MGM’s Big Bets: Bill Hornbuckle on Las Vegas, Japan, and Digital Expansion

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Before we get started, just a quick note.
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Now, let's get to the show.
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Welcome to the world according to Boyer, where we speak with top investors, best-selling authors, and business leaders to uncover the smartest ways to find value in the stock market.
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I'm your host, Jonathan Boyer.
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Our guest today is Bill Hornbuckel, CEO of MGM Resorts International, a publicly traded global entertainment and hospitality company with a market capitalization north of$8 billion.
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I'm especially excited about today's conversation as MGM is a company Boyer Research has followed for decades, and a company in which Boyer Asset Management owns shares.
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We're going to try and cover a lot of ground today from the hospitality business, MGM digital transformation, iGaming and sports betting, capital allocation, and what Bill sees ahead for Las Vegas and for MGM.
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Bill, thanks so much for joining us.
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My pleasure.
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Thanks for having us.
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As I said earlier, I'm really excited.
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And before we get into the business side of MGM, I wanted to start somewhere fun.
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You might legitimately have some of the best perks of any CEO in America.
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You host some of the world's biggest events and meet some of the most iconic performers on the planet.
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Has there been a few moments you can share with us that it's surreal?
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I can't believe I get to do this for a living.
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There's a couple, I guess.
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You know, I've been here 48 years now.
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I came out to college, thought I'd spend a couple years here and go off into the hotel business and just never left.
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I got somewhat lucky in the early days.
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But back in those days, the mob was literally still here.
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It was the late 70s, early 80s.
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And although they were transcending out, and folks like Steve Wynn and others were taking play, meeting some of those characters, and they were characters, was something I'll always remember.
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Modern day, in my current job, signing up originally Lady Gaga for a hundred million dollar contract, standing on stage with her hugging me, was like, okay, is this a real moment?
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Is this happening?
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What was that like?
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It was fun.
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It was exciting.
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She's a great human being, as casual and as cool as you would hope and think she could be or should be.
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And it was one of those moments that were like, you know, you pinch yourself and go, wow, this is great.
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This is a good day.
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Not every day's been a good day.
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You know, the day we opened Allegiant Stadium, that was a big push.
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The day the Golden Knights celebrated their first Stanley Cup, a huge push.
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So the whole sports evolution here has been pretty incredible.
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I bet you had good seats to the Super Bowl.
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Yeah, it was pretty good.
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We're hosting Formula One this weekend.
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The generation of that whole thing into what it's become for the city, I think ultimately, and the sport itself has been great.
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Getting to meet those guys, getting to meet.
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I'm a car guy by nature.
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And so going into McLaren's home place outside of London, meeting Zach and spectacular stuff, just fun stuff.
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And so I presumably think I have one of the better jobs in America, one of the more fun.
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Again, there's pressures on it.
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You've got tens of thousands of employees who demand and need certain things.
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And so not every day is, but the vast majority of it, people say, What business are you in?
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I say I'm in the entertainment business in the context of we're here to entertain folks and make it a great time for all.
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Speaking of the entertainment business, I mean, you really are in a service business and you have a variety of customers ranging from like super VIPs who are gambling millions of dollars to people at the low-stakes blackjack table.
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What does it take to get to that?
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I've always, just for my own curiosity, wanted to know super VIP level, what is it like?
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What kind of perks do you get?
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How is it different than the average experience?
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I think something Vegas has always been good at and continues to be great at is personalized one-on-one attention.
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And so we have a hosting crew in our company of almost 500 people.
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And if I include Macau, that number almost doubles.
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And their day job is to host customers, know everything about them, know their birthday, their children's names, what they like to do, how they like to do it, and frankly, hold their hand.
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Get them here as often as ultimately we potentially can, hold their hand, make sure they stay loyal to the company and give them just a great time.
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And so, I mean, you all know this is not folklore, but we fly them around in G650s, they get to stay in places called the Mansion, they get to meet backstage Lady Gaga from time to time and others, Bruno Mars, et cetera.
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And so it's interesting, though, what perks their interest.
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Past Monday night, we hosted the Dallas Cowboys, the Raiders.
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We had three very big customers in our box.
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And Tom Brady was next door.
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And all they want to do is meet Tom Brady.
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So we had to try to make that happen.
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And so what motivates individuals is always interesting, particularly around our industry, usually fun.
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And I think we as a company, but frankly, we as an industry do the high-end, probably better name than anybody else in the world.
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No, absolutely.
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And one of the stories behind MGM or the growth story is digital through MGM rewards, BetMGM, et cetera.
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How do you have that personal touch across both physical and digital?
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It's difficult.
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I mean, because the digital business obviously touches millions and millions of customers.
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We've now grown this thing from 18 to this coming year.
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We'll do over 3 billion in top line revenue.
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So it's becoming a very significant piece of the company.
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We do it through our BetMGM partnership domestically, as well as our own and operated businesses in Europe and now in Brazil.
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But the idea of AMI channel, where you could touch us both at home and here, is meaningful to folks.
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About 15% of our database folks touch both products and get recognized and rewarded for touching both products.
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And so it's for us a relatively unique proposition.
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Obviously, DraftKings, FanDuel, others are major competitors, but they don't own brick and mortar.
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And so the opportunity, whether it's in Michigan to bring somebody into the casino there or here in Las Vegas and join together and recognize their spend, both online as well as brick and mortar, is a unique position.
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And frankly, given the tools and the assets we have, we can do it probably better than most.
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We've invited for this weekend, Formula One's a great example.
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150 of our guests out there will be bet MGM guests.
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And so they'll be digital who earn their way to this experience through digital.
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What does that mean?
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How do they earn their way?
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Is it the amount of money they bet, or is it how often they go on or combination thereof?
