Disney is getting into sports betting + Earnings wrap

Bryce: [00:00:15] Welcome to another episode of Equity Mates, a podcast that follows our journey of investing, whether you're an absolute beginner or approaching Warren Buffett status. Our aim is to help break down your barriers from beginning to dividend. My name is Bryce and as always, I'm joined by my equity buddy, Ren. How you going? [00:00:30][15.3]

Alec: [00:00:31] I'm very good, Bryce. Sorry, I'm just a little bit distracted. I'm just reading about the Australian AFL team [00:00:36][5.4]

Alec: [00:00:38] Oh great. Congratulations to Callum Mills and Isaac Heeney. So unfortunate that no Bombers players got in. [00:00:45][7.1]

Bryce: [00:00:45] Very unfortunate. Not surprising given the absolute shambles of a club that it currently is. But let's move on and we've got a jam packed episode today. Shout out to the CBA boys for their 100 episodes. [00:00:57][12.3]

Alec: [00:00:58] Yeah, raise the bat. Yeah. Hit the century. [00:01:00][2.1]

Bryce: [00:01:01] They've hit the century. Canadian V Economist Hit the 100th on last Wednesday. So make sure you go and check them out. Adam and Thomas do an awesome job of breaking down the world of macroeconomics. Super interesting. Yes, super entertaining. [00:01:13][12.5]

Alec: [00:01:14] Thomas, a former RBA economist. Adam a stand up comedian. It is a match made in heaven. [00:01:20][6.3]

Speaker 1: [00:01:21] Match made in. [00:01:21][0.5]

Alec: [00:01:21] Heaven. And yeah, congratulations boys on 100 episodes. It is an epic milestone. And if you haven't listened to their podcast, this is your sign to go give it a try. [00:01:30][9.1]

Bryce: [00:01:31] That's it. So the two big segments today, earnings season and a news wrap as we are still in the depths of it, particularly here in Australia now and then we're going to do an industry deep dive on potentially the second most unethical industry deep dive we've done given last week we did private prisons. [00:01:48][17.5]

Speaker 1: [00:01:49] Yeah. I mean, I feel that. [00:01:51][2.6]

Alec: [00:01:52] Putting sports betting and private prisons in the same ballpark is tough, but we'll get to it. But last week we spoke about Disney may be getting into the sports betting game. So we've said we'd come back and do an industry deep dive on it. So I'm excited for this one. We got a heap of interesting stuff. [00:02:08][16.4]

Bryce: [00:02:08] Ren earnings season is definitely kicking. [00:02:12][3.3]

Alec: [00:02:12] Let's talk about some of the companies that caught our eye. I think one that stands out for me was Tech, a company that a lot of people may not be familiar with, but it's fast becoming a sort of it's separating itself from some of these other Australian tech names. Revenue up 25% to 632 million, profit up 80% to 195 million. But I think pleasingly for Wisetech shareholders, it's signed ten new global customers to its flagship cargo wise software platform in the last financial year, including UPS, FedEx and Access World. So some big customers signing up to the software platform. [00:02:55][43.0]

Bryce: [00:02:56] And fingers crossed we can get is a Richard it's the CEO. [00:02:59][2.5]

Alec: [00:02:59] Founder. [00:02:59][0.0]

Bryce: [00:03:00] Richard White on the show at some point. Fingers crossed. Ren Domino's Pizza up 4%, $2.3 billion in revenue profit down 14% though to 166 million and dividend also down. No surprises there given the cost pressures that they were under. They announced it has stepped up an expansion in Asia, though, with the acquisition of 287 stores in Malaysia, Singapore and Cambodia, with a push to eventually reach 600 stores across those countries. Now, remember, we interviewed Don May, the CEO at the time. Make sure you go and listen to that episode if you haven't. And he was very particular on the way that they enter international markets. So great to see. But they are now seeing early signs that the price pressures they were under for key ingredients like wheat and cheese are now starting to flatten. We did do a segment on the inflation hedge. That was the $5 pizza. [00:03:54][54.2]

Alec: [00:03:55] Now $8. [00:03:55][0.2]

Speaker 1: [00:03:56] Now $8. Yes. [00:03:57][1.3]

Bryce: [00:03:58] I wonder if they'll ever go back to the five. [00:04:00][1.5]

Alec: [00:04:00] I mean, in all seriousness, that's like a 60% increase in price. [00:04:04][3.7]

Speaker 1: [00:04:04] Yeah. Can I show it? Inflation is not at 60%. [00:04:06][2.0]

Alec: [00:04:08] The crazy thing. So there's a Domino's, the parent companies listed in the US and then there's the franchise in Australia that runs a bunch of different countries. There's also a franchise listed in the UK that runs a bunch of different countries. There's actually a couple, there's another one that runs Russia and that list in the UK that they have all just been incredible stock market performers. It's crazy how pizza listed in three different markets around the world. Obviously, you know, the same company in some ways, but just incredible share price performance. [00:04:41][32.2]

Bryce: [00:04:41] Absolute market darling. I remember when we were at uni and it was absolutely on a tear. [00:04:45][4.3]

Alec: [00:04:46] Yeah. Yeah. Pizza's the new growth stock. But speaking about surprising, surprising categories where we're seeing growth Breville group homewares and appliances. Appliances, yeah. Revenue up 19% to $1.4 billion. Profit up 16% to $105 million. Dividend up 11% to $0.15. Breville For the last few years I feel like they've sort of been taking along in the background in some ways. [00:05:13][27.2]

Bryce: [00:05:14] Well, it's just going to stop. Feel like they've been. This is another reporting season of excellent. Yeah. [00:05:21][7.6]

