William Hill’s owner is considering leaving the US gambling market because of “intense” competition and high operating costs.
888 announced that it has ended its partnership, which was with Authentic Brands Group (owner of Sports Illustrated), through which it provided online sports betting to four US states. It will review all of its operations in the US, and consider options for selling or exiting its direct-to consumer business.
The company agreed to pay $50 million over five years to end the partnership. The agreement allowed the gambling company to use Sports Illustrated’s image to promote online sports betting. The company expects to save $6-$7 million in the next two year by terminating the partnership.
In explaining its potential plan to leave the US market, 888 stated that high fees and duties to enter the market as well as “intense competitors from well-capitalised existing participants” had lowered its gross margin.
Investors welcomed the company’s cost-cutting plan, which saw its share price rise by 2.8p or 3.4 percent to 85.8p.
The gambling company has a much smaller market capital than Entain, which is listed in London, or Flutter. Its combined market cap is about £380m, while Entain, which is listed on the London Stock Exchange, has a £5.4bn and Flutter a £30bn.
The Supreme Court of the United States overturned a ban on sports betting in 2018. Gambling giants flooded the market and 888 announced its partnership with Sports Illustrated for 2021.
Statista’s study shows that sports betting became the most popular online gambling form after the ban was lifted. CRG Global researchers have stated that US punters bet the most on the NFL.
Many of the biggest sports gambling groups struggle to make a profit despite high demand. Last year, FanDuel (owned by Flutter) became profitable for the very first time. BetMGM – owned jointly by Entain, MGM Resorts and Entain – also made profits during the second half of the year.
In addition to the US market, 888 also faces pressures in other areas of its business. It has issued two profit warnings, since September last. In January, 888 said it expected its earnings before deductions in 2024 to be at the “lower end” of estimates because it had invested heavily in artificial intelligence and advertising.
Per Widerstrom said that the US is a difficult market for 888 to scale up in a short timeframe due to the intense competition and the need for scale.