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It's theoretical.
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It's the amount of money that theoretically they put in play, which earns them certain perks along the way.
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And just like brick and mortar, we have high rollers who are domestic online, whether it's iGaming Casino in the five or six states that we're in, or our sports betting itself, and they quote, earn their way through our rewards programs into various things that they can do.
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We host with the Super Bowls here, we hosted folks for it.
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We've got the Final Four coming next year.
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We've got a lot of attention around that.
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People want to come for that.
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We have the college football thing in 27, the championship game.
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And so people focus on certain things they want to do and quote, earn their way to those things.
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Through BedMGM and the rewards program, like how much information do you actually know about someone and how do you utilize that to your advantage?
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Go back to what we do here.
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It is personal relationships.
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So our BetMGM team also has hosts who get to know and understand their customers and what they want.
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Obviously, in a digital environment, their behavior you can follow intimately.
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I mean, very closely, you can follow behavior.
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Not as much as easy here in brick and mortar, but clearly in digital.
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But what we don't know is a lot about them, but ultimately we do outreach to them and go back to the with your children's birthday or somebody in Detroit who's a football fan, well, what a surprise.
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We have a box at the Lions.
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And so being able to say to them, hey, next Sunday, you want to come down to a game.
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We'd love to take you and your son who enjoys the Lions to a football game.
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That's a point of differentiation that others can do.
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But the combination of what we have here, particularly in Las Vegas and some of our regional properties, National Harbor, et cetera, and the assets we have exposure to make it a fairly compelling and unique proposition.
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Those regional properties, obviously, you have the Las Vegas hotels, which are the biggest part of your gambling business, but you also have the regional properties spread across the country.
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Are they core to your business?
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Do you need them to operate well?
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Yeah, I mean, they're a big part of our business.
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The word core might be a push, but we have eight of them.
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We've sold one, so we'll have seven.
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They earn us about a billion dollars a year in an enterprise that does about even about four and a half billion when it's all said and done.
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So they're a sizable piece of our bottom line.
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They're unique.
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Five of them are leading market takers in each market that they're in, Borgata in Atlantic City, National Harbor in Maryland, MGM in Detroit by way of example, are market leaders in their own respects.
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And the ability for people to go in there, enjoy that experience, and ultimately get rewarded to come to Vegas is a common thing.
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And so we share a common database that all feeds into MGM Rewards.
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And then those customers can do as they like.
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And we've now positioned an airplane by way of example in for our high end in Borgata in New Jersey.
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But we can take customers up and down the coast.
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We take them to DC, we take them to Mississippi.
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They want to go to the bow for a certain experience.
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And so most of them, not all of them, are big enterprises under themselves as well.
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I mean, I guess what I was trying to get at is if you got rid of the regional casinos, would that impact, and you got a good price for them?
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Would that impact your Las Vegas business or your core business in general?
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To a degree, but not significant.
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No, it would impact our digital business.
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This is now becoming a fairly intricate web between digital, and I'll use Detroit as the example, Michigan, our Detroit property, Las Vegas, where both iGaming and sports betting are allowed.
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There's a pretty direct connectivity between those customers and all of that activity case.
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And one that's growing in meaning that people, one of the reasons they stay and play on BetMGM on a digital device is that they get access to whether it's local events and local things they want to do, or once or twice a year to come out for something special here.
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And so, yeah, we like our portfolio.
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There's a couple of assets that aren't market leading.
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We've got to figure out the consternation in New York, ultimately, what to do there.
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But you know, when it comes to New Jersey, Michigan, Maryland, Mississippi, we love what we have there and what they represent onto themselves.
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So is it core?
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No, Las Vegas is still core, but it's an important piece of our pie.
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Now, let's get back to the show.
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You had mentioned iGaming in Michigan.
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For those who don't know, and this is a big growth driver for NGM and something I'm personally really excited about.
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What is iGaming?
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It's digital casino gaming.
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You can go online, play slots, you can do live dealer.
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So what that simply means is you can click on a link that has a live dealer that will deal to you.
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We have a live dealing studio here in Las Vegas.
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We have one in Michigan, we have one in New Jersey that services.
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So like 15% of our players who play table games online do it through a live dealer, which is fascinating unto itself.
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And so that's a great experience for those who enjoy that.
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And the pace of the game, they consider it more real, they consider it more trustworthy in some way, shape, or form.
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God knows why, because it all should, it is trustworthy, but they do.
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And so it's a unique proposition that people enjoy.
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There are jackpot links that ultimately tie to brick and mortar casinos as well.
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And so the idea of linking jackpots across the totality of our products is fun and interesting for people.
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And so it's all of the gaming activity that you would expect in a casino, the types of games, the types of slot machines, you can play online.
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So essentially, it's a casino without the cost of building a casino.
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Oh, yeah.
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So the margins must be insane.
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Well, it's a very aggressive competitive space.
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And so look, we think ultimately the margins settle in the mid-20s in this business.
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But as long as there's a DraftKing, a fan duel, pick your favorite fanatics, your favorite marketplay, I think you'll see margins within the mid-20s.
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But acquiring customers, the cost of acquiring customers, the length that you need to keep them involved of time before they become profitable, you know, it's not unlikely for us to put a$500 stake on a customer to say, make your first bet and we'll give you$500.
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And so then the time it takes to earn that back in then some is months sometimes.
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And that's where the strategy of also having a brick and mortar gives you an advantage over the DraftKings of the world.
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So how many states in the US have eye gaming now?
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Six.
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There's three that are really meaningful Michigan, New Jersey, and Pennsylvania.
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And those six states interestingly drive over 60% of our top line revenue.
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So we have sports betting in, I'm gonna give you a bad number here.
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I think it's 28 or 29, but we have sports betting in a significant like four X.
