've got these big you know, th there's kind of a a quick answer for government if, you know, government read this letter and they're, you know, the biggest gambling companies in the UK, but that they can immediately just go, Okay, you're saying that it's gonna massively impact our bottom line, it's gonna impact jobs. But hang on, you're still saying you can make money from the downfall of of your competitors. So
speaker-1 (08:33.014)
It's such a hard thing for for f to to balance though because you have to tell the the story to the government and do all that lobbying. And you Well the same time you can't tell investors that
speaker-2 (08:42.136)
That you w this is this is a massive problem. Yeah, exactly. It's it's a tough kind of tightrope to to tread, isn't it? But I I I can't see the government being sympathetic to these big companies when they are and y and like you say, it's so kind of it's such a strange path to navigate, right? Because what are you gonna say? this is such a disaster. But I mean I think the the angle that they're taking in terms of lobbying against the MGD rise is is a better one.
speaker-1 (08:44.215)
Yeah.
speaker-2 (09:11.714)
than black market. we've said it before, black market doesn't resonate with the general public as well as lobbying against loads of people who are going to lose their jobs. The lot that line that is what you need to to to portray. And it's it's correct. You know, we've already seen job cuts and shop closures in the UK on the back of the remote gaming duty increase and machine game duty increase. As much as machines game machine games duty is harder to to to kind of argue against the tax rise on
for f for the government and for like because of the social impact of of machine games compared to to generally having a bet. the the angle of people are going to lose their jobs is definitely one that that they they need to take rather than the black market. And of course it's going to have a massive impact on Entain. I think I mentioned before that the tax bill for the first half of last year was already massive compared to
year on year compared to twenty twenty five, should another tax increase come, we're gonna be seeing that rise even further next year or the year after.
speaker-1 (10:18.754)
I mean, y you say there actually, and I think it's a a really good point that the the communications of this tax rise or against this tax rise in terms of making it and framing it around jobs has been genuinely quite impressive from from from the industry, I would say. you know, bringing the s the stories of individual workers and and employees in the shops has has been a much more powerful message than the black market, which is elusive and I d I d don't think people tend to understand quite sure.
speaker-0 (10:45.934)
not on the point that the connective message from people losing jobs and shops closing is that ultimately that would lead to less net take from the treasury with these potential machine games duty increases. It was mentioned about independent analysis in the Entain Call.
that around 1,500 betting shops would close and approximately 16,000 jobs would be lost. But then you've also had regular partners who have done their own forecasted cohort analysis of the situation and they believe that 28,000 people could lose their jobs and over 4,000 betting shops could close, which would ultimately see a 32 % decline in MGD. that would approximately be
a decline of MGG returns of approximately 155 million. So these are like significant numbers that they're talking about on all sides of the argument. And hopefully it's one that the government will listen to because otherwise it's going to impact a lot of people's lives.
speaker-1 (12:02.85)
Well, we'll see. we'll see about that one. we've we've got less than two weeks now until the budget. But so we'll we'll definitely come back and
And and tackle this debate once again. but for now, let's take a very short break and we'll come back and we'll we'll carry on the discussion about NTN's Q3s. Learn how Optimus positionless marketing is changing how iGaming teams operate. Discover how operators are using Optimus positionless marketing platform to launch personalized CRM campaigns, dynamically change casino lobbies and bet slips, and create engaging gamified experiences. Learn more at Optimove.com. Welcome back to iGaming Daily. if Machines Games Duty w is one crisis that the the the industry
Trying to navigate, then Brazil is another huge crisis that the industry is trying to navigate. And Entain is one one operator that is massively impacted by this. we know it's got a significant position in the Brazil market, we know it's got significant investment there. Patrick, what was the the fallout from Lula's provisional measure for for Entain and how how has it impacted the company throughout its Q3 trading? We should probably
clarify as well that the w the provisional measure came in. I think three days before the end of the quarter, so though though though there will be an impact, it might not have been felt so drastically in in Q three itself.
speaker-2 (13:26.294)
yeah, so down thirty six percent. But as cited in the investor call, they made a lot of references to not chasing unprofitable volume before the the the close of the market, which was was was kind of being hinted at for for months on end before before it was actually announced by President Lula.
