DMIᵀᴹ Index for Casinos & Gaming

January 17, 2022

 

Summary

In 2018, the United States Supreme Court overturned the Professional and Amateur Sports Protection Act (PASPA). The PAPSA decision paved the way for states and territories to legalize, tax and regulate sports betting. Since then, multiple states (New York being the latest) have legalized internet gaming and online sports betting. In addition, the shuttering of physical casinos during COVID-19 caused a number of customers to turn to online avenues. 

These events have resulted in seismic changes in the Casino & Gaming industry. Pure play online providers like DraftKings have surged. In addition, traditional operators have made M&A moves to cash in on consumer demand. MGM Resorts announced a 50/50 joint venture in 2018 with UK gambling operator GVC Holdings (now known as Entain) to create a sports betting and online gaming platform called BetMGM. Penn National Gaming finalized a $450 million deal to acquire Barstool Sports in 2020. Finally, Caesars Entertainment completed the acquisition of UK-based William Hill PLC in 2021 for approximately $4.0 billion.

DraftKings has a DMI Index of 100% compared to 6.47% for Caesars Entertainment, 20.08% for MGM Resorts International and 3.44% for Penn National Gaming. The data valuation is based solely on iGaming and Online Sports Betting data that drive player acquisition and odds pricing. DraftKing’s high DMI Index is driven by the fact that it is completely online compared to its peers who have roots in physical casinos.

A higher DMI Index is generally preferable across companies and industries. By way of reference, internet companies have a higher DMI Index because most of their enterprise value is derived from data. For example, Google’s DMI Index is 93 percent as we will discuss in a later blog.

Caesars Entertainment, MGM Resorts and Penn National Gaming have large traditional loyalty programs with 60M, 37M and 24.9M members respectively. However, the Enterprise Value per loyalty member is much lower for these companies compared to DraftKings for a number of reasons:

  • The traditional loyalty programs more likely target an older demographics versus a younger, more engaged online demographic
  • Traditional loyalty data likely consists of simple contact information like name, address and phone number while online data consists of customer’s wagers and win history to allow casinos to do better targeting
  • Traditional loyalty customers may reside in states such as California and Florida that have not yet fully regulated online gaming and sports betting

Definitions

  • DMI Index = Data Valuation / Enterprise Value
  • Data Valuation = Valuation of data for iGaming & Online Sports Betting, loyalty programs, employees and real estate (this exercise uses iGaming & Online Sports Betting Data Valuation exclusively)
  • Enterprise Value =  Equity Value + Long Term Debt – Cash, a key metric used in the investment community
  • iGaming & Online Sports Betting data is used to drive player acquisition and odds pricing

 

Methodology

The YDC team recently published a DMI Index for major Casino & Gaming companies in the United States. Here is an example for MGM Resorts International along with a benchmark that includes other companies in the industry.

The data valuation is based on iGaming & Online Sports Betting data from 4Q21 only and relies exclusively on publicly available data sources. The total value of data will likely be higher once additional datasets relating to loyalty programs, employees and real estate are included in the coverage. Going forward, we will be working to make the data valuation more real-time.

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