Alec: [00:05:22] Yeah. Well, so that's where I was getting to the never like the front page of the paper. Yeah. They never the first company that we spoke about on the podcast. Yeah. But they just grinding out really impressive numbers and they've got this international expansion strategy, which I mean, you know, it's a big world out there and they're growing different parts of the world are growing at different pace. PACES So the Americas accelerated in the second half of the year for them, and that offset a slowdown in Europe. So, you know, like it's not all been smooth sailing, but it's pretty impressive story they're building. [00:05:55][33.0]

Bryce: [00:05:55] Yeah, I love it. We unpacked Préval, I reckon two or three years ago with Julia year and had a look at when they first announced their five year expansion plan into Europe and and the Americas. [00:06:06][10.6]

Alec: [00:06:06] And did you buy it then? That's the question. [00:06:08][1.4]

Speaker 1: [00:06:08] I wish I did. I wish I had anyway. [00:06:12][4.0]

Bryce: [00:06:13] Anyway, that's not to say that it's we can't now, but yeah, you're right. It's one that we always seem to be talking about it. [00:06:19][6.4]

Alec: [00:06:19] Yeah. One other company that caught our eye this week are Ampol, formerly Caltex Australia reported. Now they are in the refining business taking crude oil and turning it into petrol or gas. For our American listeners, revenue up 83% to 17.3 billion, profit up 114% to 695 million. Dividend up 131% to a dollar 20. It's a good time to be in the oil refining business. [00:06:47][27.9]

Bryce: [00:06:48] Is it? Is it is. So when to close out? Let's take a look at retail as always, Coles, your baby revenue was up only 2% to 39.7 billion profit up 4% to just over a billion and dividend also up 7% to $0.30. Interestingly, though, the March quarter price inflation for Coles was sitting at 3.3% compared to Woolworths 2.7. [00:07:12][24.2]

Alec: [00:07:13] Yeah, so prices going up at both of the major supermarkets, slower than inflation we should say Coles a little bit quicker than Woollies. [00:07:20][7.0]

Bryce: [00:07:21] Well prices are not down. Down at Coles that's for sure. [00:07:23][2.2]

Alec: [00:07:24] Still a down down inflation adjusted there. [00:07:27][3.2]

Speaker 1: [00:07:28] I think real prices are down. All right. [00:07:33][5.5]

Alec: [00:07:33] You're the retail whisperer. You've got two more retailers here. Tell us what. [00:07:36][2.9]

Bryce: [00:07:36] Endeavour Group, the retail the alcohol spin off from Woolworths revenue was flat at 11.6 billion, but profit up 11% to just shy of half a billion dollars dividend also up 10%. They had a massive boom in the December half when liquor retailing went crazy due to people stuck at home during COVID. People turning to delivery of Dan Murphy's and B W. S, however, they're diversified. They have 344 hotels. And now that has taken over as the main driver of growth in the June half. As people come back to real life, leave their homes and start drinking in pubs again. [00:08:14][37.5]

Alec: [00:08:14] It's such a funny year to think that, you know, they the the financial year was like they had this massive online boom and then hotels were down and hotels were back on and online slowed down. But at the end of the day, revenue was just flat. [00:08:30][15.8]

Bryce: [00:08:32] Well diversified. That's what happened. Kogan ran. It's been on a weird run pricewise over the last sort of a couple of months. It jumped from a low around mid July, jumped 67% at the start of late July and has now fallen 22%. IT revenue down 8%, a loss of 35 million, down from a profit of 3 million last year. And they're not paying any dividend. It's a story of inventory for Kogan. They benefit from having a lot of inventory onshore during COVID and didn't get disrupted as much by the impacts of supply chain. And now they're feeling that they have too much. [00:09:13][41.5]

Alec: [00:09:14] Yeah. So that's I guess a bit of a wrap of reporting season. A few of the companies that caught our eye over the last week, we've still the end of this week and next week to go. Yeah, yeah. And then there's maybe a little tail off to that, but it sort of slows down. So we'll be back next week with a few more companies that catch our eye. Then I guess it's what are some of the storylines from it all bigger storylines. It's just like, God, it's good to be in the oil business, right? [00:09:39][25.4]

Speaker 1: [00:09:40] I don't know. [00:09:40][0.7]

Alec: [00:09:41] Ethical or unethical. It's profitable. Yes. But I think one other news story that caught my eye this week, have you been following the Allen stuff loosely? So his lawyers have subpoenaed Jack Dorsey, the Twitter co-founder and former CEO. They've also subpoenaed Goldman Sachs and Jp morgan. And then Twitter's lawyers, on the other hand, have subpoenaed Marc Andreessen, David Sachs, another big investor and Pay the Tails Founders Fund. So there are some pretty big names that are going to be test. The firing in this trial. And then the ex Twitter head of security, Twitter's former head of security, has turned whistleblower and gone to the regulators, the Securities and Exchange Commission claiming that Twitter has security problems and that they misled the board about the amount of fake accounts and bots which plays directly into Allen's hand. [00:10:34][53.1]

Bryce: [00:10:35] Good time to be a lawyer currently available. [00:10:37][2.4]

Alec: [00:10:38] Yeah, the FTC had a big article about the Twitter's lawyer. And apparently, this guy is like a superstar. Yeah. [00:10:46][7.7]

Bryce: [00:10:46] And he's. [00:10:47][0.3]

Alec: [00:10:48] He's gunning for Alan. No, but, Mike, I mean, my conspiracy theory, which probably isn't that conspiratorial at all, is that the timing, the whistleblower's timing isn't a coincidence. The fact that he's gone right when the subpoenas are flying and the lawyers are really getting themselves into a lather, and then he just happens to go to the SCC. True. And makes a claim that falls directly into Allen's hands. [00:11:14][26.6]

Speaker 1: [00:11:15] True. Yeah. Well, no sign of that. [00:11:17][2.6]

Alec: [00:11:18] I'm not saying anything untoward, and I'm not even saying that he's wrong. I'm just saying that, like, you know, he left. He left Twitter over half a year ago. Yeah. Yeah. And now is the time that he turns whistleblower. [00:11:28][10.6]

