A worldwide famous gaming and betting corporation, 888 Holdings, is set to leave the US gaming market. The group has notified the investors that it commenced a strategic review of its B2C operations in the States. The process may be followed by the sale or controlled market exit of 888 Holdings at a cost of $50 million, according to a source.

Strategic Review:

The strategic review has reportedly been driven by the group’s operations reporting reduced gross profit margins, high licensing fees, and the overall rise of operating costs affecting the company’s strategy to deliver value across all jurisdictions. 888 is reportedly present in four states: Michigan, Virginia, Colorado, and New Jersey, and the strategic review comes after these operations reported lower financial indicators than the group’s level of operations and ventures.

As the source reports, if the 888 Holdings decides to exit the US market, it will have to terminate the exclusive deal closed with Authentic Brand Group for this group’s vertical Sports Illustrated (SI). Under the partnership, 888 Holdings and Authentic launched the SI Sportsbook and Casino online betting and gaming brand.

$50 Million Termination Fee:

Now, 888 reportedly confirmed that it would follow the terms of the agreement to pay $25 million to terminate the contract. According to the source, the company revealed that it will use cash from available resources to pay the first installment now and proceed with a further $25 million payment in three to five years to settle the termination fee.

In the press release, 888 CEO, Per Widerström  said: “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. 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.”

Costs and Competition Causing Decline:

888 Holdings reportedly indicates that the decline of its gross profit margins in the U.S. is a consequence of the impact of direct costs and fees, as well as strong competition from other market participants. As reported by the source, the group understands that these factors affect its current structure and leave a small margin for the company to benefit from the net profit after deductions and costs. In this respect, the termination of the Authentic Brand Group will save $6 to $7 million in 2024 and 2025 for 888 Holdings.

The strategic review is in progress. As the group weighs its balance sheet in the four US states, the source reports that the rising insecurity about the future of the company’s US business has already resulted in lay-off announcements for the staff in a subsidized company SI due to substantial corporate debt incurred. As reported, 888 Holdings set no timetable for the completion of its strategic review and gave no assurance regarding the outcome of the review.