Q&A With Gaming Investor Jason Ader of SpringOwl
Jason Ader has been a prominent and influential voice regarding the gaming industry since he was a high-profile and oft-quoted gaming analyst for Bear Stearns. He went on to serve as an independent director at Las Vegas Sands (2009-2016) and also co-founded SpringOwl Asset Management LLC, where he seeks out investment opportunities and attempts to maximize returns as an independent sponsor.
Over the years, he has been actively involved with companies IGT, Bwin, Stars Group and recently, European gaming company Playtech PLC. Over the last week, it was Ader’s equity stake in Playtech that had him in the news as he advocated the notion that sports betting and daily fantasy company DraftKings should acquire Playtech, which is profitable and arguably undervalued. Gambling.com talked with Ader this week.
Gambling.com (GDC): You’ve always been accessible and have articulated points of view, often about the gaming industry, in down-to-earth terms. Is that part of a philosophy to address financial literacy among the investing public?
JASON ADER: I just came out with a book and the title is “Deviate to Win,” and I really think my philosophy is that you can follow the crowd and be safe, or you can step out from the crowd and act a bit different and win. And I think time and time again through examples that I’ve witnessed and referenced there is a lot of value in deviating toward winning.
We saw that with PokerStars (now part of The Stars Group) — how that company pivoted from poker to sports betting to this giant merger with Flutter Entertainment. You create value by creating something a little bit different. Elon Musk and Steve Jobs are great examples. What I focus on is value creation for my investments and ultimately for my investors who are backing me. And I find value creation is better done non-confrontationally. I do my best to work constructively and friendly with management.
GDC: Financial analysts and wealth managers aren’t normally cast as celebrities, but you’ve been a high-profile personality in analyzing the gaming industry and have achieved some celebrity. What do you make of that?
JA: I take that as a compliment. I just try to work hard, have a sense of humor and try to be right more than I’m wrong. And when I’m wrong, at least learn from my mistakes and not repeat them.
GDC: You were a believer in online gaming for a long time, even when you were an independent director at Las Vegas Sands (where owner Sheldon Adelson was largely opposed to internet gaming). Many bricks-and-mortar gambling operators were tepid on online gaming back then. What did you see at that time and how do you continue to see internet gaming?
JA: That’s a great question and in the context of the times, a timely question especially with Las Vegas Sands (casinos) closed for a period of time like everyone in Las Vegas and watching online gaming companies having a windfall. My general view is that Sands was building a company that would be very dominant in the meeting and convention business but anyone who was alive … could see the proliferation of mobile phones.
Over the years I was on the board I saw that the customers coming through the properties was getting older and older. I felt the future in Las Vegas was going to be a hybrid of land-based casinos and online casinos. From my perspective, Caesars and MGM were a bit more advanced in their thinking and now just about every land-based company is trying to think about an online strategy. I was most impressed by Penn National Gaming’s purchase of Barstool Sports. I feel Barstool Sports has the perfect demographic for online sports betting and I think for Penn to have that ability to acquire customers via that affiliated media will be extraordinarily effective.
I believe over the next 10 years people will continue to go to Las Vegas for vacations and concerts and events and food. But the idea that young people are going to a slot machine and watch these three bars spin to win a jackpot, that’s dying. It’s all over. There needs to be a hybrid and I predict a convergence of land-based and online companies. The best example I can give is Walmart and Walmart.com. Walmart looked at Amazon and said, ‘Wow we could get killed here.’ … So they created Walmart.com and Walmart’s doing really well in the face of Amazon. It’s really a lesson for the gaming industry to not be like all those retailers who are going out of business every day.
GDC: Besides Penn National, are there any companies you feel are poised to create the land-based and online-based hybrid that you’re talking about?
JA: I think MGM International has a very unique partnership with GVC Holdings (the two jointly own online gambling company BetMGM) and now Barry Diller with InterActiveCorp and his very spectacular track record in traditional media … and then dominating the online dating business. … He’s just now bought a stake in MGM where the hidden value, if you will, is in the online gaming environment. So I think MGM with InterActiveCorp and GVC is positioned really well.
GDC: In the United States, the friction on online gambling and sports betting is that those things have to be approved on a state-by-state basis. You’ve said that you think 2026 is a reasonable target for widespread sports gambling in the U.S. Given the pace of governmental action, can sports wagering get to that place in six years?
JA: The states really need the money more than ever now so that’s critically important. The sports leagues are no longer an impediment; they want the sports betting. The (traditional) casinos are embracing the proliferation of online gambling because of their own partnerships. The key is going to be the access — who gets licensed and how. And also important is pooling. Nevada, New Jersey, Delaware and Pennsylvania can pool (players) in poker but it’s still very small.
My advice to Connecticut recently regarding sports betting was to pool with Europe and the UK. … What could really make this industry grow rapidly is not just allowing for bettors in the U.S. to bet across states but open it up in a regulated and transparent format with the regulated and transparent markets of Europe and the UK. You can get very big tax numbers for the states if that’s the case. Everybody benefits from that. Look, it’s not going to happen in 2021 but by 2026, we should be in a very much better place in terms of business growth.
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