Speaker 1: [00:11:29] Yeah. So, anyway, that's why. [00:11:30][1.6]

Alec: [00:11:31] Conspiracy and school alleged. No, nothing new segment. But we we wait the trial set for 17th of October. So a couple more months of my conspiracies and then it'll all come out. [00:11:43][12.6]

Bryce: [00:11:44] I'm going to be watching it on YouTube, that's for sure. [00:11:45][1.6]

Alec: [00:11:46] If it's on YouTube. [00:11:46][0.5]

Bryce: [00:11:46] I'm sure it. [00:11:47][0.4]

Speaker 1: [00:11:47] Will be. [00:11:47][0.1]

Bryce: [00:11:48] I'm sure it will be. They, you know, the American, they put all their big cases on. Well, I'm yeah, I'm more public anyway. Anyway. [00:11:55][6.8]

Speaker 1: [00:11:55] Yeah. A lot of footage, you know. [00:11:56][1.0]

Alec: [00:11:57] The art of the courtroom sketch is being lost. Over there is. [00:12:01][3.8]

Bryce: [00:12:01] The. The Johnny Depp verse. [00:12:04][2.6]

Alec: [00:12:04] Yeah, that was ridiculous. [00:12:05][0.6]

Bryce: [00:12:06] Amber heard, you know, it was streamed. [00:12:07][1.3]

Alec: [00:12:08] Your productivity fell to an all time low. Equity Mates. There was one morning so bright, and I don't live too far away from each other. And there was one morning when I see him walking to work and I walk up like and I'm like trying to get his attention. And he's just staring at his phone as he's walking into work. [00:12:25][16.6]

Speaker 1: [00:12:25] In the hallway. He's watching the highlights of the trial. [00:12:27][1.9]

Bryce: [00:12:29] Anyway, I should have been researching for a stock discussion, but I was watching now. [00:12:33][4.0]

Speaker 1: [00:12:34] That's all right. Anyway. Anyway. [00:12:35][1.3]

Bryce: [00:12:36] Ryan, let's keep moving. Look, Equity Mates, we're not all about investing here. We do do some projects on behalf of other organisations and we, we were lucky enough to work with Monash University on a mini series called What I Wish I Knew about studying business. And it was a real sort of moment where Ran and I went and reminisced on our days at university and spoke to some current and former Monash University students about the transition from high school to university. So if you are at that stage in your life or you know someone who is looking at business entrepreneurship and finding a degree or whatnot, this was just a really enjoyable project for us and we just wanted to share it with you. It's a podcast, I think five or six episodes. You'll find it in your podcast player. As I said, it's called What I Wish I Knew About Starting a Business. Yeah. [00:13:24][47.8]

Alec: [00:13:24] And I think, I mean, it made us very nostalgic for our uni days, but if you know someone or if you are that person who's transitioning to uni regardless if you're going to Monash or if you're studying business, I think there were some good lessons for making that transition. You go from that structure of school to the freedom and independence of university. It's a great moment, but I wish I had this podcast to listen to when I made that transition. [00:13:51][27.2]

Bryce: [00:13:52] So in that project was the the latest production by Equity Mates amplify a production arm here at Equity Mates Media. If you're looking to do podcasts, we're always open and willing to create the next amazing podcast series. So hit us up at Ren. Let's take a quick break to hear from our sponsors. And on the other side, we're going to take a deep dive into the sports betting industry. So when last week we spoke about Disney and its potential foray or it's not potential, but its announcement that they're going to be looking at sports betting via ESPN, which has led us to this moment of a deep dive on the sports betting industry, because there are some big tailwinds, certainly. [00:14:37][44.9]

Speaker 1: [00:14:38] Place. Yeah. [00:14:38][0.3]

Alec: [00:14:38] And I feel like it's one of those industries that's been pretty widely spoken about in the Equity Mates community for the last oh well, maybe four years since it was legalised in the US. I don't think we've done an industry deep dive on it before, but it's certainly an industry that I've looked at in my personal capacity. [00:14:56][17.9]

Bryce: [00:14:57] To engage with it every day. [00:14:57][0.8]

Speaker 1: [00:15:01] I double. It's all very. [00:15:05][4.2]

Alec: [00:15:05] Responsibly. [00:15:05][0.0]

Bryce: [00:15:06] And I'm sure this is the same. It's saying that Darcy in the office, our alpha in the office. [00:15:11][5.3]

Speaker 1: [00:15:12] Well, you're you're going to just not put yourself in this bucket. Oh, I know. When's the last time I bet on. [00:15:19][7.8]

Alec: [00:15:20] That golf game that we all did? [00:15:22][2.4]

Speaker 1: [00:15:23] Which golf on. [00:15:23][0.4]

Alec: [00:15:23] The Masters that I won? [00:15:25][1.8]

Bryce: [00:15:26] I didn't. Okay, that's different. [00:15:28][1.6]

Alec: [00:15:28] And when. [00:15:29][0.8]

Bryce: [00:15:29] We that wasn't true of sports. [00:15:30][0.9]

Speaker 1: [00:15:30] When we had that. [00:15:31][0.5]

Alec: [00:15:31] Sportsbet bet with mates. [00:15:32][0.9]

Bryce: [00:15:33] Wasn't it. [00:15:33][0.5]

Speaker 1: [00:15:34] No. Yeah. I'll never say I didn't, but I don't. And you know. Right. Well, now I'm not going. [00:15:42][8.3]

Alec: [00:15:42] I think I think we should say from the outset here that there is a clear conversation about ethical or unethical. There are obvious harms from this industry based on that last interaction. It's clear that we bet. But but I think, you know, for some people, this is screened out of their the investable world, and that's completely fine. I do want to say right from the outset that I think I'm okay with sports betting, but I'm not okay with sports betting ads. Can I just kill that shit? [00:16:13][31.1]

