Endeavor posts Q3 revenue rise, talks up betting operations for 2024

(Darren Carroll/PGA of America/PGA of America)
(Darren Carroll/PGA of America/PGA of America)

Sports and entertainment conglomerate Endeavor has positioned OpenBet and its wider betting operations as key revenue drivers for the group in 2024, but insists IMG Arena will remain “number three” in the sports betting rights sector behind Genius Sports and Sportradar.

Endeavor today (Wednesday) posted revenue of $1.34bn (€1.25bn) for the third quarter of 2023, up from $1.22bn in the prior year, and reported a net loss of $116m, with adjusted adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) of $311.6m.

The Owned Sports Properties segment, which includes TKO Group, the public company created by the merger of Ultimate Fighting Championship (UFC) and World Wrestling Entertainment (WWE), had quarterly revenue of $479.7m, up 19.3 per cent year-on-year (wider analysis of the unit’s financial performance available here).

Revenue at the Events, Experiences & Rights segment hit $367.1m, down 6.9 per cent. The drop was largely attributable to the $1.25bn sale of IMG Academy to BPEA EQT, a unit of global private equity group EQT, in June. This was partially offset by new contracts in IMG’s media production business and biennial and quadrennial events like the Ryder Cup and Rugby World Cup. The segment’s adjusted Ebitda was $29.8m for the quarter, down $15.7m.

The major production new business win, cited by Endeavor chief financial officer Jason Lublin in today’s investor call, was IMG’s deal alongside broadcast and services provider NEP Group to support Apple TV’s Major League Soccer live match and studio productions.

The Sports Data & Technology segment comprising Endeavor’s betting activities reported revenue of $124.8m, up from $46.7m in the prior year, with the growth largely the result of the acquisition of OpenBet in September 2022 and the continued growth at IMG Arena. The division had adjusted Ebitda of $24m, up from $4.2m.

Finally, Endeavor’s Representation segment, led by WME, generated $385.6m revenue in the third quarter, down 0.7 per cent year-on-year due to the impact of the writers’ strikes, and adjusted Ebitda of $96.3m.

Betting division set for boost

Endeavor acquired OpenBet last year, dropping the value of the takeover of the UK-based sports betting technology platform by a third to $800m.

At the end of the third quarter it entered the newly regulated sports betting market of Brazil, agreeing a partnership with Play7.Bet, and Endeavor president and chief operating officer Mark Shapiro believes the business is well-positioned for growth in 2024 as more markets worldwide open up.

He told an investor call today: “Regulation is lifting if you look at Brazil. Finland is a huge opportunity, and yesterday I had a great meeting with an operator in the Dominican Republic.

“It’s a noisy area that plays to our advantage because these operators are not going to go out there and spend all the capital that is required on infrastructure, on technology, on labour when they can white label it with OpenBet. We are very bullish about that business and the prospects for 2024 as more regulation gets lifted.”

Shapiro was more cautious on IMG Arena, which in the third quarter signed up as Conference USA’s official data rights collector for American football, men’s basketball and women’s basketball.

He said the business of sports data rights, compared with the betting market, is one where “we have to be careful,” citing the costs of acquiring rights and the competition in the market where IMG Arena is jostling for share with the established trio of Genius Sports, Sportradar and Stats Perform, as well as Infront Bettor which entered the space in 2022.

Shapiro warned major sports’ properties that IMG Arena will not be overly-aggressive in forthcoming tenders, noting: “We have been very disciplined to this point. We don’t play at tier-one, trojan horse money-losing properties. Often it is a rights fee-fest to try to get the sports data from some of these major leagues, and frankly the margins are just too tight, there’s too much risk, and we can’t make money on that.

“We play in the tier-two, tier-three properties and often package it with our media division at IMG where we can get all kinds of efficiencies and synergies to make these profitable and strong margins. That is where we’ll continue to stay so we are very content being the number three player in this marketplace behind Genius and Sportradar, which have been doing it longer than anyone else.”

On Location

Also looking ahead to 2024, Shapiro praised the performance of On Location and the wider demand for premium experiences at sports events.

The International Olympic Committee announced a new global hospitality model in the middle of 2021 by awarding the exclusive service provider contract to On Location covering Paris 2024, Milan-Cortina 2026 and Los Angeles 2028. It is the first time customisable Olympic Games hospitality packages have been centralised by a single provider, and On Location officially went to market in January.

Previously it was left to the different National Olympic Committees (NOCs) to appoint authorised ticket resellers with varying levels of hospitality expertise in each of their respective markets, creating a disparate model hampered by limited – or no – public access to packages.

Shapiro said: “We have sold through one third of our package for Paris 2024 already, and our stack of marketing does not take place until Q1, Q2 of 2024.”

Endeavor acquired a majority stake in New York-based On Location at the start of 2020 in a deal worth $660m.

PGA Tour proposal clarified

The Endeavor president also took the opportunity to set the record straight on the group’s interest in the PGA Tour, amid reports its offer to invest or form a strategic partnership had been rejected.

Shapiro said Endeavor is focused purely right now on the “integration of TKO to maximise revenue synergies”, adding: “We are not thinking about M&A elsewhere.”

He outlined the group’s wide-ranging agreements with the PGA Tour – media rights sales, player representation, event ownership, sports betting, analytics – and said a pitch was made to extend those contracts in exchange for a minority investment.

Shapiro explained: “The opportunity was there as to whether we would be interested in a minority investment being part of a consortium. And by the way that consortium was probably TBD [to be decided] down the line.

“All we said was, ‘absolutely we’d be interested in making a 10-per-cent minority investment as long as many of these commercials services deals, those contracts we have could get extended for $25m per year’. It was an aggressive ask, maybe it was unrealistic.

“We figured it would get shut down, it ultimately did and then we were out of it. We’re not looking to buy the PGA Tour. But certainly if we could get a slice while we’re getting our commercial services extended at a nice premium, we would do that. It wasn’t to be.”