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Hello and thank you for joining the Entain plc Quarter 4 Trading Update Conference Call. [Operator Instructions] So now, I would like to hand over the call to the Chief Executive Officer, Shay Segev. Please go ahead.
Thank you. Good morning, everybody. Thank you for dialing in this morning for our full year and fourth quarter trading update. I hope you are all keeping safe and well. I'm joined on this call by Jette Nygaard-Andersen, my successor as CEO; Rob Wood; and David Lloyd-Seed.Let me start with a few comments about my recent decision, then I will hand over to Jette to say a few words, after which Rob will take you through the business performance. This business has been my own for the past 5 years, and I'm proud of what we have achieved in this time. It has been an incredible journey transforming Entain into the leader in our space and into a company that is driven by a commitment to sustainability and to player protection. The timing was never going to be good. It is never easy to leave, but I'm secure in the knowledge that I will be leaving the business in the best shape it's ever been. It is a clear strategy and a superb leadership team to deliver and drive shareholder value. I have no doubt about the strength of Entain and remain convinced it will double or triple our size within the next 3 years. The diversification of the products we offer, our graphical mix, the entrepreneurial culture and quality of our people, combined with our technology and commitments to player safety, will ensure we continue to deliver great performance.Why am I leaving then? It is simple. I was presented with an opportunity that perfectly matches my skill set and my passion to transform the consumer experience in one of the hottest sectors using disruptive technologies. The potential is phenomenal. I would be sad to say goodbye, but I remain passionate about the business and its potential and will watch its development with a keen interest. Indeed, a significant amount of my personal wealth is tied up in Entain, and I'm confident about that. On that note, I will hand you over to Jette.
Thank you, Shay. And good morning, everybody. It's great to talk to you all, and I surely look forward to leading you in the not-too-distant future.Now let me start by saying that I'm incredibly excited to be taking on this role and leading what is a global entertainment and technology company. It's a true leader in sports betting and gaming entertainment. I've been on the Entain Board for just over a year now. My experience is very much in the media and entertainment as well as digital business as well as working with companies to use technology to transform and disrupt industries. It's these experiences that led me to being asked to join the Board in the first place. I bring a different but very related perspective and one that reflects the direction of the travel for Entain.As a Board member, I was involved in shaping the strategy set out in November, which has set us firmly on the path for future growth as well as continuing to lead in innovation and safety and responsibility through the 2 core strategic pillars of growth and sustainability. But we must also recognize that consumer behavior is changing, and that change is technology-driven. My view is that we will be successful by putting customers at the center of everything we do with superior user experiences, great customer service, safety and the right procedures.The strategy we laid out in November will provide us with tremendous growth opportunities. Today, we are in a little over 20 regulated or regulating markets. However, there are 50 or more such markets where we can see opportunities to grow. We can do this by leveraging our tech, our scale and our expertise. For example, we're in the process of acquiring Bet.pt. And last week, we announced our offer to acquire Enlabs, which would give us access to an additional 5 to 7 regulated markets. The U.S. offers huge potential. We're already in 11 states, delivering a market share of 18% across those states. We are planning to be operational in 20 states by the end of the year, and there is more to come after that. This is a tremendous opportunity, and I'm very excited about us bringing all our expertise and technology to the U.S. market via our joint venture, BetMGM. Thirdly, as consumer behavior changes, a lot of it driven by technology, we can see opportunities with new audiences. My experience includes operating in and around e-sports, recreational, interactive, entertainment and skill-based gaming. And so I see some exciting opportunities in this direction as we evolve our business and our offering to attract this large and growing customer base. But these are also developing markets, and so we'll take a step-by-step approach. And finally, we've shown over the last 20 quarters that we know how to deliver growth, and we will see plenty of growth opportunities in our existing markets. Sustainability is at the core of our strategy and something that is very important to me and core for a customer-centric company. I'm especially excited about using our technology to develop even safer products for our customers. Our new sustainability charter demonstrates our commitment to leading in this.Regulation is part of doing business for us, and so we must work closely with the regulators. Fundamentally, we want to only offer products that are safe, entertaining and fun. And we can use our technology, our research and expertise to put a safety net around the vulnerable. It's been said many times before and it's something that I entirely agree with that we have the best technology in the industry, and it is all our own. That provides us with a significant competitive advantage. It enables us to deliver a great service and product for our customers, while ensuring that through programs like ARC, we provide an enjoyable environment where customers will be protected from harm. But because it's ours, the power is in our hands to ensure that every part of our technology is delivering the best customer experience.One thing that I've been really impressed with in my time in being involved with Entain is the strength and capabilities of our people. The clearest evidence of that to me has been how the business responded to the COVID-19 pandemic. What has been delivered over the last 10 months has been truly remarkable, and I'm really looking forward to working with such a great team. The thing that stands out in my mind about the team at Entain is the entrepreneurialism and the constant desire to innovate and disrupt. That is as much the DNA of Entain as anything and has been what has led us to be so successful.So I'm keen that we maintain that and our operational excellence and invest whatever it takes so we can continue to deliver fantastic growth as well as continue to outpace, outmaneuver and outperform our competitors. I want to see us grow Entain as a global customer-centric entertainment and technology company and a world leader in sports betting and gaming entertainment. I'm really excited to be taking on this role at such a fantastic point in Entain's evolution. We have a lot of great opportunities to create significant value for our stakeholders. I look forward to talking and engaging with you all over the coming months and years as we deliver on that.And with that, I will now hand you over to Rob, who will take you through a bit more detail on our trading statement. Rob?