Speaker 1: [00:16:14] Yeah. [00:16:14][0.0]

Bryce: [00:16:14] What about casinos? Are you okay with casinos? [00:16:16][1.6]

Speaker 1: [00:16:17] Yeah. [00:16:17][0.0]

Alec: [00:16:18] Yeah, I think paper. As long as says, as long as I was on the people making a choice to go and do it freely. And you know that there's if they are addicted and they're not free to make that choice, that there's proper support available. But I think that the enticement of it, the advertising of it, I think changes that for me. So kill gambling ads and give us our sport back, is what I would say. [00:16:40][22.2]

Speaker 1: [00:16:40] Right. [00:16:40][0.0]

Bryce: [00:16:42] Well, let's just quickly unpack the Disney piece before we take a look at some of the context around the industry we spoke about last week. Disney have announced they're looking at sports betting via ESPN, including having a sportsbook at Disney World. [00:16:55][13.3]

Alec: [00:16:55] Yeah, yeah. Take your kids to the happiest place on earth. [00:16:58][2.5]

Bryce: [00:16:59] Which is pretty interesting, given that Disney is often seen as like the barometer of what the average American is is thinking is acceptable. [00:17:07][8.1]

Alec: [00:17:08] Yeah. Yeah. Disney not a company that's going to push the boundaries. They're going to wait for social views to change and then they'll move with it. So it did really catch our attention when Bob Chapek, the CEO, said Disney must quite seriously consider getting into gambling in a bigger way. And ESPN is the perfect platform for this. Now, Aspen have been dabbling. They've made a deal with Caesars Entertainment and with Draught King DraftKings to link to their sports books from ESPN.com. That's like an advertising deal. That's like when you open the AFL up and Sportsbet have the the odds under the games. That's not actually the product. Yeah, it's sober. Yeah, yeah. Kill gambling ads and just let the industry exist. Too much money anyway, anyway. Too much money? Yeah. [00:17:58][49.8]

Bryce: [00:17:58] Yeah. Same as crypto anyway. [00:17:59][1.0]

Alec: [00:18:01] But now ESPN thinking about getting building their own sportsbook, not just being an advertising platform for others. Which is interesting, I think, and I think it shows that. [00:18:10][8.6]

Bryce: [00:18:10] Which in a nutshell means that they are going to be creating their own markets. [00:18:14][3.5]

Alec: [00:18:14] They'll be the bookie. Yeah. Yeah. Well, I mean, it's early days, but that's what they're talking about. Yeah. So we thought this was a good opportunity to go a little bit deeper on the industry and we're talking about really talking about America here because the law only changed four years ago. But before we zoom in in America, let's zoom out and talk about the global sports betting industry. [00:18:35][20.3]

Bryce: [00:18:35] It's pretty big sports betting and luxury Ren make up a market cap or not a market cap, but have a value of about 195 billion USD, and that's up 13% since 2020. There are about 25,240 businesses in the sports betting market and. [00:18:55][19.4]

Alec: [00:18:55] We're going to cover them. [00:18:56][0.7]

Speaker 1: [00:18:56] Or you're going to. [00:18:57][1.5]

Bryce: [00:18:58] Cover all of them. [00:18:58][0.6]

Alec: [00:18:59] Now the highest valued sports betting company is joining us. [00:19:04][5.2]

Bryce: [00:19:04] Bet365. [00:19:04][0.0]

Alec: [00:19:05] Bet365 as Samuel L. Jackson in the ads. [00:19:08][2.8]

Bryce: [00:19:10] Which i think correlates to advertising because I see them advertise everywhere. [00:19:12][2.8]

Alec: [00:19:13] Yeah, well, his line is lie. [00:19:14][1.1]

Speaker 1: [00:19:15] And anyway, we'll get into. [00:19:16][1.1]

Alec: [00:19:17] Unpack. That's not going to be a whole lot of setup. The CEO of Bet365 now Bet365 isn't a public company, so that's why I'm putting it here rather than when we talk about the companies. But I just had to get this start in. Denise Coates, the CEO. Her salary in 2020, £421 million, a.k.a. 851 million Aussie dollars. [00:19:40][23.0]

Bryce: [00:19:40] She almost got paid $1,000,000,000. [00:19:41][0.9]

Alec: [00:19:42] Billion Aussie. Yeah. [00:19:43][0.7]

Speaker 1: [00:19:43] Yeah, that is crazy. [00:19:44][0.9]

Bryce: [00:19:46] That's the size of this. That's the. Anyway, you can understand why a lot of people want to get into sports betting if that's the type of stuff that they can be paying out. But let's let's continue setting the scene here, Ren, because as you said, it is really all about America here, because there's been some pretty significant change that has led to the last four or five years of incredible growth. And that's been early 2018. Sports betting was illegal in the states and then the Supreme Court changed all that. [00:20:14][27.8]

Alec: [00:20:14] Yeah, yeah, yeah. So for about 100 years, sports betting was illegal. And then the supreme New Jersey sued the federal government. Supreme Court ruled with New Jersey overturned the ban on sports betting. So then every state was able to then make their own laws. Today, 2022, we have a bit of a mismatch mishmash of different laws in different states. 30 states and Washington DC have legalised sports betting. Four other states have legalised it, but not launched legal sportsbooks. But the way that they've legalised, that is all a little bit different. And it's all like every state has their own licencing regime, which becomes really interesting when you talk about the companies that are winning market share and how they go about that. In some states, there's a state lottery and they're the they have a monopoly on the sportsbook. And then there are others where it's like a free for all. Some only allow in-person. Like you got to go to the a physical location to lay a bet. Others you can do it on your phone and stuff like that. So it's a bit of a mishmash, but I think that the trajectory is clear. In the last four years, two thirds of states have legalised and a massive industry has been created. [00:21:26][71.9]

