Episode Transcript
[00:00:12] Speaker A: Hello, everybody. Welcome back to Writing to the Source. My name is Robin Harrison and I'm here as ever, with the Sundance Kid. To my Butch Cassidy, it's Mr. Ed Birkin. Ed, how are you today?
[00:00:24] Speaker B: I'm good, thank you, Robin.
And I know that reference. I have never seen Butch Cassidy and the Sundance Kid. I assume it's a Western.
More in the modern, Modern westerns myself than the old school.
I don't even know which.
[00:00:43] Speaker A: So what, what constitutes a modern western?
[00:00:47] Speaker B: Well, things like, you know, Yellowstone. I mean, I know that's not a film, but any.
[00:00:51] Speaker A: It's not really a western.
[00:00:54] Speaker B: Well, cowboy clothes.
[00:00:56] Speaker A: Yeah, yeah. Well, I mean, it's like, it's, it's succession, but they wear cowboy clothes.
[00:01:01] Speaker B: Yeah, but. And it. So even.
All right, Dutton Ranch is good, but any, anything, anything like that. Even Ransom Canyon, which is effectively just a romcom series, but, you know, set by guys who are cowboys, ranchers, all that kind of stuff.
[00:01:19] Speaker A: Fair enough.
[00:01:20] Speaker B: I don't think. I can't. I couldn't tell you a single Clint Eastwood film from that time that I've kind of watched all the way through various clips from when I was Unforgettable.
[00:01:32] Speaker A: That was quite good.
[00:01:36] Speaker B: The Bad, the Ugly is that one. That's the one.
[00:01:38] Speaker A: Yeah. Well, that's kind of like the spaghetti westerns, isn't it? Sergio Leone. I think they're all filmed in Spain.
[00:01:45] Speaker B: Oh, yes. Because I've seen someone went. I've seen pictures of someone who went there.
Oh, well, who's there?
But talking of films, I watched, watched a few at the weekend because I was jet lagged from my US well,
[00:02:07] Speaker A: and I hear you're, you're now incapacitated.
[00:02:11] Speaker B: Yeah. Slightly crippled.
Someone had to give me a pink hot water bottle to lean against.
But I thought, you know, I've got a bit of time now on the sofa. Let's watch a film.
And there's so many crap films I've been watching recently. So I thought, you know what? I'm gonna watch the Godfather because it's been so long since I've seen it that I don't really know what happens. And you, amongst others, say it's one of the greatest films of all time.
[00:02:38] Speaker A: It is good.
[00:02:40] Speaker B: It was enjoyable.
I really won't put it as one of the top films of all time.
Masterful about it. It was an enjoyable watch.
[00:02:49] Speaker A: I like it. I do like it. But yeah, I mean, but the thing is, the second film, I don't really see the point of it.
Like it's, you know, it's it's very good and it's very well made, all that kind of stuff. But he's already.
[00:03:08] Speaker B: Well, don't ruin it.
I'm going to watch 2 and 3.
[00:03:11] Speaker A: But I mean, if you've seen one, you've seen it. He's completed his journey from this kind of war hero, whereas, you know, kind of all his Ivy preppy clothes to essentially the new Godfather.
That's kind of it. Everything else is just what happens to him afterwards.
[00:03:31] Speaker B: I mean, what. What makes it one of the greatest films? Because I just don't.
It was just an enjoyable film, along with lots of other things.
[00:03:39] Speaker A: I mean, it's just.
It's just kind of like the scale of it, I think. It's got a lot. It's got really good story beats, I think. Because I have a problem with films being too long.
There are way too many films, and they all last about two or three hours. But. But, yes, I'm getting there. The Godfather, it doesn't feel too long.
Like, there aren't bits when I'm like, all right, come on, you know, hurry up, do something.
I do feel for a film that's about three hours long or something, it kind of skips through at a decent pace, and I like that.
[00:04:18] Speaker B: That's fair.
That's fair. Anyway, so when I was in the U.S.
yeah,
[00:04:30] Speaker A: Okay.
[00:04:30] Speaker B: You know what that is?
[00:04:33] Speaker A: It's a baseball cap.
[00:04:35] Speaker B: Yeah.
And the brand.
Not the brand, but the logo.
[00:04:42] Speaker A: Lean closer to the screen.
Gamblers.
[00:04:50] Speaker B: The Austin Gamblers. Do you know who they are?
[00:04:52] Speaker A: I do not.