Thank you, Jette. Good morning, everyone. Let me just start by saying that I'm sorry to see that Shay is leaving us. He's been such an integral part of the Entain story, and I really enjoyed working with him. But I'm also incredibly excited to be working more closely with Jette. I've seen firsthand the big contributions she's made at the Board, and I know that she'll lead our business well and with energy and dynamism going forward. Obviously delighted to be taking on the role of Deputy CEO as well as CFO and working more closely with our M&A and retail teams.Now let's focus on our business performance in Q4 and more broadly across 2020. We gave quite a lot of detail in our release this morning, so I'll touch on the key points now and then we can move to Q&A. Overall, I think it's clear that Entain has delivered another very strong performance. When you consider that back in March, all elite sport was canceled, our shops were closed and the outlook was looking very uncertain. But as we've said already, our diversification, our product offering, our technology, our digital marketing expertise has all enabled us to deliver double-digit Online revenue growth every quarter again. And across the full year, we grew Online 28% in constant currency. In Q4, our Online business was up 41%, which makes it to our 20th consecutive quarter of double-digit Online growth.Now that 41% growth was undoubtedly helped by favorable sports margins and channel shift from retail closures, but underlying volumes were pleasing as well. Just on sports margin, you'll see that we were up 1.6 percentage points over the full year, and we estimate that around half of that was favorable results, while the other half we attribute largely to mix impacts, which we think will unwind through 2021. So things like product mix and increased retail-style betting, which is lower stake and higher margin, that will move back to retail as we get past COVID, causing Online margins, therefore, to fall back in 2021.The one mix point which will permanently impact 2021 and beyond is the effect that our changing geographical mix has on our corporation tax rate, our ETR, which we expect to rise to around 16% from 2021 onwards. It was around 13%. We think it will go to around 16%. And that's because territories like Australia and Italy have outgrown others during 2020, and they attract higher corporation tax rate. So there's nothing we can do about it and not particularly material, but it is worth tweaking ETR to 16% in your models going forward.Back to trading, and retail has, of course, been heavily impacted through the year by closures due to COVID. Retail EBITDA has been hit particularly hard, and I expect it will fall by up to 70% year-on-year in 2020. But our very strong Online performance has more than compensated. And as a group, we ended the year with EBITDA in the range of GBP 825 million to GBP 845 million, which remarkably is up on 2019 by around 10%. And that strong trading, together with the VAT refund before Christmas, means we ended the year with leverage around 2.1x.Moving on to the U.S. now, and BetMGM has delivered a fantastic year. It started the year with around 150 employees and live in only 3 states. And now it has over 400 employees, it's live in 11 states, and it's performing exceptionally well. Over the 3 months to November, its market share is up to 18% in the states where we are live, which, as a reminder, is in line with our long-term expectations of a market share in the range of 15% to 20%. And particularly pleasingly, we're achieving it in both sports and gaming. If you look at the states which came online during the year, our share of Online sports over the last 3 months was 21%, so both sports and gaming. Across the whole U.S. market, not just markets where we're live, we're now up to 12.5% share, and we're firmly positioned as a top 3 operator in the U.S. market.Operationally, our new state launches through the year have been successful, which is a credit to all of our teams working well together across BetMGM, Entain and MGM Resorts. And looking at the most recent launches, we started exceptionally well in Tennessee, which has a very high market share. And we saw on Tuesday that our first month in the established Pennsylvania iGaming market came straight in with an 8% share in December. And because of these successful launches and strong growth in New Jersey, we saw our active weekly digital sports bettors at the end of the year were more than triple the actives that we saw during the Super Bowl week earlier in the year. And our Q4 actives are nearly double the actives that we saw in Q3. So momentum is certainly building. Player values and CPAs have also progressed in line with expectations, and we continue to expect CPAs to trend down from over $500 earlier in the year to around $250 over time. As a result of all of that progress, total NGR for BetMGM should end the year between $175 million and $180 million, which is comfortably ahead of our previous guidance of $150 million to $160 million in October and also the $130 million that we guided to back in the summer. A few more updates for you on regulation and new markets, and then we'll go to Q&A. During October, we were pleased to receive sports betting licenses in Germany, which, together with the tolerance policy, is bringing greater clarity and certainty to the German market. Our bwin brand remains exceptionally strong in Germany. And whilst it's early days as the restrictions bed in and the market dynamics play out, the impact to revenue remains on track with our guidance. In November, we committed to only operating in nationally regulated markets. And by the end of last year, 99% of our NGR was from regulated or regulating markets. On new markets, in October, we announced the acquisition of Bet.pt in Portugal, which restarted our M&A program. In November, we received licenses to operate in Colombia as we grow our footprint in Latin America. And since the year-end, we announced an offer for Enlabs and the offer documents were issued yesterday. So in summary, thanks to excellent trading on our core digital platforms through the year, we were able to deliver EBITDA in the range of GBP 825 million to GBP 845 million, which is up 10% year-on-year and it's around 7% ahead of our guidance in October despite the retail lockdowns that followed. BetMGM is now firmly on track to deliver our target market share of 15% to 20%. And so with growth in our core markets, growth in the U.S. and growth into new markets, we're delivering on the key tenets of our growth strategy, and we go into 2021 with good momentum.I'll leave it there. And let's hand the call back to the operator, please, for Q&A.