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But the eye gaming activity is big for the industry, it's big for us, and particularly in those states, where gaming and the ability to tie in two of the three for us brick and mortar to get to digital, because we've had a database for a considerable period of time in brick and mortar, to be able to leverage into that from a marketing perspective has been meaningful.
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So why only six states where sports gambling has 28, 29, or however many states it is?
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It's all about legislation and about making it permissible.
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So regulators, state legislators, governors all have a view.
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Most of the states we're in are blue.
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It emanates from having casinos on the ground for jobs and it migrates itself from there.
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Many are considering it.
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Obviously, it's a great form of tax revenue.
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The challenge we face is there's black market sites all over, anyways, today.
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And so if I'm in any one of those states that doesn't have it, I can simply go to a black market site, not pay tax, and not to the benefit of the industry or the state for that matter.
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So we continue to push the agenda, but as of today, we have six.
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But as the recent scandals show you, I mean, branding is very important.
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I mean, I can't imagine why someone would want to go to a black market site where it's not regulated, they could cheat you.
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I mean, isn't that a big differentiator?
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It is.
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That's why we've been able to grow an industry that's well beyond the cottage industry.
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I mean, we're gonna push three billion.
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Some of our competitors are gonna push four and five billion this year.
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So, you know, it's grown to a I think next year we're pushing a$15 billion industry because of that very notion.
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And five years from now, how many states, if you had to guess, would have eye gaming?
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I would hope to think we could double it by now.
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Would be a realistic goal.
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There are big states like Texas that just simply doesn't want gaming today.
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We have ongoing dialogue around sports betting and brick and mortar casinos.
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There are other states like California and Florida, which are influenced by tribes and tribal gaming, and so that gets very complicated very quickly.
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There are other states, Ohio, Illinois, New York, which I think at some point will, but time to tell.
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So we're talking about the US business, but how big of an opportunity globally is EI gaming?
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Big.
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We are now it's a more mature market in most countries.
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We're in 11 markets.
00:16:59.440 --> 00:17:01.200
We've just added Brazil this year.
00:17:01.360 --> 00:17:09.599
We have BetMGM now, the actual brand itself, which we control and own in UK, Sweden, and one other place.
00:17:09.680 --> 00:17:11.039
I want to say Netherlands.
00:17:11.200 --> 00:17:12.640
And we're expanding on that brand.
00:17:12.799 --> 00:17:14.559
We bought something called Leo Vegas.
00:17:14.720 --> 00:17:17.599
We bought our own technology platform, our back end.
00:17:17.680 --> 00:17:20.559
We bought something called typical, our own sports betting platform.
00:17:20.799 --> 00:17:23.920
And so we've established ourselves now as an operative.
00:17:24.079 --> 00:17:28.000
That business will generate close to a billion, top line as well this year.
00:17:28.160 --> 00:17:29.200
And to us, it's new.
00:17:29.279 --> 00:17:32.799
I mean, we're in our third year of this, so it's an evolving, growing business.
00:17:33.039 --> 00:17:36.799
Its core, this company called Leo Vegas that we bought back four years ago.
00:17:36.960 --> 00:17:41.440
We got it in play three years ago, has been really dominant in the Nordics.
00:17:41.519 --> 00:17:42.880
And so we like our position there.
00:17:42.960 --> 00:17:51.359
We have 38% market share in many of those places, and we're trying to spread that out on the back of obviously MGM's brand, on the back of now our knowledge.
00:17:51.599 --> 00:17:55.440
And we're not yet at a point with that business where we can tie it to Las Vegas.
00:17:55.599 --> 00:17:58.319
I mean, yeah, every once in a while somebody will do the on me channel.
00:17:58.400 --> 00:17:59.440
It'd be nice and interesting.
00:17:59.599 --> 00:18:04.559
But on to itself, and almost all of them, are sports medicame and iGaming combined.
00:18:04.720 --> 00:18:07.680
And so we have this unit that's continuing to grow.
00:18:07.839 --> 00:18:10.000
We think Brazil is the big market to go.
00:18:10.160 --> 00:18:12.960
We see it as a seven or eight billion dollar marketplace.
00:18:13.200 --> 00:18:19.519
If we can get high single-digit share, we've got a$300 million earning business bottom line there.
00:18:19.599 --> 00:18:20.880
And so we're excited about that.
00:18:21.279 --> 00:18:26.799
Do you one day envision the international eye gaming to be bigger than the US eye gaming?
00:18:27.359 --> 00:18:29.519
In totality, yes, it could and should be.
00:18:29.680 --> 00:18:30.000
Yeah.
00:18:30.559 --> 00:18:35.920
I know this may be many years in the future, but this is such a high margin business.
00:18:36.240 --> 00:18:43.039
Could the iGaming one day surpass in importance the actual physical gaming aspect of the business?
00:18:43.519 --> 00:18:46.079
I guess at some point, but there's a long way to go for that.
00:18:46.240 --> 00:18:49.920
We've taken this business, the Ben MGM Core business domestically.
00:18:50.160 --> 00:18:52.720
We were underwater 200 million last year.
00:18:52.880 --> 00:18:55.279
We're going to push$200 million in profit this year.
00:18:55.359 --> 00:18:58.960
So we've done over a$400 million swing in the course of a year.
00:18:59.200 --> 00:19:03.839
And so it's hit its critical point and then, and we're going to continue to grow from here.
00:19:04.000 --> 00:19:11.279
That's a long way away, though, from the combination, because don't forget we have a Macau business that throws off a billion plus a year in cash as well in EBITDA.
00:19:11.519 --> 00:19:12.880
Not in cash in EBITDA.
00:19:13.039 --> 00:19:14.880
So there's some room to grow there.