[00:04:56] Speaker B: Pbr.
[00:04:57] Speaker A: Pabst Blue Ribbon.
[00:05:00] Speaker B: Professional bull riding, baby.
Went to professional bull riding in Anaheim.
That's la.
[00:05:09] Speaker A: Oh, okay. I mean, I was slightly worried that you joined an outlaw motorcycle gang for a minute.
[00:05:18] Speaker B: Really cool. Really cool. There's a Netflix program about it, but, yeah, very good fun.
So thought I'd do something new. And there's no nf. Well, there's no NFL on in la because on that day, the Rams were playing in Melbourne, I think, and got humped.
But, yeah, NFL season,
[00:05:40] Speaker A: it's underway, so.
Well, I mean, like, NFL's never really been my sport. I prefer. Well, I prefer baseball. The past season has been very painful, watching the Mets, but obviously this is sort of. This is the big one for us sports. This is where you have, you know, the kind of the majority of activity. Everyone gears up for, you know, this kind of era of era of the year, this kind of time of year.
So what? But obviously this year is going to be slightly different. You know, we're all sick of talking about them. But prediction markets, they're obviously going to start to, you know, kind of potentially eat into sports betting revenue.
Is that borne out in H2's figures?
[00:06:39] Speaker B: It is.
So we are yet to release it, but we have actually built a prediction market data set.
[00:06:48] Speaker A: Okay.
[00:06:49] Speaker B: We're just waiting to make a few changes and work out how, how much we're going to publish and how often.
Yes, we have that. So we have handle for the year being broadly flat, I mean literally plus 0.4%.
[00:07:10] Speaker A: So is that just sports betting or is that total.
[00:07:14] Speaker B: That's NFL. That's just NFL. It doesn't include college.
Just NFL.
[00:07:20] Speaker A: Now
[00:07:23] Speaker B: we also depends. We've got it slightly up. So plus 0.4% on the reporter states.
If you include our estimate for Florida, we have it down 1% now why more for Florida? And bear in mind it was kind of flat last year as well. So this isn't exactly a, a new thing, but we have a bit of a. We have organic growth, about 4%.
We have another little boost of from Missouri having a full season, but then we have about 4 or 5% headwind from prediction markets.
Now that could seem a bit high, but if we look at kind of what prediction markets have done recently, they were very aggressive in around the World cup.
And that's fine because we know that
[00:08:21] Speaker A: it's a tried and tested playbook, isn't it? It's like if you're looking to increase share, just going to pump money into acquisition.
[00:08:28] Speaker B: Yeah, so pump it into acquisition. But also sportsbooks were generally keeping their powder dry for the NFL season, but the thinking was that it would probably go down a bit afterwards. But August volume has been continued to be very strong, so not quite as much as July, but pretty strong. So the most recent figures we have is if you look at their notional, the kind of handle or handle equivalent, because that's not notional volume, you know, you need to make adjustments. But it's actually about 40% of the entire combined prediction market and sports wagering market.
Now within markets where there was regulated sports betting, we estimate it's around 15% now which given it was about 4% six months ago, 5% know, has been a significant uplift as they are pumping a lot of money into it.
And then you have to look at, well, how much of that is incremental versus, you know, substitution.
And it's impossible to know exactly.
But you know, we're saying that it looks to be about year on year, about kind of 5% headwind. From, from the prediction markets. So it's kind of offsetting the organic growth. Now clearly it is bringing in new people.
It also allows them to target 18 to 20 year olds, people who are self excluded, etc. But it's that kind of 4 or 5% headwind that we're thinking. So it's not going to decimate things. The one point that I really want to stress though, and this is where publications not like yourselves, who clearly you know more about this than others, but there's going to be a significant calendar impact from the start of the football season.
So we started a week later and that actually been pushed into January.
So what we are going to see is that September hold is going to be substantially down. So for NFL alone I think we have September down 27%. Off the top of my head trying to find it now 26% and January will be up 37%. So over the course of the year is going to even out.
But when you see this substantial decline in handle in September then there's going to be all these articles written about prediction markets, you know, taking Fragile and DraftKings lunch.
Like yes, we think there is an impact but don't let a calendar impact, you know, decide the story and just have completely as my, as my first boss Andy Lee said to me, you can be 90% right but 100% wrong.
And yeah, I think people are going to completely misread that crap.
[00:11:24] Speaker A: But we are going to see the almost traditional profit warnings from some of the big listed companies in Q3 because it feels like this is almost.
