MGM Resorts Bullish On BetMGM Profitability In 2023

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MGM Resorts echoed its BetMGM joint venture partner, Entain, that profitability should come at some point in 2023.

CEO Bill Hornbuckle was not ready to say on MGM’s third-quarter earnings call Wednesday if BetMGM‘s profitability could come sooner than next year’s third quarter as expected because of the likely failure of Prop 27 in California:

“I don’t want to get ahead of ourselves. We continue to invest in the business. We want to see it grow. We like the positioning we have, both from iGaming in particular and ultimately in sports betting. And so it will take some investments.”

“Point on California is well-taken. But we’re not going to get ahead of ourselves right now.”

MGM’s stock dropped 5.9% from Wednesday’s close to open at $33.05 Thursday.

No questions about BetMGM post profitability

One of the questions hanging over MGM’s call but not asked is about what could happen to BetMGM once it is profitable.

Entain said on its recent trading update that spinning off BetMGM to its own public entity or paying out special dividends are options. MGM had also shown interest in acquiring Entain as well.

Caesars CEO Tom Reeg was up-front about why spinning off a digital segment might not be the best idea:

“I’d say that our competitive advantage here is tying it to the existing brick-and-mortar business and our Caesars Rewards database. And it would be my preference that that remains 100% owned by the parent company.”

“If you get to different shareholder bases for the two businesses, there’s a complexity introduced that you see in – you can see that in some of our peers in terms of when you get to different shareholder bases in the same business.”

BetMGM financials update

MGM sustained a net income loss of $23.6 million for its 50% of BetMGM operations in the third quarter. That is more than half the $49.1 million loss MGM recorded for the same period last year.

MGM has contributed $200 million to the JV this year, up from $150 million through the first three quarters in 2021.

The company will contribute another $25 million to BetMGM over the remainder of the year.

‘Opportunity’ to let some partnerships fall off

Hornbuckle echoed Caesars’ Reeg when asked about the many partnerships and deals signed with various teams and other entities:

“Some of them have been very profitable, some of them are not as. The team knows exactly the [cost per acquisition] cost per market, and it allocates certain percentages to what those sponsorships may feel like.

“But there’s clearly an opportunity going forward. Those deals range anywhere from a single year up to five. It just depends on market and depends on who and what they are.

“But yeah, I think as we get all smarter about this, we all build a customer base that begins to plateau at a reasonable level, you’ll see everyone get including us, most notably, more efficient at that.”

BetMGM ‘damn close’ to iGaming lead in Ontario

Hornbuckle said BetMGM is performing “exceptionally well” in Ontario, even though the official reports do not break out share or even differentiate between Ontario sports betting and iGaming.

That success is attributed to its database of customers in the Detroit-Ontario market, as well as signing Wayne Gretzky as a sports betting brand ambassador:

“They don’t actually publish per share. So we can’t have exact things, but I know what we’re doing. We’ve done exceptionally well.

“… And so we have taken real share. And if we’re not leading, we’re damn close in the context of iGaming of note.”