00:19:15.119 --> 00:19:20.720
But we have said and we believe our BetMGM business is going to hit the half a billion dollar mark over the next couple of years.
00:19:21.119 --> 00:19:28.720
You had just mentioned the Macau business, and it's obviously a great business, but it's also in a place that there's a lot of regulatory uncertainty.
00:19:28.960 --> 00:19:29.839
How do you manage that?
00:19:29.920 --> 00:19:32.160
And how do you think investors should think about that?
00:19:32.480 --> 00:19:35.119
I don't know if I would use the word uncertainty.
00:19:35.279 --> 00:19:41.759
Actually, with this new relicensure, when we have seven years to go and then they have a three-year extension if the government chooses to take it.
00:19:42.000 --> 00:19:48.000
There is, in terms of regulations themselves and policy, there's a lot of clarity.
00:19:48.240 --> 00:20:05.359
In terms of how to invest, in order for all of us to get relicensed, we all had to contribute to the notion that we would spend, in our case, a billion one on capital and a billion one-ish on opex for non-gaming activity that would drive tourism and leisure activity into the market.
00:20:05.680 --> 00:20:10.000
We're about a third into that spend, and we're about a third into our license tenure.
00:20:18.240 --> 00:20:21.759
That people will gamble while they're here, but that's not the primary reason they come.
00:20:22.000 --> 00:20:23.680
They come for all this other activity.
00:20:23.839 --> 00:20:25.440
That's the notional proposition.
00:20:25.519 --> 00:20:28.240
We've got a long way to go, all of us there as operatives.
00:20:28.480 --> 00:20:31.680
But that's the part that's a little less clear how to get there.
00:20:31.920 --> 00:20:36.319
Everything else there was pretty straightforward as a regulator, as a marketplace.
00:20:36.640 --> 00:20:43.599
Frankly, we feel good about where the Chinese government has landed in terms of Macau's existence and its going forward.
00:20:43.839 --> 00:20:48.799
And so good signal, good signs on that, which are obviously very important in the long run.
00:20:49.039 --> 00:20:54.400
How to get this money spent and make it productive is really the challenge, I think, over the next couple of years.
00:20:54.720 --> 00:20:57.279
Just moving on to something that's very topical.
00:20:57.440 --> 00:20:58.160
It's been in the news.
00:20:58.240 --> 00:21:05.759
You know, we've seen headline grabbing, integrity issues from the MBA scandal, game manipulation, prop bets scandals.
00:21:06.000 --> 00:21:10.240
How should the industry think about where to draw the line on these betting types?
00:21:10.640 --> 00:21:14.319
The majority of all of that information came from us, the operatives.
00:21:14.480 --> 00:21:25.839
Because we are so dialed in, because we understand the odds, because we understand the activity, we can see betting activity, we can hunt out quickly fraud, suspicious activity, et cetera.
00:21:25.920 --> 00:21:33.759
And so we all often now have become the policemen of the activity and therefore notifying the league of, hey, we might want to look at something here.
00:21:34.000 --> 00:21:35.680
That's the first comment I would make.
00:21:36.000 --> 00:21:37.200
Can you take us through that?
00:21:37.359 --> 00:21:41.119
Like, how do you figure out that there's suspicious activity?
00:21:41.359 --> 00:21:41.839
What do you do?
00:21:41.920 --> 00:21:42.480
What's the call?
00:21:42.880 --> 00:21:43.839
It depends on the activity.
00:21:44.000 --> 00:21:46.000
Look, there's anomalies, an activity case.
00:21:46.160 --> 00:21:55.519
In our Ben MGM place, we have 50 odd data analysts who look at betting data all the time, every day, basically the odds makers themselves.
00:21:55.759 --> 00:22:02.480
And when something doesn't line up the way we had thought it would predict, sometimes We dig into it because, well, what happened here?
00:22:02.559 --> 00:22:04.160
Why weren't we right about this?
00:22:04.400 --> 00:22:11.759
And through that activity case, which goes on every day, all day, we find things from time to time that you go, hmm, this is suspect.
00:22:12.079 --> 00:22:15.119
And we report them because it's not in our interest to have it happen.
00:22:15.200 --> 00:22:17.440
Because by the way, we're the ones we're taking advantage of.
00:22:17.680 --> 00:22:18.720
You're taking risk.
00:22:18.880 --> 00:22:20.799
Yeah, at the end of the day, we're the ones with the risk.
00:22:21.039 --> 00:22:22.640
And so we're very good at that.
00:22:22.799 --> 00:22:29.920
And so we'll call it out quietly, but we'll call the league or we'll call somebody and say, hey, by the way, you might want to take a look at this.
00:22:30.000 --> 00:22:32.079
And then they go off and do what they do.
00:22:32.240 --> 00:22:34.559
And so to that extent, it's been an advantage.
00:22:34.720 --> 00:22:39.839
I think where we all need to be cautious and we all need to have a righteous eye is play and play.
00:22:39.920 --> 00:22:51.039
I'm betting on the next activity case, whether it's a pitch, a strike, ball, antenna, whatever the next play is, that's suspect, and more so than the broader outcome of a game, potentially.
00:22:51.200 --> 00:22:53.519
And so we just have to be diligent about it.
00:22:53.759 --> 00:23:08.880
I will tell you this there's been enough black market activity over decades that I'm sure all of that existed and continues to exist, that I think we've become an interesting policeman in some of that because it's in our interest to make sure it doesn't happen.
00:23:09.039 --> 00:23:13.599
And so the other side of that coin is obviously some of it gets called out publicly because it has to.
00:23:14.000 --> 00:23:18.960
Would you support the industry stepping back from some of the more like exotic prop bets?
00:23:19.119 --> 00:23:21.119
Or is it more of a case-by-case basis?
00:23:21.200 --> 00:23:22.319
Like what do you do going forward?
