888 Holdings are set to exit the U.S. market at a cost of $50 million.
The group notified its investors that it has begun a strategic review of its U.S. B2C operations which could include the sale or controlled exit of the group’s U.S. B2C business.
This includes parting ways with Authentic Brand Group, which owns Sports Illustrated (SI), and ending the joint venture that launched SI Sportsbook and Casino. 888 is currently live in four states with the brand.
888 confirmed that it has agreed to pay a $25 million termination fee which it will pay using cash from available resources, as well as a further $25 million between 2027 and 2029.
“Since commencing my role as CEO I have been focused on ensuring the Group is set up to deliver strong value creation in the coming years. In the U.S., the intensity of competition and requirement for scale means huge investment is required to reach profitability,” said 888 CEO, Per Widerström. “A series of record-breaking months for SI Casino has underscored the strength of the SI brand. However, despite these successes, we have concluded that achieving sufficient scale in the US market to generate positive returns within an accelerated time frame is unlikely.”
888 cited a number of reasons why gross profit margins in the U.S. are lower than the group level. These include direct costs, like duties and market access fees, as well as intense competition from well-capitalized incumbent participants.
According to the group, it has determined that its current structure will not optimize returns in the region and they expect the termination of its deal with Authentic Brands will save them $6 to $7 million in 2024 and 2025.
It has been a tough time for SI as in January it announced plans to lay off most or all of its staff, putting the future of the 70-year media brand at risk. The Arena Group, who hold publishing rights for the magazine, claimed that the company held substantial debt and recently missed payments which was the reason for the reduction in staff numbers.
