BetMGM earned $178 million in the US in 2021, but spent almost $300 million.

“No Pain No Gain” For Entain: BetMGM Co-Owner Anticipates Further Losses In Pursuit Of 20% US Market Share

Entain positively glows in its US market optimism. Its 2020 Annual Report released yesterday targets a 20 percent US market share and $20 billion in net gaming revenue (NGR) by 2025.

Entain, formerly GVC, conducts most of its business in the US under the BetMGM brand. This is a joint venture with the casino chain MGM Resorts International. The BetMGM partnership also covers the US operations of Partypokerthough that brand is the sole property of Entain in the rest of the world.

BetMGM is now active in 12 US states. 2021 could see it expand this to as many as 20. MGM attempted to buy Entain last December, but the latter rebuffed the offer, saying that it significantly undervalued its future prospects.

Short-term sacrifices made for market share

BetMGM had an 18% US market share based during the three months ending of January 2021. That puts the company in first place across the states where it does business, but it would like to expand its share further, to 20%.

But this success has come at a cost. According to the report, BetMGM produced $178 million in net gaming revenue in 2020, an increase of 140% over 2019. It nonetheless failed to turn a profit, with Entain’s share of the losses totaling $60.6 million. Doubling those losses to include MGM’s share implies that BetMGM spent around $300 million in its pursuit of market leadership that year.

Entain CEO, Jette Nygaard Andersen anticipates that trend will continue and be amplified, stating:

“Given the significant growth of the business, it is expected that both NGR and losses will increase significantly in 2021.”

Treating the US market as an investment is essentially mandatory, as it is still expanding rapidly. Entain forecasts that 35 to 40 US states will have some form of legal iGaming within the next few years.

That may be optimistic, but even half of that would represent a lot of revenue. Once the market levels off, Entain should be able to take advantage of its position to reap the rewards for many years to come. “No pain, no gain,” as the saying goes.

Legal iPoker expands with sports betting

The report also contains some tidbits of potential interest to US poker players.

Online poker generates only 4% of global online gaming revenues, per the report. We can also see that its legalization trails far behind the spread of sports betting across the US. Entain is optimistic that this will change over the next few years:

“Indiana and Michigan are looking into expansion of internet gaming in their states. It is expected that other states that have regulated their sports betting markets will be looking into allowing internet gaming as well.”

Ironically, a study just released by the National Council on Problem Gambling shows that problem gambling risks are three times higher for sports bettors than other types of gamblers. The evidence that online poker is relatively safe is plain to see in states like Nevada, New Jersey and Pennsylvania, where it is legal alongside casino games and sports betting. There’s really no good argument for why online poker shouldn’t be part of every online gambling bill.

Taxes are still a threat to online poker

Entain’s report makes several references to the poker situation in Germany. Tax is the big worry there, in a market that is, like the US, still in the early stages of legalizing internet gambling:

“In addition there is a proposal to introduce a 5.3% turnover tax on online poker and slots from the beginning of July this year. If such a tax were introduced, it would make certain parts of the market uneconomic for many operators.”

A turnover tax, rather than a revenue tax, is an oppressive force in a gambling market. In the context of poker, this means a tax on every pot and every tournament buy-in, not just on the rake collected by the site. Fortunately, US states have taken the sensible route and taxed revenue, rather than bets.

Tax rates vary from 6.75% in Nevada up to a cap of 28% in Michigan, and operators can cope with the burden. Tax turnover, and the tax is paid whether the operator makes a profit or not.

Could this mean PartyPoker pulling out of Germany? Probably not, but Entain is warning Germany of the consequences. Players may simply stop playing, since a turnover tax amounts to double rake, after the operator has also taken its cut.

US lawmakers occasionally look to what their European peers are doing in terms of online gambling. Usually, this is a good thing, but it occasionally means bad ideas get copied alongside good ones. One example of is the minimum hold Tennessee decided to impose on its sportsbooks, which is a mistake it copied from French gambling laws.

Entain’s ARC program makes responsible gaming a priority

Environmental, social, and governance (ESG) criteria are now an important factor in the corporate world. For gaming companies, this means that responsible gaming is becoming a higher profile issue.

Along with the name change from GVC to Entain, part of the company’s reinvention has been the introduction of an Advanced Responsibility and Care program. CEO Jette Nygaard Andersen sees the importance of using technology to be at the forefront of this drive.

“Across the industry protection for customers reacts to triggers defined by markers of protection, but at Entain we are moving to implement an advanced proactive player management platform that navigates each customer journey in real-time around any identified risk specific to that customer, promising never before seen levels of player protection.”

Research over the last decade has produced some innovative uses of Know Your Customer (KYC) data. Operators like Entain now use that data to create early alerts of problem gambling.

Though players may feel this monitoring of their activity is a little intrusive, it’s an initiative everyone should support. If attempts to self-monitor by operators fail, the government is likely to step in to curb problem gambling. That would probably mean heavy-handed policies. Germany is a cautionary tale in this regard too. It now allows a maximum deposit size of €1,000 ($1,172) for online casinos and poker alike, which is a big problem for poker pros.

Overall then, Entain seems to be charting the correct course. It’s investing heavily to maintain its market leadership, but it’s also doing so responsibly. Hopefully other operators will follow suit, particularly in the latter regard.

- A former founder of Poker Industry Pro and Head of Content at PokerNews publisher iBus Media, Joss Wood is a graduate in English from the University of Birmingham. Joss also holds a master’s degree in Organisational Development from the University of Manchester. His career path has taken him from the British Army, through business and finance to seven years as a successful professional poker player.
Privacy Policy