Bryce: [00:21:27] Well, yeah, the trajectory is incredible. Americans are going gangbusters on it. Yeah. They've spent $125 billion on sports betting in the last four years since legalisation, which has absolutely blown estimations out of the water. [00:21:43][16.4]

Alec: [00:21:43] To put that $125 billion in context, that's more now 135 billion over four years. But 125 billion is more than Americans spend on pet food, supplies and vet care. Last year, 125 billion is more than the net income or the profit for America's farmers last year. [00:22:03][19.5]

Bryce: [00:22:03] Wow. [00:22:03][0.0]

Alec: [00:22:04] So $125 billion is a lot of money in case you. [00:22:07][2.9]

Speaker 1: [00:22:07] Will want to. [00:22:08][0.3]

Alec: [00:22:08] These crazy record month October 2021 Americans put down $7.5 billion on bets in bets, 87% of it online. The opening weekend of the 2021 NFL season, 58.2 million online bets were placed up 126% from the year before. And Bryce exciting news. The NFL season is almost upon us once again. So interesting to see what that number is this year. The point is it's already become a massive market and the expectation is it's going to get bigger. So data, bridge market research thinks that the market is going to grow at 10.3% a year between now and 2029. [00:22:52][43.5]

Bryce: [00:22:52] And I'm imagining that North America is just going to make up a larger and larger proportion of total world global betting as well. [00:23:00][7.4]

Alec: [00:23:00] Yeah, I, I doubt it will ever beat China. Huge. [00:23:03][2.8]

Bryce: [00:23:03] So just to recap, we're at pretty interesting. Well, some major legal changes over in the States have led to a now a massive uptick in gambling, huge amounts of money pouring in. We know there's a massive amount of money spent on ads as well. So if you're thinking about it from an investing perspective, who's the beneficiaries of that? Felicia GRONDIN, who's the executive director of the Council of Compulsive Gambling of New Jersey, cited a report in Barron's that said $292 million was spent on sports betting ads in the US in 2020 and a year later that grew to 725 million. So almost three times the amount of advertising in the space of, what, a year? [00:23:49][45.4]

Alec: [00:23:49] Yeah. [00:23:49][0.0]

Bryce: [00:23:49] Yeah, it's incredible. [00:23:50][0.5]

Alec: [00:23:51] So I think. Yeah, it's. [00:23:53][2.2]

Speaker 1: [00:23:54] Good. Yeah. [00:23:55][0.5]

Alec: [00:23:58] This is a bit of a tangent, but an AFL podcast I was listening to, they were having a bit of a dispute and they were criticising one of the panellists for appearing in a gambling ad. Little did they know that the pre and post role ad on that very podcast was gambling. [00:24:13][15.4]

Speaker 1: [00:24:13] Yeah. [00:24:13][0.0]

Bryce: [00:24:14] Yeah. It's. [00:24:14][0.3]

Alec: [00:24:15] So anyway. Anyway, America. His biggest ever online bet was made in February 2022. Biggest ever legal online bet, I guess was made in February 2022 $4.53 million on the Cincinnati Bengals to win the Super Bowl. [00:24:31][15.5]

Bryce: [00:24:31] Holy smokes. The question is, did the. [00:24:33][1.9]

Alec: [00:24:34] Bengals didn't win the Super Bowl? Yeah. [00:24:35][1.6]

Bryce: [00:24:36] But you've got to be some kind of wealthy to be putting 4.5 or some kind of crazy. [00:24:40][3.6]

Alec: [00:24:40] Or some kind of stupid. Yeah. [00:24:42][1.3]

Bryce: [00:24:42] It's all the same, isn't it? Yeah. [00:24:43][1.0]

Alec: [00:24:44] Gamble responsible. [00:24:44][0.4]

Bryce: [00:24:45] Anyway. Right. And so. Yeah, gamble responsibly. We are here to chat about the investing aspect of all of this and the companies that are involved in the space. Some are listed, some aren't. But there's plenty coming to the surface. [00:24:57][12.3]

Alec: [00:24:57] Yeah, we're not going to talk about the unlisted ones. [00:24:59][1.7]

Bryce: [00:24:59] Yeah. So there has certainly been evolution in this space. [00:25:02][3.0]

Alec: [00:25:03] Yeah. So I think when you conceptualising how this industry evolved, the Supreme Court changed the law or overturned the law in 2018. The first movers in this space with the daily fantasy players are FanDuel and DraftKings. If you've heard of them, yeah, they were allowed to exist that there's this distinction between game of chance and game of skill and fantasy was seen as a game of skill. So these guys actually existed before the law was overturned. So they were good to go. They were on the blocks running with the starter's pistol anyway. So they they launched they were first movers. They launched sportsbooks to accompany the fantasy offering. We'll get to like who owns them and all of that later, but so that they moved. Then the casinos that existed made their own sportsbook at MGM, Caesars, all of the American casinos. They were pretty quick off the mark as well. They had obviously been taking bets at their casinos in Vegas and so they were pretty quick to move as well. State lotteries. So they also existed and then they quickly moved into sportsbooks as well. So Massachusetts as a state might have a government owned lottery or a government regulated lottery. They moved into sports betting as well. Then after those three. So then the foreign bookmakers made a big push into America as well. And if you're looking at foreign bookies, you really got to go to Europe and in particular the UK and we will go there because that's where a lot of the big names are. And then finally, the final player in this ever more increasingly competitive landscape is media, and both old school media like Fox have made their own sports book or partnered to make their own sports book and then new media like Barstool, your favourite company, and Dave Portnoy, your hero. [00:26:48][105.1]

Bryce: [00:26:49] Not true. Not true. You don't donate. [00:26:51][1.8]

