Good morning, and welcome to the Indy Gaming newsletter, a weekly look at gaming matters nationally and internationally and how the events tie back to Nevada.
If a colleague or associate emailed this newsletter to you, please click here to sign up and receive your own copy of Indy Gaming in your inbox. – Howard Stutz
Alex Meruelo paid an undisclosed amount to purchase the former Sahara Hotel Casino in 2018 and announced a year later that he was spending more than $150 million to restore the Las Vegas Strip resort to its Rat Pack-era name after it suffered through a failed five-year run as the SLS.
So it makes sense that Meruelo would utilize the name Sahara in other gaming ventures.
On Wednesday in Arizona, Meruelo is launching SaharaBets, a digital sports wagering platform that is jointly owned by his privately held company Meruelo Gaming and the National Hockey League’s Arizona Coyotes, which he also owns.
Meruelo, who also owns the Grand Sierra Resort in Reno, bought the Coyotes in 2019 and is just the second professional sports team owner in the U.S. to also have ownership in a sports betting operation. Tilman Fertitta, who owns the NBA’s Houston Rockets, owns Golden Nugget Online Gaming, which is being acquired by DraftKings.
“Although SaharaBets is likely to raise fresh questions regarding the rapidly deepening relationship between U.S. sports stakeholders and the sports betting industry, we note that team owners operating online sportsbooks is not unprecedented,” Eliers & Krejcik gaming analyst Chris Krafcik wrote in a research note last week.
Arizona, which legalized sports betting last year and launched it in September, allowed up to 10 sports wagering licenses to tribal casinos and up to 10 licenses for sports organizations.
The licenses cover teams and facilities, but a sports betting operator must also be included. Major League Baseball’s Arizona Diamondbacks have a partnership with Caesars Sportsbook, the NFL’s Arizona Cardinals are partners with BetMGM and the NBA’s Phoenix Suns are partners with FanDuel. All three deals include retail sportsbooks at the team’s home venues.
SaharaBets will initially have just an online presence. The Coyotes’ lease at the Gila River Arena in Glendale expires at the end of the season, and Merulo is looking to build a new arena in Tempe but is awaiting approval from the city.
“As the sports betting landscape continues to evolve in the Valley, SaharaBets looks forward to collaborating with the Coyotes organization to engage and interact with sports fans in fun and unique ways,” SaharaBets President Andrew Patterson said in a statement.
The company is utilizing the sports betting system developed by International Game Technology (IGT), which provides the software, hardware and odds-making management tools, which are often referred to as trading services. The ownership of SaharaBets assumes the risk of covering the wagers and payouts.
IGT President of Sports Betting Joe Asher said most of the company’s platform deals involve a revenue-sharing agreement.
IGT provides its sports betting management system to some 20 states and has a separate deal in Arizona for sports betting with the Cliff Castle Casino in Camp Verde, which is 42 miles east of Prescott and 90 miles north of Phoenix. The property is operated by the Yavapai Apache Nation.
Arizona’s sports betting launch has smashed the record for state start-up states, according to gaming analysts. The Arizona Department of Gaming said at the end of December the state’s combined sports wagers for September and October totaled more than $777.3 million.
In addition to the operators attached to teams, the state has drawn some of the gaming industry’s largest sports betting names, including Penn National Gaming’s Barstool Sports, which has a deal with the Phoenix Raceway, and DraftKings, which is partnered with PGA Tour’s TPC Scottsdale Golf Course.
However, Merulo Gaming Senior Vice President Andrew Diss, who spent time last year in the state when the Legislature was debating its sports betting law, said the company’s launch isn’t late in the game.
While the competition between sports betting operators to sign up customers has been fierce, Diss suggested some of the companies are starting to pull back on large promotional costs that were initially being spent in the state. He said Meruelo Gaming’s approach will be focused on Arizona’s Hispanic market.