[Operator Instructions] The first question is from Simon Davies from Deutsche Bank.
Firstly, on the U.S., can you talk a bit about the percentage of new customers that are now coming through from M life and Yahoo! and the momentum that you're seeing from that? And also given the strength in terms of customer acquisition, what should we think of in terms of potential start-up losses for the JV in 2021? Secondly, just on Enlabs, the deal is condition on 90% approval from shareholders, and we've had comments in the press that hedge funds representing over 10% are saying they're going to block the deal. Are you concerned? And could you potentially reduce the 90% threshold? And lastly, just on retail. Back in November, I think you were talking about around GBP 40 million per month of losses from retail closures across the whole estate and that assumed furloughing, but it did not assume significant capture of retail spend in Online. What do you think the monthly impact is now including that Online capture? And are you expecting to furlough staff during the first half of 2021?
Simon, let me give some flavor about the U.S., M life and Yahoo!, and maybe, Rob, you take the rest of the questions about Enlabs and about the retail. I mean, again, along with our strategy, clearly, M life is a key part of the value proposition of BetMGM with omnichannel. I mean we mentioned last year that we are in a path to make this integration even more tight, where M life customer have now more value [where they feel] basically part of the same journey when they are with BetMGM. We're aiming -- again, it's currently a high single digit of all of our acquisition is coming through the M Life program, but we see this even increasing. I mean we did mention, I think, at some point that, again, both M life and Yahoo! -- I mean Yahoo! is our largest affiliate now. And as we will continue progressing, it will be even further and further as we penetrate to more states and we continue to integrate the journey. So we're actually very pleased with the progress of both of them. And this is part of the story that Rob mentioned that the $500 CPAs will go down to $250 and we see this continually increasing.Rob, do you want to touch the other points?
Sure. Happy to. So I think the second question was start-up losses for 2021. We will guide in more detail either on the 4th of March or at a separate event for BetMGM. But safe to say, we're expecting significant growth in NGR, you would imagine comfortably more than doubling. But that also will mean a more than doubling of marketing spend and certainly losses, you can expect to trend in the same direction. So it's absolutely going to be -- the losses will be far greater than they are in 2021 as more and more states come online and you have the annualization of the states that came online towards the end of 2020. Third question was on Enlabs. Are we concerned? I mean, not at this stage. We're very clear that we offered a full price. We offered 12x EBITDA. We think that's a full valuation. The Board supported it. They had a fairness opinion done. They had an independent valuation committee. I know on the overnight premium, it looks very skinny. But on a 90-day basis, it was nearer 20%. On a 100-day basis, it was 40%. So the share price just ran away a little bit, which obviously makes the overnight premium look slimmer. But the key point is the valuation was full. We have 42% irrevocables. And let's say hope there aren't too many shareholders that get left stuck in what would otherwise be a pretty illiquid stock on the secondary Swedish market. So a bit early to say. Offer letters only went out yesterday, but we're absolutely hopeful that our valuation is considered full, and we're able to progress. On to the fourth question, that was around retail furlough net impacts with online migration. So yes, Simon, you're right, we put out GBP 43 million as being the impact of retail closures per month back in November. That number is still good. That number is on the assumption that we claim furlough. If we don't, then the furlough equates to around GBP 13 million, GBP 1-3 million, per month. So if we don't claim furlough, it would be more like, say, GBP 56 million for every month that we're in complete lockdown. The question is to whether we will or not is an open question and constantly under consideration by the Board. In terms of net impact, clearly, it's really hard to measure the channel shift with any degree of precision. I think what Q4 showed us was that with a partial lockdown during Q4, we were still able to outperform expectations and therefore positive. In Q1, if we're fully locked down throughout Q1, I don't think the Online benefit will be enough to offset during the quarter, but I would expect over the fullness of 2021 that we would get back to where we started. So it's very much a partial offset, but a very material one at that.
The next question is from Monique Pollard.
Just 3 questions from me, if I can. A couple on the U.S. and one just on trading. On the U.S., the first question is just around whether the losses will still be, for 2020, GBP 60 million, given obviously, the 15% upgrade to the revenue guidance versus the last time we had an update on the U.S. losses for this year. The second was around Michigan, obviously, launching tomorrow just after legalization in the state. Just interested to know how many of your peers will also be launching then and what you're expecting the competitive landscape to look like. And then finally, just in terms of the current trading, obviously, as you said, you're still seeing that benefit from retail migration or you did in the fourth quarter. U.K. lockdowns have continued into 1Q. I'm just interested to understand what you see in terms of Europe. So in Italy and Belgium, are the stores open or closed or sort of partially open? And do you see that same retail migration in those countries as well?
