Shares in London-listed 888 Holdings jumped more than 20% in early trading after the business revealed a new major shareholder.
FS Gaming Investments, a consortium which includes former GVC Holdings CEO Kenny Alexander, former director Stephen Morana and former chairman Lee Feldman, has secured a 4.55% shareholding in the business.
In addition, former GVC COO/Entain CEO and current DAZN Group CEO Shay Segev, transferred the voting rights of a 2.02% shareholding to the group, giving it total voting rights of 6.57%.
Shake things up
A note from investment bank Peel Hunt suggested that the “well-informed group of investors could contribute to finding a new CEO, accelerating the existing strategy and finding new directions for growth” at 888.
Meanwhile, sources told the Financial Times the group was “likely to push for a speedier integration between 888 and William Hill to drive down costs, and could request a board seat for Alexander or Feldman”.
In the longer term, sources said 888 could even become a target for a partial sale or takeover by another gambling firm or private equity vehicle.
“It’s a really quality, undervalued asset,” one person close to the matter told the FT. “There’s some top-quality brands and top-quality people in the business.”
Bloomberg also suggested the new investors would push for change at 888, and that the party had already contacted the operator with “proposals to boost the company’s value”.
Those proposals could include leadership and strategy changes, according to a report published on the matter yesterday (6 June).
Background information
888 shares remain down over 50% over the past year after a series of major challenges saw investors lose confidence in the business.
Its £1.95bn acquisition of William Hill’s non-US assets left the firm hamstrung after interest rates spiked, as 888 was left with net debt totalling 5.6x its earnings at the end of last year.
CEO Itai Pazner then left the business in January of this year following an internal compliance investigation into practices relating to VIP customers in the Middle East.
Since then, 888 has been led by executive chair Lord Mendelsohn, but has not hired a permanent replacement for Pazner as CEO.
Industry reaction
An 888 spokesperson told Bloomberg that the company welcomed the new investment, which “we believe reflects the significant value creation potential in our business.”
The spokesperson added: “The board remains highly confident in its long-term strategy to maximise value for shareholders. We look forward to updating and engaging with all our shareholders as we continue to deliver against our clear strategic and operational priorities.”
Meanwhile one source told industry newsletter Earnings+More that the investment from FS was “opportunistic,” reflecting the fact “these guys are dealmakers.”
How do you solve a problem like crypto?
In the Financial Times this week, business columnist Helen Thomas argued that governments shouldn’t treat crypto like gambling – “even if it is largely pointless.”
Reporting from the world’s “biggest bitcoin event” in Miami, Florida – where attendance was about half as strong as it had been this time last year – Thomas noted that “some of the buzz and meme coins are gone,” as was the crypto industry’s “sense of indestructibility.”
Having faced several major challenges and crises over the past 12 months, the world of crypto has battled against those who would seek to bring it down.
Not least among them are governments, with US agencies launching “a slew of enforcement actions in the sector,” and politicians in Westminster recommending cryptocurrencies be regulated as gambling.
For Thomas, that meant “an influential parliamentary committee suggested that crypto was, not disruptive or renegade, but worse: borderline irrelevant.”
Indeed, parliamentarians in the Treasury select committee judged currencies like Bitcoin to have “no intrinsic value” and serve “no useful purpose,” instead suggesting that trading cryptocurrencies was hardly different at all from backing the favourite in the 5:50 at Sandown or lumping it all on 17 in roulette.
This “dismissive” approach was wrong, in Thomas’ view, as she argued that even though cryptocurrencies themselves may have failed to clearly elucidate the use cases of distributed ledger technology, that doesn’t mean it is totally without utility.
“The industry still does a very bad job of explaining things,” said Oliver Linch, chief executive of Bittrex Global. “It’s been wink wink … if you know, you know, to the moon nonsense.”
Lawyer Marc Jones went on to suggest that “to say [cryptocurrency] is gambling makes no sense legally,” with Thomas adding that it also wouldn’t contribute to effective regulation of the sector.
And all this at a time when “UK gambling regulation is still trying to catch up with the invention of the smartphone.”
Still, there remains a challenge in working out who exactly should be looking after the crypto sector – should it be the gambling world or the finance world?
Thomas suggests that “dividing responsibility between regulators would be a mistake. The crypto universe doesn’t neatly split into conceivably useful and definitely pointless.”
For the time being, she suggests that financial regulators still seem the most likely contenders for the position of Bitcoin watchmen in the future, with the latest report “unlikely to prompt a change of direction from the government.”
Unlikely, perhaps. But stranger things have happened.
UAE casino still a gamble
Wynn Resorts’ much discussed project to bring the first casino resort to the United Arab Emirates was the subject of another story in Forbes this week.
The article suggested that the cost of developing the resort is likely to push the local government of Ras Al-Khaimah – one of the seven emirates that make up the UAE, and the first to develop plans for a casino – into a fiscal deficit.
The integrated resort is expected to open its doors in 2027 after ground was first broken on the project earlier this year.
For a small economy like Ras Al-Khaimah, however, Forbes said “the project represents a giant gamble.”
The development is set to cost close to $4bn, equivalent to some 32% of the emirate’s total GDP last year.
RAK Hospitality and Al-Majran Island, two state-owned companies, are developing the project together with Wynn and are assumed to hold a majority stake in the venture once it’s up and running.
According to a report from Fitch Ratings, however, the resort is expected to “weigh on public finances initially” before boosting growth prospects and national revenues in the longer term.
The development will likely push the government’s budget into a 0.1% deficit this year and 0.2% in 2024, according to Fitch, as a result of the cash injections needed to build the resort.
On the upside, however, the ongoing construction work should boost the emirate’s GDP by one percentage point this year and three points in 2024, with real GDP in those years set to grow 4.4% and 5.1% respectively.
And, with the resort set to be the only destination of its kind in the surrounding region, there’s no telling how much it could generate once it arrives.