00:23:22.559 --> 00:23:24.160
I think it's a case-by-case basis.
00:23:24.319 --> 00:23:27.680
I think the engagement those prop bets bring are compelling.
00:23:27.839 --> 00:23:29.200
I think they're compelling for the sport.
00:23:29.279 --> 00:23:30.880
I think they're compelling for fan engagement.
00:23:30.960 --> 00:23:33.519
I think they're compelling for media, for television time.
00:23:33.759 --> 00:23:37.839
When a football game's 32 to 10 and then there's four minutes left, who cares?
00:23:38.079 --> 00:23:41.119
Well, if you care about who makes the next field goal, you care.
00:23:41.279 --> 00:23:43.039
And so you stay engaged and so on.
00:23:43.279 --> 00:23:48.160
I think there's a way to effectively monitor and effectively police it and continue with it.
00:23:48.640 --> 00:23:57.599
Just on the human side, you know, when you see someone who's making$22,$23 million a year risk everything for a few hundred grand, like does that just make you step back?
00:23:57.680 --> 00:23:59.759
Or like how do you think about that?
00:24:00.079 --> 00:24:01.200
It makes you step back.
00:24:01.359 --> 00:24:07.920
But you have to recognize it's always existed, it will probably continue to exist, and you've got to just be diligent about it.
00:24:08.079 --> 00:24:10.240
It is amazing to me, to your point.
00:24:10.400 --> 00:24:14.400
But you know, like any criminal, I mean, look at go back to Ivan Bosby.
00:24:14.559 --> 00:24:15.519
I mean, what was he thinking about?
00:24:15.839 --> 00:24:16.880
Yeah, Martha Stewart.
00:24:17.440 --> 00:24:17.759
Yeah, exactly.
00:24:17.920 --> 00:24:20.400
Yeah, I mean, there's a better example on hello.
00:24:22.079 --> 00:24:34.000
One of your, I don't want to say competition, but perceived competition are the prediction markets like polymarket, and they have much lower fees because they match users instead of taking risk.
00:24:34.319 --> 00:24:37.279
Are they a competitive threat or are they in a different category?
00:24:37.359 --> 00:24:38.960
How do you deal with that going forward?
00:24:39.279 --> 00:24:47.119
Well, what we've been told very specifically by several states, Nevada of No, that it's off limits for us because we have followed it.
00:24:47.279 --> 00:24:48.880
We followed the marketplace.
00:24:49.119 --> 00:24:51.759
We understand what it's been in UK for decades, by the way.
00:24:51.839 --> 00:24:53.279
It's not a new thing.
00:24:53.519 --> 00:24:55.839
It takes a single digit percentage of the market.
00:24:55.920 --> 00:25:03.200
So while a threat, not a, I don't think a massive one, I think the propositions generally, now they'll get better, have been weak.
00:25:03.359 --> 00:25:07.279
I'm not so sure they don't make some of their own markets when you say they're just pitting one against the other.
00:25:07.440 --> 00:25:09.839
I'm a little dubious of that, but one day at a time.
00:25:10.079 --> 00:25:14.480
But they're getting closer and closer to having a product that looks and feels exactly like ours.
00:25:14.640 --> 00:25:16.319
No doubt about it, it's betting.
00:25:16.400 --> 00:25:19.519
It doesn't have the regulatory controls, it doesn't have the age controls.
00:25:19.680 --> 00:25:22.240
So an 18-year-old in Utah can bet.
00:25:22.400 --> 00:25:23.119
I'm sorry.
00:25:23.359 --> 00:25:29.519
Utah doesn't want it, and a miner shouldn't be allowed to, but not under, but an 18-year-old shouldn't be allowed to bet full stop.
00:25:30.079 --> 00:25:39.119
And so we're obviously very anti, not from a competitive perspective, but we just we think it ought to be regulated by the states, as all of gaming is.
00:25:39.279 --> 00:25:47.279
And the notion that it could hide behind this federal regulatory environment called financial trades markets is just not appropriate.
00:25:47.440 --> 00:25:51.279
And so we are opposed and we'll continue to fight it wherever we can.
00:25:51.680 --> 00:25:54.799
One of the big growth areas and I referenced before is Japan.
00:25:54.880 --> 00:25:58.960
And you have a really exciting project there and development that's underselling.
00:25:59.039 --> 00:26:01.599
And I think it's a$10 billion spend.
00:26:01.759 --> 00:26:05.759
Can you just tell us a little bit about it, the opportunity, what you're gonna be doing?
00:26:06.000 --> 00:26:07.039
We've been on this journey.
00:26:07.119 --> 00:26:09.759
You'll find this staggering because sometimes this is how long these things take.
00:26:10.000 --> 00:26:12.319
We saw our first Diet member in 2009.
00:26:12.640 --> 00:26:15.039
Just to stop you, that's their equivalent of their Congress.
00:26:15.359 --> 00:26:15.680
Exactly.
00:26:15.759 --> 00:26:18.880
So this was going to be a federally regulated deal, which it ultimately became.
00:26:19.039 --> 00:26:23.359
The Abe administration got enamored with opening up the country for tourism.
00:26:23.519 --> 00:26:26.079
At the time, in 2013, there was only 13 million visitors.
00:26:26.319 --> 00:26:32.079
If you think about Japan, it was staggeringly low compared to other really cool places to go in the world.
00:26:32.240 --> 00:26:34.160
Eventually, legislation gets passed.
00:26:34.319 --> 00:26:35.599
The bill's extensive, though.
00:26:35.680 --> 00:26:37.680
Our project is 12 billion, not 10.
00:26:38.079 --> 00:26:42.480
But we picked Osaka because we thought they had the political will to want to get it done.