Okay. Let me take the Michigan question. I guess, Rob, you can comment about the U.S. expected losses this year and about the retail there in Europe. So yes, Michigan, as you rightly stated, we expect to launch tomorrow, together with [indiscernible] operator. I think there was a press release by the Michigan control board. I think it would be probably a single-digit number of operator will launch. I mean we clearly expect us to be a dominate player in this market, I mean, both with the MGM property in Michigan, which is well recognized in the M life program, and also, as Rob mentioned earlier, we demonstrated this last year for the new launches that we managed to find a formula which give us a great start for new markets that we launch. I mean the product has come forward quite strong as well, the marketing machine worked quite well. So again, we see great progress in all the new states we launched recently, such as Tennessee and others, and I would expect Michigan to be very strong, I'll be very surprised if not, very strong state for BetMGM. I would expect us even to lead there. So it should be a great start for us I think in Michigan. Over to you?
Sure. So the first question, Monique, on losses for 2020. So we're still, what is it, 21st of January, we're still closing the books. But directionally, as you suggest, we guided to GBP 60 million back in October, and the business has outperformed since then on the revenue front. And I'd expect losses to be a little bit greater than that, but nothing too material. On to your third question, which is around trading in European retail, in particular. So all the shops are shut across Belgium and Italy at the moment. Slightly different dynamics in those 2 territories. In Italy, the channel shift is very clear and offers a full offset, frankly. So Italy, in Q4, our Online NGR was almost exactly double, so up 100% year-on-year. And we've seen other omnichannel operators in Italy perform exceptionally well during lockdown periods, far better than the Online-only operators. And one of the reasons for that, why the dynamic is a little different in Italy is that customers use shops to deposit and withdraw for their online business. So an awful lot of the online traffic comes via shops. In fact, around half of all deposits into our Online environment comes via the shop. So that omnichannel journey is very familiar in Italy. And essentially, we've had full mitigation of retail closure in Italy. Belgium is a different story, though, more like the U.K., and in fact, lower. Mitigation in Belgium is the lowest of the 3, and that's primarily actually because our retail estate is Ladbrokes, whereas our strongest Online business in Belgium is the bwin brand. And so you don't get that same omnichannel benefit as you do in the U.K. and Italy. So a bit of a mixed bag, but Italy, full mitigation; Belgium, the least; U.K. in the middle.
The next question is from Ed Young from Morgan Stanley.
I've also got 3. First one, trading. You mentioned Italy there basically doubling in Q4. Could you give us a little bit more geographical color just to give us some idea of where the growth has come from in the mix? The second one is just trying to think through COVID. I mean you've mentioned benefit from mix in terms of product. You mentioned sort of the retail, Online, some of which will reverse. You've obviously got a lot of different moving parts here. So can you give us sort of a broad view about how you think the business could trade through the sort of COVID comps of next year to sort of understand where the Online number could land? And then the final one, obviously, there's been news around the first circuit reversing the judgment on the Wire Act no longer applying to gaming. It could potentially have an impact on a number of segments, but includes poker. It's not something you've really spoken about very much. Could you just sort of briefly touch on what you think partypoker and your offering could be in the states and its positioning there?
Ed, let me take the third question about the Wire Act. Yes, I mean, we see, yes, an opportunity. Clearly, legislation needs to change as well. I mean poker with partypoker and with the unique technology that BetMGM has access through Entain for our poker technology, it's another massive potential. I mean, definitely with M life program and the relevant database, with the great progress we're making with iGaming, we definitely see poker is an opportunity for us to lead in the U.S. through BetMGM. Clearly, the biggest barrier has been -- so far is liquidity, which, hopefully, now the path is open for that. So yes, it's very exciting, and we definitely -- we see ourselves as a potential leader on this space. Rob, you want to take the 2 others?
Sure. So the first one was around geographical mix in Q4. So yes, Italy, standout outperformer. U.K. also strong. Again, the omnichannel bet presence playing through other areas. Australia was very strong again in Q4, albeit very margin helped. So excellent spring carnivals there. So stakes volume is more normal, but NGR very strong again in Q4 for Australia. I mean, frankly, every area performed well in Q4, just with one exception. For the first time, one of our top territories didn't achieve double-digit market at Online NGR growth, and that was Germany and obviously, due to the restrictions. So Germany was negative in Q4 as expected. But as I said in my sort of opening remarks, impact sort of broadly in line with our original guidance on Germany. In terms of NGR expectations for Online in 2021, we'll guide a little bit more fully on 4th of March, but I think a few sort of broad comments that might help. On the margin point, as I said earlier, I wouldn't expect margin benefit to remain into 2021. It may in Q1 as that retail-type betting continues to benefit the Online environment, but that will recede somewhat. There are 1 or 2 structural benefits to margin that I can point to, things like U.K. horse margin as a result of changes to the way that pricing takes place now following COVID back in Q2 last year. That has played through to stronger U.K. horse margins, but it's fairly negligible in the grand schemes of the group. So assume margin recedes. But that said, in terms of NGR prospects for next year, on an underlying basis, at least, we will continue to shoot for double digit as we always do. But then from that, you do have to deduct the impact of Germany, which we know about, and also the impact of the GBP 40 million of regulatory impacts, which we talked about on November 12. So if you add those 2 together, you've probably got a drag of somewhere around 7 points. So we'd be looking at low single-digit growth we hope for Online in 2021. The last thing I'll say is that low single-digit growth is a lot better than I would have said 3 or 4 months ago. And really, that's because 3 or 4 months ago, I assumed that we would be lapping against a very COVID-benefiting 2020 and, therefore, we would have a drag on growth in 2021. But the way it's turning out with all the lockdowns in Q4, we come into this new year with such strong momentum in our Online business that, that ought to offset the benefit in 2020 and broadly be a wash. So therefore, I get back to underlying growth, double digit, but probably low single digits after you back out Germany and the regulatory impacts.
