Taking AIM with Jason Ader

Jason Ader first captured industry attention in 2014 as the activist investor and Las Vegas Sands board member who, having bought a share of exiting PartyGaming founder Ruth Parasol and ex-husband Russ DeLeon's bwin.party stock for US$100m, initiated a proxy war that ended with the online giant's takeover by ambitious smaller rival GVC.

An influential behind-the-scenes player in land-based and online gaming via his Ader Investment Management (AIM) vehicle, where he is chief executive, he is also the founder, chief investment officer and chief executive officer of SpringOwl Asset Management, as well as a director and shareholder of Las Vegas Sands, the largest hospitality company in the world.

He spoke exclusively to iGaming Business North America's David Briggs about how he sees US igaming, why the land-based casinos are in danger of being left behind, and where the greatest potential for unlocking value in the sector lies today.

iGB North America: What are your thoughts on the lessons learned so far from real-money iGaming in the US? Can New Jersey be considered a success?
Jason Ader: The numbers are still fairly small in real terms, so it is hard to view it as a success. However, it has certainly not been a failure and it is an experiment worth watching.

Unfortunately, it doesn’t help that the player sign-on process is so encumbered with disclosures, banking-related requirements, etc. When you look at how the business has evolved in Europe, it’s like comparing the Yankees to a minor league baseball team.

By comparison, the real success story has been daily fantasy sports. The DFS guys maintain that what they do is not iGaming, but it is, of course. With the right mobile-based offering and player engagement proposition, the experience is great and the liquidity works.

DFS is a win-win for everybody – for the sports involved, the broadcasters, and the players. The success of DFS makes it clear that the appetite is there in the US for quality iGaming products.

For now, though, current regulation has cast a pall over the industry, and there is no real consensus on how iGaming can expand beyond New Jersey into other states, especially given the disappointing progress seen so far.

IGBNA: Following the recent US$4.4bn sale of Caesars Entertainment’s social-gaming division and MGM Resorts’ Jim Murren talking up his company’s myVegas social casino product, which is adding US$20m to his company’s bottom line, do you think land-based groups with little or no online exposure are missing out?
JA: My first thought is that if you don't embrace online, you risk falling behind. It’s like sticking with a hotel-reservation model that relies on bricks-and-mortar travel agents, rather than tapping into a large pool of other prospects through partnerships with Expedia and other travel portals, having your own website, creating branded apps, and employing search engine optimisation techniques.

Simply put, it’s essential to reach out to all prospective customers – including those who want to consume gaming content online. If you don't go this route, you limit your upside. Online is now a very important part of hospitality and tourism, and it should be for US gaming, too.

It’s true that regulations in this country have made it hard to get a complete picture, but in those cases where products are being offered outside the regulatory framework, such as social gaming, you can see how much appetite there is.

Ultimately, if US gaming groups don’t adapt to today’s digital-world realities, they run the real risk of emulating Blockbuster Video in its losing battle with Netflix. Moreover, if you don’t act fast enough, you can end up like Walmart, forced to take desperate measures such as buying jet.com to try to catch up with Amazon. In reality, It’s too late – the company should have done it earlier.

IGBNA: Do you think there is pressure on Sands to reverse their stated opposition to US online gaming so that they stand to benefit in the way that Caesars and MGM have?
JA: So far, other Sands shareholders are not pushing for change, and there doesn't seem to be much pressure on the company to make such a move. I obviously have a different view on this: when I bought my stake in bwin.party, Sheldon Adelson and I agreed to disagree on the merits of the online gaming sector.

That said, with growth prospects in Asia continuing to look very positive, there seems to be no need for Sands to reconsider their position just yet.

IGBNA: What do you think about the “bring your own device” opportunity, where players can use their smartphones inside the casino for real-money igaming?
JA: Well, for a glimpse of the future, all you need to do is go to a soccer match in the UK and see everybody on their phones betting as they watch. If gaming-industry operators can tap into that popular trend, they will do well.

The antiquated belief that the only way real-money slots should be played is by going indoors on a sunny day, sitting at a machine and pressing buttons and pulling levers, just won’t cut it – the younger generation, in particular, just isn’t interested.

In my view, casino operators are in denial if they don't view the reluctance to embrace online as a threat to their survival. Over the next 10 years, I believe the offline-only model for slots will be in terminal decline.

Although table games should continue to do well, the slots offering needs to adapt at the same pace as the digital age is evolving.

To the extent that land-based operators hide behind regulation rather than changing with the times, they may find the market taken from them by innovative disrupters, such as social gaming and DFS, that exist outside the regulatory framework.

IGBNA: Who do you think will most likely come out on top?
JA: One way we approach this issue is to identify underperforming companies and see what can be done to unlock value. In Europe right now, it’s the online operators that seem particularly interesting. Unibet and Betsson have really lagged and are tempting targets.

William Hill is also one worth keeping an eye on, though, of course, it is currently in play. We think there is likely to be more consolidation among the underperformers in future. Amaya is in an interesting position right now with David Baazov’s efforts to take them private again, but it’s hard to say what will happen.

In terms of land-based markets, Vegas is doing relatively well, aided by a buoyant US economy, but that segment is all very mature. Asia has gone through a quiet period but looks poised for a cyclical recovery.

So, where is the growth? For the US, it is all about online gaming and the associated technology providers. The major casino operators need to figure out how to capture more of the younger players. As of now, none of them seem to be rising up to the challenge.

IGBNA: How do you view your bwin activist investor campaign? Has anything surprised you, and are you happy with how GVC has performed since it acquired the online gaming company?
JA: Needless to say, I am delighted with GVC’s performance. I’m a huge fan of its chief executive, Kenny Alexander, and his team. I believe that bwin will turn out to be the best acquisition they have ever made and that GVC is one of the most exciting companies in the sector right now.

IGBNA: Why do you think GVC has been more effective with bwin.party than previous management?
JA: bwin.party was mismanaged and had cultural issues, but they also had a great brand and great technology. I believed that with proper leadership and the removal of duplicate management, which was a legacy of the old bwin.party structure, it was likely that there would be an immediate positive impact. GVC shareholders have clearly benefited from these changes.