00:26:42.559 --> 00:26:49.759
And we picked a partner called ORGS because we thought they had the risk profile to want to get something like this done and the background and the backbone.
00:26:49.920 --> 00:26:50.559
And they did.
00:26:50.640 --> 00:26:53.920
And so we ended up though with the only license in all of Japan.
00:26:54.079 --> 00:27:01.839
So if you think about it in the context of Singapore, which has two licenses, six million people, 20 million visitors.
00:27:02.160 --> 00:27:06.319
Singapore this year, SANS is going to make probably$2.5 billion of cash flow.
00:27:06.559 --> 00:27:07.200
Bottom line.
00:27:07.359 --> 00:27:09.200
We have 120 odd million people.
00:27:09.279 --> 00:27:13.039
We're the only licensee in any time for the foreseeable future.
00:27:13.200 --> 00:27:16.160
We've started construction, we'll be open in 2030.
00:27:16.319 --> 00:27:22.559
We see it as our version of Marina Bay SANS, and then some, given the market scale and size.
00:27:22.799 --> 00:27:26.559
It's an hour and a half closer to Beijing and Shanghai than Macau.
00:27:26.640 --> 00:27:33.839
So there's a, I think, over time, forgetting geopolitical issues that may or may not emerge, that there's a huge opportunity there with China, China visitation.
00:27:34.000 --> 00:27:36.720
China's visitation is up over 30 million now already.
00:27:36.799 --> 00:27:38.799
So that unto itself has been a positive.
00:27:38.960 --> 00:27:44.960
It sits on a place called Yumashima in Osaka, immediately adjacent to where the World Expo site was.
00:27:45.200 --> 00:27:48.480
Every day in the last week, there was a quarter of a million visitors that went to World Expo.
00:27:48.880 --> 00:27:53.440
So the infrastructure has been put in play to accommodate this kind of tourism and traffic in this zone.
00:27:53.599 --> 00:28:01.039
It sits at the base of Kansai region, which is what the place Kyoto and some of the amazing places are in Japan for visitation.
00:28:01.279 --> 00:28:04.400
It will be one of the world's largest, if not the casino.
00:28:04.559 --> 00:28:06.400
We'll have over 6,500 slots.
00:28:06.480 --> 00:28:08.640
We'll have over 750 table games.
00:28:08.799 --> 00:28:10.960
And so we're very excited by it, actually.
00:28:11.119 --> 00:28:11.920
It's a journey.
00:28:12.000 --> 00:28:13.680
It's 2030 before we open.
00:28:13.839 --> 00:28:18.400
But I think the upside potential and the fact that we're going to be the only one for a considerable period of time.
00:28:18.640 --> 00:28:27.279
And think about the profile of consumer and customers, the Pachinko business in Japan itself has been a$30 odd billion dollar business.
00:28:27.440 --> 00:28:34.960
And I would argue that the product offering that that exists today in that space, we're just going to simply re-establish a whole new thing.
00:28:35.359 --> 00:28:42.480
So if you took something like the Bellagio, I could be off by a little bit, but 70% of the revenue is non-gaming or so.
00:28:42.640 --> 00:28:48.400
Is Japan going to be a similar type of situation or is it going to be more of a gaming-centric place?
00:28:48.720 --> 00:28:52.559
I think it'll be more gaming-centric than here, because it's the only one.
00:28:52.720 --> 00:28:54.559
We are limited in room keys for today.
00:28:54.640 --> 00:28:56.319
We're going to have 2,800 keys.
00:28:56.480 --> 00:28:58.480
There's two hotels we're building there.
00:28:58.640 --> 00:29:02.880
And so we're somewhat limited in that context, but over time that will change as well.
00:29:03.039 --> 00:29:06.480
So I think it'll be more gaming-centric just because of its scale than non.
00:29:06.880 --> 00:29:09.039
But the goal is international tourism.
00:29:09.200 --> 00:29:13.200
The goal is to serve as a gateway to folks to enter Japan and go from there.
00:29:13.519 --> 00:29:14.640
Just give you a simple example.
00:29:14.720 --> 00:29:16.400
We're building a tourism center there.
00:29:16.559 --> 00:29:19.599
It's about 45 to 50,000 odds square feet.
00:29:19.759 --> 00:29:25.119
And it's to serve as a gateway to educate people on the rest of Japan and how to travel and where to go.
00:29:25.279 --> 00:29:32.079
So object being, they come in, they go, they get into this trip tourism center, they learn about other places that they can go and visit.
00:29:32.400 --> 00:29:39.359
I mean, the opportunity sounds exciting, especially being the only one in the market, but you saw Sans and when they stepped back from pursuing the license.
00:29:39.440 --> 00:29:41.920
You know, what did you see that they didn't?
00:29:42.240 --> 00:29:47.759
Well, one, we saw Osaka versus Yokohama or Tokyo, which ultimately politically never got there.
00:29:48.079 --> 00:29:49.920
Sands was pushing Osaka.
00:29:50.400 --> 00:29:53.440
We decided to have a Japanese partner at scale.
00:29:53.599 --> 00:30:02.319
And so the way our partnership works is we're 40 odd percent, they're 45%, and we have a consortium of other Japanese partners who make up the difference.
00:30:02.480 --> 00:30:06.000
Think Panasonic, think high-end Japanese partners.
00:30:06.240 --> 00:30:09.119
We each have a small piece of this thing as part of a consortium.
00:30:09.279 --> 00:30:13.200
So we said to ourselves, this is a Japanese enterprise.
00:30:13.519 --> 00:30:16.079
Sands wanted to do it principally for themselves.
00:30:16.319 --> 00:30:17.200
Fair again.
00:30:17.359 --> 00:30:22.880
The winning combination though became we were right about both location and that combination of partners.