The next question is from Gavin Kelleher from Goodbody Capital Markets.
Just firstly for me, just on marketing, is there anything you can say on marketing spend on Online? Is it as we expected? Or is there any savings you're seeing there or any kind of better efficiencies you're seeing there on the marketing in Online side or how we should think about that in 2021? That's my first question. And then my second question on Germany. In line with expectations is what you've said so far, is there any positive surprises there in terms of how the performance is? And is there anything that's kind of weighing on it negatively that is a bit worse than you would have thought?
Rob, do you want to take these 2?
Sure. Sure. Yes, no problem. So marketing, firstly, so sticking to 2020 for a moment, I mean, we -- when we guided at the interims to expected marketing spend in the second half of the year, I did say expect us to spend fully to ensure that we keep that momentum going, and that's exactly what we did. In terms of how notes to the absolute marketing spend, we actually spend more than we envisaged back at the interims, probably GBP 10 million to GBP 20 million more in that sort of order of magnitude. But because NGR performed so well, particularly in Q4, as a percentage, marketing spend as a percentage of NGR, it is lower than we otherwise would have expected, and we'll probably end the year somewhere around 20% for marketing spend. So that's -- it's not about spending being lower in absolute terms, it's simply being lower in percentage terms. And when it comes to 2021, as I said to the last question, we'll guide more fully on the 4th of March, but I would expect a higher percentage than '20 in 2021. So that's marketing. On Germany, any surprises? I guess, 2 points to make. The surprise, if you like, on the gaming side is -- we've mentioned it previously, we would have expected more operators to have adhered to the tolerance policy than is the case. And that includes operators that you would ordinarily expect to comply with these kind of regulations. Now some are catching up, and perhaps it's just technology developments that's taken a while for them to catch up, but many, you would expect, will have a difficult time getting issued licenses when the new regime comes into place. What that all means is that the gaming side has probably been a little bit worse in terms of impact than our original thinking. But on the sports side, it's been better partly because the new licenses have not all yet been issued, and therefore, there's a delay to some of the restrictions coming in. So in a nutshell, broadly in line in aggregate, gaming a bit worse, sports a bit better.
The next question is from Michael Mitchell from Davy.
A couple if I could. First of all, just on the U.S. and just digging into the momentum of the JV in recent months, both really from a share perspective, I guess, but also in terms of new state launches. And can you just help us understand what you think the annualized revenue base of the JV is at present? Clearly, it's significantly above the $175 million to $180 million that you report for the full year of 2020. And then in addition to that, I guess, in terms of that pointing to an acceleration in momentum, do you envisage any kind of scenario where you might have to inject additional capital into the business over and above what you've currently guided for '21 and '22? And then my second question, if I could, is back to online and kind of your core online geographies, namely the U.K. and Australia. I wonder if could you just talk about active growth versus ARPU.
Michael, I mean, as for the U.S., I mean, again, I don't know, Rob, if, in March, we want to share some more insights, I mean -- and including also prospective type of injection. I mean, Rob, do you want to take these questions?
Yes. We're not in a position yet to give forward-looking guidance for BetMGM, but it's not too hard to take the public data and realize that our sort of November, December NGR is far greater than Q3, which is greater than Q2, and you can get to a pretty big number if you annualize that, and that's before new states coming online. As I said in a couple of questions previously, we've got to be looking at more than doubling, but we'll give more precise guidance at the right time in the future. Just on additional capital, that's certainly a reasonable question since we announced our commitment with MGM Resorts in July, I think it was, last year. The pace of states coming online has been greater, the performance has been greater, player values have been better, and it all points to additional investment equals greater return. So I would suggest there's pressure to increase that investment more so than decrease, but we will give more forward-looking guidance later in the half. And I think it was -- should I take the last question as well? There's one on the core business. How do we think about the growth in terms of actives versus ARPU? It's still very much actives-driven as it has been through the year, and those actives are both reactivated customers and new customers. And the FTD rates continue to be very good. And really, that is the -- we attribute that more than anything to retail lockdowns. As you'd expect, we're still seeing even in 2021 in the U.K. and Italy, for instance, our FTD rates are tremendously high, if not quite doubling, but not too far off as well. So FTDs and reactivations contributing to higher actives, and that's the driver far more so than ARPU.
