EPISODE 232 | LSR Podcast

Peer Pressure Wins Out In Florida DFS Battle | Sports Betting News | LSR Podcast 232


21 min
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Peer Pressure Wins Out In Florida DFS Battle | Sports Betting News

PrizePicks and Underdog this week relaunched pick’em games in Florida as peer-to-peer instead of against the house. Is that model the future for the controversial games? Plus, why one analyst sees upside for Penn in ESPN Bet, Entain and MGM aligned on the future of BetMGM, and Minnesota going from promising to puzzling once again.

Full transcript

Matt Brown (00:09):

Hello and welcome to episode number 232 of the LSR Podcast. My name is Matt Brown, joined each and every week by the brightest minds in all of the gaming industry. With me, I do have Adam Candee. You can find him over on the Twitter machine @AdamCandee, two E’s, no Y. If you hate yourself, you can follow me @MattBrownM2 if you haven’t done so already. Do appreciate you guys subscribing to the podcast and rating and reviewing and all of those nice things that you do to help us climb the charts out there. We’ll talk Minnesota, we’ll talk some MGM stuff, we’ll talk some ESPN Bet news as well, but Adam, let’s kick things off with PrizePicks and Underdog over in Florida.

Adam Candee (00:52):

This might not be the biggest story, air quotes, on its face, but what it could mean to the greater discussion of DFS/fantasy sports versus pick’em/prop betting, whatever you want to call it, is vital here. So this week we got an announcement from PrizePicks and from Underdog that they’ve relaunched, if you remember they had closed down in Florida in response to multiple cease and desist letters from the Florida gaming regulator, and they’ve reopened with a peer-to-peer product, as opposed to an against-the-house product. Now this is a discussion we have been having for a very long time when it comes to the pick’em games. The question that some had was, is this just a parlay? OK. We understand that question. The other question that has been out there is versus the house versus peers and the discussion we had for the longest of times when it came to DFS didn’t really have to do with this, right, because the old iteration, DFS 1.0, was contests that were being played against other people.


Who you were playing against was often in question, but you were clearly not playing against the house. You were playing against other people. Now with this situation with PrizePicks and Underdog in Florida, the statements that both companies gave essentially said, “We talked to regulators. We are putting back in a product that we feel fits the greater point that they’re making and that we hope for future changes to laws and regulations.” But if this is where we landed, Matt, if other states were to land in the same place that Florida lands and say, “Yes. You can operate this product. It just needs to be in a peer-to-peer fashion,” I think you would find that most of the big gaming companies who have been accused, in some cases rightfully, of pushing the agenda against the fantasy sports companies, you would find that they’d be OK with it.

Matt Brown (02:53):

Yeah. Listen, that was the big sticking point with us all along, right? I mean, when you are sitting there and you’re playing against the house and not against other humans, then yeah. It’s just sports betting. That’s all there is to it. I mean, it’s just sports betting by another name, but when you’re going up against other people and it’s peer-to-peer stuff and things like that, yeah, I don’t think people are going to have as big of a problem with it, and I think that this is a step in the right direction, right?


I mean, we have been kind of saying all along, the biggest hang up in all of this was it was just sports betting by another name and they were masquerading as something that they’re not, but if you’re playing against other people and it’s not this whole deal of, “Oh, OK. If I get six out of eight, I get this much or seven out of eight or whatever, all that,” if it’s like, “No, it’s just a contest me against you or me against a group of people and we’re seeing who can make the best picks on all of that,” it’s much more palatable in my personal opinion and I think, Adam, this is probably, as you said, the way that this might be going in other states as well.

Adam Candee (03:51):

Well what it gets back to, Matt, is something we’ve discussed before is does it mean that it’s a game of skill just because you have to get two bets right? Right? Or should I say two picks right? Does it mean that two or more turns it into a game of skill? And again, we’re not going to litigate skill versus chance. That’s been a decade in the making, but when it comes to this particular issue of playing against peers, realize also that we’ve been talking about for a long time, one of the, I’m not going to say existential threats, but long-term business development threats for any company like PrizePicks and Underdog that’s offering a pick’em product versus the house was that DraftKings, FanDuel, et cetera, could choose to turn on something like that at any given time, and they have very large databases that they could access as well in states that do not have legal sports betting.