Alec: [00:26:51] And so I think the long and the short of it is competition is hot in this space because so many different players from other parts of the gambling ecosystem to other parts of the sports and media ecosystem to other countries all quickly converged on America and are trying to seise this opportunity. [00:27:10][18.3]

Bryce: [00:27:11] Even Disney. [00:27:11][0.3]

Alec: [00:27:12] Even Disney. So so let's talk about some of the players and then we've got some data on who's actually winning market share, which I was pretty surprised by. [00:27:20][7.8]

Bryce: [00:27:20] Well, let's kick off, as you said, when it all starts in Europe and and particularly the UK. And one of the big ones listed on the London Stock Exchange with the ticker E.A. is Entain. [00:27:31][11.2]

Alec: [00:27:32] I think it's just Entain. [00:27:33][0.6]

Bryce: [00:27:35] Entain AM it owns brands such as bwin. [00:27:40][4.9]

Speaker 1: [00:27:41] Never heard of it. I think it's based in I actually don't know when Coral. [00:27:46][5.0]

Bryce: [00:27:47] Ladbrokes had a ladies party poker and sporting bet. [00:27:51][3.6]

Alec: [00:27:51] Not Sportsbet because that's owned by the next company here Flutter Entertainment. They're big they're part of the Footsie 100 also listed in well they listed in London their share price, £11,000 a share. [00:28:04][12.7]

Bryce: [00:28:04] Wow. [00:28:04][0.0]

Alec: [00:28:05] Yeah. [00:28:05][0.0]

Bryce: [00:28:06] Ever heard of a stock's worth. [00:28:07][0.9]

Speaker 1: [00:28:08] And then they listed. [00:28:09][0.4]

Alec: [00:28:10] In Dublin Flutter owns Sportsbet FanDuel sky betting William Hill Paddy Power Fox bet and importantly for this story the daily fantasy site FanDuel. Yeah so they own a lot they. [00:28:24][13.8]

Bryce: [00:28:24] Own a lot flutter entertainment ah and let's keep moving. International game technology listed on the New York Stock Exchange. I have a $4 billion market cap and revenue of about 4 billion, so not bad. [00:28:38][14.0]

Alec: [00:28:38] Yeah. So they're also European, they're also I'm pretty sure from the UK, but they're listed in New York. They make a lot of the technology behind these sports bets. So sports books, so their platforms have processed more than 6 billion in sports wages to date. They plug in with like the casinos, the state lotteries who want to offer a sports book. They like a turnkey plug and play. [00:29:02][23.5]

Bryce: [00:29:02] This is a picks and shovels vibe. [00:29:03][1.0]

Alec: [00:29:03] Yeah. Like if Equity Mates wanted to make Equity Mates bet. [00:29:06][2.4]

Speaker 1: [00:29:07] A couple equity bets. [00:29:08][1.3]

Alec: [00:29:10] Then you'd go to these guys and say, we want to white label your stuff. Yeah, right. There's also 888 group. Listed on the London Stock Exchange recently acquired William Hill and then the French lottery, which is listed over in France with the ticker F.D. Jai. They also have a sports book as well as their lottery business. [00:29:30][20.7]

Bryce: [00:29:31] Did William Hill buy? Who's that? [00:29:33][1.8]

Speaker 1: [00:29:34] I think it's Tom Waterhouse. [00:29:34][0.7]

Alec: [00:29:36] Someone bought Tom Waterhouse. [00:29:36][0.8]

Bryce: [00:29:37] I think it was William Hill. Anyway, someone can fact check me on that. But sir and let's move to Australia. There's two that we'll talk about today. The first is Pointsbet PBA, which often gets spoken about in the Equity Mates community market cap of just over a billion. Revenue of about $260 million. And then Betmakers. [00:29:56][18.8]

Alec: [00:29:57] Betmakers is a bit of a picks and shovels play like international game technology. They're pretty small though. But then Pointsbet are a bookmaker who are trying to push into the US. They move pretty early in the US. They just maybe a year ago or so they signed that big deal with NBC. So yeah, they're right in the thick of it with some of these European players trying to get a foothold in America. [00:30:21][24.5]

Bryce: [00:30:22] So that's the established companies over in Europe and the UK, a few a couple of established players here in the States. But again, we're really starting to see some of the Home-Grown American companies absolutely take off. [00:30:34][12.6]

Alec: [00:30:35] Yeah. So let's start with Penn National Gaming in the front of mind for a lot of people because they bought Barstool. Yeah. And they also operate 44 casinos and racetracks around the United States and Canada. So they're they're trying to get into it. DraftKings. So we spoke about the two big fantasy players, FanDuel and DraftKings. FanDuel owned by Flutter, the Irish company, and then DraftKings merged with a SPAC and went public in their own right. So they're listed. D.K. and J is the ticker Bally's Corp. You haven't heard of them? [00:31:09][34.6]

Bryce: [00:31:10] No. [00:31:10][0.0]

Speaker 1: [00:31:10] Four. Yeah. [00:31:11][0.8]

Alec: [00:31:12] 14 casinos across ten states in the US, a track in horse tracking Colorado have sports betting licences in 14 states. Churchill Downs. Most people have probably heard about the racetrack, but they're listed and they have a bunch of different casinos and online betting companies. Then there's a few casinos Bryce a big one. We're planning your bucks. We're going to be heading over on a plane to Vegas, so we might be visiting. [00:31:40][27.5]

Speaker 1: [00:31:40] A lot of these. [00:31:40][0.2]

Alec: [00:31:41] Pleasure. [00:31:41][0.0]

Bryce: [00:31:42] Bucks is actually this weekend. Ren. [00:31:44][2.3]

Alec: [00:31:45] Yeah, and you don't know. [00:31:46][1.0]

Speaker 1: [00:31:46] You don't know where we're going? No idea. [00:31:47][1.3]

Alec: [00:31:48] But we've told you to get your passport ready. [00:31:49][1.3]

