What does PNG’s acquisition of theScore mean for its third-party providers?
PNG PAM partner White Hat Gaming guarantees zero job losses as Kambi’s Kristian Nylén insists theScore will not match supplier’s sportsbook standards
Penn National Gaming (PNG) announced yesterday it had agreed a deal to acquire North American media, sports betting and technology company theScore for approximately $2bn.
PNG said one of the major reasons behind the purchase was that it would allow the operator to bring key technology in-house in a move to reduce the burden of reliance on third-party providers.
“The acquisition of theScore will allow Penn National to better manage all critical aspects of its technology stack, leading to greater control over its product development roadmap, reduced costs, and an enhanced customer experience,” PNG said in a statement.
“It will also allow Penn National to drive margin expansion by eliminating fees and expenses currently being paid to third-party technology and service providers.”
This rationale was further talked up by PNG CEO Jay Snowden.
He said: “Importantly, the transaction provides us with a path to full control of our own tech stack.
“TheScore has developed a state-of-the-art player account management (PAM) system and is finalising the development of an in-house-managed risk and trading service platform.
“This should lead to significant savings in third-party platform costs and allow us to broaden our product offerings – providing the missing piece for operating at what we expect to be industry leading margins,” he added.
As touched on by Snowden above, theScore is set to unleash its proprietary PAM technology in the US market this month.
It has also decided to build an in-house-managed risk and trading service platform for its sportsbook offering under the supervision of former Ladbrokes trading director Patrick Jay after seven consecutive quarters of net losses.
This news provided a major strategic blow to PNG’s existing third-party partners in PAM provider White Hat Gaming and sportsbook supplier Kambi, even though any PNG migration away from the two companies is unlikely to happen before 2023 at the earliest.
Indeed, Snowden anticipates an 18-month transition for Barstool Sportsbook from Kambi to theScore’s tech platform.
While Kambi claimed it “remained unaffected” by the news in a press release, the knock-on effects were clear for the Stockholm-listed business after its share price plummeted by 33%.
Investors were spooked by another major US player shelving the Kambi platform in favour of a proprietary offering as PNG followed the lead of DraftKings.
Rush Street Interactive’s BetRivers sportsbook and Churchill Down’s TwinSpires will become the most high profile clients of Kambi, which is currently live in 14 US states.
Kambi CEO Kristian Nylén said there would be no financial impact to the business for the guaranteed term of its existing contract with PNG.
He made his feelings clear though, adding: “While I respectfully disagree with Penn National Gaming’s long-term view on vertical integration, the entity they have acquired has yet to develop a proprietary sportsbook, and certainly not one to a similar high standard as what we offer.
“The transaction announced today creates some exciting opportunities for Penn National Gaming and I look forward to working with them over the coming years in support of their sportsbook growth.”
White Hat Gaming also addressed the news in a company bulletin seen by EGR, describing PNG’s decision as a “negative development”.
The Malta-based business told employees there would be zero job losses as a result of the announcement, with not a single role at risk.
In the note, White Hat Gaming told staff it was still eager for PNG to succeed because it was contracted for multiple years with a platform fee model based on a percentage of PNG revenue.
“While the timing of this was unexpected, Penn has always expressed an ambition to bring their own technology in-house,” White Hat Gaming told employees.
“We believe this strategy to be flawed to the point their strategy may change or be very much delayed as the majority of European operators, who led the world in online gaming innovation, operate in part or completely on third-party platforms.
“While that view is not relevant to Penn’s decision, we anticipate significant numbers of new client opportunities for a US-facing platform solution.
“Hence we are confident of not just replacing the Penn deal long term, but exceeding it.”