Tennessee continues to await the launch of its first online sportsbooks. As sports bettors contemplate which operators may come to the state, some industry news this week suggests BetMGM is moving near the front of the line.
Yesterday, the media and internet conglomerate IAC (InterActiveCorp) announced it had invested more than $1 billion in MGM Resorts International. The investment gives IAC about a 12% stake in the casino operator as well as a seat on MGM’s board.
With the move, IAC also brings an interest in expanding its online gambling business. That introduces a new emphasis to MGM, for whom the online space has only represented a small part of its market strategy until now.
Holding company with diverse interests is new minority partner
IAC is an American-based holding company with interests in various media and online properties. In June, the company completed a spinoff of the online dating service provider Match.com. It was a deal that left IAC with significant cash to invest elsewhere, if it desired.
As IAC Chairman and Senior Executive Barry Diller explained in the press release on Monday, the investment in MGM has a particular motivation. IAC hopes to enliven MGM’s interest in online gambling. The company also views the partnership as facilitating its own entry into the market.
In his statement, Diller alluded to IAC “emerging with $3.9 billion of cash, no debt, and its opportunistic zeal intact” following the Match.com spinoff.
“We are energized and excited to make this investment in MGM,” Diller continued. “What initially attracted us to MGM… was an area that currently comprises a tiny portion of its revenue — online gaming.”
Diller sees “a digital first opportunity within MGM Resorts’ already impressive offline businesses.”
IAC has spent about $1.02 billion to purchase 59 million MGM shares. The company bought more than half of those shares over the last two weeks.
IAC sees online opportunities with MGM
The IAC press release included a copy of a letter to the company’s shareholders.
There IAC acknowledges investors “may be surprised” by the company’s purchase of MGM shares. By way of explanation, Diller and CEO Joey Levin describe their study of MGM. In particular, they noted how MGM’s online gaming revenue has been minimal — “a portion of its revenue so small that it rounds down to zero.”
From there the pair discuss the legislative landscape and general need for online providers to partner with casino operators. They note as well how MGM has already begun to deliver online products in several states.
“We think MGM could be one of the largest direct marketers on the internet as online gaming grows,” explain Diller and Levin.
As a minority investor, IAC’s influence on MGM’s efforts in the online space will be limited. However, MGM welcomes the input and whatever impetus it might provide as the company explores online options.
Responding to the announcement, MGM CEO Bill Hornbuckle emphasized the potential for IAC to contribute to the company’s planned-for “digital enhancements in sports betting and online gaming.”
“We welcome their collaboration and are excited at the possibilities it will bring,” said Hornbuckle.
Tennessee among states where BetMGM looks to launch
What might this mean for Tennessee? In some respects, the IAC deal with MGM more directly concerns what happens in other states, where online gambling legislation requires partnerships between operators and land-based properties.
Tennessee sports betting differs from many states since its sportsbooks will be online-only, not requiring partnerships with brick-and-mortar casinos.
However, IAC has made it clear it is looking to bolster MGM’s online offerings in more states. That includes both online casinos and online sportsbooks under the BetMGM brand.
IAC enthusiastically remarks in their letter upon BetMGM “operating in 7 going on 11 states by the end of 2020.”
Tennessee is among the states MGM is eyeing. Indeed, the BetMGM website currently notes the “BetMGM TN mobile app is expected to be available soon throughout the state.”
Bringing in IAC could well serve to invigorate MGM’s online-oriented efforts in the US. IAC’s successful track record investing in a diverse range of companies including Ticketmaster, Expedia and The Daily Beast also suggests a potentially positive influence.
MGM investors are certainly feeling good about the new partnership, at least initially. Shares of MGM rose 14% on Monday in response to the news.
When Tennessee finally approves operators in the state, BetMGM could be the first in line with this new investment.