Yeah, yeah, yeah, yeah. It feels like this is almost like recurring kind of annual tradition, the Q3 profit warning.
[00:11:44] Speaker B: But I suppose hold margin obviously has, you know, there's some pretty strong swings in hold margin last year.
So yeah, depending how that goes, I think Q4 was a lot stronger than Q3. So maybe that potentially the profit warning moves to the following quarter.
But yeah, there'll be some big swings.
[00:12:09] Speaker A: But I suppose this also like with an extra week in January that potentially kind of benefits in the start of next year.
[00:12:19] Speaker B: Yeah, absolutely.
So we'll be counting Pat and actually I was watching Contessa brewers doing a on espn was doing an interview Jason Robbins and asking like quoting our data asking about cannibalization stuff and clearly he had to say about how, you know, upbeat he was about prediction markets but it wasn't having any cannibalizing effect on, on the, the products because DraftKings has such good product etc. Etc.
But we split out on Our, our notes about Florida because we think one data isn't reported, so it makes it harder. But that's a state where we think it will have a much more disproportionate impact. Because it's one thing Kalsi competing against, you know, Fandual DraftKings in New York, New Jersey, it's another thing where not any Kalshi but FanDuel and DraftKings prediction markets suddenly going in and competing against a single operator in Florida.
So that is where we see quite a substantial impact. And we've got it down about 12% headwind from prediction markets in Florida.
[00:13:32] Speaker A: Okay.
And obviously, I mean it's always an interesting time for prediction markets at the moment. But one of, I suppose the great big, like the great hopes for that kind of a, that kind of part of the market was the Clarity act, this fairly kind of broad attempt to impose a sort of regulatory framework on kind of crypto assets. And obviously that kind of enshrined like the CFTC's authority and law over kind of digital commodities, which could in turn be used to kind of benefit the trading of kind of event contracts and give them kind of that strong legal footing.
Obviously that has not moved forward.
You know, in Congress there wasn't really enough kind of like votes to kind of, to kind of move it on. So essentially that's dead for this year. And that leaves us, and it kind of leaves us exactly where we were before. You know, ultimately, I mean, states believe that they have jurisdiction over what they see as another form of sports betting. Whereas the CFTC claims that this falls within its jurisdiction and these are not bets.
With that uncertainty, what's your current reading?
The potential prospects of some sort of cataclysmic event that essentially knocks these out the market because they don't have that level of legal protection. Obviously states are incredibly active and incredibly aggressive and kind of defending their rights. So I mean, where do you think that leaves us? Because there's a point where you think, well, this is kind of too big to, to kind of stamp out. But then, you know, UEGA happened, you know, within our industry 10 years and then for the ones that kind of still argued on a technicality, you then had the, you know, the 2011 indictment. So it's like the US does have an element of, you know, of kind of like, you know, it has form and you know, essentially taking fairly kind of brutal action.
[00:16:00] Speaker B: So, and this is kind of my view based on listening to some much more intelligent and people who are more closely aligned to us regulation and law than I am us but effectively Calcio and others are pushing hard, you know, so ignore, ignore. DraftKings for Angel. Let's look at, you know, Cal on it, you know, possibly for an IPO or something. You know, they know they've got two years of some kind of protection or potential to that, then it's going to be changed. Administration, family ties to them, etc. Now again, after the midterms, things could get more complicated for them, but they're pushing hard now. Make hay while the sun shines.
There are people who believe that they will be then allowed to continue to operate.
Now, whether states can collect taxes over something that is, you know, kind of federally regulated like that, I know that there's been push back.
Illinois tried to do it, they may have even repealed that.
So that's one thing. But they made it clear that it's not legal.
So either way, people are expecting it to go to the Supreme Court probably next year, towards the end of next year.
Now there's also debate about, you know, although they're meant to be completely independent, does Trump have any sway over them and actually would it be better to wait until after November 2028? You have to change my administration.
Other people have said no, the Supreme Court will do what they want and they won't be swayed. But anyway, 27, 28, all gates Supreme Court. Some people were adamant that the states will win, others went.
One interesting point that was brought up by a couple of people is they think that actually long term it doesn't matter as much because Kalshi are making money on sports but what they're trying to do is have a much bigger business outside of it and actually if they lose sports, it's not the end of the world.
Now at the moment, 80 of their volume and probably a lot, lot more of their fees come from source personally, I mean depending how far away it is, if they lose sports, I think they're pretty screwed.