“This was by design,” Diss said of Meruelo launching his company’s own sports betting product. “We got a lot of offers from the big guys, but Alex wanted to go out on his own and start his own operation.”
Krafcik expects “a strategic focus of SaharaBets will be to drive visitation” from Arizona residents to the Sahara in Las Vegas.
The rebranding has continued since Meruelo announced the Sahara name change with a VIP party with a drone light show in the sky above the property. Last year, the Sahara remodeled its sportsbook area, adding a branch of Philadelphia’s Chickie’s & Pete’s Crab House and Sports Bar to the space.
Both the Sahara and Grand Sierra sportsbooks are operated by William Hill US, which was purchased last year by Caesars Entertainment. Diss said at some point, Meruelo Gaming will determine whether to launch SaharaBets in conjunction with its Nevada casinos.
One person who isn’t betting against Meruelo to be successful is Asher. The former president of William Hill US, he struck the original sports betting deal with Meruelo.
“I never underestimate Alex Meruelo as a businessman,” Asher said. “I remember the Grand Sierra before Alex owned it, and it was losing money. You compare that to what it is today, and there is no comparison. There is a lot more activity in the Sahara these days, for sure.”
Opening weekend of New York’s online sports betting doesn’t disappoint
It took just one weekend for New York’s online sports betting industry to make an impression.
Just four sports betting operators – Caesars Entertainment’s Caesars Sportsbook, DraftKings, FanDuel and Rush Street Interactive – launched Saturday in time for the last weekend of the National Football League season.
Internet tracking service GeoComply, which can verify a user’s digital identity, followed more than 17 million online check-ins over the weekend, including 5.8 million check-ins in the first 12 hours online sports betting was live.
Those check-ins may not have resulted in wagers, but analysts quickly jumped on the New York bandwagon.
“The total was close to the next three largest states (New Jersey, Pennsylvania and Michigan) combined, for the same time frame,” B Riley Securities gaming analyst David Bain wrote in a research note. “While expected, the announcement acted as a sentiment catalyst for the online gaming space, in our view, particularly for the four license holders, given increased investor and media focus.”
Bank of America gaming analyst Shaun Kelly said New York could become the nation’s third-largest betting state behind New Jersey and Nevada with annual sports betting gaming revenue of between $400 million and $700 million.
Roundhill Investments founder Will Hershey told the financial website Seeking Alpha that New York is “likely to quickly become the largest regulated market in the U.S.” However, New York’s gain could come at the expense of New Jersey, where he expects the state’s monthly sports betting figures to decrease by as much as 25 percent.
“New Yorkers will no longer travel across the border to place wagers,” Hershey said.
Vixio/Gambling Compliance predicted that New York sports betting would total $667 million in revenue this year and more than $1.1 billion by 2025.
New York sports betting operators will need to book a lot of wagers to hit those revenue predictions. The state has an industry-high 51 percent tax rate on sports betting revenues, far above its neighboring states. Pennsylvania has a 34 percent tax on sports wagering revenues while New Jersey’s sports tax rate is 13.5 percent.
Nevada’s tax rate on sports revenue is the same as its casino revenue tax rate – 6.75 percent.
To put the figures into perspective, Nevada sportsbooks took in $329.1 million in revenue on more than $5.3 billion in wagers in pre-pandemic 2019, both of which were record totals.
Through November 2021, Nevada sportsbooks have already broken the 2019 records with $429.2 million in revenue on $7.1 billion in sports wagers, including two straight months (October and November) of more than $1 billion in sports bets.
Prior to its mobile sports betting launch, New York had allowed retail sportsbooks at eight commercial and tribal casinos, mostly upstate or in the central region. The facilities are operated by the four companies that launched mobile.
Caesars Sportsbook, the only Nevada-based firm currently in New York, runs sports betting for the Oneida Indian Nation at the tribe’s Turning Stone Casino.