Bryce: [00:31:50] Well, now it's officially told me that. [00:31:51][1.5]

Alec: [00:31:52] Has really not told you. [00:31:53][0.7]

Bryce: [00:31:56] Anyway. [00:31:56][0.0]

Speaker 1: [00:31:57] But you do have a passport. [00:31:58][1.0]

Bryce: [00:31:58] If we don't get if we don't get content up next week, you're going to know why? Because I don't know where we'll be having a buck somewhere. But anyway, let's keep going. Caesars Entertainment Ticker. See that? They've got a $10 billion market cap and obviously famous for the well-known Caesars Palace in Vegas, which I think we're staying at night one. MGM Resorts International as well, now has a subsidiary BET MGM. They're traditionally in the hospitality and entertainment space. But given what's going on in betting, they're moving further into sports and then Boyd Gaming Corp to close it out again. [00:32:36][37.8]

Alec: [00:32:36] Yeah. Another big casino player in Vegas that's pushing into the sports betting market. So I think if we just take a breath here, we can say there's a lot of companies trying to compete for the dollars of American gamblers across all four corners of the world. And then there are some strange companies trying to get into it, and Disney is one of them that we've spoken about. So then Price, I guess the question is who's actually winning? [00:33:02][25.4]

Bryce: [00:33:02] Yeah, plenty of players in this space. You know, we've heard from many investors that sometimes you just stick with the the ones that are leading the charge. And there's two, two big ones that have over half of the market share from a mobile point of view, at least over in the States. [00:33:20][18.0]

Alec: [00:33:21] Yeah, over in the States. So I think the important stat here is the market share we have is mobile. But you pair that with this other stat that we found that 80% of sports bets in the U.S. are placed via a mobile phone. [00:33:33][12.2]

Bryce: [00:33:34] There you go. [00:33:34][0.2]

Alec: [00:33:35] So this is the majority of the market. There are only two that are above 10% of market share. [00:33:41][6.0]

Bryce: [00:33:41] DraftKings at 32% and FanDuel at 30%. So they have 62% of total market share between the two of them, which I found surprising. [00:33:50][9.0]

Alec: [00:33:51] Yeah, same. [00:33:51][0.3]

Bryce: [00:33:52] I thought some of the, some of the other well-known would have had more of an equal share. I guess. [00:33:57][5.3]

Alec: [00:33:58] I guess there's an argument to say and this is may not being in America and not playing daily fantasy sports is they or a lot of people have already had accounts with them. Yeah. And it's just like you see it there. Once you've got the account, it's so much easier to just move from daily fantasy to betting, rather. Than signing up with one of these casinos or something like that. Pretty impressive how much market share they've been able to take. I guess that's why they call it a first mover advantage. [00:34:24][26.6]

Speaker 1: [00:34:25] Yeah. [00:34:25][0.0]

Bryce: [00:34:26] Nice one. [00:34:27][0.4]

Alec: [00:34:27] But the only other. So the only other one that is above. Oh, sorry. There's one that's at 10% market share fox bet, which is also owned by flutter. [00:34:37][10.6]

Bryce: [00:34:38] Nice. Yeah. [00:34:39][0.5]

Alec: [00:34:40] So there was another poll so that that market share. DraftKings listed separately number one. FanDuel and Fox bet number two and three. Both owned by Flutter. Yeah. And then a long tail. After that, there was another. [00:34:53][13.0]

Bryce: [00:34:53] So flood is massive. [00:34:54][0.6]

Alec: [00:34:55] Well, they've got an £11,000 share price. Yeah. [00:34:57][2.5]

Speaker 1: [00:34:59] Chase. [00:34:59][0.0]

Alec: [00:35:00] But, but the thing is I don't, I don't actually know if they're the biggest globally. No, I'm actually confident they're not the biggest globally. [00:35:05][5.9]

Bryce: [00:35:06] From what point of view. Market cap. [00:35:07][1.1]

Alec: [00:35:08] Yeah. Total revenue I don't think would be. I think that three, six, five is that's why they call themselves the world's biggest online sports. No, they're claiming false advertising bullshit. So, ah, as well as that market share that we just spoke about, we found a morning consult poll from early 2022 that looked at brand recall of some of these biggest brands, biggest sports betting brands, DraftKings. 78% of respondents knew the brand, FanDuel, 73%, Caesars 65%, Fox bet 56% and then BET MGM 56% as well. So they were the top five. So I think the two key takeaways for maybe the daily fantasy players are number one and number two there as well. And then that Flutter owns the second biggest and the fourth biggest. [00:35:56][48.9]

Bryce: [00:35:57] So when I do want to have a chat about what's next, but if you're thinking about this industry pretty new, particularly over in the States, any key risks, challenges that we should be aware of? [00:36:06][8.3]

Alec: [00:36:06] The really important thing to make a point here is this industry is four years old, less than four years old in America. It is incredibly crowded. And like FanDuel and DraftKings might have an early lead. But the industry is so unsettled at the moment and there's so much changing that the idea that this trend is just going to continue in a straight line is not a good investment thesis. Not only is the market dynamics shifting and the companies are shifting, but the legal framework in which they can operate is also shifting and changing. And more companies are legalising. They're legalising in different ways, and the laws are going to keep changing. And so if you're thinking about investing in this industry, the thesis cannot just be who's going to early, late now. [00:36:48][42.0]

Bryce: [00:36:49] I can only see legislation getting looser and looser as more tax money runs out. [00:36:54][4.5]

Alec: [00:36:54] But that's the point. Like all of a sudden, if all of these states that weren't really open to some of these like casino operators because they didn't have physical presence in the state or something like that, I'm just making things up. But, you know, then all of a sudden Caesars today take a big chunk of market share than they couldn't take previously because of legislation. So I agree. It feels like it's only going to go in one direction, the tax dollars and just the social acceptance of it all. The other thing is, do you know why sports betting was bad? No. Data shows. [00:37:24][30.0]