And I don't believe this idea that it's gonna be much bigger. And that's why. Yeah, but if you look at all the kind of amounts traded on the stock exchanges and then it comes retail and everything in this, I just, I just, just don't buy it.
I as, as you know, I'm not necessarily for prediction markets and loopholes and I don't think that. I think the states will win and they will leave or whether some states then allow them to do state by state regulation I think is possible.
It's also difficult is how do you tax them so betting exchanges, let's say Betfair in the uk, that GGR is effectively being taxed is their fees.
Because If I win 100 off you, then I'll use $100 to you. You know, they do the fees, the net, so that the net customer losses are effectively fees. Just like poker. Okay, Poker rate.
[00:19:28] Speaker A: Yeah, yeah, that's the thing. It's very similar. It's rake.
And there, there is an element where it's going to, you know, there's. They're claiming that it's based on skill or knowledge.
[00:19:40] Speaker B: Yeah, but that's fine. But for poker, you get charged. The effect of GGR is the rake. Because I may lose everything, but the net winnings. Yeah, or net losses is effectively what the poker company takes or what the betting exchange takes, and that's what you should be taxed on.
Prediction markets is completely different because significant majority of action is not between. It's not peer to peer, it's against market makers. So you've got these huge trading houses that are making money. They're effectively acting as a bookmaker and they're not getting any gambling tax on it. So fine, you can, you can say be Illinois or I think, was it Kansas?
[00:20:24] Speaker A: Is it Colorado?
[00:20:26] Speaker B: One of the other ones who are looking to tax them and that's their taxing. But really Cowshire, not. They're not getting the majority of the revenue.
Majority of the revenue is being, is being made by market makers. So taking money out of the ecosystem, taking money away from the customers, the fish.
Yeah, and they're paying corporation tax on it, but they're not paying the gambling tax that they're getting. So the tax, it doesn't even really work in this because it's not peer to peer betting.
[00:20:54] Speaker A: No, no, but, but this is sort of, this is sort of the ultimate challenge. And you saw this with poker, you saw this with daily fantasy. Essentially, winning is localized to a very small group of people and that ultimately degrades the product because, you know, over time people realize that they're essentially there to provide volume, so there is less kind of appeal to these products. And, and the thing is, ultimately, it's like unless you're, you know, one of the reasons why gambling has endured is because you're betting against the house.
You know, it's not, it's not, you know, is literally staking money on an uncertain outcome, which means that if, you know, it's like, I mean, house edge, never mind, you know, let's not confuse it with that. But ultimately it feels fair, you know, it's you're betting against the house and then you win or lose. It's not like you are betting against players or kind of like other entities with such a high level of skill, knowledge, understanding that ultimately the attraction of the product is going to get wiped out over time.
[00:22:08] Speaker B: I mean, I get the whole kind of, you know, liquidity and fish and shocks.
I have no issue with that side of things because quite frankly, if you're more skilled at something then you should be. I mean, at the end of the day, a bookmaker should be, you know, with all the algorithms they've got and fonts, guys, they should be incredibly skilled. So I've got no. And in theory it's not even stacked against you, so I have no issue with that.
[00:22:33] Speaker A: It creates a boom and bust cycle though. This is the thing.
It creates kind of products as cyclical. There aren't enduring products. Like if you look at, you look at what works in the industry, it's slots, it's table games, it's betting and sports.
Ultimately, the core products ultimately endure. We have these iterations and variation that ultimately feel like they come and go.
[00:23:01] Speaker B: Yeah, look, and I get that. And there's an argument about is it ever sustainable.
Poker had a boom and it's kind of gone down for various reasons.
[00:23:11] Speaker A: Yeah.
[00:23:11] Speaker B: But for me the difference is that I just don't think that these, even if these guys pay tax in the way a normal exchange does, there's just a huge part going out because it's effectively they're being, they're going to have to be taxed as a peer to peer exchange.
But the reality is that a significant amount of it is effectively bookmaking, where the bookmakers are being untaxed.
[00:23:35] Speaker A: Yeah.
[00:23:36] Speaker B: But anyway, that's an issue for someone else on another day.
[00:23:40] Speaker A: Yep. Leave that to the Supreme Court.
[00:23:44] Speaker B: Speaking of courts and stuff, House of Lords, they're trying to put an advertising ban in the uk.