A fine mess at Meta
Dominating discussions earlier this week was Meta’s record-breaking €1.2bn fine in the EU, as reported by Bloomberg, which was levied on the social media giant just a couple of days before the fifth anniversary of the introduction of the General Data Protection Regulation (GDPR).
The Facebook owner was ordered to cough up, and to stop transferring user data to the US within the next five months, after regulators said it had failed to protect personal information from American security services.
The Irish Data Protection Commission said continued data transfers to the US didn’t address “the risks to the fundamental rights and freedoms” of the people the data belonged to, and were promptly deemed unlawful.
The decision had been widely expected, according to Bloomberg, as there was already some precedent here. The last time Meta’s transfer of data between the EU and US came to under inspection by regulators in 2022, the company threatened to pull its Facebook and Instagram services out of the region entirely.
This time, Meta said it would appeal the latest decision, which it described as “flawed” and “unjustified”. It will also immediately seek a suspension of the banning orders on its transfers of data, which it said would cause harm to the “millions of people who use Facebook every day.”
According to Meta’s chief legal officer Jennifer Newstead and former UK Deputy Prime Minister Nick Clegg (who for some reason is now Meta’s president of global affairs), the rules risk chopping up the internet “into national and regional silos, restricting the global economy and leaving citizens in different countries unable to access many of the shared services we have come to rely on.”
Any appeals from Meta will have to be filed in Ireland, and will take months at best to be resolved.
It seems that while the internet might make it seem like we live in a world without borders, that doesn’t mean companies like Meta can simply ignore them.
BuzzFeed News? More like BuzzFeed Olds
As anyone working in the digital media sector knows by now, BuzzFeed News is no more.
This week, the New York Times published an impassioned obituary of sorts, of the so-described “quirky upstart that became a Pulitzer Prize-winning operation.”
It noted the newsroom’s humble beginnings, as a clickbait and listicle-driven media company designed to capture readers’ attention through the noise of social media.
Soon, though, the business took a turn for the more sincere, and as the BuzzFeed News brand began to take itself more seriously, it “soon drew attention for its ambitious, sharp reporting.”
The brand branched out overseas and invested further into investigative journalism, with several of its alumni having moved on to more ‘high brow’ publications, such as the New York Times itself, as well as the Wall Street Journal and Bloomberg News.
Those newsrooms, in turn, “have embraced many of the practices that BuzzFeed pioneered in search of readers online,” the NYT reports, as the mark made by the company on modern journalism continues to be felt across the media.
For all of its impact, however, the division failed to make enough money to survive, “unable to square the reliance on digital advertising and the whims of social media traffic with the considerable costs of employing journalists around the world.”
BuzzFeed News’ closure is set to impact some 60 members of BuzzFeed’s 1,200-strong employee base, with another 120 jobs to be cut across the parent company’s business, content, tech and administrative teams.
The layoffs are part of a broader trend which has seen other media outlets – Vox Media and Vice, for example – fail to live up to their previously massive valuations.
Vox laid off 7% of its staff in January, while Vice is “desperately seeking a buyer,” according to the NYT.
Despite the unfortunate turn of events that led to Buzzfeed News’ closure, the brand signed off in typical good humour.
The last Apple News push notification sent out by the outlet read: “BuzzFeed News is logging off with a reminder that Blippi pooped on his friend.”
Well, what more is there to say than that?
A load of old junk(ets)
The Financial Times once again took a closer look at the gambling industry this week, with a story on the “overdue reckoning for Macau’s casinos,” after the local industry’s reliance on ‘junket’ operators fell under the spotlight.
The story begins with gaming lawyer Jorge Menezes, a figure “prepared to ask on the record, difficult questions about the gambling industry in the territory,” and who was once attacked by thugs using bricks tied to their fists.
Those difficult questions include how casinos, including those publicly listed in the US, were “allowed to co-operate with parties accused of illegal practices that were carried out for years seemingly in plain sight?”
Menezes refers here to the practices of ‘junket’ operators, who promote casinos to the ultra-wealthy and encourage them to gamble stakes in the millions, transferring the money out of mainland China and into Macau in breach of Chinese law.
The issue came to a head in 2021 when Alvin Chau, the head of junket operator Suncity Group and referred to by the FT as “Asia’s gambling kingpin”, was arrested following a crackdown from Beijing on Macau’s casino sector.
Chau was subsequently sentenced to 18 years in prison for involvement in organised crime, illegal betting and fraud.
Following his arrest, MGM, Wynn and Sands all promptly terminated their agreements with junket operators, while some casinos in Australia had their licences suspended after allowing Suncity to operate gambling rooms for VIP high rollers on their premises.
Menezes suggests that casino operators have since been performing an unconvincing display of mock incredulity at the revelations, compared by the FT to the famous Casablanca gag: “I’m shocked, shocked to find that gambling is going on in here!”
“Did they not know for 10 years, can anyone believe MGM, Wynn and Sands did not know that criminal activities were taking place in their casinos, does anyone believe this?” Menezes asks.
In the end, this article brings up more questions than it does answers, as it notes: “While the big junket companies have closed, the casino businesses have continued with hardly a blip.”
And, with all six of Macau’s major operators handed new, 10-year licences last year, “their lucky streak continues,” it concludes.
Lucky indeed.
Gambling and football: a love story for the ages
Another stellar piece from the FT makes it into this week’s Hot Copy, as Samuel Agini and Oliver Barnes offer a deep dive into “How English football became hooked on gambling.”
As clubs in the Premier League now prepare to (very slowly) phase out front-of-shirt sponsorships by gambling firms, the authors looked into the past, present and future of the gambling sector’s love affair with the Beautiful Game.
They suggest that the reluctance of football authorities to cut ties with the sector altogether is indicative of the sport’s financial reliance on gambling, especially in lower leagues.
The government is accused of taking half-measures “to keep the hawks at bay,” while it’s suggested the Premier League is attempting to “portray an image of responsibility,” without giving up the revenues associated with gambling.