Sporting Bet is the brand that Entain has in Brazil and is heavily sports focused as opposed to iGaming. And that's massively th the the the kind of winding down of operations from Entain before or the la the lack of focus on Brazil has massively impacted Q three's and it's a it's an interesting one really with with how they're approaching it. They expect the market to reopen and I think that's something that a lot of people expect.
We know that if Flavio Bolsonaro gets in, he's not exactly a massive fan of the gambling industry. But he's not opposed to he's been critical of Lula's ban and he he seems quite favourable towards opening sports betting, which would be big for Entain. I think they would be in a strong position. Stella David said, even if there's restrictions on marketing and it's just sports that opens, they're in a strong position.
Because they're already a an established brand there. But at the moment they they've kind of managed to offset the impact the the the act of of the actions that they've taken in Brazil throughout Q3. But it still kind of took a big hit on on their numbers and 36% is a substantial decrease, right? So to to and to impact overall
overall net gaming revenue by a few percentage points it is is obviously a a major thing and it's something that is the last thing that really Entain wants during a a period where three of their key markets are under huge regulatory pressure in Brazil where it's been completely wiped out, Australia where we we know there's a lot of public pressure on the government to to introduce further gambling reform. And the UK, obviously we've we've debated tax increases till the cows come home, haven't we? So
speaker-2 (15:52.386)
So yeah, it's
speaker-1 (15:53.122)
Yeah. Look, it's a it's a it's an uncertain environment for for any business to be operating in, not not not least Entain. let let's let's shift now from Brazil to to the US Connor, where we know that it has a joint venture with MGM on BetM GM. we had a a a business trading update a couple of days ago now on on BetMGM. What what's the story there and how how is Entain viewing BetM GM as part of its its overall portfolio?
speaker-0 (16:20.632)
Well, Entain will be pretty pleased with the progress that BetMGM is making, especially since the beginning of this year, because they started paying their parent fees. you know, it's, I'm not a parent myself, but if I'm sure that parents out there listening would be pretty pleased as their child started giving them money and BetMGM has started giving...
Emtain a lot of money from according to their most recent Q3 reports. Adam Greenblatt said in the call that the parent fees initially totaled 18 million, but then they've got cash distributions on top of that of 50 million. So it's 68 million split in between MGM Resorts International and Emtain. So yeah, the math equates to 34 million come in the way of Emtain in that quarter alone. So that's pretty good on their part. But ultimately in terms of how MGM is operating,
They've always been pushing their iGaming operations and they're pretty pleased with the performance that they're making there. They've had good success with a lot of their titles over there as well. Game of Thrones, we all know that TV program that's recently been branded into slot games for for BetMGM and they've been performing well across the US and Alberta as well. And also they recently launched one that may
I'm not sure if it's launched here in the UK yet, but if it does come over to the UK, they've got the slot game based on the Traders program. yeah, certainly in the eyes of Aintain, but MGM is being very faithful.
speaker-1 (17:54.466)
Wow. okay, we'll we'll we'll just gloss over that one, can't I? Noah, but y y y you you strike upon a a a good point now, which is but MGM is very, very confident in its online casino proposition in the US. And I think another thing that makes them quite interesting in stateside, particularly this year, is their a version of prediction markets compared to some of its its competitors, like FanJuel and DraftKings, which which have
both invested in in developing a predictions product. okay, well let's let's bring things towards a a bit of a close now. We we've kind of done a a whistle stop tour of some of Entain's core markets. we know that they're projected to hit the lower end of its e bit DAR guidance for the year is s somewhere around nine hundred and ten, nine hundred and twenty million pounds for the year. Which of course that's a positive message for for investors to hear. But there's so much uncertainty with we've
spoken about it briefly across lots of different markets today. So how can Entain continue to project this message of confidence to investors in in in over a long term when you have so much disruption and uncertainty going on in the background? Connor, do you want to go first on this?