And just watching the NBA playoffs last night, not only was there a push for it from DraftKings for their pick product, they had a Kevin Hart commercial that was describing a DraftKings product that is exactly what PrizePicks and Underdog are doing. And so not only do you have companies like DraftKings now saying, “OK. We can get into this game as well,” they’re now actively promoting it.

Matt Brown (05:05):

The other thing about, and this isn’t necessarily talking about PrizePicks and Underdog here, Adam, too, but whenever you’re playing against the house, if bettors win — and let’s just call it what it is, they’re bettors — if bettors win, then you’re coming out of your coffers to pay these people out. And we have already seen some of these companies go insolvent and things and not be able to pay out and all that. When it’s peer-to-peer, the prize pool is made up of other people, and as long as you don’t have people really, really screwing it up on the back end and there’s not impropriety going on and all of that, then it also takes away some of that that we’ve been talking about too, which is the money is being put up by us, the money by the people. And so the people are the people that are funding these prize pools, and therefore you have far less chance of, again, companies not being able to pay out, not being able to do stuff, and things like that. So there’s other things that just make this a better system.

Adam Candee (06:00):

Well, and we talk about what Underdog does versus what PrizePicks does, let’s be very clear about something here, that Underdog has always had the other products, right?

Matt Brown (06:08):


Adam Candee (06:09):

They’ve had best ball. You can play head-to-heads. You can play the types of DFS products that are well-known to players who’ve been in that market for a long time. It’s really PrizePicks that pushed that envelope even a step farther and said, “No, we’re solely doing over/unders and we’re doing them against the house.” And so you just made a great point. I don’t worry about either the two companies you just mentioned going insolvent, but we have seen it with many other companies offering similar products that they have had payout issues.

Why one analyst sees upside for Penn in ESPN Bet

Matt Brown (06:38):

Let’s head over to the stocks, and it’s been a while since we have talked stocks here on the podcast and used to be a little bit more popular of a topic with us here, but this one is pretty interesting because it does involve, I’m not going to say the newest player on the block, but one that we were highly anticipating entering the market in ESPN.

Adam Candee (07:01):

So this issue requires me to be reading directly from a story. So those of you on YouTube, gosh, I’m sorry you don’t get to see my eyes looking directly at you as we discuss this, but the story that came out comes out of a note from Barry Jonas at Truist who follows the gaming space as closely as any analyst, and he is moving back up to buy on his rating for Penn from hold, and he had gone to hold in large part because he was waiting to see what happened with ESPN Bet and how it performed early on. Price target stays the same at $23. It closed Monday at just under $17. Now overall, what Barry Jonas is saying is that he does not believe that the price of the stock right now has any value implied for the interactive part of Penn Entertainment, which we know is a multi-state operator with land-based casinos and a number of online channels as well, as well as some market access deals like the fact that DraftKings has its license through a Hollywood Casino in Pennsylvania.


So that being said, you look at right now what Barry Jonas is saying, he’s showing that the market values Penn’s land-based casino at 6.4 times next year’s expected EBITDAR. Kind of close to the bottom of the historical range. Barry Jonas sees $455 million in additional losses for ESPN over this year and next, but reminds that the interactive segment is more than just the sportsbook. So basically what he’s saying is that there’s upside in Penn from ESPN Bet with any sort of reasonable growth over the next two to three years. Now we can sit and debate what reasonable growth looks like for ESPN Bet. Does it ever get out of single digits without promotions because we’ve seen them scale back significantly on promotions here over the last few months since they launched at the end of last year. We’ve also seen them in the past week decide to bring in a new chief technology officer who was brought over from Disney.


And essentially what you’re seeing is Disney, maybe not saying out loud, but saying, “You know, this guy over here has done a pretty good job for us, not only at Disney, but at ESPN in terms of improving our ESPN+ and online products. We’re going to go ahead and move him over to Penn and try to help get ESPN Bet moving in the right direction as well.” So there are reasons if you want to be bullish on what ESPN Bet’s future looks like. I can point to things for you. If you want to be bearish, you can look at the fact that it really hasn’t been a great performance here over the first six or so months of ESPN Bet. I think the marketing has been subpar. I think we look at how hard it’s been for some people to sign up and the amount of time that it takes compared to other sportsbooks as a reason to say, “OK. They have some things to work out,” but Matt, as you have pointed out many, many times, that brand is still worth something, and when you look at the amount of games that are going to be in front of ESPN viewers, you’re going to have a captive audience for a very long time to come.