Of course, football is the biggest betting sport in the UK, followed fairly closely by horse racing, while no other sport comes remotely close to either.
Readers are encouraged to have a proper look at the FT’s article, which sets out several key statistics from the sector in a series of easy-to-understand graphics.
Football’s obsession with gambling firms can be traced back to 2002, when Fulham became the first English football club to sign a sponsorship deal with betting exchange Betfair.
Fast forward a couple of decades, and a 2020 study showed that a gambling sponsor was referenced every 21 seconds during a typical TV match broadcast.
The article argues that even if front-of-shirt sponsorships disappear from view over the next few seasons, the gambling sector’s obsession with football is going nowhere.
Because, while the EFL may insist that gambling sponsorships are in no way related to increased betting among football fans, “they wouldn’t keep spending the money if it didn’t work.”
Raising the Stakes
The Financial Times turned its attention to crypto darling Stake.com this week, to examine how the brand has grown “almost unnoticed” to become the world’s seventh largest gambling group in the space of just six years.
Featuring commentary from co-founder Ed Craven, the youngest billionaire in Australia, the publication explored the ups and downs of Stake’s meteoric rise in recent years.
Craven, alongside business partner Bijan Tehrani, set up the brand after being banned from online role playing game RuneScape for inviting players to bet with digital gold coins, effectively creating an in-game gambling operation.
The pair’s business ventures to date have been bankrolled by early investments in cryptocurrency, at a time when Bitcoin sold for less than $20 a piece.
According to estimates compiled by Regulus Partners for the FT, Stake’s revenue eclipses that of industry stalwarts like DraftKings and 888, with the firm generating more than $2.5bn in revenue in 2022.
That leaves just a handful of operators – including Flutter, Entain, 1xBet and bet365, ahead of the crypto-focused firm, which is popular among high rollers, not least big-betting celebrity partner and Canadian rapper Drake.
One former employee, who was working with Stake in its early days, told the FT: “There were so many high rollers. I’d be sitting there with the team and one of them would be like: this woman in Singapore has just put her hand down for a million dollars against this guy in Russia who’s done the same.”
The piece sets out how Craven and Tehrani have steadily built up Stake’s reputation to the point where users are comfortable making such bets, through a combination of brand-building, sports sponsorship and advertising.
Those tactics are perhaps secondary, however, to Stake’s core business plan, which, according to FanDuel founder Nigel Eccles, has become a proven model. “You start in the grey market and you grow to a huge size, and then you find a path to becoming more regulated.”
Indeed, Stake boasts six million accounts and 600,000 users across a variety of grey markets including Brazil, Japan and Southeast Asia.
Can Stake eventually become the world’s biggest operator? Following the breakneck speed of its ascent in recent years, that might not be impossible.
The drugs don’t work
A curious story from the world of medicine came out via The Guardian this week, as the paper shone a light on an unusual side-effect of the antipsychotic medication aripiprazole.
According to an expert in the field, patients who are prescribed the medicine – which is commonly used to treat depression, bipolar disorder, psychosis and schizophrenia – must be told there is a risk it could lead to them developing a gambling addiction.
The National Problem Gambling Clinic – a treatment provider for those experiencing gambling-related harm in England – has observed a growing number of patients who have developed gambling addictions following aripiprazole use, with some patients losing huge sums of money and having relationships break down as a result.
Professor Henrietta Bowden-Jones, the psychiatrist who runs the clinic, said more awareness was needed around the issue as GPs are failing to monitor whether patients using the drug are developing addictions as a result.
“This is not just any side-effect – it can come with a risk of losing your own home. What we constantly see is that not enough people know about this. I gave a recent lecture to all the psychiatrists in my trust and a very large proportion had never heard about it,” she said.
Nearly 9% of the National Problem Gambling Clinic’s patients in 2022 were found to be on the drug, with most saying they were not aware of the connection between its use and gambling addiction.
Lee Jordan, a patient who began using aripiprazole in 2021, went from gambling small amounts occasionally for fun to experiencing a gambling habit which quickly began to take over his life.
“I was spending a huge amount of money because it was a release. But the devastating effects were humungous – I nearly lost my relationship, I lost family, friends, it just destroyed my life really,” he said, adding that he had lost £10,000 to gambling companies and been unable to recoup the money.
After stopping using the drug in 2022, Jordan was able to give up on gambling – through a combination of willpower, self-exclusion software and the removal of the extra pressure created through taking aripiprazole.
The story shines a light on under-explored links between mental health, psychiatric medicines and problem gambling, a topic which is slowly beginning to gain more awareness in the medical world.
Holknekt goes for the jugular
Swedish fashion designer and entrepreneur Per Holknekt pulled no punches this week in a guest column he wrote for Swedish news portal Realtid.
Holknekt, a self-professed gambling addict, is currently in the process of suing Unibet owner Kindred Group for damages worth SEK10m (€887,000), after losing SEK26m with the betting brand during a 15-year struggle with gambling addiction. The operator, he argues, exploited his addiction for profit.
In his latest column, Holknekt went for the industry with all guns blazing, after Betsson AB CEO Pontus Lindwall appeared in court recently to defend his company against a similar case being brought against it by another former gambling addict.
Lindwall’s plea of ignorance around Betsson’s methods of identifying problem gambling behaviours did not sit well with Holknekt, who pointed to a press release issued by the CEO in 2017, claiming Betsson “had developed safe and strong tools to find gambling addicts both in personal and data analyses.”
Holknekt asked in response: “How did he know that? And how could he be so sure? And did they really want to?”
And of course, crucially, he asked why Lindwall has now stood up in court claiming not to know how the processes work.
Holknekt provided some background on Betsson’s latest legal battle, claiming: “The man who has now sued Betsson in the Uppsala district court is a severely addicted young gambling addict who had been drawn into the gambling swamp and over time had come to be systematically exploited by Betsson until the day came when he lost everything and more.
