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Scientific Games recently found buyers for the sports betting and lottery arms of its business. Its plan in selling them off was to focus more on iGaming, so we expected to see some online casino-related announcements in the near future. As it turns out, we didn’t have to wait long.
The company announced today that it has acquired Authentic Gaming, with the plan of entering the US live dealer casino market.
According to the press release, live dealer games make up 30% of the iGaming market in Europe. By contrast, they’ve only been around for a few years in the US but are steadily increasing in popularity. Evolution Gaming has enjoyed an effective monopoly over such products for most of that time, having acquired its only competitor early on. That time is now coming to an end.
Dylan Slaney, Scientific Games’ CEO of iGaming, said this about the deal:
“As a result of welcoming Authentic to Scientific Games, we will be uniquely positioned to continue to excite and entertain players to capture both the growth opportunities that exist within Live Casino and the convergence of players globally across digital and land-based channels by providing leading immersive experiences. We are excited to work with the talented team at Authentic to enhance our iGaming proposition for both operators and players.”
The company’s investors seem ambivalent about the news. Scientific Games stock gained in value today, but by less than 1%.
Authentic Gaming was hitherto a privately owned company. Because of that, the announcement doesn’t include much detail about the terms of the acquisition, such as the purchase price.
It’s the second time in two years that the company has changed hands. Formerly a subsidiary of LeoVegas, it sold to Genting Online for €15 million in 2019. LeoVegas, in turn, had acquired it about three years earlier for less than half that price.
Authentic, based in Malta like many gaming companies, hasn’t made landfall in the US yet. However, its products are offered by over 30 European operators, including some with a US presence like Entain, 888 and Betway Group.
It’s a highly specialized company, focusing exclusively on live dealer products. That should mean it fits in nicely with Scientific Games’ current business. The latter hasn’t yet explored the live dealer niche, yet already has an extensive catalog of fully digital products.
Scientific Games revealed its intentions towards the end of the first half of the year. In June, it told investors that as a result of a strategic review of its business, it had decided to get out of the sports betting and lottery markets and double down on online casinos.
It didn’t take very long to execute the first part of that. UFC owner Endeavor soon ponied up $1.2 billion in cash and stock for the OpenBet sports betting platform. Shortly after that, Scientific Games successfully negotiated the sale of its lottery business to Brookfield Business Partners for $6 billion.
Clearly, the US forms a big part of the company’s casino-specialization plan. Online casino revenues trail sports betting for now, but only because far more states have legalized the latter. One can turn that around and say that it means that US iGaming has much more room to grow. On a state-by-state basis, it is by far the more lucrative vertical. Thus, it looks as if Scientific Games has its eyes on the long term.
It’s bucking the overall trend in that regard. Sports betting still generates the most buzz and gets the most attention from investors. Meanwhile, most US gaming companies are engaging in a mergers-and-acquisitions feeding frenzy, trying to become as vertically and horizontally integrated as possible. Even so, most online casinos will continue to rely on third-party suppliers to provide the broad range of content their players expect. That’s where Scientific Games intends to establish its dominance.
Online casinos are relatively new in the US, and live dealer games are even more so. Golden Nugget Online Casino was the first to see the value in them, partnering with Ezugi to launch them in the New Jersey market in 2016. Evolution followed suit in 2018, with Hard Rock Atlantic City as its partner, and went on to acquire Ezugi the following year.
One consequence of that monopoly is that online casino operators have struggled to differentiate themselves in the live dealer space. For the most part, they’re all offering the same games, streaming from the same studios. First DraftKings, then BetMGM and most recently Barstool have addressed that problem by contracting with Evolution to build custom studio setups for their brands. Even so, it’s clear that the market could use some options.
Authentic Gaming should have some built-in differentiation, which is a positive. The bulk of live dealer play in the US right now focuses on blackjack. While Authentic does offer this and other games like baccarat, its speciality is live dealer roulette. That alone should give casino operators more flexibility in terms of how they approach live dealer.
Scientific Games won’t be the only one squaring off against Evolution, either. Aristocrat Gaming recently acquired Playtech, which has permission to open a live dealer studio in Michigan. Like Scientific Games, Aristocrat clearly sees the US as an important market, as shown by its casino content deal with the NFL, revealed in a separate announcement today.
It’s not clear yet where Scientific Games will start with live dealer in the US. It could wade into the fray in New Jersey or Michigan, or opt for Pennsylvania, where Evolution is still the only game in town for now.
There are also the smaller markets of West Virginia and Connecticut. The former seems too small for Evolution’s taste, as online casinos have been operating there for over a year but without any live dealer options. Connecticut’s regulations allow for it to offer live dealer games streamed from out-of-state studios for now. That’s an emergency rule, however, which will expire in March next year.
After that time, any live dealer games in Connecticut will have to come from in-state studios. However, the state is small enough that it can probably only support one studio. Given DraftKings’ pre-existing custom content deal with Evolution, they’re the most likely candidate. For its part, Scientific Games will likely choose to start in one of the larger states, even though that means facing off against better-established competition.