Bryce: [00:37:24] Yeah. No. [00:37:25][0.4]

Alec: [00:37:25] So the Chicago Black Sox was a scandal where the Chicago White Sox threw the World Series. [00:37:31][6.0]

Speaker 1: [00:37:32] No way. Yeah, they go. [00:37:33][1.2]

Alec: [00:37:34] The World Series being like the final of the MLB. Yeah, they throw it. Wow. And everyone was outraged, obviously. [00:37:40][6.7]

Bryce: [00:37:41] That's fascinating. [00:37:41][0.2]

Alec: [00:37:41] Yeah. So, like, there was a lot of match fixing, I guess, in American sports in like the early 1900s. And so then Congress banned sports betting. I'm not saying there's going to be sports match fixing again, but if it did make a comeback, you can bet that it would get banned again. [00:37:59][17.6]

Bryce: [00:37:59] Yeah, you would think so. [00:38:00][0.8]

Alec: [00:38:01] So maybe that's a big risk to your investment thesis as well. True. [00:38:03][2.9]

Bryce: [00:38:04] Well, we're speaking of sports. To close out partnerships with sports leagues is another big component that we can't overlook. The NBA now has 20 sports betting partnerships. And Scott Kaufman Ross, the NBA's senior V.P. for head of fantasy and Gaming, has quoted that our goal is to partner with every sportsbook in the United States. Unbelievable. And speaking of MLB Major League Baseball as well, Ren, they have made MGM their official gaming partner at a league level. Then each of the respective teams within the MLB have their own partnerships. And an example of that is the Chicago Club's contract with DraftKings is reportedly worth 100 million big ones. [00:38:50][45.9]

Alec: [00:38:50] Yeah. And for our listeners in Chicago, apologies to the Cubs. [00:38:54][3.8]

Speaker 1: [00:38:55] The Cubs 100 million. [00:38:57][2.5]

Alec: [00:38:58] Alone for one team. So that gives you a sense of just how big these deals are and I guess how much the sportsbooks expect to recoup. Yeah, yeah. If they're willing to pay that much. Well, if. [00:39:08][10.0]

Bryce: [00:39:08] You're paying, you say 850 million, you're expecting a fair chunk. [00:39:11][3.2]

Alec: [00:39:11] Yeah. Yeah. Now, probably not surprising that alongside. The individual companies that you can invest in. There's been a bunch of ETFs and thematic ETFs in particular that have launched to, I guess, give people exposure to this trend. Vaneck have won the gaming ETF. The ticker is B.J. K. Roundhill have a sports betting and iGaming ETF. The ticker is BET's Bet said. I'm sure there are more out there to call holdouts. If you're thinking about trying to invest in a thematic ETF to get exposure to the industry as a whole rather than any individual companies, actually, three take all. That's one we've already made. First of all, the legislation continues to change, so just be careful. Second one is remember that some of the biggest players are unlisted. So like, if you think you're getting exposure to the industry, the nuances, you're only getting exposure to the listed players in the industry. Yeah. So if Bet365 continues growing and dominating, then that's not going to get captured in any of these listed ETFs because they're unlisted. And then third call out the top holdings in these eighths are pretty different. [00:40:23][72.1]

Bryce: [00:40:24] Yeah. [00:40:24][0.0]

Alec: [00:40:25] So it's not like a tech ETF where the big five tech players are the top of all the tech ETFs. So looking at that X gaming ETF, the biggest holding is VCE. Do you know the story behind them now? So they're the real estate investment trust that owns a Caesars Casino, I'm pretty sure. And it was like this massive brawl when they split off and were split into a separate real estate investment trust. Anyway, separate story. Another day, really interesting. Actually know I'll find an article and put it in the show. No, it's not that interesting that a VCE Properties isn't one of the top three holdings in Round Hills, so it's just a call out that it's like there are different top holdings. So look under the hood, do your research. [00:41:07][42.2]

Bryce: [00:41:07] Yeah. Nice friend will. No doubt that it's an industry. What was it, 10% Kaga over the next few years or whatever it is, North America is obviously going to continue growing at a rapid pace. It's beating expectations in terms of the money that's coming in. We're seeing companies that we would never thought would be involved in sports betting now interested, giving the amount of money that is coming into this space. Plenty of ways to invest in it. There's the bricks, the picks and shovels, those that help the bookmakers, the technology behind it. There's the bookmakers themselves, there's media, there's sports teams and there's the likes of Disney as well. So massive industry, one that obviously is only going to continue to grow. And as we said at the top, it's not an industry for everyone. It will certainly fall out of some people's screens depending on where you sit on the fence with this sort of stuff. But an interesting industry that is evolving nonetheless, right in front of us being driven by some pretty fascinating legal changes over in the States. [00:42:09][61.9]

Alec: [00:42:10] So, Bryce, final question. Ethical or. [00:42:12][2.6]

Speaker 1: [00:42:12] Unethical? [00:42:12][0.0]

Bryce: [00:42:13] Unethical. [00:42:13][0.0]

Speaker 1: [00:42:14] Fair enough. [00:42:15][0.3]

Bryce: [00:42:17] And we're great to chat. We'll we'll pick it up next week when we're back from the Bucks. Maybe we'll have a story or two that will be appropriate to share. [00:42:23][6.3]

Speaker 1: [00:42:24] Well, we're. [00:42:24][0.3]

Alec: [00:42:24] Going to have to change plans if you say it's on it. [00:42:26][1.9]

Speaker 1: [00:42:26] So we won't have to go to Vegas anymore. [00:42:27][1.4]

Bryce: [00:42:29] Anyway. So looking forward to it and we'll chat next week. [00:42:33][3.5]

Alec: [00:42:33] Sounds good. [00:42:33][0.0]

[2379.3]