MGM Resorts (NYSE:MGM) is going to be a big player in online betting — for better or for worse. The company has entered into (likely costly) partnerships with the NBA, MLB, NHL, and many teams across the country in an effort to attract sports betters to its mobile platform, BetMGM. Now, if reports are correct, it’s trying to buy its partner in BetMGM, Entain (LSE:ENT), for over $11 billion.
The move may seem crazy on the surface. Entain isn’t a well-known name in the U.S. and online gambling is a relatively small business, particularly in North America. But this may not be as crazy a deal — or price — as it seems.
Why MGM wants Entain
As MGM’s 50/50 partner in BetMGM, buying Entain would allow MGM to own all of its local operations. And the potential for betting in the U.S. is huge. In November alone, New Jersey and Pennsylvania saw $931.6 million and $491.9 million bet on sports, respectively, and 80% and 91% of bets respectively are made online. Revenue is much lower than what’s bet after paying off winners (typically 5% to 10% of all bets), but we’re still talking about potentially a $1 billion revenue market from just these two states if the market keeps growing.
The U.S. market is still in a very nascent phase, with online betting of any