speaker-0 (19:10.55)
Yeah, I think they can project this message of confidence because they have confidence in their brands. know, we talked about the presence of Sporting Bet in Brazil, how they have confidence that if it was just to solely be a sports betting market online going forward, depending on the outcome of the elections, then they have confidence that their brand can succeed because of the presence that they have and the recognition that they have there. Obviously here in the UK,
They have Ladbrokes and Coral as well recognized brands, not just online, but on the high street as well, which gives them confidence for managing any sort of remote gaming duty that came in place earlier this year. And also the machine games duty that could potentially be around the corner, because sure, it will impact them on a jobs and shop front, but also at the same time, there's an opportunity there for them to grow their market share.
with those closures and gain gain gain gain advantage from that. And then in the US we already spoke about the the BMGM brand and how well that's doing there. So there's lots of things within that that can give shareholders confidence in what the message that Entain is portraying. But obviously there is these underlying issues of the regulation.
and the constant different dynamics in the market that are going to leave questions for shareholders when pushing forward. But ultimately, Entain sees itself with strong foundations, a good global footprint as well, and they believe that they can use such capital that they've got. Remember, they're exiting their markets in central and eastern Europe too, so that's going to potentially bring more liquidity for them moving forward.
could potentially use that liquidity to manage some of these regulatory headwinds that they're coming up to face. So they've got confidence in themselves because of the brands that they've built up and the way that they're managing at the moment. Whether or not that will transfer into share price improving for them, we'll have to wait and see. They did mention about buybacks during their call, so that could be around the corner. But ultimately, this is a brand of Entain that has confidence in itself moving forward.
speaker-0 (21:32.266)
seems to be prepared for whatever's gonna come their way.
speaker-1 (21:35.424)
that divestment of the C E unit as well is is is something that you know, we shouldn't completely gloss over either in terms of just having that core focus on on your key markets. Patrick, how do you reflect on on the long term
speaker-2 (21:49.644)
I I think th exactly what you both just said in terms of NTN CE that reducing that debt burden is is such a a big thing at the moment. You know, we know that's created it's a phased operation. But in terms of kind of projecting confidence, it's such a difficult we've already mentioned how difficult it is at the moment. But there is the un there's underlying signs that that there is, you know, reliance on not only on the fact that they've got heritage brands in several markets, but they're they're
Being slightly innovative and moving forward. You know, the job cuts in technology departments is never a nice thing to discuss. But even with that, there was kind of suggestions of improving the back-end technology and being more streamlined and more efficient business. They invested, I think, about 300 million into upgrading the infrastructure in their retail portfolio in the UK into the technology there. So
There's that that you know, that kind of you know, it doesn't show a signs of an embattled business or anything like that, does it? But it's so hard to to portray to investors that you are a something that w that they should have confidence in when you're in such an uncertain situation in so many markets. I don't think that the only reason that I think or the main reason that people may be investing in entertaining my opinion at the moment is because the stock is undervalued. D having
Potential tax increase in the UK, not a clue what's going on in Brazil until we get a bit more of a picture on that. And just the global betting market at the moment is is at such a a strange in such a strange place in terms of regulation and what sort of political what avenues political powers take in their respective markets and it with entering so many of those, it's it it's not a kind of an attractive proposition in my opinion. But
The the numbers that we've the the the kind of brief numbers that we've got given today look good in some parts. Connor's mentioned about BetterMGM showing positive signs. lobbying against machine games duty hikes is massively important, but as we've kind of said, does saying this amount of people will lose their jobs, this is how much our revenue will be affected by our profit and eBay Dow will be affected by this.
speaker-2 (24:15.514)
does that kind of put investors off if you're saying that you know, if something that looks likely to come in is going to impact your business that much? So to I I know it's it's an easy thing to say, but we kind of just gotta wait until we've kind of got a clearer picture in terms of wanting Entain to be an attractive investment proposition. but yeah, there there there's still signs of of life within Entain, definitely.
speaker-1 (24:42.142)
Well I think it's gonna be all lies on a couple of weeks' time when we've got these runoff for the presidential election in Brazil and the budget in the UK. So all lies on that and we'll bring you all the latest on SBC News, on iGamingExpert and iGaming Daily. But for now, Connor, Patrick, thanks ever so much for joining me. Thanks to Optimu for supporting the show and to our listeners. Thanks for tuning in to today's episode of iGaming Daily and come back tomorrow to keep up to date with all the latest global gambling news.