“After all, he belonged to the 4% of the company’s customers who accounted for at least 50% of the business. The company’s most important customers.”
If businesses identified and blocked such customers from playing, Holknekt argues, “you would simply lose your profitability and go bankrupt as a company”.
Instead, he argues, modern operators are doing the opposite, accusing them of enticing addicted players to increase how much and how often they gamble.
After providing some background on established links between gambling addiction and suicide, Holknekt concludes his piece with a visceral description of how he views the industry.
It consists, for him, of gambling business owners taking “blood money for another yacht in Marbella or Malta”.
Another 10,000 bite the dust
Meta returned to the headlines this week in a story which has become increasingly familiar in recent months, following wave after wave of big tech layoffs.
As reported by the New York Times, the Facebook and Instagram owner is set to sack another 13% of its workforce – or around 10,000 individual employees.
Founder Mark Zuckerberg has, presumably in yet another attempt to convince the public that he is not an AI-powered humanoid robot, described 2023 as the company’s “Year of Efficiency,” and it seems he will stop at nothing to trim the fat from the firm’s bloated workforce.
Meta’s recruiting team – perhaps unsurprisingly given that there is little recruitment going on at the moment – will be the first to be affected, before a restructuring of its tech and business groups will see those areas put under the microscope in April and May.
The firm already laid off around 11,000 staff in November, which was also some 13% of its total workforce at that time, and is now set to axe 5,000 job postings that had yet to be filled alongside the latest round of cuts.
Investors responded positively to the news, it seems, as shares in the tech giant jumped more than 7% by the close of trading on Tuesday, after the announcement was first made.
The NY Times laid out the now-familiar roadmap which has brought the company to this point.
Meta hoovered up all the talent it could find during periods of rapid expansion – for example following its acquisition of WhatsApp, or as mobile app usage boomed during the Covid pandemic.
As the old adage goes, however, what goes up must come down, and it seems the number of employees able to hold on at the tech giant is no different.
The article points to Amazon, Google, Microsoft and Salesforce all following a similar trajectory as they too attempt to cut down on costs amid a slowdown in the global economy.
It also points out that Zuckerberg’s big bet on the metaverse has yet to pay dividends, and that emerging technologies such as these continue to face an uncertain future.
So too do Meta’s remaining employees, who must now continue working, aware that the scythe may soon swing in their direction.
Silicon Valley Blunder
In more miserable business news, the Financial Times reported this week on the damage caused to tech start-ups by the much-publicised collapse of Silicon Valley Bank.
According to the piece, new firms are now “scrambling to deal with tighter regulation and the influence of larger banks that are set to replace the informal financial relationships and close personal connections that have characterised Silicon Valley Bank’s dealings with the sector.”
Naturally, the first priority of a lot of SVB clients on hearing rumour’s of the bank’s shaky position was to remove their cash and spread it around a bit, to avoid being reliant on a single bank again in the future.
“A lot of concentration in one bank in a highly connected community clearly turned out to be a very bad thing,” Laksh Aithani, founder of UK-based biotech company Charm Therapeutics told the FT.
And, when you put it like that, it does seem fairly obvious.
Still, there were benefits for start-ups in the simplicity of holding all their cash in a single bank.
Founder of sustainable period care start-up The Flex Company, and former SVB client Lauren Schulte Wang, told the FT that her firm had opened an account at JPMorgan over the weekend and planned to diversify further, but that the new set-up will inevitably make life more complicated.
SVB had previously touted itself as a one-stop shop for start-ups, with services designed around fitting their particular needs.
“There was always somebody you could speak to, no matter how small [the start-up],” Robin Klein, a VC investor at LocalGlobe, told the FT. “That’s very different from the big banks.”
The paper concluded that losing the bank is set to make life a lot more difficult for start-ups and their founders, eventually tilting technology markets further in favour of bigger platform companies with strong balance sheets.
Indeed, it said, the collapse of SVB marks the beginning of a new era for tech start-ups, who now have “to deal with the loss of a singular institution that had sought to provide for all their financing needs.”
While the media has been quick to reassure the public that the collapse of SVB does not precipitate a 2008-style global financial crash, one thing is for certain: The future is beginning to look a lot less bright for new businesses looking to shake up the tech world.
Why not have a flutter on… well, Flutter
Barron’s this week suggested that FanDuel’s parent company (as it’s known to Americans) remains a valuable buy, despite a recent rally in its share price following the announcement it may consider a dual listing in the US.
It pointed to FanDuel’s undeniable dominance in US sports betting, with around 50% market share, and its recent turn to profit in the market, making it the first licensed online bookmaker to do so.
Despite announcing significant growth in its Q4 and full-year 2022 earnings report, Flutter’s shares fell following its release, which Barron’s said was the result of investors underplaying the growth opportunity in the US and instead focusing (on this occasion) on apparent weaknesses in the Australian market.
The UK, of course, may also have played its part in the tumbling share price, with shares in the market currently trading at a record 40% discount to those in the US, according to Citi analysts.
Still, Flutter shares are up 24% so far this year, which Barron’s suggests means investors “are starting to wake up to the bigger picture.”
Susquehanna analyst Joe Stauff gives the stock a Buy rating and a target price of £163 – around 21% ahead of where it sits today.
He noted that the US market size for Flutter over the next two years is set to become as large as the nine largest countries it operates in today, combined.
According to Barron’s, the stock also “isn’t too expensive, trading at 24.7 times estimated 2024 earnings, lower than an average of around 34 times among a basket of competitors, according to FactSet data.”
Gambling reform in the UK could present a roadblock up ahead, but apart from that, it seems there are still plenty of reasons to have a punt on Flutter.
Matt Hancock: the Non-Fungible Tory
In this week’s edition of Bizarre News from British Politics, the Financial Times reported that reality TV star, renowned philanderer and former Health Secretary Matt Hancock is launching his own NFT collection.