[00:23:50] Speaker A: Yeah, yeah.
I mean, look, it's, it's. Once again, gambling is regulated on vibes.
[00:23:59] Speaker B: But okay, controversial. And we've always said at H2 that, you know, one of the only advantages of regulated bookmaker has or regulated operator is being able to advertise.
[00:24:10] Speaker A: Yes. And I know where you're going with this and yeah, we're talking about this before we record it. Yes, it is important.
[00:24:17] Speaker B: However, hang on, could you just clarify that we were talking about this when we had like a 45 second chat, not in some kind of like pre, pre.
[00:24:24] Speaker A: Oh, yeah, yeah, yeah. Like just, just to make clear to everyone we Were we did not prepare and come into this organized. I cannot stress that enough.
But in the 45 seconds where we're working out what we're actually going to talk about, we did touch on this because ultimately and people have said this about Italy as well, which the dignity decree essentially kind of banned. Well banned any kind of above line advertising that benefits the companies that already have a brand presence in the market.
So essentially if you've spent the money building up your brand when an ad ban comes in, people are still going to gamble. Your name is still known.
So it's usual thing. I think they want tobacco style warnings because there's this conflation of essentially potential harm with demonstrable harm. Like smoking ultimately causes genuine harm. Like we know it all the studies, you know, as does probably vaping. As much as I love a lost Mary double apple.
Yeah. I mean like ultimately there is, there is a definite impact. Whereas gambling there can be harm like. Yeah, there can't.
[00:25:57] Speaker B: So okay, but look, let's say you're a big operator then. Okay. So stops small operators competing. So entrepreneurs you a bit. It slows down the growth of the market.
[00:26:07] Speaker A: Yeah.
[00:26:08] Speaker B: It also saves you a lot of money in advertising.
[00:26:11] Speaker A: Oh yeah.
[00:26:13] Speaker B: I mean some of that will be put towards promotions and stuff like that but it saves you a lot of money on advertising.
It does harm channelization because there will always be illegal operators who are pushing the boundaries and trying to get to you know, via WhatsApp or Telegram or social media things which legal ones can't.
But if you're looking purely on the P L of a big say bookmaker but online operator.
[00:26:42] Speaker A: Yeah.
[00:26:42] Speaker B: In.
In the UK especially normally Channel one.
This isn't necessarily the worst thing that could happen. I mean it's a hell of a lot better than the. The gaming duty going up.
[00:26:56] Speaker A: Yeah.
[00:26:58] Speaker B: Now speaking about Omnichannel, I mean Fred Doanes kind of said he's going to close it has to close a little more shops, isn't he? If they're talking about putting the machine gaming duty up in betting shops got budget and at some point next month.
So that could be a bit of another nail in the coffin for a lot of the retail industry.
So I think it's a lot to be looked at in the UK over the next few weeks.
[00:27:26] Speaker A: Yeah, I think there's going to be a lot of.
There's a lot of hand wrings. There's a lot of LinkedIn thought leadership about how the country is.
[00:27:39] Speaker B: LinkedIn has so much on it.
[00:27:41] Speaker A: Oh my God. It's all these chat GPT posts. Have you found the little AI slop feature?
[00:27:49] Speaker B: I try and avoid LinkedIn as much as possible. Apart from how to post something every
[00:27:52] Speaker A: so often you can.
Yeah, yeah. It seems like AI slop. It's great.
[00:27:59] Speaker B: Okay.
[00:28:00] Speaker A: Yeah. But yeah, there's a lot of this and a lot of a. There's a lot of very pious stuff about how there isn't enough business experience in a parliament and all that.
And I'm always kind of dubious of that. I do think real world experience would help a lot of politics. But at the same time, all these people saying, oh, you need people who can run a business in parliament. It's like, I think you need people
[00:28:27] Speaker B: to understand how businesses work.
[00:28:30] Speaker A: Yeah. But there's this idea that, you know, sorry, it's just something that's been bothering me a lot. You see a lot of like, you know, I mean, I think they're essentially business coaches. Half the time it's probably a pyramid scheme.
But saying, oh, you need kind of like people who've run businesses running government because the government is the same as a business.
[00:28:52] Speaker B: I mean, I think you should have to have to understand returns on investment. Yeah. You can't just some money. Whereas I saw this again, I haven't checked it but 224 of 257 of the new Labor MPS came from backgrounds. There was either charities, NGOs or political lobbying stuff.
So like zero commercial experience.
