Wynn Resorts to Sell its Online Sports Betting Business at a Steep Discount
Las Vegas-based casino giant Wynn Resorts may be in the works of selling its online sports betting unit Wynn Interactive at a very steep discount of $500 million. This potential move is due to the number of losses, taxes, and promotion costs to stay competitive in the industry.
Wynn Resorts to Move on From the Sports Betting Business
The sports betting industry is a very competitive sector as each online sportsbook operator has unique marketing tools and elevator pitches to get users to sign up on their platform. Sportsbooks also extend partnerships throughout the industry to have even the slightest edge possible.
WynnBet has done precisely that as the company made a deal with the attempt to take WynnBet public through a $3.2B SPAC transaction with Austerlitz Acquisition Corp. In November. Outgoing CEO Matt Maddox didn’t say the words investors or any other shareholders wanted to hear during its earnings call.
He stated that the company’s interactive business was not sustainable. He went on to say, “Competitors are spending too much to get customers. The economics are just not something that we’re going to participate in in the short term.”
The evaluation is a steep drop-off from its initial price tag. This potential fire sale also comes less than six months after Wynn brought on former NBA legend Shaquille O’Neal as a brand ambassador. O’Neal even sold his minority stake in the Sacramento Kings organization to focus more on Wynn and avoid any issues with the league’s stance on gambling.Basketball legend Shaq became a Wynn Resorts brand ambassador less than six months ago.
It is not an uncommon business approach as numerous sportsbooks have brought in former players as brand ambassadors. One, in particular, is Allen Iverson, who played a massive part in promoting PointsBet when the sportsbook received an approved license in his home state Virginia.
Why Wynn is Taking This Approach in the Sports Betting Industry
Morgan Stanley analysts stated that WynnBet is valued at $700 million. This is factoring in that they only win a market share of 2.5 percent across North America.
In most cases, with any business, retaining a customer is much cheaper than acquiring new customers to use its product.
Entering new markets can be costly as the goal is to get as many new customers as possible. Sportsbooks also have to factor in things like the state’s tax rate on revenue and many other operational costs.
As of right now, it costs the company $300-$500 to acquire new customers in the sports betting industry. It just wouldn’t be practical to operate this way as new markets like New York are currently being dominated by other competitors such as Caesar’s, FanDuel, DraftKings, and BetRivers.
The four sportsbooks listed above have accepted $603 million in wagers in the last few days. BetMGM has also started to accept bets in the Empire State as its sports handle will be posted very shortly. BetMGM has already stated that this has been the company’s most successful launch in its history.
The massive popularity has to do with the amount of spending that goes into promotions and marketing. Wynn may just face more consequences as the company does have an online operating license in New York but cannot offer its product yet.