A man clearly with his finger on the pulse of what the people want, Hancock has released the collection hot on the heels of his I’m A Celebrity appearance, during which he choked down a camel penis, a sheep’s vagina and a cow’s anus with a side of crunchy cockroaches. With Boy George, for some reason.
To his credit, Hancock’s new NFT collection is not intended to benefit him (except for the obvious PR implications), as the proceeds will be used to support the Ukraine Humanitarian Appeal, helping charities deliver food, warmth, clean water and medical care to those who need it.
Cynics may say it is the MP’s latest attempt to dampen the flames which have so consumed his reputation in recent years, having overseen significant failures in the UK’s Covid response as Health Secretary before leaving his wife of 15 years for his mistress after the pair were caught canoodling on camera.
And, after promising to donate a significant proportion of his fee from I’m A Celebrity to charity, Hancock stoked the flames further by passing on a measly 3% of his £320,000 earnings from the show to charitable causes.
Since then, however, Hancock has taken in a family of eight refugees in his constituency house in Suffolk, including renowned Ukrainian artist Oleg Mishchenko.
The NFT collection, released in collaboration with Coinbase, is based on Mishchenko’s paintings of Ukrainian landscapes and landmarks, “many of which have been destroyed by the war,” according to Hancock’s press spokesman.
So far, just one of the 386 NFTs which make up the collection has been minted, after being claimed by Coinbase’s VP of international policy, Duff Gordon.
The project is set to officially launch at the NFT Gallery in London’s Mayfair next week. Place your bets on how popular it will be.
Ad agency calls for gambling firm boycott
Gambling advertising came under fire in The Drum this week as ad agency Media Bounty hit the headlines with a call for other agencies to boycott the sector.
Gambling industry firms’ “gigantic budgets, celebrity-filled shoots, and association with sports give them the nostalgic allure of advertising’s hedonistic heyday,” the piece said, but added that the companies are attempting to hide “a predatory system” which “preys on the most vulnerable users.”
The article pointed out how gambling had been able to weather the storm of economic instability in recent years, quoting growth of 18% in 2022, and linked this to an expected increase in gambling spend despite consumers having less disposable income than ever.
“When the pipe dreams of meritocracy fail, gambling gives a shot of false hope for a more prosperous way of life,” it said, which together with the widespread availability of online gambling creates a dangerous situation for those vulnerable to gambling-related harm.
As a solution, Media Bounty has positioned itself as staunchly anti-gambling, while it also eschews accounts from the fast fashion, tobacco and fossil fuel sectors.
While agencies continue to pick up the work, however, Media Bounty suggested that improvements could still be made in gambling advertising.
“Frequency capping rules (which limit the number of times an ad can be served to an individual) could be tightened to limit re-targeting, or ad-serving platforms could let users opt out of gambling advertising altogether,” it suggested.
It also pointed out that changes are already expected, with new rules on the use of influencers and sports stars in ads, but said that more overarching reforms have been pushed back as the government fears reduced tax revenues from the industry as a result.
Perhaps advertising will be ripe for further review in the long-awaited Gambling Act white paper.
SIS goes up for sale
Sky News published some big news in the M&A world this week, as it revealed that sports betting technology supplier SIS may be up for sale.
The supplier boasts shareholders including gambling giants Entain and 888, as well as Betfred founder Fred Done.
It describes itself as “the leading supplier of 24/7 betting services to retail and online operators globally… [providing] betting operators with… content with an end-to-end solution of live pictures, data, on-screen graphics with betting triggers and a wide range of markets and pricing to drive betting revenues,” according to the article.
The firm counts partnerships with more than 400 customers across 50 countries, according to its website, offering horse, greyhound and virtual racing, as well as esports and live numbers draws.
SIS can supply operators with more than 600,000 betting events every year, it added.
The business has apparently now instructed iGaming M&A legends Oakvale Capital to assess the interest around a possible sale, with the price reportedly set at somewhere in the region of £200m.
The firm was established in 1986 and launched The Racing Channel in the UK in 1995. Today, it has established a growing presence in the esports space and broadcasts channels covering sports including greyhound racing.
The firm is run by chief executive Richard Ames, the former head honcho at toymaker Hornby.
A possible sale could mark a return to large-scale M&A activity in the gambling sector, after 2022 saw a decidedly quiet period take hold amid macroeconomic uncertainty.
Zimpler could pay price for payments approach
Swedish news outlet Dagens Industri (DI) has not held back in its reporting on payments provider Zimpler this week.
In a series of articles, the scoop-hungry newspaper revealed that Zimpler was pursuing a sale and potential exit for its shareholders – many of whom have links to Betsson and Cherry – after the company skyrocketed in value over recent months.
DI alleged the drastic upturn in value is because Zimpler has continued to facilitate iGaming payments for operators targeting Swedish consumers without a licence. These companies have no obligation to link to the country’s self-exclusion register and are free to offer attractive bonuses to customers outside of the regulated market environment.
Zimpler’s growth is now 200% year-on-year according to DI, with an operating margin of 50% during Q3 2022, for example.
In the piece, DI points out the valuation of rival payments provider Trustly has plummeted over the same period after it ceased to offer payments to Sweden’s unlicensed operators.
DI suggested a raft of new rules being implemented by the Swedish Gambling Authority this year might make it harder for Zimpler to work alongside unlicensed operators, which could negatively impact any potential sale.
Zimpler said it had not been allowed to comment in DI’s coverage and swiftly put out a release of its own to address the claims.
“Zimpler has zero tolerance for illegal gambling activities,” said the firm. “Therefore, we work rigorously to ensure that all our customers comply with the legislation in each jurisdiction.”
Hinting at a potential loophole, the statement read: “Since 2019, when the law was introduced, Zimpler has never provided payment services to any company that the Gambling Authority has banned and thus can be found on the Gambling Authority’s website.”
Zimpler said reports regarding a sale of the company were speculation, although admitted it has a “constant dialogue” with investors, which is “natural” for a firm in the scale-up phase.
