IAC invests $1 Billion in MGM, Gets Repaid in Online Gambling Winnings

Online gambling is paying off for New York-based global media and internet giant, IAC. The company is betting that its $1 billion investment in MGM Resorts International will be repaid in online gaming revenue. IAC holds a 12% interest in MGM.

The move follows a month after IAC and Match Group announced that Match Group has been separated from the rest of the businesses under the IAC umbrella. Match Group is the parent company of dating websites Match, OkCupid, Tinder, and PlentyOfFish,

“With the separation of Match Group and a renewed IAC emerging with $3.9 billion in cash, no debt, and its opportunistic zeal, we are excited to make this investment in MGM,” commented Barry Diller, IAC’s billionaire chairman, and senior executive. “This is a digital-first opportunity for IAC within MGM Resorts’ already substantial offline businesses. With our experience, we hope we can contribute to the growth of online gambling.”

IAC Sees the Future of Online Gambling

With a 12% interest, IAC CEO Joey Levin notes that the company will be a minority investor. But Levin also noted IAC plans to be a long-term strategic partner.

In a note to shareholders, Levin and Diller said that although IAC has purchased shares in a company that has virtually nothing to do with the internet, as one of the world’s largest casino operators, MGM has the potential to dominate online gaming.

“IAC has traditionally been opportunistic when it comes to capital. If there ever was a time, this moment is it,” they wrote to IAC shareholders. “We think this can generate powerful returns for our shareholders. We hope our expertise will be added to MGM’s opportunities, but even if our involvement doesn’t advance from here, the value was too persuasive to ignore.”

Levin and Diller went on to say that research showed that MGM’s revenue from its online gaming brand, BetMGM, is virtually zero. But they wanted a piece of the $450 billion global gambling industry. Today, online gambling represents less than 10% of the revenue in the U.S.

“Also, MGM is an aspirational company. MGM offers online gambling consumers, including 34 million existing MGM Rewards members, daily accessibility to online gambling.” they wrote.

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The Future of Online Gambling

Since the COVID-19 shutdowns of land-based casinos, gamblers have been playing their favorite games online. In states like New Jersey, online gambling revenue, including sports betting and casino games, more than tripled during the shutdown.

Now that these gamblers are signed up and familiar with the platforms, online gambling could now be a new habit. While overall, the pandemic shutdowns were detrimental to the gambling sector, it also opened more gamblers to consider playing on digital platforms.

New Jersey’s Division of Gaming Enforcement’s bet on online gambling paid off big during the shutdown, with revenues surging to a record $80 million in April. That’s up 119% compared to April last year. The DGE also reported that May’s total gaming revenue surged past April, with $82.6 million.

While online gambling can not replace the get-away experience of visiting a land-based casino, it can satisfy players at home. Obviously, screentime can’t replace the Vegas experience, or a trip to Atlantic City and the Jersey shore.

However, with more people trying out online casinos and sports betting during the COVID-19 lockdowns, online gambling will continue to grow in popularity.

Another unique aspect of digital gambling is the growing popularity of betting on virtual sports and eSports. Virtual sports simulate major league play with realistic, computer-generated teams. On the other hand, eSports are live, video game competitions featuring the best human players from around the globe.

No matter how you slice it, online gambling, in its many forms, is here to stay. Smart investors are definitely looking into the growth potential for the online gaming and sports betting industry.

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