888 to Bow Out of US Markets, Part Ways with Sports Illustrated
Online gambling giant 888 Holdings [LON: 888] appears likely to exit the US B2C markets, citing operational costs.
888 CEO Per Widerström, above, highlighted the difficulty of achieving scale in the fiercely competitive US markets in a filing to London Stock Exchange on Wednesday morning. (Image: 888)
In a filing to the London Stock Exchange Wednesday, the group said it would launch a strategic review into its US operations that would explore “potential alternatives that can deliver value for the business.”
These could include the sale of 888’s B2C business or a “controlled exit” from the US, the company said. 888 will remain active in the B2B market in the US.
Sports Illustrated Breakup
888 currently operates in four states, Colorado, Michigan, New Jersey, and Virginia, although New Jersey is the only market where it uses the 888 brand name.
Elsewhere, it powers a Sports Illustrated-branded betting and gaming platform through its 2021 partnership with the Authentic Brands Group, the sports magazine’s parent.
888 said it had mutually agreed to part ways with Authentic Brands Group. It will pay a cash fee of $25 million to break the contract and an additional $25 million between 2027 and 2029.
A series of record-breaking months for SI Casino has underscored the strength of the SI brand,” Per Widerström, CEO of 888 said in a statement Monday. “However, despite these successes, we have concluded that achieving sufficient scale in the US market to generate positive returns within an accelerated timeframe is unlikely.”
‘Gold Rush’ Disillusion
The US markets were seen as a modern-day Gold Rush for US online gambling companies following the US Supreme Court’s defanging of PASPA, the federal prohibition on sports betting.
But the fierce competition for customers has proved to be expensive and new entrants have had to overpay for customer acquisition. Meanwhile, FanDuel’s and DraftKings’ dominance of the market is proving hard to dent.
Since commencing my role as CEO I have been focused on ensuring the Group is set up to deliver strong value creation in the coming years,” said Widerström. “In the US, the intensity of competition and requirement for scale means huge investment is required to reach profitability.”
The group said gross profit margin in the US was lower than the group level. This reflected the “significant direct costs of operating in the market including duties, market access fees, and license fees,” in addition to intense competition from “well-capitalized incumbent participants,” it added.
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