Significant as Boyd Gaming’s $170m proposed deal to buy Pala Interactive is for its igaming plans, it is clear it doesn’t change anything about its arrangement for sports betting with FanDuel.
As announced last week, the deal gets Boyd a player account management system (PAM) alongside platforms for casino, poker, and social gaming. It also brings an element of B2C operations in New Jersey and Canada and B2B licensing in eight states.
Pala’s financials, meanwhile, suggest a hefty multiple of over 30 times 2021 EBITDA of $5m.
The analysts at Deutsche Bank suggested people should look at the deal in two parts. First, the business it is inheriting, people should view B2B and B2C as having been bought for ~$70m, or about ten times prospective EBITDA in 2023 and 2024.
Meanwhile, the technology itself should be a $100m investment.
The only effect on the relationship with FanDuel relates to the igaming side. Once the deal completes, Boyd will be able to move its Stardust offering away from the B2B relationship with FanDuel parent Flutter.
The current agreement around market access in return for a 5% stake in FanDuel and a profit share in the relevant 15 states remains intact.
The question of tech stacks
The Deutsche Bank team suggested that Boyd is following a path taken by others within the icasino and online sports betting sectors of “bringing elements of the cost structure to run the business in-house and putting it on the balance sheet,”
In other words, it takes out the revenue share element behind Stardust, meaning that in the long term, the icasino business can be more profitable.
This is precisely the formula others use when speaking about bringing significant elements of the sports betting tech stack in-house. It enhances long-term profitability at the expense of short-term tech investment.
The significance of the loyalty program
It is maybe no coincidence that a matter of days after the Pala announcement, Boyd Gaming said it had refreshed and rebranded its B Connected loyalty program to the new name Boyd Rewards.
In the Pala Interactive buyout press release, CEO Kevin Smith said acquiring the Pala technology would enable his company to “further leverage and monetize” its existing database and portfolio of national properties.
Speaking to Wagers.com last week, David Sargeant, a sports betting consultant, advisor, and investor with iGaming Ideas, said the omnichannel element of the pala deal was the most exciting part of the deal.
Much has been staked on the potential for casino groups to benefit from the migration of sports betting and icasino players into the land-based segment and vice versa.
It has been spoken about on multiple occasions in recent earnings calls. Indeed, a recent note from the analysts at Wells Fargo noted that MGM’s management said they had “started to see some omnichannel benefits” from acquiring customers at properties.
Integrating MGM Rewards, the analysts wrote, was “effectively creating a synthetic hub/spoke network with customers in states where MGM has no brick/mortar presence.”
But as Sargeant points out, this “isn’t true omnichannel.”
“Land-based casino management systems (CMS) know a lot about their customers,” he says. “What tables they are playing at, how much they are dropping, what restaurants that customer is then eating at.”
But he suggests that a proper integration between the online and land-based loyalty programs is still a way off. “Most omnichannel integrations will allow the CMS to know that a player plays online and is able to give them some points based on gameplay and spend,” he says.
“But they won’t know the same level of detail, and they won’t be able to match it up to the land-based profile,” he adds.
“The true omnichannel dream is understanding exactly what a user does and when they do it across both retail and online and using that information to influence customer behavior.”
Sargeant points out that because of the current integrations between online and offline technology, even the linkage between the retail sportsbooks and the online proposition is somewhat limited.
“Sports betting has made retail an online channel,” he suggests, “and that allows a workaround for that vertical alone.”
Significance beyond Boyd
It is worth noting that omnichannel provision lies at the heart of the legal challenge brought by another PAM provider, GAN. At the time of its results announcement, it brought legal action against MGM for alleged patent infringement about its omnichannel technology.
We won’t know the case’s merits until that is settled either in or out of court. But we do know the omnichannel capability central to the dispute is becoming more critical to gaming operators.
They will need to see the omnichannel benefit from directing those expensively acquired sports betting customers to their casino operations.
Making the most of the players that come through the door via sports betting is arguably as important as gaining them in the first place.
Who has omnichannel? Who has to buy omnichannel capability from elsewhere? Who can genuinely make the most of the omnichannel opportunity? These are likely to be significant issues for the most prominent casino operators for the next few years.
For some, it might well be the key to unlocking sports betting profitability.