And when it's just, you're coming from, I'm doing it wrong. Charity sector is fantastic sector and it's a shame we need so much of it. But we do.
When you come to something where it's you, you know, your entire view on things is being given money.
So then give out rather than like, I know not all charities. Some charities I work with, one that you know. But it's amazing how much they make from their shops and other stuff and actually lotteries.
So there are people within that certain roles that are having to be very commercial to make these lotteries, make the charities survive.
[00:30:07] Speaker A: Yeah.
[00:30:07] Speaker B: But as a general viewpoint, I don't think it would harm having people who are more commercially minded.
[00:30:14] Speaker A: But you look at the government before this one, you know, with no, with no kind of great affection for either A from my perspective. And you had a lot of people that kind of came from business, were very wealthy from business and I don't think they were doing much better.
[00:30:37] Speaker B: I don't think, I don't think the country was doing much better now. But I think that the I think the. I think the economic outlook was probably slightly better, albeit we had Covid and everything's difficult.
[00:30:50] Speaker A: Oh, I'm not sure if it was. This was. The thing is, I don't really feel that we've seen any kind of discernible change. And you've essentially got.
I mean, then you've got kind of people on either side of these two main parties. One of them wants to pull further to one side, one wants to pull further to the other, but the core ideas that they're pulling from don't really work.
So, you know, it's like there's, you know, the, you know, the. All the kind of, you know, that old cliche about the definition of madness. It's like,
[00:31:23] Speaker B: well, look, we're not a political broadcast, but I don't think anyone is. Is too enamored with what they're doing.
I think taxes are going to go up and probably including gambling taxes.
And as Ralph Topping said once in a William Hill presentation when I was a young analyst, people don't lose votes by increasing taxes on gambling. So Landy Burnham's been pretty clear that he doesn't like gambling shops.
[00:31:54] Speaker A: No.
[00:31:55] Speaker B: Or vape shops.
[00:31:57] Speaker A: Both of which. Both of which I see as a hint. Essential to the high street, of course.
[00:32:02] Speaker B: So on that I spent a night staying in Laguna Beach.
[00:32:07] Speaker A: Yeah.
[00:32:08] Speaker B: The entire. Which is a city.
The entire city isn't. That is no smoking.
[00:32:15] Speaker A: Yeah.
[00:32:18] Speaker B: What the fuck?
[00:32:21] Speaker A: But.
[00:32:22] Speaker B: But next to my hotel, guess what? But there's. There's a dispensary, a tobacco and weed shop, so you can buy it, but you can only smoke it in your private homes.
So no smoking area. No public places. Can't. On the street. There's no name designated areas.
So literally, if. If visitor.
[00:32:45] Speaker A: Yeah.
[00:32:46] Speaker B: You cannot smoke in the entire city.
And one of the councilmen who passed this few years ago said, quote, something like it is one of the greatest leaps forward of mankind or some bollocks like that.
And I was just like, seriously? An entire city that has banned smoking outside of.
Well, that's smoking your car and in your house.
But then he tobacco shop right next to me.
[00:33:18] Speaker A: Did you have to get an Uber out beyond the city limits? And then kind of.
[00:33:25] Speaker B: I moved hotels the next day.
Cities.
Anyway.
First world problems.
[00:33:35] Speaker A: Yeah. First world problems indeed.
I mean, it's been a while since we last recorded, so probably the other big thing just to touch on before we wrap up is Law Tomatica's deal for cirsa.
Because this is. Because I remember, you know, this kind of harks Back to the Banerjee Typical deal, which you were brutally dismissive.
But this kind of, this feels quite similar in that it's two strong regional companies being combined.
And this is, you know, this, this is kind of, I think this is interesting because this is essentially where you see like the new, the new category of kind of like emerging leaders come from. Like obviously people like Botano, like Super Bet they did a very good job starting off as essentially kind of omnichannel operations, building up strong customer bases with a decent mass market proposition, then migrating that into emerging markets.
And then you've seen this kind of second iteration where it's essentially very strong local business. So you know, kind of France for Banerjee, Beckley, Germany for Typical.
And then with circa, you know, you've got Spain, you've got Latam and then Latomatica, you've got a strong base in Italy.
So I think it's interesting.
[00:35:00] Speaker B: So I mean based up before how impressive Botano and Superbet have been in terms of where they've come from, how many acquisitions have they made between them or each?
[00:35:12] Speaker A: Not very many.
