But rather than unload every aspect of the operation, Mr. Levy and his sons, who work for the family business, held on to the company’s smartphone app, known as theScore.
At the time, the digital revolution was still in its infancy and the app itself was pretty basic, mostly providing sports scores and news.
Although theScore app was rather popular, with 3.6 million users in Canada and the United States, the family hadn’t figured out how to make money off of it – in fact, their company hadn’t turned an annual profit since selling the TV business.
The two agreed to work together on sports betting in the United States, and Penn also bought a 5-per-cent stake in Score Media.
Like many digital businesses, Penn had seen its valuation soar during the pandemic, fuelled by incredibly low interest rates and a growing belief among investors that the digital economy would trump real-world experiences after the pandemic.
In Ontario, however, where Score Media is based, Doug Ford’s Progressive Conservative government chose to open the floodgates to the free market, starting April 4.
In 2020, Denise Coates, the founder and head of the U.K.-based Bet365 platform, took home £421-million .
The digital sports betting industry there is a tad more developed than in Canada, having been legalized in 2018, and what’s transpired since has to be disquieting for anyone who thinks Ontario’s shift will be a digital gold rush.
The company lost US$1.5-billion, and its cumulative loss dating back to 2019, the year it went public, now totals US$2.9-billion.
“The industry wants everyone to think they’re going after profitable customers,” Alan Woinski, chief executive of Gaming USA Corp., a consultancy, said in an interview.
At the same time, share prices of unprofitable tech companies are crashing en masse because rising interest rates hurt growth stocks the most.
“Many are pursuing maximum market share in every state with limited regard for short-term or potentially even long-term profitability,” chief executive Bill Mudd said on the company’s last quarterly conference call for analysts.
For Canadians, this evolution may sound eerily familiar.
Four years later, licensed producers are awash in red ink – including the industry giants – and their share prices have crashed.
Because, at the moment, it looks much more likely to morph into something that resembles the cannabis industry’s crash.
“We’ve been very open about our position that we oppose legalized sports gambling,” NFL commissioner Roger Goodell said in 2015.
The origins of this view were multifaceted, but often rooted back to some high-profile cases in which coaches or referees were involved in betting scandals.
Because of these fears, any sports betting in Canada had to be offered through multigame parlays, in which bettors try to predict the outcome of several games at once.
Supreme Court overturned a federal ban on sports betting, and 30 states have since legalized the business, including heavyweights such as New York, which opened up at the start of this year.
While there are fears that sports betting will cause a spike in gambling addiction, possibly leading to financial ruin for some users, Canada’s legalization has broad support, including from organizations such as the Responsible Gaming Council.
One of the main reasons, she explained, is that single-game sports betting has existed in Canada for years in the grey market.
Because the grey market has proliferated, millions – if not billions – of potential tax dollars have disappeared offshore.
To get in on the gold rush, the NFL partnered with four approved sportsbooks last year, and the league said it expected to bring in US$270-million of revenue from gambling deals last season – a figure that could rise to US$1-billion by the end of the decade.
With those obstacles out of the way in North America, the market for sports betting is expected to be big.
Betting lines are also available on all sorts of sports worldwide, so someone sitting in Canada can bet on, say, Aussie rules football.
In Ontario, dozens of companies have registered to launch, and they range from giant U.S.
Caesars Sportsbook has been one of the most generous with promotions, at times offering a US$300 sign-up bonus, as well as a dollar-for-dollar match on player deposits up to US$3,000.
Even then, the company doesn’t expect to be “profitable or close to it” until 2024, CEO Jason Robins said on its most recent earnings call.
Robert Fishman, an analyst at New York-based MoffettNathanson LLC, which does research on media companies, has more dire expectations.
An extra wrinkle in Ontario is that betting companies can’t market the way they do in the U.S., where they advertise their sign-up bonuses.
PROLINE+, the single-game sports betting outfit run by Ontario Lottery and Gaming Corp., announced a multiyear partnership with the NHL earlier this month.
Yet no matter how much they advertise, there will be a tilted playing field at the outset because the grey-market platforms have existing users they hope to keep in the legal market.
With so much competition in a newly legalized market, and with new entrants facing off against existing grey-market operators, the parallels to Canada’s experiment with recreational cannabis are striking.
Eventually the introductory offers had to end, and then multiple casinos closed, including ones Donald Trump owned at various times.
Mr. Woinski said those that do are likely to be the ones that also offer online casino gambling, such as poker and blackjack.
Only a handful of states have legalized online gambling such as poker or blackjack, and that has made it even harder for online betting companies to make money so far.
companies are trying to venture into this market to subsidize their sports betting losses, with DraftKings buying Golden Nugget Online Gaming Inc., an online platform in New Jersey and Michigan, last year.
“Sports betting should act as the top of funnel acquisition tool to bring users onto the platform,” suggests Mr. Fishman, the analyst at MoffetNathanson.
Score Media, for instance, hopes to convert many of its existing users by targeting them through an app they already open.
Aubrey Levy, the company’s senior vice-president of content and marketing, also hopes the app’s ecosystem will help users stay loyal to the brand because it will allow them to bet, check scores and read sports news all in one place.
Rush Street Interactive, which operates online casinos and sportsbooks in several U.S.
The company also wants to make a name for itself as the platform that makes it easy for users to get their money – which can be quite a tricky endeavour in the grey market.
experience is a relevant one, it won’t be possible for every competing company to make it out alive.
And if there’s one thing that can be learned from Canada’s cannabis crash, where consolidation was also necessary, it’s that it doesn’t pay to be proud.