Gambling industry professionals have likely been following this story for some time and will have made up their own minds by now.
Footballer calls on sport to boot out gambling
Professional footballer David Wheeler penned a piece for The Guardian this week, expressing his distaste at the over-exposure of gambling brands in the sport.
In nearly all of his 500 appearances in professional matches, he claimed, he has had an online gambling advert either on his own shirt or surrounding him on the pitch.
This is not news to regular viewers of English football, of course, where Premier League fixtures can feature gambling logos and adverts upwards of 700 times per match through in-stadium and shirt advertising, according to the piece.
Wheeler called out the counter argument that gambling money helps pay for footballers’ often exorbitant wages, claiming: “I’d rather be paid less if it meant not profiting from addiction, harm and suicide – and I’m not the only one.”
Recent scandals among gambling operators – including Betway’s £400,000 UKGC fine relating to the appearance of gambling ads on the children’s section of West Ham’s website – show that teams are willing to take the money of companies who are failing to protect the most vulnerable members of society, according to Wheeler.
“It says all you need to know about how a sport and a country treat a public health issue that we name our national league after a gambling company,” he wrote.
“The EFL deal with Sky Bet ends next season and after Sky Betting & Gaming sent self-excluded gamblers free spins and exploited fans through sign-up offers, I would urge the league to look elsewhere for its next sponsor.”
And the fact that gambling firms contribute a relatively small proportion of their profits to supporting the sport while attempting to “lure in the next generation of lucrative profit makers” is “a bad deal for the sport and for fans,” he added. Tell us what you really think, David.
Underlining a peculiar irony of the sponsorship deals, Wheeler pointed to several scandals involving professional footballers being punished for placing bets on the sport.
“We are part of a strange world where we are expected to heavily promote products that could lose us our jobs if we use them,” he pointed out.
Japan’s betting boom
“All bets are off in Japan’s sports gambling craze,” argued Financial Times Asia business editor Leo Lewis this week.
Lewis shone a light on a curious growing trend in Japan, where legal options for sports betting are extremely limited.
There, boat racing, motor racing, horse racing and Keirin cycling are four of the biggest attractions for bettors, and growth in recent years has gone beyond what anyone might have previously imagined.
“All four sports, in terms of betting revenues and numbers of punters, have thrived to a remarkable degree over the past three years, primarily through online portals,” Lewis wrote.
“Some analysts attribute the growth to the pervasive (but possibly temporary), entertainment-hungry ‘nesting’ dynamics that Japanese households settled into during the pandemic.”
Since the onset of the pandemic, more time spent at home among Japanese residents has led to a pronounced proliferation of sports betting, Lewis argued, with revenues rising slowly and steadily since 2013 before soaring rapidly in 2020.
And the action has not subsequently slowed down. Since March 2020, the index covering the four sports mentioned above has risen 60%, Lewis said, while the index for boat racing alone has jumped a whopping 134%.
“This expansion jumps off the page among data for sectors in which contraction – latterly because of Covid but fundamentally because of Japan’s shrinking and ageing demographics – is rife.”
But the growth has not come without cost to Japan’s unique gambling sector.
Over the same period, the former king of Japanese gambling games – vertical pinball-style game pachinko – has seen revenues plummet.
The game’s 2020 revenues were roughly half their 2006 level of $207bn, Lewis said (although a quick Google search reveals Lewis was likely referring to total stakes here, and not revenue).
In any case, it seems the limited options available are far from preventing Japanese residents from having a punt. Whether the growth continues as post-pandemic habits subside, that very much remains to be seen.
Targeting ‘illegal’ slot machines
The Wall Street Journal reported this week that the US casino industry has launched a campaign against what it considers to be gambling in certain states: video game machines that resemble Las Vegas-style slot machines.
These machines have been placed in bars, convenience stores and social clubs. Games developers argue that, unlike slot machines, these games require players to use skill to win money.
However, casino industry lobbyists claim that these games are actually gambling, and provide a way to circumvent gambling regulations and avoid taxes.
The American Gaming Association, a trade group representing the casino industry, recently released a report estimating that Americans play $109bn on these “unregulated gaming machines,” with the machines generating nearly a billion dollars in estimated revenue.
The AGA has asked the US Justice Department to investigate these games and classify the machines as gambling devices under federal law.
The Justice Department responded by stating that it considers illegal behavior related to gambling a priority and has forwarded the information to the FBI.
Saving NFTs
In the Financial Times, the CEO of OpenSea, the leading non-fungible token (NFT) marketplace, has attempted to differentiate NFTs from cryptocurrencies as the sector faces the fallout of several recent scandals.
Devin Finzer admitted that the crypto industry had seen “some setbacks recently”, referencing the fall of FTX, the cryptocurrency exchange that collapsed into bankruptcy in November helping to trigger a fall in the value of digital assets.
But the head of the New York-based company insisted that NFTs have a bright future and will continue to be bought and sold with real money.
“It is not necessarily the case that NFTs will always be bought and sold denominated in cryptocurrency as they are today,” Finzer said.
“There are a variety of reasons why that makes sense in the current ecosystem, but as we get broader and more accessible, there is no reason that NFTs could not at least be denominated in US dollars.”
OpenSea, which takes a 2.5% commission on each sale, has raised $423m in funding since 2021 and was valued at $13.3bn in its most recent funding round in January.
Governments and law enforcement agencies are also considering whether NFTs should be registered and disclosed as financial securities.
“It is really important that regulators and government officials understand that this is not the same as the broader crypto industry where there is a lot of focus around financial use cases,” Finzer was quoted as saying.
He added the value of NFTs should be decided by how people engage with it, whether through using tokens to attend exclusive events, play games, or display digital artwork in their homes.
Calls for regulation
Germany’s international broadcaster, Deutsche Welle (DW), zoomed in on India’s online gaming industry this week.
The article highlighted that the industry is set to more than triple in size over the next four years, but officials and mental health professionals are concerned about the potential for gambling addiction.