Matt Brown (10:15):

Yeah. You talk about Penn and I think we just talk about Penn as their parent company as a whole a bit. I mean, if you’re out there and you’re not incredibly familiar with Penn, as Adam mentioned, I mean, this is a company that owns several racetracks. If you’ve ever seen an Ameristar, if you’ve ever seen a Hollywood Casino, a Boomtown, if you’ve ever seen L’Auberge Casino, Argosy Casino, any of those, those are all Penn properties.


So if you’ve seen any of those, those are all Penn properties. So this is a major gaming company that I think that, whenever we talk about Penn, it’s not just some little minor player. It’s very easy for us to get wrapped up in the MGMs and Caesars of the world because they do have the big, gigantic properties and all of that up and down the strip and certainly even in the other states, they have these really fancy properties and things like that, but these regional casino companies are big companies and make a lot of money and have a bunch of properties and I think at last check when I was looking at Penn, I think they have 40 different casinos and tracks that they own across the country. So it’s a major player, and like you said, I mean, whether this all works out for them or not, we don’t know, but it is at least seemingly a step in the right direction.

Adam Candee (11:27):

Keep in mind that part of the reason that we’ve said we don’t know if it’ll work out is because by the end of the current deal with ESPN Bet, assuming that it makes it to the end of the current deal, you’ll have nearly $4 billion of investment for Penn involved in the failed Barstool Sportsbook deal and now in whatever comes out of ESPN Bet. And frankly at this point, you see Penn trying to get to a point where that’s a clear third for them, and third on the podium might not even be a full 10% with the way that DraftKings and FanDuel have gone thus far. Now some of the smaller operators have started to fade off. Maybe there will be some consolidation. Maybe ESPN really can expand the market through its brand name. But what we heard Jay Snowden, the CEO of Penn, talk about when this deal was first signed was getting to 15 to 20% market share within the first three to four years.


That’s a tall order. That is something that I think, no matter what sort of reach both ESPN and Penn, as you mentioned with whatever database they have built up, for them to be able to accomplish because look at what happened with Barstool Sportsbook. It’s not like Penn was able to immediately tap into what it had with Barstool Sportsbook and be able to use their database to convert over to there. I think when you talk about Penn in particular, they’re among a number of companies, but I don’t know that there’s a company for whom it is more important to see iGaming expansion than Penn because they do have the ability to take a lot of those land-based properties and be able to expand them out into the iGaming vertical with customers they already have.

Entain, MGM aligned on the future of BetMGM

Matt Brown (13:03):

We talked about some of those other gaming giant companies out there. And so we do have some information on BetMGM as well, MGM.

Adam Candee (13:15):

Yeah. One of the first calls we’ve heard this year involving Entain, the BetMGM joint partner with MGM, now what we’re trying to get into here with this is how do we see the year 2024 for this joint venture? Now it’s been an interesting joint venture over time. It’s been reported many times that MGM has tried to buy Entain. DraftKings at one point tried to buy Entain. At this point, it appears to be a stable joint venture partnership between Entain and MGM with BetMGM at 50/50. But there was some difference in the way that the two companies were talking about what BetMGM looks like here going forward in 2024. Early on in 2023, we heard Bill Hornbuckle, the CEO of MGM Resorts International, saying, “Yeah. We think the product is pretty much where it needs to be.” And by August of last year, the tune had changed a little bit to where there was some acknowledgement that maybe MGM and Entain had not adjusted to the American market quickly enough with their BetMGM product.


If you remember, when this BetMGM product first launched, if we go back five-plus years, you still had European decimal odds being put out there to American customers, and that is fundamentally misunderstanding what you’re doing in trying to get that product launched. Now we saw BetMGM go back, they’ve revamped the app, and now you also importantly have an interim CEO at the head of Entain who was looking at this and saying, “You know what? This needs to be another investment year for us in BetMGM. We need to be able to put more resources in to have a better product to be able to compete in the US market.” And Matt, here we are, the anniversary of PASPA falling is within a month at this point. We are almost six years into the market, and I think we are pretty clearly at the point that many had talked about for these first six years that there was going to come a point where product was going to be the differentiator and you’re starting to hear it from the companies that are trailing, right?


