International Game Technology (IGT) announced last week that it plans to discontinue its electronic tables game division by 2027. The decision aligns with the company’s goal to concentrate on its primary business objectives and long-term growth strategies. This development is part of a broader trend in the gaming industry, where major players are increasingly scaling back after periods of diversification and expansion, signifying a potential shift toward consolidation and a renewed focus on core operations.
Last year, IGT was involved in a significant transaction when it was acquired and merged with Everi Holdings by Apollo Global Management in a deal valued at $6.3 billion. A notable outcome from this transaction was the separation of IGT's former lottery division, which became its own entity, Brightstar Lottery. The planned closure of IGT's electronic tables game division further emphasizes the company's narrowed focus.
This shift in strategy is reminiscent of actions taken by IGT’s rival, Light & Wonder (L&W), previously known as Scientific Games. In 2021, L&W sold off its lottery and sports betting divisions and has since directed its efforts back to games and systems, enjoying a 30% increase in its share value over the last five years. CEO Matt Wilson praised the streamlined organization following the company's divestiture of its sports betting segment in 2022, emphasizing a commitment to developing high-quality cross-platform games.
The trend of reinforcement and consolidation is also observable among casino operators, particularly in the context of online gambling. In the wake of the 2018 PASPA decision, many companies rushed to implement omnichannel strategies. However, some key players have recently withdrawn from their online initiatives. Wynn Resorts, for instance, closed its WynnBet online brand in 2023, diverting its focus to developing a new resort in the UAE. CFO Julie Cameron-Doe indicated dissatisfaction with the high marketing expenditures required for online user acquisition, suggesting the company found more effective opportunities for capital investment.
Similarly, Las Vegas Sands, led by its founder Sheldon Adelson, who historically opposed digital gambling, also retreated from its online efforts. After briefly exploring opportunities through Sands Digital Services post-Adelson, the initiative was terminated last October. Sands CEO Patrick Dumont noted that the continued pursuit of digital expansion was not in line with the company’s long-term goals.
In a notable turnaround, Penn Entertainment, which had invested $2.5 billion in online sports betting partnerships with ESPN and Barstool Sports, has now narrowed its digital strategy to focus solely on its theScore brand. This shift has resulted in a 40% increase in its stock value this year.
As the landscape evolves, casino giants MGM and Caesars could be navigating similar changes, with potential new ownership by year’s end. Caesars was recently taken private in a $17.6 billion deal led by Tilman Fertitta, a notable maven in entertainment. The future of Caesars’ digital operations has been surrounded by speculation regarding possible spin-offs, particularly since its digital division has consistently outperformed its traditional Las Vegas and regional segments. Both Fertitta and Caesars have remained mum on this subject during regulatory appearances.
MGM, on the other hand, has heavily invested in its digital platforms, partnering with Entain for its BetMGM venture. Despite receiving an $18 billion takeover offer from Barry Diller, MGM’s largest shareholder, the proposal remains non-binding. Diller’s interest seems primarily focused on MGM's physical properties, emphasizing their tangible value.
While suppliers and major casino operators appear to be favoring a consolidation approach, online sports betting companies are leaning into expansion. Many are entering prediction markets, which, despite being related to sports betting from the consumer perspective, involve distinct operational demands. DraftKings and FanDuel have been particularly active, with DraftKings acquiring the Railbird exchange and launching DKeX, while FanDuel has partnered with CME Group to facilitate FanDuel Predicts.
This expansion carries certain risks. Numerous online sports betting firms are currently offering both state-licensed sports betting and federally licensed prediction markets, but challenges lie ahead. Leading gambling states are embroiled in legal disputes concerning prediction products, a situation that may escalate to the Supreme Court in the near future. Depending on the verdicts, the growth trajectory of online sportsbooks into predictions could be curtailed.
DraftKings has forecasted its prediction market-related expenses could reach $300 million this year, with similar estimates from FanDuel. Given their stock declines—51% and 31%, respectively—this investment represents a significant risk for these companies as they delve into new territories.
