Analysts Question GVC, MGM On BetMGM Growth In US Sports Betting

GVC is hailing strong growth from Roar Digital, its US joint venture with MGM, but analysts remained unconvinced.

In a trading update on Friday, the London-listed firm said Roar had made good progress in Q4, highlighted by its partnership with Yahoo Sports.

The deal gives Roar access to 60 million customers. It’s described by the group as a “significant step forward.” The partnership currently is live in New Jersey, but the two firms want to expand to five more states this year.

“Online revenues grew strongly throughout the quarter, and the group is excited about the outlook for 2020 and beyond,” GVC said.

Is BetMGM making progress?

The operator did not break out specific US numbers but has previously set itself a target of 10% to 15% market share in NJ sports betting by March.

BetMGM had a 7.7% market share in New Jersey in December and not yet launched in Pennsylvania.

Analysts were unconvinced by the update. London-based Regulus Partners pointed out that customers acquired via Yahoo Sports were likely to be “low spend.” Other analysts have questioned whether Yahoo Sports’ customers will convert at the same rate as daily fantasy sports brands thanks to the lack of an existing wallet.

Regulus added:

“Roar has yet to materially move the needle in terms of market share in any of the major US sports betting markets and this is the only true barometer of ‘good progress’ in our view.

“While GVC’s ability to improve underperforming assets or capture growth across a wide number of geographies has been impressive, the challenges of the US are in many respects distinct: not least the appetite of a critical mass of operators to lose large sums of money in a land grab of uncertain end value.”

To illustrate the point, Kindred Group said this week it took a nearly $8 million EBITDA loss on its Unibet US operations in Q4; while FanDuel expected to lose $58 million in 2019, and Fox Bet has projected losses of $40 million. 

According to recently filed IPO documents, DraftKings lost $114 million in the first nine months of 2019. William Hill US expects to break even.

What does the future hold for Roar Digital?

The joint venture recently secured licensing approval to launch the BetMGM brand in Nevada. It also parachuted in ex-Ladbrokes Australia chief Jason Scott to oversee trading across the US. 

Elsewhere the brand is spending heavily on sponsorship and marketing deals around the US. BetMGM has partnerships with lacrosse, the NBA, NHL and MLB. Expect to see BetMGM’s market-share figures grow in the coming months as those deals start to pay back.

German investment bank Berenberg said in a note: “We expect 2020 to be a crucial year for Roar, which we expect to be one of the main players as the market grows.”