Thank you. Maybe to add something, Michael, here on what Rob is saying. I mean we do see the U.S. is our largest opportunity. And as we said it in the past, I mean, we are fully committed to put whatever it takes in order to continue to grow the U.S. So both MGM and Entain are in a great position to inject even further cash if we need to. And we see also probably the fastest-growing business in the U.S. So it's all, as Rob said, actually a great opportunity for us as states opening is accelerating to have the option even to inject further funds and to accelerate this journey. So it's very exciting.
The next question is from Virendra Chauhan from AlphaValue.
Can you hear me? I have a couple of questions on -- firstly, what kind of -- in the U.S., what kind of an overlap do you see between M life and Yahoo! subscriber base? Given that you're somewhere deeper into the integration right now with that, would you be in a position to provide us with some kind of guidance on that? And then adjusting for that, what kind of a monthly unique user base would you be looking at in aggregate? That's one on the U.S. Secondly, to the incoming CEO, Jette, one for you. In terms of strategy and operational direction, are there any things you'd like to do differently in order to accelerate momentum, probably from your observations as an outsider because so far, both Kenny as well as Shay had been with the firm for a pretty long while even before Shay also got promoted to the CEO role? So that would be for her. Apart from that, Jette, any specific thoughts on retail and its relevance to the group would be really helpful.
Great. So let me take the first 2. So in terms of, again, M life and Yahoo!, I think someone asked it before, I mean, again, we do see a great momentum on conversion from M life, which started to pick up probably a few months ago through more deeper integration and journeys. I mean, clearly, I mean, still we are under pandemic time. So again, some of the journey is not fully tuned yet, but we do have a lot of digital work with M life and still in Yahoo!. I mean both of them are working much better. I mean we mentioned in the past that Yahoo! is -- now is our largest affiliate and M life, we see a really strong conversion. We do see actually interesting enough, I mean, you touched that point, is that not only we see direct people coming from M life program and becoming part of BetMGM brand, we saw a lot of people who has a M life account also reaching directly to BetMGM, which means, I mean, if anything, it's probably put a big strength of how strong the MGM brand in the U.S. is. And again, we are very confident about it. Again, it's something that -- I mean, as another thing in the U.S., I mean, we've always been quite conservative in what we're saying. But actually, we would prefer to -- when we have more confidence in the numbers, is to come and basically commit to specific numbers. But as I said, M life and Yahoo! are working very well for us. In terms of the future strategy, I mean, again, I think the strategy is set very well. I mean, again, yes, there was part of it. I mean, Jette, you're on the line, you want to take it?
Yes. Absolutely. And thanks for the question. So to answer your question, I've been on the Board for more than a year, and I was involved in shaping the strategy that we set out in November with the 2 strategic pillars and the 4 growth areas that we communicated. And during that process, I was also able to bring my experience, as you say, from entertainment and leading digital businesses into the work that we did. So I'm very much behind the strategy. I believe it's the right strategy at the right time. So for me, at this point, my first priority and our first priority is really to execute on that strategy and set the priority to deliver that. As part of that, of course, we also recognize that consumer behavior is changing and a lot of this is driven by technology. And I really believe that we can lean into this and these changes to access new audiences and new customers. I think this is where my experience comes in as it includes operating in and around many different digital consumer businesses as well as areas like e-sports and recreational, interactive entertainment and also skill-based gaming. So I can certainly see some exciting opportunities here. I would, however, also like to stress, knowing these markets well, that it's developing markets. So I'm also keen that we take a step-by-step approach here. So Virendra, on the strategy, very much behind it. I think it's a great strategy, and it will set us forward for the growth opportunities. Now then you asked about retail, so let me just also comment on my view here. I mean retail is an important part of our offer to the customer. And for example, the U.K. retail market is worth more than GBP 2 billion. And as our business is customer-centric, what that really means is that you go where the customer wants you to go. And we can see there is a clear demand for retail and then our customers enjoy retail. And thereby, through the omnichannel strategy that we have, retail has actually proven pretty resilient. So this brings us a number of benefits, which we can also use in our overall strategy through our omnichannel experiences and really aid Online sign-ups and interaction and use retail also as a point of contact for Online customers. So that's really where I see retail as a part of our offer to the customers.
The next question is from James Rowland Clark from Barclays.
I've got a few questions, please. The first 2 really on the U.S. Given you're already seeing 18% market share in your active markets and your target is 15% to 20%, you've obviously stepped up a lot this year, do you think you can maybe look for a slightly higher target than that 15% to 20% in active markets? And would you, in fact, look to achieve that? And then on CPAs, you've spoken about reducing CPAs from over $500 to about $250. Can you give us a sense of the sort of time line in achieving that reduction on CPAs? And is this reliant on a certain proportion of customers coming from the Yahoo! Sports database and M life database and how much? And finally, on Canada, you said that you'll look to get a license there even when it legalizes. What would your target market share be in Canada?