You’ve heard it from Bally’s who’s already on their 3.0, 4.0, who the hell knows what it’s going to be for them, right? MGM has had to redo its product. Caesars has had to redo a lot of its product and move people over from the legacy Will Hill, especially in Nevada after the Super Bowl disaster they’ve had and try to improve their products. And the one company, or I should say the two, that have not had to do that in the same way are the companies that were working on tech from long before the fall of PASPA in DraftKings and FanDuel.

Matt Brown (15:51):

Yeah. It is. And as we move into a more savvy market, Adam, as you mentioned, I mean, we’re sitting here with still relatively new in all of this for some of the states out there and as we move into more savvy bettors and people like that are going to, they’re going to care about the product. Yes, they’re going to care about odds and as they learn more about all of that, sure. Can you get a better number here? Can you get a better number there? But a lot of people are just going to use the app they like the best, and that’s going to be the one that functions the best. They want to get the live odds as soon as humanly possible. They want to get the in-game stuff flashing up there as soon as humanly possible. They want to be able to smoothly find what they’re looking for when they get inside of the app and not have to search all over the place.


And so this is, like you said, this is kind of like the, as we continue on in this journey, it’s going to become more and more important for these companies to make sure that the people who are becoming more savvy understand that, “Oh no. You can use our app. It’s seamless, it’s smooth. We’ve got all these features. Look at this. Yada, yada, yada,” and it’ll be less about the bonus bets, et cetera, et cetera, et cetera.

Adam Candee (16:57):

Yeah. And maybe not even just price consciousness and things like that. You talk about ease of use in the UX, but also you have to think about it from the sportsbook side as well and think they’ve talked plenty about how do we improve our parlay mix? How are we best serving same-game parlays to people, making it easy for them to bet these high-hold products? How are we getting prepackaged SGPs in front of them or how are we making it easy for people to bet not only SGPs, but live SGPs as well? And I know that is something that sounds like fingernails on the chalkboard to experienced bettors, but as we’ve discussed many times on this podcast, that part of the product ain’t for you.

Minnesota going from promising to puzzling once again

Matt Brown (17:33):

Absolutely. It is. If you’re the 1% screaming at the clouds, then it just kind of is what it is; 99% are the vast majority of everything. Take us home here talking about Minnesota.

Adam Candee (17:45):

This was one of the most hopeful states at the beginning of the year, and with some news that we’ve seen over the past couple of weeks, it is more and more looking like Minnesota might not make it through this year, and we’ve talked about repeatedly, what is the issue? Well it is a state that involves two governments. What do we mean by that? You have the Minnesota state government, and then you of course have tribal government interests and tribal gaming has the exclusive rights to offer sports betting in the state. You have seen the Democrat-Farmer-Labor Party work very closely with the tribes to try to get something in place that grants licenses to the tribes and still creates a revenue structure where the state is getting something through its gaming compacts, but you have also seen that horse racing tracks in the state have found some close allies in the Republican Party in the state legislature, and they are pushing very hard for more than what they have gotten so far.


They have gotten an offer of some level of revenue sharing is an offer that was increased this year from past years. They want licenses and they have not gotten license, and the tracks have not gone along with that. Now we’re at the point where the more recent news is that the tracks are suing tribes, and this goes back to fights that have nothing to do with sports betting. You want to read more about it? Go see the article that Pat Evans put together at Legal Sports Report. No one understands the Minnesota situation as well as Pat does, but you’re getting into fights that you’ve heard of in California before over cards and which games are offered and so on and it’s a discussion that is devolving in very rapid fashion in Minnesota, and it’s going to be out of the control of the legislature because, go back to last year.


What we saw with the Minnesota state legislature was they knew that they had both houses of the legislature and the governor’s office and they wanted to move the things they could move to be able to prove that they were getting things done for their constituents. And they looked at sports betting as an issue that was not going to be easy to move last year, and they eventually put it to the side close to the end of the session and said, “That’s not one that we can focus on.” Well I think the landscape’s even tougher for them this year when it comes to sports betting, and we might be looking at another year on the back burner.

Matt Brown (19:58):

Guys, head over to legalsportsreport.com to not only get all the words for these stories we mentioned on here, there’s a story on kind of a new compliance firm that’s being put together out there. We’ve got some other stuff on what’s going on in the New York market, so be sure and check those stories out over at LSR as well. If you haven’t done so already, do appreciate you guys hitting that subscribe button if you want to give us a thumbs up. If you want to give us a rating and a review, we do appreciate all of those as well. For Adam, I am Matt. Talk to you guys next week.

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