Tabcorp’s iron grip on venue-based gambling in NSW has been loosened ever so slightly. Competitor Entain announced a long term sponsorship deal with NSW hotels following the recent expiry of TAH’s exclusivity period.
Mind grab. Entain and Flutter Entertainment (both UK listed gaming companies) are the leading sports betting and gaming companies in the world with a heavy online emphasis. Neds and Ladbrokes (Entain) and Sportsbet (Flutter) are familiar brands to Australian punters courtesy of heavy advertising campaigns.
Entain has taken its profile building a step further with the announcement of a long term sponsorship agreement with NSW hotels. The agreement allows Entain to promote its domestic digital wagering brands (Ladbrokes and Neds) on an opt-in basis inside ~1,800 licenced NSW pubs and hotels.
This is purely a sponsorship agreement, but it will give Entain a boost to promote greater use of its apps. The apps already compete with TAH’s pubTAB terminals which reside in ~1,000 venues across NSW.
Entain cannot set up branded betting terminals or use tablets to facilitate bets through Entain sites in NSW hotels. Entain will not pay commissions to venues for in-venue bets placed through Entain apps, but it will pay a fixed sponsorship fee to participating venues. This avoids breaching laws that protect TAH’s retail exclusivity in NSW which expires in 2033.
Dabble. In separate news, TAH has taken a 20% stake in Australian based online social betting platform Dabble for $33 million. This will provide TAH with access to a younger betting audience. Dabble's revenue run rate is ~$47 million pa based on its 150k customers.
Investment view
TAH’s betting terminals are a distinct advantage in the battle for venue-based betting market share. But the ability for Entain to actively promote its app-based betting directly inside every NSW venue, not just those with pubTAB terminals, is an encroachment on TAH’s hegemony.
Newly promoted TAH CEO Adam Rytenskild has placed TAH on a heavy diet of everything digital. The company has launched a new app in time for the all-important Spring Racing Carnival which coincides with a fully open retail network for the first time post COVID-19. TAH has said it has seen an 11% increase in average weekly customers compared to the six weeks prior to launch in late September.
Some NSW venues have been carrying loss-making pubTAB operations and may be keen to replace it with a Ladbrokes/Neds promotion and a fixed sponsorship fee. Conversely, TAH’s highest grossing pubTAB venues are unlikely to disturb a winning combination. For hotels that currently do not host pubTAB terminals, a decision to partner with Entain could be readily welcomed.
The potential risks to TAH include leakage of business to Entain’s apps via greater promotion activity and the potential for other states to adopt a similar approach. The Clubs network might also take a close interest in how this arrangement works out for Entain.
A new entrant has also raised the temperature in the industry. ‘BetR’ is run by Matthew Tripp and partners News Corp and Tekkorp Capital. Not only will BetR be competing vigorously for TAH’s customers, but recent press speculation says BetR may have won the race for the WA TAB licence.
Mr Rytenskild’s new hero metric of digital market share for TAH is undoubtedly already hearing the thundering hooves of competition.
Risk to investment view
The wagering industry is regulated, licenced, and taxed at a State Government level. There is a reasonable amount of risk associated with changes to each of these factors and historically, change has been frequent. Changes in consumer preferences in gambling and the general level of participation may change over time. The horse racing industry can also be subject to biological risks such as the Equine Influenza outbreak in 2007.
Recommendation
We have retained our Hold recommendation.