00:30:23.039 --> 00:30:24.240
And so we won the bid.
00:30:24.319 --> 00:30:25.200
It's the bottom line.
00:30:25.440 --> 00:30:26.480
Look, it's not easy.
00:30:26.559 --> 00:30:27.599
The tax is 30%.
00:30:28.079 --> 00:30:34.559
Building anything in Japan, particularly on an island, we've got 3,500 pylons that go up to 70 meters.
00:30:34.799 --> 00:30:38.640
This is not a simple feat by any stretch, but we're all in.
00:30:38.799 --> 00:30:39.839
I was there last week.
00:30:40.079 --> 00:30:41.839
The site's literally coming out of the ground.
00:30:42.000 --> 00:30:45.119
You can begin to see the shape of the foundation, which is fascinating.
00:30:45.440 --> 00:30:50.480
After literally 15, 16 years of this is compelling as help force.
00:30:50.960 --> 00:30:54.240
I mean, you talked about them that they walked away.
00:30:54.319 --> 00:30:57.920
One of the things that you recently walked away from was New York.
00:30:58.319 --> 00:31:00.880
You were going to have a casino in Yonkers.
00:31:01.039 --> 00:31:02.720
You decided to walk away from it.
00:31:03.039 --> 00:31:04.880
What was the thinking behind it?
00:31:05.200 --> 00:31:11.359
So in 2018, we purchased the Empire Casino at Yonkers Raceway, is where it is and what it is.
00:31:11.440 --> 00:31:16.400
It's a 97-acre parcel right off the freeway, has a racino, so it's all slots.
00:31:16.559 --> 00:31:18.480
We operate on behalf of the state.
00:31:18.640 --> 00:31:24.880
And so, as you know, the proposition was and is ultimately adding table games and making it a full-fledged casino.
00:31:24.960 --> 00:31:27.119
So we would own the machines, we pay a tax.
00:31:27.519 --> 00:31:38.799
The first proposition for us were the taxes were high because we had to match and guarantee that particularly the education fund would not go down, which is where the vast majority of our current tax structure goes.
00:31:38.880 --> 00:31:40.640
It's$300 odd million dollars.
00:31:41.039 --> 00:31:44.400
We also needed to keep the horsemen alive and keep the track going.
00:31:44.480 --> 00:31:47.039
That's a$60 odd million dollar proposition.
00:31:47.119 --> 00:31:51.599
And under the new regime, we had to give money to, which was fine, the city of Yonkers.
00:31:51.920 --> 00:31:55.359
So the underwrite bill on this thing was to begin with$400 million.
00:31:56.000 --> 00:32:03.119
Yonkers, while compelling in many respects, because we saw it as a large-scale regional casino, we didn't necessarily see it as a destination resort.
00:32:03.279 --> 00:32:04.240
Think Port Gotham.
00:32:04.400 --> 00:32:05.039
We saw it at large.
00:32:05.759 --> 00:32:12.880
But the closer the competition got to us, I mean, I was rooting for sands out in Nashville, you know, gone out to Nassau County.
00:32:13.119 --> 00:32:15.680
Anything downtown Manhattan was fine.
00:32:15.920 --> 00:32:25.200
But the way it ended up was you've got valleys, and more notably, you've got the city field proposition for$8 billion, kind of in our backyard.
00:32:25.440 --> 00:32:29.279
And so the competitive landscape was changing, didn't love it, but okay.
00:32:29.519 --> 00:32:33.839
The final straw, though, was they changed the length of the license.
00:32:34.000 --> 00:32:37.759
Within weeks, we had already made our submission of what we were to build.
00:32:37.920 --> 00:32:43.440
They changed the length of the license to if you didn't spend$5 billion or more, you could only get a 15-year license.
00:32:43.680 --> 00:32:45.039
That was news to us.
00:32:45.200 --> 00:32:52.559
And so it put us on edge about well, what else will happen between tax, any and all things.
00:32:52.799 --> 00:32:56.400
And so we decided to be prudent stewards of the Capitol.
00:32:56.480 --> 00:32:58.640
It was$2.2 billion today.
00:32:58.799 --> 00:33:02.720
So that means who knows where this would have ended up, but call it 2.2.
00:33:03.279 --> 00:33:08.400
We saw a massive concern around the taxes, you know, the underright to begin with.
00:33:08.559 --> 00:33:14.240
We saw competitive concern and that they were closer to us than we wanted them to be originally and we had hoped for.
00:33:14.400 --> 00:33:22.160
And then we saw a changing regulatory body that at the last minute said, Well, I'm going to change the basis of how we're thinking about your license.
00:33:22.400 --> 00:33:24.720
And we wanted to save the money for other things.
00:33:24.880 --> 00:33:27.279
And so we're still in business, to be clear.
00:33:27.440 --> 00:33:28.720
We still run this racino.
00:33:28.880 --> 00:33:30.319
It's still productive for us.
00:33:30.480 --> 00:33:33.680
We're not going to have any competition for three or four years at the minimum.
00:33:33.920 --> 00:33:37.200
Aqueduct will do something, I'm sure, in the interim with tables.
00:33:37.359 --> 00:33:40.160
But that being said, I think we're in pretty good stead.
00:33:40.480 --> 00:33:43.200
Is New York just a difficult place to do business?
00:33:43.519 --> 00:33:45.599
They weren't making this piece easy.
00:33:45.759 --> 00:33:46.559
I would say that.
00:33:46.720 --> 00:33:51.200
It was an elongated process that needed to be clear and more succinct.
00:33:51.279 --> 00:33:52.480
And I'll just leave it at that.
00:33:52.559 --> 00:33:53.680
We're doing business there now.
00:33:53.759 --> 00:33:55.839
We've enjoyed our relationship with the city of Yonkers.
