GVC pledged Wednesday to spend “whatever it takes” to ensure its US joint venture, Roar Digital, ends up on top of the US sports betting pile with its BetMGM brand.
GVC and MGM today announced $250 million in new funding for the JV, bringing their total investment up to $450 million.
That was not the only investment made, however, as GVC chief executive Kenny Alexander put strong words behind the cash. Alexander said the firm wouldn’t hesitate to increase that investment further to take a run at DraftKings and FanDuel.
“The US opportunity is probably bigger than we realized when we started the JV,” Alexander said on a conference call on Wednesday. “The market is showing us with DraftKings’ valuation how big this opportunity is.”
Alexander highlighted the fact that FanDuel and DraftKings both recently raised money for their US operations, and BetMGM needed to match that.
“Other people have the ammunition to really go and grab market share, and we’ve put this investment in as a sign the kid gloves are coming off,” Alexander said. “Our aspiration to be the market leader is very real.”
Growth over profit for BetMGM
The investment also marks a slight change in strategy for Roar and the BetMGM brand. Going forward, Alexander said the parent companies would be less worried about profitability and more focused on market share.
“It’s a bit of a no-brainer,” the Scotsman said. “Take the DraftKings valuation, which is now $12-13 billion. We expect over a five-year period to beat DraftKings and if we do that, the profitability will come and that valuation will come to us.
“It’s all about grabbing share and winning that battle,” Alexander added.
Ramping up expectations for GVC, Roar
The announcement also marks a major step up in ambition for GVC/MGM. The duo previously targeted 10-15% share of the New Jersey sports betting market.
The BetMGM brand is running closer to 5% so far in 2020. That prompted analysts to ask why it had fallen short of those targets.
Alexander explained the firm had been a “bit slow” with its product and a “little bit shy” with its marketing investment compared to competitors.
However, he said the product was in “good shape” and would be materially improved in the next few months. He also pledged an uptick in marketing spend.
BetMGM to go “toe-to-toe” with market leaders
Alexander said: “If [competitors] are going to be spending a few times more than us, then they either have to be absolutely useless or we have to be absolute geniuses to come out on top. I’m pretty sure we’re not geniuses and they are not useless. So we are going to have to go toe-to-toe on the level of marketing investment.”
GVC CFO Rob Wood added it would be years before the ultimate market leaders in US sports betting were decided.
“My guess is the market leaders’ share will begin with a ‘2’ and that’s what we’re trying to achieve,” he added.