Although chance-based gaming is already banned in India, determining what is legal remains contentious, with fantasy sports and rummy being considered as skills-based games by India’s highest court, but as chance-based games by state courts.
Real-money online games and chance games are generally banned in India.
According to a Mumbai-based non-profit Responsible Netism, children are in particular at risk of online gaming addiction.
“We receive hundreds of calls from parents on a daily basis who approach us to counsel their children addicted to online gaming, like rummy.
“These children play with money, putting out thousands of dollars every day,” co-founder Unmesh Joshi told DW.
But few Indian states have started taking initiatives to address the surge in online gambling.
“There is an urgent need to establish regulations for online gaming. It is regulation and not outright banning that would address the problem,” Joshi said.
Elsewhere, lawyer Aditya Kumar also stressed that the Indian government should clearly distinguish between skill and chance-based games.
“We need to set up an independent commission that certifies what is a game of skill and game of chance.
“This will help the government deal with betting and gambling more severely,” Kumar said, adding that the states and central government need to work together concerning regulations.
Tell us what you really think
Much criticism has been proffered in the direction of the cryptocurrency world this year, though few have produced a takedown as scathing as Financial Times columnist Jemima Kelly.
Having spent years calling out “the steaming pile of horse manure that is crypto”, Kelly suggested in her FT column this week that 2022 has shown the sector to be even more corrupt and dangerous than she previously thought.
“In many ways, I have been shocked myself at what has happened in the world of crypto over the past year,” Kelly wrote. “It has proved itself more shameless, dishonest, interconnected and fantasy-based than even its strongest critics could have imagined.”
Kelly goes on to list a handful of things we’ve learnt from the world of crypto this year, including the fact that the ecosystem has been propped up by a lot more leverage than many realised.
“And this was borrowing in real money, not just the magical strings of 1s and 0s that crypto tokens consist of,” Kelly pointed out.
The result of that was widespread chaos and collapse amid rising interest rates this year, leaving crypto prices tanking and platforms such as Celsius and Voyager failing to hold it together.
The past 12 months have also taught us that the world of cryptocurrency isn’t nearly as decentralised as its biggest supporters would have you believe.
“2022 was the year that we found out the extent to which Big Crypto is a real thing: a cartel of interconnected players from exchanges, stablecoin companies and crypto networks who work together via group chats – one Signal chat was reportedly called “exchange co-ordination” and included executives from FTX, Binance and Tether,” Kelly said.
Kelly then pointed out the ‘smoke and mirrors’ effect of the crypto world in recent years.
Martin Walker of the Center For Evidence-Based Management, a longtime crypto critic, told her, the books of crypto exchanges “are filled with their and their friends’ nonsense tokens”, and that when one of these implodes, “whole chunks of industry can very rapidly disappear”.
In spite of all the criticism – of which there has been plenty this year – the biggest takeaway for Kelly was ultimately the sector’s resilience.
Regardless of collapsing exchanges and the falling value of the tokens themselves, “many people are still willing to suspend disbelief, clinging on to the hope that one day, their miraculous internet money might resume its trajectory to the moon.”
Crypto investors will no doubt be hoping for their coins to lift off once again in 2023. Will Kelly be left with egg on her face?
Going on a bear hunt
According to a new Reuters article, investors in US stocks and shares are currently bracing themselves for an expected recession in 2023.
With just a few trading days left in 2022, the benchmark S&P 500 index is down 19.8% year-to-date and headed for its biggest annual decline since 2008, the article said.
That is largely the result of aggressive monetary policy adopted by the Federal Reserve this year, in an attempt to curb the impact of rapidly rising inflation.
While inflation continues to run rampant, investors are now shifting their focus to the potential consequence of recent Fed rate hikes; the prospect of an economic slowdown in 2023.
Fund managers responding to a survey by BofA Global Research named a deep global recession and persistently high inflation as the biggest risks in the market for next year, with a net 68% forecasting a downturn as ‘likely’ in the next 12 months.
“The consensus is pretty clear that there is going to be a recession in 2023,” said Chuck Carlson, CEO of Horizon Investment Services. “The issue is how much has the market already discounted a recession, and that’s where it gets a little bit thornier.”
Ed Clissold, chief US strategist at Ned Davis Research, added: “If we’re not in a recession now but we’re going into one that would mean that a retest of the October [share price] lows and a break of them is quite possible in the first half of the year.”
Investors are also now working to gauge the degree to which slowing growth has already been factored into corporate earnings.
Consensus analyst estimates suggest a 5% rise in S&P 500 earnings next year, according to Reuters, with at least slim year-over-year growth expected in every quarter.
Earnings fall by an average annual rate of 24% during a recession, however, meaning there is still plenty of risk under current market conditions.
In spite of this, strategists polled by Reuters last month said they expected the S&P 500 to end 2023 around 10% ahead of current levels.
“One way that could happen is if a recession hits early in 2023 and ends quickly. Bear markets on average have bottomed four months before the end of a recession,” the article said.
If there is a bear market on the horizon, the global economy will at least be hoping that it isn’t too grizzly.
Time to take over Twitter
Self-appointed Saviour of the World Elon Musk hit the headlines again this week – or more accurately, continued to hit the headlines – as he performed what was likely considered by his critics to be his biggest and most public self-own.
After asking Twitter users if he should stand down as head of the social media giant following his acquisition of the platform earlier this year (and promising to abide by the results of the poll), 57.5% of respondents suggested Musk should be relieved of his Twitterly duties.
After the poll closed, Musk promised users on the site: “I will resign as CEO as soon as I find someone foolish enough to take the job! After that, I will just run the software & servers teams.”
BBC News pointed to several possible causes for Twitter users turning against the mogul – though this will come as no surprise to regular users of the platform, who have seen no shortage of criticism aimed at the South African-born space explorer in recent weeks.