[00:35:15] Speaker B: Okay.
Shoehorn. The success of one single minded focused company with acquisitions. And in my past life as an analyst, I have seen so much value destroyed from acquisitions, yet pretty much every acquisition announced being hailed as some.
[00:35:37] Speaker A: Yeah.
[00:35:37] Speaker B: Mind blowing. Changing things. And there's gonna be cost synergies and revenue synergies. Guess what? Revenue synergies rarely ever, ever happen.
[00:35:44] Speaker A: No.
[00:35:45] Speaker B: And so that's why I wasn't dismissive of, you know, the, the typical one. It was just for me it was like a.
Okay, so what? Who cares? And, and we haven't seen, we haven't seen anything positive come from it yet. We haven't seen like any mind blowing stuff.
[00:36:00] Speaker A: No.
[00:36:00] Speaker B: For Automatica Cerser, I think this is actually a more interesting one.
Okay, I see why the shares were down on the day. I think they're down about 8% or so.
[00:36:12] Speaker A: Yeah.
[00:36:14] Speaker B: Because they're, they're big push and Automatic has had a bit of a history, you know, G Tech and igt, all that, you know.
[00:36:20] Speaker A: Yeah.
[00:36:22] Speaker B: Back in the day. So then they've moved and like. No, we're focused on effectively Italy online.
[00:36:27] Speaker A: Yeah.
[00:36:28] Speaker B: You know, where they are by far and away through acquisitions, you know, acquisitions, bolt on ones or whatever, you know, the clear market leader.
And then suddenly they're taking a land based, you know, Latami and Spain business, you know, not the kind of exciting growth that they're talking about in Italy.
But since then, shares have Gone to new highs at Lotta Massacre. And I think, well one, it kind of helps Yenas Black. I think Blackstone isn't it so kind of getting their shareholding in a pretty liquid and everything into a big one. So I think it makes sense for the, for the owners of it.
But like if Lottomatica can use that online experience and with the kind of circa brand and land based presence and omnichannel things up to have a, you know, the online opportunity and in the markets I think is potentially quite compelling. And that for me is a much more compelling case than, you know, Banjay and, and Tipigo which is just two businesses that just kind of both have their.
Okay, you're strong in France, you're strong in Germany. Let's just put you together under one corporate group. Okay.
[00:37:43] Speaker A: Yeah, but there's kind of pure experience. There's also like the Banji typical. There's Africa, which I always think is interesting.
But I mean I get your point in M and A. But you look at when it's done well like if you look at someone like Flutter, you know, right back to the start from Paddy Power, that was, you know, a few kind of Irish bookies pulling their shops because they didn't want to get forced out the market by William L. Ladbrokes, people like that.
So it's like. And that is, you know, that whole business from its very inception has been an M and A proposition.
[00:38:19] Speaker B: It has.
And it's very hard to kind of show the, you know, what if, because you'll never know.
But with Flutter, if you take FanDuel out of the equation because you know there's. We had a guest on our show who would argue that, you know, it was kind of stolen or at least massively unvalued. Okay. So if you take fanduel out and look at really what the residual value of the, that that rest of Flutter business is, I think there would be an argument and I haven't done any of the maths on it, but I think there'd be an argument. If you look at like Paddy Power, you look at Betfair, you look at the Stars Group, you look at Sky Bets, which was flying on its own.
I think there's certain ones
[00:39:08] Speaker A: Sports Bet, the Jarabet.
[00:39:12] Speaker B: Yeah, you've got Sports Bay in Australia. If you look at all of those as kind of what they were as individual businesses and, and they could have done, you know, a lot worse on their own.
I, I'm not sure you could really argue that through being combined as Being value creation.
I. I think there'd be. I think you could make an argument. I haven't done the maths. I'm not saying they've destroyed value. And I know there is stuff across the group like Sports bet have massively benefited from, you know, technology and other expertise.
[00:39:41] Speaker A: Yeah. And then that has fed into Fangio, you know, the trading expertise, particularly from Australia.
[00:39:47] Speaker B: Yeah. Flutter, I think you shouldn't, you shouldn't confuse the fact that Flutter is the biggest gambling company and it's done it through M and A with that, M A has created value.
[00:40:00] Speaker A: I think. I think it kind of has because one of, one of the, one of the things that I think is. I mean, I know it's kind of a bit commoditized and kind of maybe a bit overhyped now, the Flutter Edge concept, but I think that model is actually quite a good way. You know, I think it's actually been quite effective. You know, you have a relatively experienced local leadership. You parachute in.