James, so U.S. market share, yes, we're aiming 15% to 20%. We're already 18%. I mean, clearly, we're are not going to stop at 20% when we reach to 20%. We'll do our best to maximize the opportunity. I believe that we have all the ingredients to lead this market. And if this will be more than 20%, I mean, it's great. I mean I think we want to be, as I said before -- I mean, the Entain DNA is to be conservative and then surprise for the best. I believe we have a great momentum. We're already in 18%. Still there's a lot of states to open up. We're making a progress. I hope that we can do more than 20%. And again, we just progressed, and we're not going to stop. Clearly, we're going to continue to invest and to maximize the opportunity. In terms of CPAs, yes, we see this as a journey. It probably would take -- again, it's very hard to put a figure. But again, just to give you, probably, it's more like 2-year journeys. I mean it depends, clearly, how fast, what happen with the competition, what happen in new states opening, et cetera. But again, if I need just to give you some concept, I would think that probably will take us a journey of around 2 years to drive the CPAs down from $500 to $250 or something around that. Clearly, this depends on M life and Yahoo! continue picking up. We are very pleased. If anything, this actually works even better than what we thought. Definitely, the M life and Yahoo! as well. And in terms of Canada, I think it's very hard to say anything about market share at this point of time. We will clearly have all the plans to work with Canadians to apply for license. When the time is right, Ontario, probably will be the first one. We have experience in this market. We have all the ingredients, and I believe that we'll be a leader in this market as well. I hope that answers.
The next question is from Ivor Jones from Peel Hunt.
Could we come back to Germany? Could you give us a sense of where we are in terms of run rate revenue and profit contribution? I think it's de minimis, but I just wanted to check that. But what about a 3-year view? It seems like it's almost been written off in the discussion, but can you get back to the profit contribution that it once made to the group? And what does that mean about your marketing strategy now? Will you be spending marketing ahead of revenue? Or are you just assuming the business is flatlining? It seems like a big opportunity you're not talking about. Secondly, in relation to the U.K. and affordability and the other remote customer interactions. If one just read the press, you get the impression the companies like Entain don't do anything about affordability, particularly. Could you just talk about the measures that the company takes to check about affordability already so it's slightly really to get a sense of the risk? And then finally, in relation to the U.S., you're gaining market share strongly. I'm trying to think of risks to that. Is it that you have very strong product relative to the competitors? Do you think that DraftKings' and FanDuel's products are materially weaker than yours? And that they can catch up and recover some of the market share gain? But I'm trying to think of threat to the success that you've had in 2020, particularly.
So let me maybe take the U.K. affordability. Rob, you can take Germany, and I can talk about the product in the U.S. as well. So in terms -- again, one thing we said a number of times and I think we made the big progress is our investment in player protection. And clearly, affordability is a big piece of that. I mean the old management team, including myself, spend a lot of time to better understand the data and do whatever we can in order to protect our customers. We also launched, as we mentioned, ARC, which is Advanced Responsibility and Care, trying to leverage as much as we can the data that we have and the technology in order to protect customers. I mean I said it a number of time, and I will say it again, we do whatever it takes to protect customers, and we don't have any incentive to take $0.01 from people that cannot afford it. If anything, we have all the incentive to protect our customers and make sure that our products using only for entertainment. We already -- again, it's not something that started for probably the last 2 years, and if anything, we're accelerating. We put -- especially also in this COVID time, we put a lot of market of arms, a lot of intervention with customers. We track behavior of customers. If we see someone is spending more time, more money than usually, then we interfere with them. We launch even now a check with a third-party database, where customers making the deposit. We check the background and understand, based on some KPIs, what is the affordability level for them. We are coming with much more proactive intervention as well. And there is actually a very big momentum again in terms of checking customer on the background, in turn, to protect customers and then walk around affordability. So if that answer. In terms of U.S., again, one of the things that I believe that long term BetMGM will continue lead and be the winner on the long term is the fact that we own our full technology, and we believe that consumers always, end of the day, will end up with the brands which give them the best value, the best product proposition. And believe that we will be that one because we have all of the tech in-house, we have the flexibility, we have the ability to innovate faster, to develop -- to better understand our customers and to tailor the products to their needs. And we already see some of it already happening, I mean, definitely for iGaming and also on sport now. I believe that at this point of time, probably our products is -- again, DraftKings and FanDuel product, it's probably as good as our products. I would say probably -- we are all probably on the same level in terms of product and proposition. I mean you could always say they offer another 2 features or we offer another 2 features. But I think the exciting part is arriving now because we are in a place that we can accelerate, we are accelerating our development. And if you look -- if you take now 2 or 3 or 5 years view, then Entain -- or BetMGM access to Entain technology give us the ability to create even a further gap and accelerate the development as we're doing. And I believe that over 2 to 3 years, it will become clearer that our products, our customer experience, our innovation, the mix of content that we provide customers in the U.S. would be best and will continue to drive further growth for BetMGM.Rob, do you want to take Germany?
