BetMGM executives have said the MGM-Entain joint venture has made “a concerted decision” to lessen its pursuit of mobile sports-betting customers in New York due to the state’s steep tax rate.
Chief financial officer Gary Deutsch said during a company investor presentation on Thursday (May 12) that BetMGM had diverted marketing budget away from New York in the first quarter of 2022, just weeks after launching there.
“The specific problem in New York is that it has a high tax rate of 51 percent of gaming revenue, and it applies that rate to both real revenue and phantom revenue associated with non-cash promotional wagering,” Deutsch said, referencing operators’ inability to deduct player bonuses from taxable revenue as they can in the likes of Pennsylvania, Michigan, Virginia and other key markets.
“So even at lower than typical promotions levels for a new market, operators in New York experience stand to effective tax rates … of well over 100 percent,” he continued.
BetMGM has held only about a 4 percent market-share consistently since the state’s January launch, making it the fourth-largest among the state’s eight active operators, but trailing runaway market leader FanDuel, which held 61 percent of market share in April, as well as DraftKings and Caesars.
Deutsch said the joint venture of MGM Resorts International and Entain hopes the state will ultimately revisit its tax rate and that the company can again begin to pursue customers at some point.
“However, as rational allocators of capital with sophisticated investors in Entain and MGM, we simply can’t apply our capital against irrational investment pieces,” he said. “Players would never continue to play if the house always won, and the house cannot continue to play if it’s always going to lose.”
In addition to New York, BetMGM discussed its launch in Ontario, its first market outside the U.S.
“Ontario was fully formed before we got there,” said CEO Adam Greenblatt, repeating a theme of intense competition from grey-market operators such as bet365 and Betway. “And which is why it’s in that context we are … just so delighted with the business which is now five weeks old.”
Greenblatt pointed out that the BetMGM brand had no history in Ontario prior to launch.
“Yesterday, between our sports betting, casino, and poker business, we did almost two million transactions, I think that’s a good number from a standing start,” he said. “We’re seeing thousands of players every day, and notwithstanding an inability to offer promotions, our daily registrations and first-time deposits are very strong.
“What’s equally encouraging for us is that our registration to first-time deposit conversion rate has been at or ahead of our U.S. states,” he continued, adding that online casino performance has been stronger than sports betting so far. “So the recipe is working again.”
Greenblatt also talked about the ongoing campaign in California to legalize online sports wagering, with the constitutional amendment backed by BetMGM and other online gaming heavyweights awaiting verification of its submitted signatures to officially qualify for the November ballot.
“We’re very, very excited about California, because of also its proximity to our MGM Resorts heartland of Las Vegas, so we over-index in California within our MGM rewards database, and clearly there’s a lot of drive-in traffic we would seek to capitalize on,” he said.
“The so-what of all that is that it reduces our cost of establishing our player base in the state,” he added.
Also discussed was MGM’s recent acquisition of online casino operator LeoVegas, and how BetMGM would be affected by the deal.
“BetMGM is exclusive in the U.S. for our product set and so really, it doesn’t affect us, I don’t anticipate it will have an effect on BetMGM at all,” he said. “MGM and Entain remain fully committed to seeing the success of BetMGM here in our market.
“Where there’s an impact is in Canada, LeoVegas has an active and strong market position, but that’s not really changed with MGM ownership, that’s really the existing competitive set … so that’s not really affected.”