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Barry Diller is making a virtual bet on casinos. The chairman of IAC/InterActiveCorp said on Monday his company bought a 12% stake in MGM Resorts International, calling it a “once in a decade” chance. That’s true if he can bring online expertise to the e-poker tables. With a minority stake, that’s no sure thing. The price gives him good odds.
The media mastermind has done well calling booming markets just as they were taking off. He got into the online dating business in 2000, and online travel booking shortly after that. Online gambling is the next frontier. As casinos in Macau and Las Vegas buckle under Covid-19 pressures, playing poker through living room clicks has been booming. In New Jersey, gross gaming revenue year-to-date has about doubled compared to last year. From Spain to Australia, too, more gamblers are trying their luck online.
Diller said that he has had his eye on the industry for some time. The trouble is that U.S. regulators require online gaming companies to partner with a local casino operator. That’s where MGM comes in. Diller plans to dip into his background in direct marketing and media to develop Walt Disney-style cross-branding.
While it seems like the skills should translate, Diller could be overstating his way in. He is not shy in the boardroom, even going toe-to-toe with rival mogul John Malone. IAC will have board representation. But he may find that he’s less effective without a controlling stake. With competition growing – and investors from Tilman Fertitta to Harry Sloan, a former movie-studio boss, getting in on the game – Diller and MGM have their work cut out.
But he has bought in at a low price, relatively speaking. Even including a 13% boost to shares on Monday, and on its 2020 revenue estimates, abnormally low because of the pandemic, MGM’s enterprise value is roughly 4 times its projected revenue, a big discount to DraftKings’ DKNG.O more than 20 times multiple. If MGM captures the gaming market with Diller’s guidance, it’s a win all around.
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