The only word I can think of is commissar, but that's probably not the best one.
You know, I mean, like kind of someone from the mothership that knows how it all works and then you support with the assets that it needs. Based on what.
[00:40:39] Speaker B: I agree. I. I agree and I think so.
[00:40:42] Speaker A: I think that kind of operational structure is. Is quite clever. You know, it's like obviously there is no perfect solution, but if we're talking about value creation, I think that is a good way of doing it, you know, 100%.
[00:40:55] Speaker B: 100%. But I think within that there's probably been bits of the business that like part of some deals that just haven't worked. I mean, if we look at Entain wants to do the same thing, you know, local brands, local leadership and everything.
I mean, clearly there's. The valuation of that company now would suggest that M and A hasn't worked. Now again, you know, that could be. You know, it could be. It's not saying that necessarily all the deals are wrong, but I'm saying that all the. I mean, I remember being the excitement of when B Win and Party Gaming Mesh.
[00:41:28] Speaker A: Yeah, I remember that too, you know,
[00:41:30] Speaker B: and I was like, you know, this is. This is great, but a lot of it, a lot of it just doesn't work. I mean, finally put too much dead and you know, you could like, what would have happened to William Hill separately. But if you look at all these companies come together, just because they're bigger companies, it doesn't mean that M&As created shareholder value and that's why I don't get excited about things where I go, oh, emerging. It's like oh yay, this is going to be revolutionary because actually, you know, Botano and I know we just. We're pointing out some kind of failed, not failed M A but ones where things haven't gone as well versus two very successful single brands.
[00:42:08] Speaker A: Yeah.
But then even like Super Bets acquired. Hasn't it acquired a in Belgium?
Napoleon.
[00:42:18] Speaker B: Napoleon, yeah.
[00:42:20] Speaker A: Yeah.
So I know it's kind of smaller, but it's.
Yeah, I mean it's like I'm not kind of arguing that MA is always this kind of like transformational thing. It's like what I'm arguing more is that there are ways that it can create value and Flutter is the best example of that. You know. I mean.
[00:42:42] Speaker B: No, because I don't think anyone's shown that Flutter has created value.
It has grown as a business.
I agree with the thing of the same way entain does the same thing. Okay, so of local brands, local thing and using mothership.
So I agree with that. I don't think outside of fanduel the analysis has been done to categorically proven that Flutter has created.
[00:43:07] Speaker A: You say that but then you look at intain and things were on different tech stacks years after they were acquired. They were on different platforms. So there wasn't that centralized approach that might have been like the desire and
[00:43:26] Speaker B: the thrust that will be the same old Flutter.
Not as bad as I'd imagine. There's still stuff on separate platforms.
[00:43:34] Speaker A: Yeah, but I mean, but you know, I mean I'm saying like there's. There's good ways of doing the kind of I suppose hub and spoke style thing really.
[00:43:46] Speaker B: I mean I would evaluation.
I mean okay, this is just Google system but I mean it's difficult because it's just claps so much. I mean there's argument at least and I've speaking some analysts about before they were arguing to me and this is when it was a higher thing that actually if you, if it's very simplistic but you kind of look at DraftKings, look at the valuation put it onto them the US business of Flutter and you effectively got the rest of Flutter for almost zero.
Okay.
So if you look at all of those other companies that would imply on that very basic thing that actually all those companies are worth failure obviously got to take into account the debt and everything but very little. So on that basis you would say it has completely destroyed by the value from the things. So I don't know, I'M not saying that. I'm just saying that I think that Save Flutter has created a lot of value from M and A outside of fanduel.
It is a big shout.
It has made it the biggest company. But I agree with the whole spoken thingy and that makes sense in theory.
It's tough. It's not as easy when being back as an analyst it's like oh yeah, just move them onto this platform, move on to that. And it just doesn't.
I think when I speak to companies moving across platforms like the beer in party that expect to lose 20, 30% of players just like that from moving across platforms it's, it's a lot harder to do. Anyway, how do we get on to this topic? Oh yeah, so I'm, I'm, I think I'm more positive about Circetomatica than I am about recent M and A in the sector.
[00:45:27] Speaker A: It's good to know. And in that bombshell wrap up for this week.
So this has been right to the source Robin Harrison and Ed Birkin and we will be back hopefully next week with another episode.
