Interactive Games Technologies (BETS.C) has announced their strategy for entering the US online gambling market.
Interactive Games (IGT.BET) believes the US online gambling market is currently underserved and so they have signed an agreement to collaborate with a large US-facing commercial partner to exploit this gap in the market. IGT.BET believes that there are a number of recently established land-based casinos who they could partner with and provide a digital presence for.
Interactive Games believes they can provide these land-based casinos with a digital presence that allows them to preserve their brand, best utilize their customer databases, and maintain maximum control over their online extensions. IGT.BET thinks they can use their experience in the digital gambling arena to help new land-based casinos reduce their initial risk by diversifying their upfront financial investment.
“The Company is hugely excited by this opportunity in the burgeoning U.S. online gambling market. We have a great team and a great partner to add significant value to future potential partners in this space,” stated Chris Neville, CEO of Interactive Games.
IGT.BET’s release cites Morgan Stanley research estimates, which project the US online gambling market reach over $20 billion/per year in gross gaming revenue. For comparison, the UK, a country with more permissive gambling laws and a population of 66 million (around a fifth of the US) had 33.6 million active online gambling accounts, which created a gross gambling yield of £14.4 billion (approximately 20 billion USD).
As more and more states legalize online gambling, it is not hard to imagine that online gambling will become an increasingly lucrative industry, and Interactive is smart to try to establish itself as early as possible.
The largest states, California, Texas, and Florida, currently have no plans to legalize online gambling, and New York Governor Andrew Cuomo said he supports online gambling, but only if it runs through the state’s lottery system, which doesn’t give ITG.BET much to work with.
However, many mid-size states (like Washington state, North Carolina and Virginia) have passed laws permitting online gambling which have not gone into effect yet or where the state government is still in negotiation with tribal councils. These states will soon have land-based casinos looking to get into the online betting market, and if Interactive can establish themselves as a leader in this field, it could be very lucrative for them.
Attempting to pair themselves with land-based casinos does provide them with a higher floor than striking it out on their own would, but also potentially presents a lower ceiling as well. However – if they can pull it off – a successful establishment of their own independent brand while partnering with existing land-based casinos could offer IGT.BET the best of both worlds.
Following the announcement, the stock went down 7 cents to $0.64.
Full disclosure: Interactive Games Technologies is an Equity.Guru marketing client.