00:33:56.000 --> 00:33:58.079
They were great, but it wasn't easy.
00:33:58.480 --> 00:33:59.200
Understood.
00:33:59.359 --> 00:34:03.200
We're big fans of IAC and Barry Diller in 2020.
00:34:03.359 --> 00:34:04.480
They made a good bet on you.
00:34:04.559 --> 00:34:07.440
They plowed a bunch of money into IAC stock.
00:34:07.519 --> 00:34:09.760
I think they own roughly 20% of the company.
00:34:10.079 --> 00:34:13.440
What did they see in MGM that the market didn't?
00:34:14.159 --> 00:34:15.920
Well, look, it was just coming out of COVID.
00:34:16.079 --> 00:34:20.480
So the value equation alone was spectacular for them, and they paced it right and timed it right.
00:34:20.559 --> 00:34:23.519
So there was just the very principle of we were depressed.
00:34:23.599 --> 00:34:31.920
I think a stock was trading at like seven or eight dollars when I think they started considering this thing, which was obscenely low given the obvious because these assets weren't going anywhere.
00:34:32.239 --> 00:34:34.719
And for reference, it's about 32 in change now.
00:34:34.880 --> 00:34:35.440
Yeah, exactly.
00:34:35.599 --> 00:34:37.360
So they made a couple of bites at the Apple.
00:34:37.440 --> 00:34:41.039
We've bought back since almost 42% of the company.
00:34:41.199 --> 00:34:44.880
So their share has grown up to 24% at this point of the game.
00:34:45.199 --> 00:34:51.280
They saw a burgeoning digital opportunity that they thought was very real, and they've been right about that so far.
00:34:51.440 --> 00:34:55.760
It's taken longer than we'd all like, but it has taken and it is moving and it's productive.
00:34:55.840 --> 00:34:57.519
And so they saw that opportunity.
00:34:57.679 --> 00:35:01.039
And then Barry of Notes always had a vision and interest in Las Vegas.
00:35:01.119 --> 00:35:03.920
He's been a follower of Las Vegas for a considerable period of time.
00:35:04.079 --> 00:35:05.360
He's extremely creative.
00:35:05.440 --> 00:35:07.679
He's a visionary guy in many respects.
00:35:07.840 --> 00:35:12.719
And so he likes the idea of how can I impress and impact my thinking on Las Vegas?
00:35:12.880 --> 00:35:18.800
And so for me, on our board, he's been a great visionary in terms of where we are and where ultimately we'd like to go.
00:35:18.960 --> 00:35:20.000
And so time to tell.
00:35:20.320 --> 00:35:23.760
What type of things has he suggested that you run with?
00:35:24.159 --> 00:35:25.840
Mostly around the entertainment platform.
00:35:26.000 --> 00:35:31.199
I'm not going to tell you what they are yet, but mostly around the entertainment platform of what to do.
00:35:31.360 --> 00:35:37.199
You know, we've seen the sphere here in Las Vegas just take off in terms of something that's productive and selling tickets.
00:35:37.360 --> 00:35:39.679
It's been a great experience for the overall community.
00:35:39.840 --> 00:35:58.079
So it's encumbered upon us as the entertainment leader in the community to recreate some things here that we're working on aggressively in both our showrooms and outside of our showrooms that help add to the notion and the experience of entertainment and live entertainment, which continues to be on fire here in Las Vegas.
00:35:58.239 --> 00:36:00.480
And so programming is essential.
00:36:00.639 --> 00:36:03.760
You know, not a week goes by now that we don't have something of real interest.
00:36:03.840 --> 00:36:05.199
This week happens to be Formula One.
00:36:05.280 --> 00:36:07.679
You know, I mean it goes on and on and on, which is good.
00:36:07.760 --> 00:36:09.440
So very active in all of that.
00:36:09.760 --> 00:36:13.519
In terms of helping you with digital, what type of stuff have they suggested or done?
00:36:13.840 --> 00:36:15.360
Particularly through Joey Levin.
00:36:15.920 --> 00:36:18.079
Had been their CEO for a considerable period of time.
00:36:18.239 --> 00:36:21.039
Joey's been active on the board with BetMGM.
00:36:21.199 --> 00:36:29.920
He's an observer who has been active in trying to help us think about database, how to do REACH, how to do marketing, how to think about it, where to spend money.
00:36:30.079 --> 00:36:32.719
And so they've been very active in that whole cycle.
00:36:32.960 --> 00:36:40.559
They've been active in the MA that we got ourselves into this business on our own in Europe and in Brazil and very supportive of that activity.
00:36:40.719 --> 00:36:47.599
I brought one of their guys into the company, a guy named Gary Fritz, who's now my chief commercial officer, who also oversees those digital assets.
00:36:47.760 --> 00:36:52.159
And so getting ourselves established in that business has been at their stewardship.
00:36:52.320 --> 00:36:53.920
And so we're excited by that.
00:36:54.239 --> 00:36:55.760
Bill, this was fantastic.
00:36:55.920 --> 00:36:57.840
Thanks again for taking the time.
00:36:58.000 --> 00:37:07.920
We covered a ton of ground today from MGM to evolution and how you're thinking about capital allocation to what's happening in Japan and the digital side of the business.
00:37:08.159 --> 00:37:13.679
Thanks for being so open and giving us a look at how you're thinking about the next chapter for MGM.
00:37:13.920 --> 00:37:16.719
Thanks for joining us, and thanks to everyone for listening.
00:37:16.800 --> 00:37:19.440
We'll see you next time on the World According to Boyer.
00:37:19.760 --> 00:37:21.199
I hope you enjoyed the show.
00:37:21.440 --> 00:37:25.280
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00:37:25.440 --> 00:37:28.639
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00:37:28.800 --> 00:37:30.000
Until next time.