Ahead of the mobile sports betting launch, Caesars announced partnerships with Madison Square Garden, the NBA’s New York Knicks, and the NHL’s New York Rangers.
Bain believes the volume will benefit Caesars, adding to his previous prediction the company will be the industry’s largest market share gainer in 2022. He noted Caesars has a market share of 14 percent in Arizona, well ahead of its overall nationwide online sports betting market share of 6.5 percent.
“New York offers a similar, apples-to-apples comparison with other online operators that have been marketing in the online space in other jurisdictions long before Caesars,” Bain told investors. “Given the size of New York, (the state) can accelerate Caesars’ overall share gain.”
Caesars won’t be the only Nevada casino and sports betting company in New York. Bally Corp’s BallyBet, MGM Resorts International’s BetMGM and Wynn Resorts’ Wynn Interactive are three of the five companies that are expected to launch online sports betting in New York ahead of the Feb. 13 Super Bowl LVI.
California voters could see four different sports betting ballot questions
While New Yorkers have sports betting options, Californians will head to the ballot box in November and could have to decide between four competing ballot initiatives to legalize the activity.
California is home to nearly 70 tribe-owned casinos that produce an estimated $8 billion in annual gaming revenue, nearly 90 privately operated cardroom casinos and four privately owned horse racing tracks.
With the California Legislature showing zero interest in weighing in after a 2020 sports betting effort died in committee and with a debate raging over retail sportsbooks versus online sports betting, one thing is clear: The parties all want a slice of a California sports betting pie that is pegged by gaming analysts as a potential rival to Nevada’s sports wagering throne on the West Coast.
California is the largest of the 27 states that have not legalized sports betting since 2018. Analysts have projected that the Golden State’s retail and online wagering could generate $3 billion in taxable revenue on an annual basis.
“The tussle over legalized sports gambling is shaping up as one of the most pervasive and expensive initiatives in state history,” Fresno Bee columnist Marek Warszakski wrote last week.
A coalition of statewide tribal casinos, which includes new Palms Casino Resort owner San Manuel Band of Mission Indians, has qualified one ballot initiative that only allows retail sportsbooks and bans wagering on games involving California universities and colleges.
A second ballot question, which would legalize online sports betting and is backed by cities with cardrooms, has reached the 25 percent threshold for signature collection, according to a campaign spokesman. The initiative calls for the taxes raised through legal sports betting to be directed to cities and counties to fight homelessness.
Two other initiatives, one backed by several Indian tribes separate from the other tribal coalition, and another formed by seven sports betting operators – DraftKings, FanDuel, BetMGM, BallyBet, Wynn Interactive, Barstool Sports and Fanatics – are also still collecting signatures.
Global Markets Advisors Partner Brendan Bussmann told an investment conference call organized by Truist Securities last week that Californians will see millions of dollars spent on marketing campaigns to get the signatures needed to be on the ballot.
But he suggested the confusion with voters having multiple choices of sports betting initiatives “could bring a negative vote all around.” Bussmann said the ultimate debate could be the choice between mobile sports betting versus retail sports betting. California’s initiatives, he said, offer “a generally reasonable tax rate.”
Pandemic again puts the brakes on Macau’s Chinese New Year celebration
It appears COVID-19 will silence any massive Chinese New Year’s celebration planned by Macau’s struggling casino industry — for the third time since 2019.
Chinese New Year is traditionally the busiest – and most lucrative – holiday in Macau for its casino industry. The COVID-19 outbreak in January 2019 halted Chinese New Year events and closed casinos in Macau for 15 days during February.
The 2020 New Year’s celebration was also subdued, and 12 months later, spiking COVID-19 numbers are causing concern among the Special Administrative Region’s gaming regulators.
“COVID remains a major obstacle in Macau with new cases on the Mainland and the crucial Guangdong region once again threatening to push out the recovery timeline,” Jefferies gaming analyst David Katz told investors in a research note Monday.