I will resign as CEO as soon as I find someone foolish enough to take the job! After that, I will just run the software & servers teams.
— Elon Musk (@elonmusk) December 21, 2022
From charging users for Twitter’s ubiquitous blue ticks to removing journalists from the platform, the court of public opinion has brought a litany of charges against Musk since he took control of the site.
Even the United Nations and European Union got in on the action, with the UN tweeting that media freedom was “not a toy” and the EU threatening Twitter with sanctions.
One thing which could cool off criticism of the platform is the prospect of new management. After the poll closed, however, Musk responded saying that “No one wants the job who can actually keep Twitter alive. There is no successor.”
Indeed, BBC News agreed with his assessment that a replacement will not be easy to come by.
Some have speculated that Twitter’s co-founder and erstwhile CEO Jack Dorsey could re-enter the fray, while other names, such as former Facebook COO Sheryl Sandberg, engineer Sriram Krishnan and Donald Trump’s son-in-law Jared Kushner have been mentioned. Heaven forbid.
At first glance, this does not appear to be a list completely free from the possibility of creating further controversy.
Musk will soon need to find time to focus on his role as Tesla CEO, however, as investors in the car manufacturer appear to be losing patience with the uncertainty created by his foray into the world of social media.
Shares in Tesla have tanked by some 69% this year-to-date, a number which is likely to amuse ‘edgelord’ Musk. His investors won’t be laughing, however. As for the value of Twitter at this point, that’s anybody’s guess.
A new Gambling Act at last?
Since the UK’s new government, led by prime minister Liz Truss, came into office last month, the gambling industry’s call for answers on a review of the 2005 Gambling Act have been met with little more than radio silence.
According to a report this week in the Racing Post, however, a review may well still be on the cards, according to former Conservative party leader and long standing campaigner for gambling reform Iain Duncan Smith.
According to the article, Smith told a meeting at the party’s conference in Birmingham on Tuesday that there had been little change from the situation under Boris Johnson’s regime with regards to the Gambling Act.
The government first launched its review of the act in December 2020, with a promise to bring forward new legislation “fit for the digital age”.
However after repeated delays, the most significant of which took place as outgoing PM Johnson announced his resignation earlier this year, the industry has been left wondering whether a review will be forthcoming at all.
Smith told the meeting that it is “not altogether certain where the government is right now” following Truss’ ascension to the UK’s highest office, however he added that former gambling minister Chris Philp, now chief secretary to the Treasury, was still keen to move forward with reforms.
Smith remains optimistic that the white paper will still be published, according to the article, but added that “it’s going to be one of those things where the government will have to balance the time they have for doing it and whether or not they’re driven to do it for the right reasons, and that’s really a game of persuasion I guess.
“It’s in exactly the same place as it was before. The problem is that names have all changed and people who therefore knew something about it are no longer in the posts that they were, so that’s the problem,” he added.
While the new government continues to find its feet and establish its priorities, it appears there is still little comfort for an industry which still doesn’t know for sure which way the wind is blowing.
Legalised sports betting? California’s dreaming
Both of California’s sports betting ballot measures are “underwater” despite the near half-billion dollars spent in supporting them, according to California-focused political newsroom CalMatters.
The ballot campaigns, which are now by far the most expensive political campaigns ever seen in the state, are widely accepted to be heading for disaster when state residents are invited to vote on them next month.
With election day just five weeks away, support for Proposition 27 – which would see mobile wagering introduced allowing commercial operators like DraftKings and FanDuel to enter the market – sits at just 27%, with 53% of voters opposed to the measure and 20% undecided.
Proposition 26 – which would allow for in-person wagering on tribal gambling properties – isn’t faring much better, with support of just 31%, with 42% of voters opposed and 27% undecided.
And there is not much time left to change voters’ minds – county election offices are required to begin mailing ballots to all active, registered voters no later than Monday.
According to CalMatters, the campaigns have not been helped by the fact that many of the ads surrounding the issue have been considered confusing or even misleading, and that they are funded by four separate ballot measure campaigns featuring a “complex cast of players”.
Each proposition has attracted separate campaigns both for and against, making for a cutthroat and hard-fought competition which, it now seems, has been battled for months entirely in vain.
Twitter takeover intensifies
Elon Musk’s Twitter takeover saga continues, as the social media giant has agreed to delay a deposition by Musk originally scheduled for yesterday (6 October), as the two sides continue to hash out a way of closing his $44bn buyout of the social network, according to the Financial Times.
After saying he would buy the company in April and subsequently trying to back out of the deal, Musk this week sent a letter informing Twitter he was willing to close the deal at the originally agreed $54.20 per share price in exchange for halting the litigation to determine whether he can walk away from the deal.
A trial to determine that is scheduled to begin on 17 October in a Delaware court.
Negotiations over how to close the deal have hit problems over concerns that Musk could still sabotage a $13bn debt financing agreement he has arranged, while the FT said that according to one person inside Twitter there remains far less concern about the banks themselves being reluctant to meet their debt commitment contract.
An agreement would put an end to weeks of legal to-ing and fro-ing, during which each side has accused the other of being uncooperative and deliberately hiding information.
On Wednesday, the judge overseeing the case in Delaware Court of Chancery, Kathaleen McCormick, wrote: “The parties have not filed a stipulation to stay this action, nor has any party moved for a stay. I, therefore, continue to press on toward our trial set to begin on October 17.”
The article added that legal analysts have suggested Musk’s change of heart was an acknowledgement of weaknesses in his case in which he alleged that Twitter had misled regulators and investors by underestimating the number of fake accounts on its platform.
He also accused the company of failing to disclose cyber security failures, an issue later added to the complaint following similar allegations by a former Twitter executive-turned-whistleblower.
Twitter snapped back at those allegations, saying it was Musk who had breached his obligations in the merger agreement by repeatedly disparaging the company and its executives, while failing to move to complete the deal.
Whatever happens next, there is no question this has been the most overly dramatic M&A story of the year.