GVC and MGM Join Forces To Create US Sports Betting Powerhouse

GVC and MGM Join Forces To Create US Sports Betting Powerhouse

On Monday, July 30, MGM Resorts International and GVC Holdings announced a partnership to create a market-leading online sports betting and gaming platform in the United States. Each company will make an initial commitment of $100 million to fund the joint venture, and while the contract covers a 25 year period, GVC and MGM have agreed an option enabling them to buy each other out after ten years.

Details of the Deal

Ownership of the new organization will be split 50/50 between the founding companies. It will focus on both brick-and-mortar and internet sports betting while also including online casino and poker sites. By partnering with each other, the two groups hope to capture significant market share, lower their risk profiles and take advantage of operating efficiencies to keep margins high. The new firm will establish its main office in a “major U.S. technology hub.” Staff from both MGM and GVC will be transferred to the fledgling entity, but there will also be many new personnel brought aboard. Operations will be overseen by a four-member board of directors.

Background

The creation of this new investment vehicle was sparked by the May Supreme Court decision in Murphy v. NCAA, which set aside the federal prohibition on sports betting contained in the 1992 PASPA legislation. This landmark case paved the way for sportsbooks to open in states that allow them. Right now, there are four states that have set up legalized betting on sports: Nevada, New Jersey, Delaware and Mississippi. Pennsylvania meanwhile has passed laws that allow this form of wagering although no operators have yet obtained a license. Many other states are pursuing their options and may enact sports betting legislation in the near future.

Only in Nevada is the sports betting market mature because it was granted an almost complete exemption from the PASPA rules. Other states either had very limited betting opportunities possible or were not permitted to host sportsbooks at all. There’s therefore likely to be an explosion in the size of the industry now that the Supreme Court has removed the main obstacle to its growth.

MGM’s Strengths

MGM Resorts owns a number of prominent land-based casino properties, including the Bellagio and MGM Grand in Las Vegas, MGM Grand Detroit in Michigan and Diaoyutai MGM Hospitality in China. Despite its forays into the international market, most of the facilities managed by MGM are located in the United States. Importantly, it runs the Borgata in Atlantic City, as well as the Beau Rivage and Gold Strike in Mississippi, all of which are expected to see an uptick in sports betting business. In fact, the latter two Mississippi casinos have just recently opened up offline sportsbooks on Aug. 1.

Most state-level online gaming legislation mandates that would-be operators partner with existing casinos within the state. Therefore, the diverse portfolio of MGM-owned gaming centers will give the new enterprise the ability to hit the ground running without having to engage in complex negotiations and contracts with third parties. The company already has interactive gaming experience with its playMGMcasino and playMGMpoker brands in the New Jersey regulated online gambling market.

GVC Holdings’ Advantages

GVC Holdings is a U.K. headquartered entity that houses a number of well-known and respected internet gaming brands. Its sports lineup is headlined by bwin, Ladbrokes, Coral and Sportingbet. Its other gambling products include partypoker, Casino King and Gala Bingo. Because the development of internet betting software is a time- and resource-consuming activity, the fact that GVC has a number of solutions ready to go will give the new business a leg up on the competition. GVC already supplies the client software for the partypoker and partycasino online sites in New Jersey.

Looking Forward

There are several ways in which the new enterprise may see its fortunes soar in the coming years. In May, MGM Resorts agreed to purchase the Empire City Casino in New York. While all attempts at passing NY online wagering legislation in 2018 fell short of the mark, most experts believe that it’s just a year or two away. With access to the populous and wealthy New York City geographic area, the Empire City acquisition could prove to be a long-term bonanza.

Furthermore, MGM has more than 30 million individuals in its customer databases. With the right marketing efforts and promotions, many of them could be converted into real money sports betting customers.

More Partners at the Dance

MGM Resorts has been busy entering into agreements with various other corporations. On the same day that the deal with GVC was announced, MGM revealed that it had also reached an accord with Boyd Gaming. Boyd owns buildings in seven states, some of which MGM itself does not operate in. Each firm will allow the other market access to its locations for the purpose of mobile and online gaming along with sports betting. GVC Holdings will also have access to the same markets that the Boyd contract opens up to MGM. Thus, the three entities will leverage each other’s strengths to the mutual advantage of all of them.

The NBA is another organization that has approved an arrangement with MGM, naming the casino company its “official gaming partner.” This is the first-ever such agreement inked by a major U.S. sports league and a betting concern. MGM will be allowed to showcase the NBA’s logos and intellectual property, helping to give its betting brands an aura of legitimacy and authenticity in the minds of consumers. Commenting upon the deal, NBA Commissioner Adam Silver said:

“What this relationship entails is access to official data for the many casinos that MGM operates. It’s the use of the NBA’s intellectual property and as we’ve discussed before we’re very focused on integrity provisions to protect our fans, to protect those who choose to engage and bet on the NBA.”

The three-year deal inked between MGM and the NBA is thought to be worth around $25 million, and also includes the Women’s National Basketball League (WNBL). This is not the first business relationship entered into between MGM and the league, though, as last year the company purchased the WNBA’s San Antonio Stars as part of a deal that then saw them renamed the Las Vegas Aces and relocated to the Mandalay Bay Events Center in Las Vegas, Nevada.