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Boyd Gaming – An Old Dog with New Tricks in the US Market

Boyd Gaming, while, on the face of it, a relative unknown in the thriving US market, has been preparing for the spotlight for decades, given birth to, and twinned with arguably some of the biggest entertainment venues in the US.

It was the father and son team, Sam and Bill respectively, who partnered with each other to form the Boyd Gaming Corporation in 1975, right at the heart of what was the biggest gambling resort in the world at the time - Las Vegas.

Surrounded by multi-million-dollar hotels and casinos, the company gradually expanded with the assistance of investors and built its reputation for running a business that was beyond reproach, with Nevada regulators even turning to them to help investigate the mob, which was renowned for skimming customers.

In the decades that ensued, the company expanded its presence across America, where gambling was legal, with Bill taking it to the next level when he stepped up as CEO following his father's passing, opening the world-famous $1.3 billion Borgata Hotel Casino Resort Atlantic in 2003.

By 2018, Boyd Gaming owned multiple hotels and casino resorts, though it still somewhat operated under the radar. The major market presence of the Wynn Resort Group - an owner not shy of the publicity, would at the time appear to be the star of the show.

The results of Boyd Gaming's expansion in the US were strong revenues, mostly generated through gaming (Figure 1).

Revenue of Boyd Gaming by segment in the US

Figure 1: Revenue of Boyd Gaming by segment in the US from 2017 to 2021 (in million US dollars)

Subtle Route into Online Expansion

Clearly boasting a business empire with 28 resorts spanning 10 states, Boyd's decision to move into online gambling came as somewhat of a surprise. So much of a surprise, in fact, that there was barely a whisper, which suited Boyd just fine.

Leveraging its flagship Stardust Resort in Las Vegas, Boyd created its Stardust Social Casino in July 2020 - a namesake of the previously Boyd-owned Stardust Resort, once a flagship of the Las Vegas strip.

President and CEO of Boyd Gaming, Keith Smith, paid tribute to the launch of the app at the time stating: Though the Stardust Resort and Casino closed more than a decade ago, this iconic brand remains one of the most legendary names in Las Vegas history.

Themed slot games are hugely popular, but studios have not really taken the same approach to table games. We wanted to bring some of that entertainment value to the table game market and that’s exactly what we have done with Scarab Auto Roulette. Ancient Egypt is one of the most consistently successful themes in iGaming, so it made sense to create a game around this while also putting our own unique twist on it. Scarab Auto Roulette really is a visually striking game that also delivers plenty of thrilling gameplay and we look forward to seeing players enter the Temple of the Scarab in search of their own riches.

He continued: Stardust is a name that clearly resonates with gaming customers across all generations. Given its considerable brand equity, we believe the Stardust name will give Boyd Gaming a unique advantage as we further expand our online and mobile gaming presence.

This move has proven to be somewhat of a masterstroke, with Stardust quickly gaining in popularity among an avid online gambling market that has adopted a thirst for the types of games that are developed.

In creating highly immersive games based on various themes that strike a chord with their target audience, Boyd knows that there is enough of a hook to charge for add-ons - a move that has proven to be a wise gamble in a sector where differentiation is key.

With a number of other social gaming companies in the industry, Boyd Gaming quickly realized that quality would win over quantity every time, and the almost rarified atmosphere that it competes in ensures that there is enough of a demand from what has rapidly become a loyal userbase.

Less than a year later, the success of Stardust started to yield fruit when heavyweight online casino and sportsbook brand, FanDuel (owned by Flutter Entertainment), announced a partnership to take Stardust into the thriving New Jersey and Pennsylvania markets.

Such plans would see the Stardust Casino built on FanDuel's proprietary front-end technology, applications and player account management system, simultaneously integrating Boyd Gaming's B Connected loyalty program - key for acquiring player tokens.

Boyd Gaming's CEO, Keith Smith, explained at the time: For nearly 50 years, the Stardust was one of the most famous casinos on the Las Vegas Strip. And while the resort has been gone for more than a decade, the Stardust brand is still as well-known and popular as ever. We are excited to work with our partners at FanDuel to launch our first real-money online casinos and are confident this legendary brand will give us a significant advantage in connecting with players looking for a distinctive online gaming experience.

Meanwhile, the president of FanDuel Group, Amy Howe, further highlighted the enthusiasm for the venture, adding: The new Stardust Casino will retain all of the great games that customers love on Betfair casino while incorporating a new stylish look that captures the glitz, glamour and nostalgia of old Las Vegas.

