The CEO of the sports-betting app BetMGM breaks down his outlook for the industry — and shares 3 pieces of advice for investors targeting the sector

  • BetMGM is a sports betting platform backed by an equal shareholder partnership with MGM Resorts and Entain.
  • The CEO explains the key differentiators of the platform vs competitors and the MGM/Entain partnership.
  • He also shares his outlook on the sports betting industry and 3 pieces of advice for investors.
  • Visit the Business section of Insider for more stories.

BetMGM, the sports betting and iGaming platform, is betting big on partnerships.

The platform is backed by an equal shareholder partnership from MGM Resorts (MGM) and Entain (GMVHY). 

Most recently BetMGM partnered up with 2019 world series champions, the Washington Nationals, which gives the firm exclusive jurisdiction over the stadium and the surrounding two block radius, said CEO of BetMGM, Adam Greenblatt.

The strategy enables the platform to gain access to sports fans in Washington, but also fans from neighboring states, who come to watch their team at National Park and download the app to bet at the game.

The shareholder partnership with MGM Resorts and Entain provides the firm an edge to compete with the likes of FanDuel and DraftKings (DKNG).

MGM Resorts provides real-life rewards to customers, such as a night at the Bellagio hotel in Las Vegas, which will become even more attractive once the economy fully reopens after COVID. Entain provides access to a large group of technologists, who can help to quickly develop the product.

BetMGM’s product is geared toward both new and sophisticated bettors and is ranked in the top ten in the sports category on the Apple app store, with an average rating of 4.8 stars, based on around 16,200 reviews.

For the new customers, Greenblatt said they are able to edit bets after they are made and use a generator to create parlays, which are a cumulative series of bets.

“You make your selections and the app will automatically generate a parlay to suit your selection, if you want to bet this with this kind of pay out,” Greenblatt said.

For more experienced bettors, there is the option to automatically cash out, or sell part of the parlay back in real time, Greenblatt said. The feature is similar to a stock-trading platform, he added. The difference is that this product is all about entertainment.

There are definitely parallels in the emotional connection between betting and trading, Greenblatt said. However, the underlying activity is very different, he added. 

“Nobody loves stock X as much as they love their team,” Greenblatt said.

MGM & Entain Partnership

MGM Resorts recently unsuccessfully pursued a merger with Entain. 

But Greenblatt explained a merger wouldn’t have altered BetMGM’s operations by much.

“Where does it sit in what organization?” Greenblatt said. “Frankly, I’m not so concerned about that, because what I do know is that there won’t be changes which disrupt, or put at risk, our spectacular momentum currently.”

Read more: One of FanDuel’s early investors breaks down how to capitalize on the booming US sports betting industry amid a ‘tremendous decade’ of growth

The firm is not lacking focus from either shareholder and has received tremendous support, Greenblatt said.

A research report from Morgan Stanley released on February 1 highlighted the same positive view on the partnership as it explored how potential consolidation could play out in the sector.

Though the offer was rejected, we think it will continue to provide valuation support for Entain, and that both partners will continue to explore ways of achieving maximum value for the BetMGM JV (of which they currently own 50% each),” said Morgan Stanley equity analyst, Ed Young.

The analysts are expecting M&A to continue to play a role, as companies position themselves in the online gambling sector.

Competing with top players

Greenblatt said the partnership has enabled the firm to work with a small-company mindset, but with big-company capabilities.

The whole industry is becoming a big-company game, Greenblatt said, because of the costs of market access, lobbying, technology, compliance, testing, third-party providers, leagues and licence fees in every state.

It’s not for the faint hearted, he said.

Read more: Deutsche Bank shares 3 undervalued online gaming stocks poised to skyrocket as the industry builds on a blockbuster 2020

“This is why I believe we’re in the sweet spot, because we have MGM resorts and Entain’s big-company capabilities and resources, but have this speedboat to get things to market and ensure that we’re as relevant as we can be on a state-by-state basis,” Greenblatt said.

He predicts 2021 is the year when the narrative changes around competition and whoever is in the leadership position starts to feel less comfortable.

“So is there space for a new entrant?” Greenblatt said. “Of course there is. Is it very, very difficult, very time consuming? And very complex? Yes.”

Advice for investors

For investors interested in the sports betting sector, Greenblatt gives 3 pieces of advice:

1) Be selective

Understand how difficult and expensive it is to operate in this market, Greenblatt said.

“Unless you’ve got the recipe to compete at the very, very highest level, which includes balance sheet – but it’s not exclusively balance sheet,” Greenblatt said. “I think you’ll find that there’ll be some casualties.”

2) Long-term differentiators will be critical

3) Understand market share doesn’t mean profitability

“Don’t assume that 1% of market share means that there is a profitable business behind it, because of all the costs of participation,” Greenblatt said.

The outlook

The US sports-betting total addressable market is expected to go from less than $1 billion in 2018, to an expected $15 billion in 2025, according to Morgan Stanley.

Young said the pace of state liberalization has accelerated and early-stage revenues have beaten expectations. 

So, where will sports betting be in five to 10 years?

“I think in five years, we will see the US as the biggest sports betting and iGaming market, digitally in the world,”  Greenblatt said.

On the regulatory front, BetMGM is currently live in 10 digital states and 5 retail states.

Greenblatt expects regulation will continue to take place on a state-by-state basis, and around 30 to 40 states to have adopted sports betting legislation in five to 10 years. He also sees four to six national operators, with the potential niche players in some regional pockets, or particular states, where there is already brand recognition, or physical assets and presence. 

Longer term, Greenblatt expects further consolidation, which is in line with recent reports from investment banks, such as Morgan Stanley and Goldman Sachs. He also thinks there could be the potential for shared liquidity in the sector, which would allow nationwide digital jackpots. However, that prospect is dependent on potential changes to the 1961 Wire Act.

“We’ll see the US reclaim its place as the leading poker market worldwide, once we have shared liquidity to support it,” Greenblatt said. “And it’ll be great for iGaming, because of the customer experience and potential life-changing wins.”

Read more:

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  • A new 33-page report from JPMorgan breaks down how media companies can cash in on the rise of US sports betting. Here are the key takeaways and likely winners.

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