It’s a universal truth in the US that lobbying drives legislation and money fuels lobbying. In the next term for the Massachusetts legislature, MGM’s latest investment money could help lead to sports betting legalization in the state.
Shareholders have just committed $450 million of total capital to the brand’s online gambling and sports betting platform, BetMGM Massachusetts. A new market would be a great way to realize a return on that investment.
What the MGM investment says about the brand
MGM spending some of the new cash to sway Massachusetts lawmakers its way isn’t a foregone conclusion. However, the entertainment company seems to be prioritizing digital growth over even its brick-and-mortar properties with this latest investment.
MGM Springfield has endured a near four-month shutdown, during which time it collected zero revenue. The Massachusetts Gaming Commission has approved rules for casinos reopening and MGM Springfield will reopen with restrictions on July 13.
If retail was the higher priority, MGM could have focused on raising capital to cover losses suffered by all of its properties around the country while they were closed. At the end of June, shares of MGM were down 83% as compared to earlier this year.
It’s telling, therefore, that this new round of funding was focused solely on BetMGM. The brand’s strategy to reinvigorate investor confidence and build revenue, apparently, is digital. MGM confirmed that suspicion with a statement in the press release.
MGM says its digital properties already have a valuable market share, specifically 18% when it comes to the online casino segment in New Jersey. It also expects online sports wagering will continue to grow, reaching an estimated $8.5 billion in revenues by 2025.
Taking advantage of those opportunities requires a hefty amount of working capital. MGM is looking to expand its digital reach and earn a bigger piece of the online gaming pie with this latest investment.
Growth is pivotal for online sportsbooks
Right now, running an online sportsbook in the US is a capital-burning, low-profit operation. Sportsbooks tend to pay out around 90-95% of the money they take in, and then use a lot of what’s left over for marketing.
The path to future profitability has two components. One is expanding to new markets while the other is being the dominant player in those markets.
For the time being, there’s no road into Massachusetts for BetMGM. The gatekeepers of that situation are the members of the state’s legislature and Gov. Charlie Baker.
Before the pandemic struck, it appeared Massachusetts was finally working toward legalization. A joint committee that had been working on a sports betting proposal for months had finally produced a bill. Other items took priority for the legislature, however.
State legislators could reintroduce a similar bill in the next legislative term. While Baker has been a vocal proponent of legalization, it’s uncertain how many members of the legislature feel the same way.
Some wheel-greasing from MGM might aid in that cause. It might even lead to a greater expansion of legal gambling in the state than legislators originally planned for.
Online slots and table games tend to be more profitable than sportsbooks. They also assure their operators of some revenue if face-to-face gambling is impractical. Future legislation could authorize both new forms of gambling in Massachusetts.
BetMGM would happily pounce upon those opportunities if the state’s government opens the door. The same would likely go for Boston-based DraftKings, which offers both types of gambling as well.
It’s not a sure thing that some of the $450 million collected for BetMGM’s health might end up funding lobbying measures in Boston. It would make a lot of sense for MGM to dedicate some funds to that use, however.