Stardust Casino allows us to take a market-leading product to the next level, creating a unified platform across New Jersey and Pennsylvania and integrating Boyd Gaming's B Connected player loyalty program to provide even more value to our customers.

Software Appearing Central to Further Boyd Gaming Expansion

If there weren't any further signs that Boyd Gaming was gearing up for a potential assault on the US online gambling market, then look no further than its acquisition of Pala Interactive, a California-based technology company, and all of its subsidiaries, for $170 million. Serving both the B2C (Business-to-Customer) and B2B (Business-to-Business) regulated markets across the US and Canada, it is clear that Boyd Gaming is laying the groundwork for something big.

The technology that Pala has at its disposal spans casino, poker, integrated sports and social casino and includes a sophisticated player management system, while the hidden value of the deal may well be that Pala has also secured a license for the newly-regulated Ontario market in Canada.

Keith Smith spoke about the deal, which is anticipated to close in early 2023, revealing: The acquisition of Pala Interactive marks the next phase in the ongoing execution of our iGaming strategy, providing us full control over the technology, development and customer experience.

By integrating online casinos with our existing land-based operations, we will be able to further leverage and monetize our expansive customer database and the amenities of our nationwide portfolio of properties, driving growth in both our land-based and iGaming operations.

He continued: Given our nationwide geographic distribution, significant database and established loyalty program, it makes sense for us to pursue a direct approach with our iGaming operations. By engaging directly with our guests and having the ability to personalize the customer experience, we are confident in our ability to create a cost-effective and profitable regional iGaming business.

While the acquisition of Pala Interactive supports our iGaming strategy, we remain fully committed to our sports betting partnership with FanDuel, which has allowed us to participate in the nationwide expansion of sports betting.

Going on to talk about the group's financial performance of the last year and the years before (Figure 2), Smith provided some insight as to how the next 12 months might unfold, should similar results be repeated: In the first quarter of 2022, our disciplined approach to managing the business and strategic focus on our core customer once again produced exceptional results.

During the quarter, strong performance from our core customers and sustained efficiencies in our marketing and operations contributed to record revenue, EBITDAR and margin performances on a company-wide basis.

Meanwhile, Pala Interactive chief executive Jim Ryan added: This is the result of a considerable capital investment and a lot of hard work by the Pala Tribe and Pala Interactive employees to build a modern-age online gaming platform and business tailored to the North American regulated gaming market.

Boyd Gaming's acquisition of the Pala Interactive business positions the enterprise for the next growth phase, which includes the development and execution of an iGaming strategy for Boyd Gaming and a continued commitment of investment and development in Pala's B2B business.

Net income of Boyd Gaming in the US

Figure 2: Net income of Boyd Gaming in the US from 2015 to 2021 (in million US dollars)

How Might the Next Two Years Unfold for Boyd Gaming?

Based on the rather telling tactics of the last couple of years, it appears that there may well be just some method in the company's actions, albeit those being somewhat 'cloak and mirror' so far.

If, indeed, Boyd Gaming is preparing to launch a full-scale assault on the US online gambling market, then it is certainly going about it in a highly strategic way, ensuring that it has all of the right components in place to scale fast and in multiple states and territories.

Propped up by a thriving land-based business, there is a huge opportunity for online development for the company, particularly given its appetite for acquisitions, which could well lead to a well-timed purchase of an operator that has positioned itself perfectly for a takeover when the opportunity presents itself.

While it appears highly unlikely that it will start its own online brand, in the same way, that land-based competitors, Caesars, Golden Nugget, and MGM Resorts International have (although time will tell), the purchase of an already established brand to compete with these and the rest may well be on the agenda at some point.

What is interesting is the acquisition of Pala Interactive, due to its California location, given that there is set to be a vote in November that will decide whether to allow online gambling in the most populous state in the country - connections that could well come in useful.

So far, Boyd Gaming has veered away from aggressive advertising, an approach that is unlikely to change - in the short term at least - with no obvious plan in place. Major corporate sponsorship of franchises may occur if the company expands into the B2C space.

However, the most recent moves from the company in what is a highly intriguing market bear all of the hallmarks of a mystery in terms of what will happen next.

To coin a George Bernard Shaw quote, the rest of the US gambling market may have played the king as though Boyd Gaming has already played the ace. Second act - imminent.

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