BetMGM has reinforced its net revenue plans for 2022 of $1.3 billion, from $850 million in the previous yearThe company has also announced that the business will adopt a cautious approach in New York, in hopes of the currently “irrational” taxes dropping At the moment, the state’s gaming revenue tax is set at 51%
Image Source: Shutterstock.com (Photo by Galyna Andrushko)
MGM Resorts’ exclusive sports betting partner MGM announced its $1.3 billion net revenue plans for 2022 and projected earnings before interest, tax, depreciation, and amortization loss of $430 million during a recent investor day. Soon after, the company expressed its desire to be more cautious regarding its presence in the New York market until the currently “irrational” taxes would go through some changes.
BetMGM Wants to Be More Cautious
The company’s chief financial officer Gary Deutsch stated that the company will keep embracing a cautious attitude towards its activities in the state of New York until the “irrational” taxes here will drop significantly. At the moment, the state is charging a 51% tax on gaming revenue. However, the respective rate is applied to revenue generated by promotional credits. In other words, the real net revenue tax on gaming in the state crosses the 100% mark.
Deutsch added that the company cannot afford to keep applying its capital against “irrational investments”. He further explained that while players will not be able to keep playing with a constantly winning house, the same goes for the house that cannot keep playing when a loss is always in sight.
The company is, however, looking forward to a more favorable tax environment in the future.
Is a New York Tax Contagion Probable?
Not according to BetMGM’s chief executive Adam Greenblatt who stated it is less likely for even more states to embrace the same type of taxes as the ones applied in New York. He reinforced his view by mentioning the introduction of new frameworks in Kansas and Ohio. Greenblatt also believes the enhanced sustainability of these tax systems will eventually trigger higher engagement rates for players in regulated markets. In turn, this will benefit all parties involved.
BetMGM will now be investing in other states instead of putting all its money in the New York market. This strategy of relying on results to decide where to invest more is an important part of the company’s overall growth strategy. The approach allows BetMGM to compete with its rivals who are already busy making more investments in their marketing policies. At the moment, the company is spending hundreds of millions less on marketing compared to its main competitors. At the beginning of the month, MGM Resorts made a bid to purchase online casino operator LeoVegas for $607 million, taking sit expansion plans on the European continent one step further. A few days later, BetMGM announced it had agreed to its first-ever professional sports partnership in Texas with the Houston Astros.