He expects a long-awaited reopening of the Chinese border with Hong Kong will be delayed while additional travel restrictions will “set a disappointing context for the Chinese New Year.” The Year of the Tiger begins on Feb. 1.
Katz told investors that Hong Kong, which is just a one-hour ferry ride from Macau, began banning passenger flights last week from eight countries, including the U.S. and Canada, until Jan. 21.
Meanwhile, Fitch Ratings placed the debt controlled by Macau casino operators, including Las Vegas Sands Corp., MGM Resorts International, and Wynn Resorts, on Rating Watch Negative (RWN) in December and reiterated the risk to investors on Monday.
In a statement, Fitch Ratings Senior Director Colin Mansfield, who follows U.S.-based gaming operators, placed the rating on the Macau operators on Dec. 10, saying there was “imminent regulatory risk” to the companies, given that gaming license concessions expire on June 26.
Two days after the initial downgrade, Chinese government officials released what analysts deemed to be favorable results for the renewal process, which seemed to lift some of the uncertainty.
However, Mansfield said the negative rating watch will also consider actions “should there be signs that the recovery in visitation to Macau, particularly from Mainland China, and resultant gaming revenues do not materialize as expected.”
Macau’s casinos collected $10.8 billion in gaming revenue in 2021, an increase of 43.7 percent over 2020, but still more than 70 percent below 2019 when casinos in the region produced $36.6 billion. Macau’s all-time gaming revenue record was $45 billion in 2013.
Mansfield warned investors there are assurances of Macau’s future operating environment, but the rating service believes Macau regulators will “take a pragmatic approach given their preference for stability.”
He suggested the Macau chief executive, the region’s top government official, could utilize a five-year license extension option, which would allow the casino market to focus on the “long-term recovery trajectory or visitation and gaming revenues.”
Other items of interest:
The American Gaming Association said it’s official: Commercial gaming revenues in 2021 have shattered their single-year total set in 2019.
And there is still one month left to report.
The Washington D.C,-based trade organization said gaming revenue from 26 states was a combined $48.34 billion through November, 21.3 percent higher than the same 11-month period in 2019. That year, the nation’s casino industry produced $43.65 billion, the previous one-year record.
Combined revenue from traditional casino gaming, sports betting and online gaming reached $4.85 billion during November, marking the industry’s second-highest revenue month and the ninth consecutive month of $4.4 billion or more. Prior to 2021, monthly commercial gaming revenue had never surpassed $4 billion.
Sports betting and online gaming combined for just above $1 billion in gaming revenue in November, nearly 21 percent of total commercial revenue.
Gaming equipment provider Everi Holdings acquired Atlas Gaming, an Australia-based slot gaming content and product developer for an undisclosed price.
Atlas will become a development studio for Las Vegas-based Everi, joining the company’s other studios where news games and gaming technology are created. In a statement, Everi said the purchase provides the company a pathway for future expansion into new international markets. The development and engineering employees of Atlas will become Everi employees.
Everi Executive Vice President Dean Erlich said the Atlas purchase will “provide more original content for our current customer base while creating an opportunity to further penetrate the markets Atlas has historically served, including Australia.”
Everi is funding the purchase with cash and the transaction is expected to close in the next 60 days.
Gaming equipment developer AGS acquired the rights to a blackjack side bet that the Las Vegas-based company believes it can market to a much larger audience.
In a statement, AGS Senior Vice President John Hemberger said the Lucky Lucky side bet is already part of more the 1,000 blackjack tables throughout the U.S. Side bets, often created by individuals or small gaming developers, have increased in the last decade because they can increase wagering totals on traditional table games.
The Lucky Lucky wager is in addition to the blackjack wager in which the player’s first two cards are added to the dealer’s first up-card, creating a three-card total. Odds are paid if the total is 19 or higher, with the top award being suited 7-7-7.
Colorado-based Aces Up Gaming developed the side bet and sold it to AGS. The terms of the deal were not disclosed.