Increasing Profits, Decreasing Workforce
Bally’s Interactive is starting 2023 off with a new goal in mind: to achieve “profitable operations” in its North American segment. Unfortunately, this plan is contingent upon reducing the workforce of Bally’s Interactive by 15%.
The company filed Form 8-K with the U.S. Securities and Exchange Commission detailing the plan. The filing also included a letter – dated Jan. 18. – addressed to employees from Bally’s CEO Lee Fenton, announcing the news.
“I am proud of what we achieved together. However, we didn’t manage to achieve everything we had hoped for. Our mature businesses continue to grow but are facing into macro uncertainties,” Fenton wrote. “Our North America business remains an investment market, where the returns will be reaped but we can now see that this will take some time to come to fruition, so we need to manage our cost base appropriately.”
Managing the cost base, unfortunately, means reducing their salary capital. Fenton acknowledged that the company may have over-hired in some areas when the company’s digital business received a boost from the pandemic.
It Costs To Cut
The restructuring is expected to be carried out over the coming weeks and employees affected by it will be notified in the coming days. Bally’s pledged to “fully support” these employees in their departure. “We will offer more than is required in all the markets we operate in, although terms will be governed by local frameworks and will align with employment laws in every country,” the letter wrote.
Item 2.05 of their filing breaks down the costs that the company will face as a result. “The Company estimates that it will incur between approximately $10 million to $15 million in cash severance costs in connection with the Plan, which the Company expects to incur in the first quarter of 2023.”
“Macroeconomic Conditions” Strike Again
Profitability remains a consistent struggle for companies in the iGaming sector. While Bally’s decided to restructure, 2022 saw some operators cease operations altogether.
MaximBet shut down its sportsbook in November of last year, citing “challenging macroeconomic conditions and an increasingly cost prohibitive marketplace” as the main reasons for their exit.
One month prior to that, Fubo Sportsbook bid its farewell to the industry. In a press release dated Oct. 17, FuboTV CEO David Gendler said, “we have concluded that continuing with Fubo Gaming and Fubo Sportsbook in this challenging macroeconomic environment would impact our ability to reach our longer term profitability goals. Therefore, we have made the difficult decision to exit the online sports wagering business effective immediately.”
Churchill Downs also pulled its TwinSpires Sportsbook out of the market last year.
Industry-Wide Profit Struggle
Companies outside of DraftKings, FanDuel, Caesars, and BetMGM have a hard time gaining market share. These four dominate the sports betting space and can incur the large costs associated with being in the industry, because their returns are greater. But even these giants aren’t always profitable. DraftKings, for example, projected an EBITDA loss of $475 to $575 million for 2023.
With high customer acquisition costs from marketing and promotions, smaller iGaming operators – be it sportsbooks or otherwise – have found it increasingly difficult to stay profitable, and some (MaximBet, Fubo, Churchill Downs) cut their losses altogether.
Hopefully for Bally’s, the restructuring is the adjustment they need to remain in the green.