Sure. Yes. Ivor, you raised a really good point on Germany. So typically, regulation and new impact dictated by regulation, they are a negative in the short term, but they're a long-term positive if you're one of the more established operators with the strongest brands and the strongest products. So to answer your question, will we get back? Absolutely. It might take 3 years, but in 3 years, we'll get back to where we were, and actually, our market share will be stronger as a result. And therefore, to the question of strategy, you've already guessed it, but we are continuing to invest in the bwin brand. It's a fantastic brand. We would be crazy to pull back from that. To give a feel for the numbers, you can work it out from publicly available information, but our contribution from Germany is a little over GBP 200 million before these regulations. So if we lose that GBP 110 million was our guidance, you're losing half of it, you're still at around GBP 100 million. And of course, because it's leveraging our group's technology, you're talking about, give or take, GBP 100 million EBITDA business. So absolutely, we will continue to invest. Absolutely, we expect to get back. Germany is still a relatively immature online gaming market as well. And so 3 years from now, I think it's probably a sensible time frame for when we will be back to where we were, and then our market share will be even stronger as a result.
And your guidance about marketing overall, Rob, covers that push of marketing a bit ahead of revenue in Germany, has got some extra boost to come to deliver that strategy.
That's right. That's right. So I haven't given a figure for 2021 yet, other than to say it will be up on 2020, which is around 20%. And then what we typically do is manage sort of geography by geography within that. And there are some areas where we'll be spending less, whether that's as a result of competitive dynamics or new restrictions, for instance, but there will be other areas where we invest more and more. And Germany, you would imagine, will be one of those where we really get behind the bwin brand and make sure we're a long-term winner.
[Operator Instructions] The next question is from Richard Stuber from Numis.
Just one question for me, please. Clearly, you're getting better at launching in new states in the U.S. In terms of tomorrow, Michigan, are you going to think differently in Michigan? What sort of lessons have you learned? Are you being sort of more proactive in sort of marketing the prelaunch? Is there any sort of lessons you're learning? And what you're doing better?
Richard, yes, I think, yes, we are getting better. We feel also much more confident as well. I mean, again, if anything, I mean, probably in the last 12 months, we learned a lot through launches, and we reached to a very good formula to feel confident about launching new states. If it's related to some marketing or some customers proposition that we do in prelaunch and that we did in Michigan, we did in Tennessee as well. It worked very well for us. It put us ahead of the market. Again, especially in Michigan, it can be very attractive, as I mentioned, because MGM has a property there, and we believe that the brand will become very, very strong. The product also come very strong as well on the last 12 months. Again, we had a very big focus to tailor the product to the U.S. and create even further exciting products around Parlay and other thing we discussed, the integration with M life, deeper integration with Yahoo! the marketing team works better now. Again, it takes time to recruit it's 300 people and train them on the tools, which are now really up-to-date. And we have all of the marketing channels working properly, again, checking the database, checking the CPAs, which campaign works, which campaign doesn't work and tailoring the product, the content, et cetera. So -- and this brings us to a place that we are in a very strong confidence, definitely in Michigan, but also in any other new state that will come up. Again, one of the things that we put as part of our U.S. strategy is to be first to market in every new state, take early market share, be the best product, push strong on marketing. And again, we are -- we see this formula works very well for us. And if anything, as I mentioned before, I expect that MGM to accelerate our growth this year.
The next question is from Kiranjot Grewal from the Bank of America.
I've just got 2 questions. Firstly, on the U.S., do you have any visibility on the types of customers you're capturing? So are they more casual gamers or more focused games? Or alternatively put, how is the frequency and spend per customer in the U.S. versus what you might have originally been expecting? And then the second question is on LatAm and Brazil. I think both were flagged in a part of a key growth focus for Entain. So potentially, could you update us on where you see the opportunity and potential timing going forward?
So in terms of U.S., I don't think we're sharing anything about -- specifically about the customer mix. I mean, I wouldn't expect it to be very different from any other operator in the U.S. I mean, clearly, you have a variety of mix. Some customers who are more frequent players and some of them less. I mean, clearly, we have our CRM and product mix for both the casual recreational players. And in terms of, again, Latin America, maybe, Rob, you want to touch it? I mean, I will only say that, clearly, Latin America is a key part of our growth strategy of new markets that we mentioned a few times, and we launched Colombia. I mean, specifically Brazil, Rob, do you want to touch?
I need to add that, as you say, we launched in Colombia. It's -- Latin America is a market that we are really interested in. We think the bwin brand resonates particularly well in that part of the world. People still remember the Real Madrid sponsorship. And it's fast-growing, brazil, in Q4, a bit like Italy, it was a near doubling for NGR. So I'm not going to talk too much about which territories and which partnerships we might be looking at. But it's safe to say, it's a continent that we continue to be interested in. And of course, when we think forward to the prospect of Brazil becoming fully regulated and what that might do in terms of growing the market, we continue to be really excited about. I know various analysts have had a go at estimating what that -- what could happen to that market and most are coming away with a multiple of 3, 4, 5x in terms of growth once the market completely opens up, the product's fully available, kind of freely market as we do in other territories, et cetera. So lots of reasons to look at Latin America as a region where we see material growth for the group over the next 5 years.
There are no further questions. So I will hand back to Jette for closing comments.
Thank you, operator, and thank you all for dialing in today and listening. As you've heard, Entain continues to go from strength to strength, and we have an exciting future ahead of us. I look forward to sharing more on that journey with you and to meet with you all soon. In the meantime, if you have any further questions, do get in touch with David. Thank you, and goodbye.
And this now concludes today's call. Thank you all for joining. You may now disconnect your lines.